Rent Increase & Allowed Percentage: Questions Answered [Revised]

The landlord can increase the rent once per year at a maximum percentage set by the city. We cover that aspect of the maximum allowed annual rent increase and more in our explainer, Maximum Allowed Annual Rent Increase: What You Need to Know. But how much the rent can rise becomes a bit confusing when notice of an increase coincides with the annual revision of the allowed percentage. Let’s take a look!

A rent increase must be in writing, posted or mailed, and be provided to the tenant at least 30 days in advance (35 days if mailed) of the date the new rent is payable. That and the allowed percentage are spelled out in state law and our local rent stabilization ordinance (respectively). Yet questions may arise for which the city offers no posted guidance:

  • A rent increase notice is posted or mailed but days later the city publishes a revised, and lower, allowed increase percentage. Is the tenant obligated to pay the higher percentage?
  • The landlord has posted or mailed the notice for a rent increase, but before the date that the new rent is payable the revised percentage is published and it is higher. Can the landlord make the tenant pay the higher percentage?
  • If the inflation declining and the landlord anticipates that the soon-to-be revised allowed percentage increase will be lower, can the landlord post or mail a notice of the rent increase two or three months early in order to lock-in the higher percentage rather than send the notice after the revised, lower percentage is published?

These scenarios are not hypothetical. Each year in June the Chapter 6 percentage is revised. (The Chapter 5 percentage is revised every month.) And that can introduce some questions about timing for at least 1 in 12 renting households.

For example, our Chapter 6 rent increase notice was posted in late May; the higher rent took effect on July 1st. Shortly afterward, though, the allowed percentage was revised downward by a full percentage point (in accord with the revised government figure for consumer prices). Painful but there was no question we had to pay it: higher percentage was in effect when the notice was posted; and even though the percentage was revised downward shortly after, that had no bearing on the new rent.

But there are cases where it is not so clear. This explainer looks at some possible situations.

Who Should Care?

Chapter 6 tenants served with rent increase notice around June. Why? The Chapter 6 allowed increase percentage is revised once annually and it could jump a percentage point or more year-to-year. Chapter 5 tenants won’t be as affected by fluctuations because the Chapter 5 percentage is revised monthly in accord with an arcane section of the Municipal Code. Because the month-to-month change is much less – it may vary by one tenth of one percentage point and sometimes less — the stakes are higher for a Chapter 6 tenant. So we will focus exclusively on Chapter 6 rent increases in this post.

How the Rent Increase Works

Each year in mid-June the revised maximum allowed annual rent increase percentage is published on the city’s Rent Stabilization website. It is based on consumer price data for our region (specifically the May-to-May change in consumer prices as published by the Bureau of Labor Statistics).

A landlord can demand the maximum allowed percentage or demand no increase at all. If he is raising the rent, the notice of the increase must be formal: a written and dated notice that is posted or mailed 30 or 35 days (respectively) in advance of the date that the new, higher rent is payable.

An improperly-served notice (by email, text or verbal) or an insufficient notice (for example without the date of the notice) must be posted or mailed again and the 30-day (or 35-day) clock starts anew. (Read all about it in our explainer: Maximum Allowed Annual Rent Increase: What You Need to Know.)

Most landlords will properly notify a tenant of the higher rent and will properly use the posted percentage. However, when the allowed increase percentage fluctuates widely from one year to the next, there is additional incentive for a landlord inclined to game the system to, for example, post notice of a rent increase early enough to lock in the current percentage before a lower percentage increase is posted.

Let’s consider some possible situations.

Some Scenarios

Question: The rent increase notice is posted or mailed days before the city publishes a revised, lower allowed rent increase percentage. Is the tenant obligated to pay the higher rent based on the percentage at the time of the notice — or would the tenant pay a new rent based on the subsequently revised and lower percentage?

Answer: The tenant would pay a new rent amount based on the percentage increase allowed by the city at the time of the notice of the increase as long as that notice meets the requirements of the law: a dated notice that is posted or mailed 30 days (or 35 if mailed) in advance of the date payable for the new rent.

