Topic No. 052: Imposing the Annual Allowable Increase
The Rent Board re-calculates the annual allowable increase each year and announces the new rate around the end of December, to become effective the following March 1st.
A landlord is permitted to impose the annual allowable increase each year without filing a petition. The first annual increase can be imposed 12 months after the date the tenancy began. The effective date of the annual increase is known as the tenant’s “anniversary date.” (If no increase has been given, then the tenant’s anniversary date is the date the tenant moved in.) The next annual increase can be imposed no earlier than 12 months after the tenant’s anniversary date. If the increase is imposed more than 12 months after the tenant’s anniversary date, the effective date of the increase becomes the tenant’s new anniversary date and the landlord must wait at least 12 months to impose the next annual rent increase.
The landlord must give the tenant at least a thirty-day written notice of the proposed annual rent increase. A sixty-day notice is required if the increase, either by itself or combined with any other rent increase in the 12 months prior to the effective date of the increase, is more than 10%. An additional five days must be added to the notice period if the notice is mailed.
The rent increase notice should include both the dollar and the percentage amount of the increase, as well as the date the increase will go into effect. The landlord should use the annual allowable increase percentage that will be in effect on the date of the increase, not the percentage in effect on the date the notice is served.
Annual increases must be calculated only on the tenant’s base rent, which does not include capital improvement passthroughs, utility passthroughs or bond measure passthroughs. Rent increases cannot be “rounded up” to the nearest dollar.
Landlords can “bank” or accumulate the annual increase and impose it in later years. Generally, an annual increase is not banked unless and until the landlord does not impose the increase for 12 months after the increase first could have been imposed. Specific rules for banking annual increases are described in Fact Sheet 7. It is important to understand the banking rules in order to properly calculate the rent increase. You may obtain a complete list of past annual allowable rent increases, as well as Fact Sheet 7, by visiting our office. These documents are also available in the Forms Center on the Rent Board’s website.