Topic No. 053: Banked Rent Increases
A landlord is permitted to impose an annual allowable increase each year. The amount of the annual allowable increase is set by the Rent Board and changes on March 1st each year. When a landlord imposes the annual allowable increase, the effective date of the increase is known as the tenant's "anniversary date." If the landlord does not impose the allowable increase each year on the tenant's anniversary date, the landlord can "bank" the unimposed increase and impose it at a later date, provided that the landlord follows the banking rules. Simply stated, the banking rules provide that a skipped annual increase is "banked" when it has been at least 24 full months since the last annual increase was imposed.
When only a portion of an annual allowable increase has been imposed on the tenant's anniversary date, the remaining portion is banked and may be imposed after 12 full months have elapsed or on any subsequent anniversary date. There is no requirement that the entire banked rent increase be imposed at one time.
The banking provisions of the rent law went into effect in April 1982. A landlord cannot bank unimposed increases prior to that date. However, there is no limit to the amount of rent increases that can be banked since April 1, 1982 and there is no time limit for imposition of these banked amounts. New owners may impose banked increases that were accumulated by prior owners, but banked increases from a prior tenancy may not be imposed on a new tenancy. In other words, once a tenancy is terminated, all prior banking expires.
Banked increases do not have to be approved by the Rent Board, but must be calculated correctly and cannot be compounded or pro-rated. The landlord must add the banked percentage amounts together and then multiply the banked percentage amount that will be imposed times the tenant's current base rent.
When it has been more than 12 months but less than 24 months since the last increase was given, a new annual increase is not considered a "banked" increase, and the landlord is only entitled to the annual increase amount in effect at the time the new rent increase takes effect. The effective date of this increase becomes the new anniversary date, which means that the owner must wait at least 12 months before the next increase can be given. Such a change in the tenant's anniversary date may result in the loss of an annual allowable increase. To avoid this result, the landlord should always give rent increases on the tenant's original anniversary date.
Any rent increase notice that includes a banked amount must explain which portions of the increase are attributable to banking and the dates upon which said banking is based.
For more information on banked rent increases, refer to Fact Sheet 7. To receive a copy of Fact Sheet 7, you can fax it to yourself through our Fax Back service by calling (415) 252-4660 or visit our website at www.sfrb.org. The Fact Sheet is also available at our office.