Why? The revised (lower) percentage would not apply even though it is published before the new rent is due because the notice was delivered before the effective date of the new percentage, which is the day the Bureau of Labor Statistics (BLS) publishes the May-to-May change in consumer prices (CPI). This year that day was June 12th.

Example: The landlord prior to June 1st posts a notice that the rent will increase at the current percentage with an effective date of July 1st, which is 30 or more days in advance. On June 12th BLS publishes the May-to-May change in consumer prices and our city revises downward the Chapter 6 allowed increase percentage accordingly. Though the tenant would like to pay the lower of the two percentages, it is the date of the notice, in which the new rent amount is calculated based on the percentage then in effect, that determines which percentage is the applicable one.

Question: If the landlord has posted a notice for a rent increase and allowed percentage is shortly thereafter revised upward before the effective date of the increase, can the landlord make the tenant pay the higher of the rent increase percentages?

Answer: No, the allowed percentage then in effect will determine the new rent amount, and that will not change even if the percentage is subsequently revised upward. Here again it is the date of the notice, in which the new rent amount is calculated based on the percentage then in effect, that determines which percentage is the applicable one.

Moreover, the landlord cannot revise upward his new rent amount based on the revised (higher) published percentage because he will not have formally noticed the revised (higher) rent the required 30 days in advance. Simply put, he cannot change the rent amount on the notice without delivering a new notice 30 days in advance (35 days for a mailed notice) of the new rent payable date.

Example: A notice of a rent increase is delivered to the tenant on or before June 1st for a new rent payable date of July 1st. Subsequently the new allowed percentage is published in mid-June and it is higher. The landlord informs the tenant that the increase has changed, and provides the tenant with a new, higher rent amount that July 1st. The tenant will be correct to object.

Either the tenant pays the higher rent in the original notice; or the landlord rescinds the notice and delivers a new change-of-terms notice with the higher rent (which reflects the new published percentage). If there is any question the tenant should call the Rent Stabilization Office at (310) 285–1031 and the office will inform the landlord that he must abide by the original notice or deliver a new one.

Question: Let’s say a landlord follows monthly changes in consumer prices and knows they are on the decline. He anticipates a lower BLS percentage and wants to deliver to his tenant a notice of a rent increase before the new (lower) percentage is published in June. However he cannot actually raise the rent until August. Can the landlord deliver a notice that reflects a new rent amount based on the current (higher) percentage even if that rent increase cannot take effect for two months in the future?

Answer: No. While the landlord can post a notice of a rent increase reasonably earlier (the law says 30 days minimum but specifies no maximum number of days), he cannot do so simply to capture a higher percentage that may be in effect when he delivers the early notice. In other words he cannot structure the notice of increase simply to circumvent the rent increase provision (section 4-6-6) of the rent stabilization ordinance.

Example: A tenant is due for a rent increase on August 1st at the earliest (12 months after the last increase). Anticipating that a smaller percentage will be published by the city around mid-June, the landlord notifies the tenant in late May (more than 60 days ahead) of a rent increase that shows a new rent amount calculated according to the higher percentage in effect in May.

The tenant should contact the landlord to point out that the revised percentage effective June 12th comes more than 45 days in advance of the date payable for the new rent (August 1st); and that the new rent amount should reflect that revised percentage — not the percentage in effect in May. Any question should be directed to the Rent Stabilization office at (310) 285–1031. City staff should conclude that, on its face, the advance notice suggests an interest to circumvent the ordinance. (Good-faith errors on the part of the landlord should be remedied without hesitation.)

Question: The landlord posts a notice of a rent increase at the percentage in effect on the date of the notice. But on learning in mid-June that the new published percentage is higher, the decides to rescind the notice and subsequently deliver a second notice with the higher percentage — allowing the 30 days advance notice the law requires. Can he do that?

Answer: Yes, the landlord can rescind a notice of a rent increase as long as the tenant has not yet begun paying the new rent. (Once the tenant begins to pay the new rent, then the rent cannot again be increased for another 12 months.) If the landlord then properly posts a new notice, reflecting a higher rent calculated according to the revised percentage, and delivers it 30 days in advance (35 for mail) of the date payable of the new rent, then yes the tenant will have to pay it.

