Rent increases subject to conditions

22 Jan 2013

South African tenants in rented properties often have the idea that no rent increases can be allowed on a 12-month lease.

Some landlords, says Albutt, tend to think that any increase in rates, taxes or leases entitles them to pass these extra charges onto their tenants. This, however, is only legal if it has been stated in the original lease signed by both parties at the outset and can only become applicable during the second calendar year of a lease exceeding 12 months. This cannot be made applicable to leases on terms less than 12 months.

This, says Wayne Albutt, National Manager of Rawson Rentals, is substantially correct - but if landlords in a high demand area believe that more frequent rent increases should be allowed, they can arrange to have shorter leases, for example, six months and at the end of this period the rent can be renegotiated. Often an arrangement of this kind will suit both the landlord and the tenant.

Some landlords, says Albutt, tend to think that any increase in rates, taxes or leases entitles them to pass these extra charges onto their tenants. This, however, is only legal if it has been stated in the original lease signed by both parties at the outset and can only become applicable during the second calendar year of a lease exceeding 12 months. This cannot be made applicable to leases on terms less than 12 months.

When a lease expires, both the landlord and the tenant sometimes opt to renew it on a month-to-month basis. In these conditions, says Albutt, the landlord is entitled to increase the rent at the end of every month if he so wishes, as long as he gives applicable notice (normally one month). It is for this reason that it is not really advisable for a tenant to renew a lease on such a short-term basis.

“The principle at work here, is that once a lease has expired, totally new terms and conditions can be drawn up.”

Right now, says Albutt, the national average in rental increases is only 5% but this figure is misleading because it reflects, inclusively, the low demand for rentals in sparsely populated outlying areas such as country towns. In high demand areas, rent increases now being regularly achieved are around, and sometimes exceeding 10%, with the result that the buy-to-let investor market in this segment is improving rapidly. 

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