Example: The landlord posts a notice on or before June 1st of a rent increase payable July 1st and the new rent is calculated according to the percentage in effect at the time of the notice. Soon the landlord learns that the revised percentage is now higher. He then rescinds the notice (before July 1st) and by July 1st delivers a second notice showing a higher rent calculated according to the revised (higher) percentage increase. The new rent is payable on August 1st. The tenant must pay the higher rent.

Question: The landlord posts a notice of a rent increase with a new rent calculated according to the percentage in effect on the date of the notice. However the notice is delivered less than 30 days before the new rent is payable. Subsequently a revised, lower percentage is published. Should the tenant overlook the short notice and pay the rent increase — or make an issue of the late notice?

Answer: The tenant should always contact the landlord in a case where a rent increase notice is not properly delivered. That can mean it did not reach the tenant 30 (or more) days in advance; or was undated; or it included a miscalculation or named the wrong tenant. (We have seen some sloppy notices!) That notice will no be valid.

Example: The tenant is served a notice on June 3rd for a rent increase that make the new rent payable on July 1st. The rent amount is calculated according to the percentage then in effect. On June 12th the new published percentage is lower. The landlord will have to rescind and deliver a new notice a full 30 days (35 for mail) in advance, pushing the payable date for the new rent back some period of time.

If the tenant contacts the landlord shortly after receiving the improper notice, and the landlord is savvy, a new notice will be delivered immediately, and before the new percentage is published.

However if the tenant is savvy, and has reason to believe that the new percentage will be lower, the tenant will reap a bonus if the landlord is informed about the improper notice only after the revised (lower) percentage is published. The new notice will then have to calculate the new rent according to the lower published percentage.

Question: The landlord properly posted a notice of a rent increase and only later does the tenant realize that the percentage used was not the correct percentage, or some other miscalculation produces a new rent amount in error. If the tenant did not inform the landlord in a timely fashion of the landlord’s error, will the tenant be penalized by, say, paying a miscalculated higher rent?

Answer: The tenant should speak up! By law the landlord cannot keep any rent that was the product of a good-faith error or malfeasance. The tenant should contact the landlord and point out the error. Any rent collected as a result of that error will be refunded to the tenant no matter when it is brought to the landlord’s attention. The city allows a three-year period for recovering rent paid in excess. Any question should be directed to the Rent Stabilization office at (310) 285–1031.

Example: The landlord properly posts a notice of a rent increase on or before July 1st with a new rent payable on August 1st. The landlord did not know that the city had already published a revised percentage that was lower than the prior allowed percentage increase. The new rent is calculated in error based on the prior, higher percentage. The tenant discovers the error later, perhaps in September or in the next year. She contacts the landlord and an arrangement is made to credit back to the tenant the over-payment.

However if the landlord miscalculates the rent in the tenant’s favor — using an old percentage that is lower than the revised percentage — and includes that rent amount in the notice, then once the tenant pays that new rent the landlord cannot come back to the tenant for what he may have charged. That’s another bite at the rent-increase apple, and even though it was the product of a mistake the landlord must wait 12 months before increasing the rent again (and he cannot roll that lost increment into a future increase above whatever may be allowed then).

Lessons to Take Away

The landlord must calculate the new rent based on a percentage increase that is in effect on the date that the notice is served to the tenant.

  • The landlord cannot post a notice of a rent increase sufficiently in advance of the effective date of the increase merely to circumvent the provisions of the rent stabilization ordinance.
  • Gaming the process around the publication of the allowable percentage rent increase is mostly relevant to Chapter 6 tenants because the year-to-year change in the percentage can be significant relative to the more minor fluctuation in the monthly published percentage for Chapter 5.
  • The tenant should contact the Rent Stabilization office at (310) 285–1031 with any question about a rent increase and especially when the published allowable percentage creates some confusion.

Finally, save any and all notices from the landlord concerning a change in the terms-of-tenancy — and especially any notice of a rent increase. Those documents may be useful later when considering whether to appeal the rent as reported by the landlord during the annual registration process. (For more read our explainer: Annual Rental Unit Registration: What Does It Mean for Tenants?)

We want to thank Rent Stabilization Program director Helen Morales for taking the time to think through these questions. More will invariably arise. Got one? Get in touch!