# Is the Landlord’s Rent Increase Lawful? Trust But Verify!

Beverly Hills is a rent control city which means the allowed annual rent increase for rent-stabilized tenants is regulated by a local rent stabilization ordinance. The ordinance determines the allowable rent increase and the city posts that percentage online. Sometimes the landlord raises the rent and a tenant will wonder, Is the landlord’s rent increase correct or even allowed by law? Here we explain how to find the allowed percentage and verify that the rent increase imposed by the landlord is correct and lawful.

## The Maximum Allowed Rent Increase in a Nutshell

First the basics: what the Beverly Hills rent stabilization ordinance does and does not allow for rent-stabilized households. Residents of newer multifamily buildings, condominiums and single-family homes are not rent-stabilized but may find some protection under state rent control. For rent-stabilized tenants:

- The rent can be increased only once in any 12-month period.
- The maximum allowed maximum increase percentage for
**Chapter 6 tenants**is determined once annually in June, and posted that month, with new percentage taking effect on July 1st. - The
**Chapter 5**maximum allowed annual increase is recalculated each month, is posted monthly, and that percentage is applicable only to a Chapter 5 rent increase that will take effect in that month. - The landlord can demand the maximum allowed percentage or demand no increase at the landlord’s discretion.
- Only failing to register a unit with the city’s rental unit registry will prevent the landlord from demanding a rent increase.
- Notice of rent increase is formal change in the terms-of-tenancy which requires a dated written notice which must then be served personally to the tenant no fewer than 30 days before the rent increase takes effect; OR mailed no fewer than 35 days before it takes effect (out-of-state mailings are 40 days).
- An improperly-served notice (for example a notice of rent increase by email, text, simple posting or even verbal) is not valid and should be corrected with a
*new notice*served properly that starts the clock anew; - If an improper notice is not called-out by the tenant then it is presumed to be lawful notice.

This post goes on to explain how to calculate and verify the percentage rent increase and how to calculate the lawful rent over a period of years to ensure that you are not being overcharged.

## Calculating the Percentage Change Between Old and New Rents

After receiving notice of a rent increase a tenant will often ask, Can my landlord raise the rent by that much? To verify that the rent increase is lawful we must calculate the percentage change between the old rent and the new rent. First determine the dollar difference between the original rent and the rent after the increase; then compare that to the original rent. How much has it increased? The steps:

- Subtract the new rent and from the current rent prior to the increase. Example: $2,062 – $2,000 = $62.
- Divide the monthly dollar difference by the original rent. Example: $62 / $2,000 = .031
- Multiply the numeric increase by 100 to arrive at the percentage: .031 X 100 = 3.1%.

If the answer is a negative number then that would be a percentage *decrease*. We expect no tenant will find a rent decrease!

## Calculating the New Rent Using the Announced Percentage

Once the city establishes the maximum allowable rent increase percentage a tenant will often asked, What is my new rent after the increase? That percentage difference is determined by multiplying the original rent by the amount of the increase and then adding the dollar different to the original rent. The steps:

- Convert the percentage figure (3.1%) into a decimal by dividing it by 100. Example: 3.1 / 100 = .031
- Multiply the original rent by the rent increase to get the monthly dollar increase. Example: $2,000 x .031 = $62
- Add the dollar amount of the increase to the original rent to get the new rent. Example: $2,000 + $62 = $2,062

## Calculating the Allowed Rent Increase Over Time

The principle for calculating the lawful rent through successive periods of rent increases is really the same as for calculating the correct new rent for any one period: 1) identify the multiplier that corresponds to the percentage increase at the time of the rent increase; 2) determine the additional dollar amount in rent as a result of the increase; and 3) add that monthly dollar amount to the current rent to determine the new lawful rent. Then rinse-and-repeat through each period where the rent was increased.

Take for example the annual reporting of our rent amount by the landlord. (The figure is shown on the ‘notice of rent reported by the landlord’ that we receive every spring.) To determine whether the reported rent is the lawful rent we should look farther back than the most recent rent increase; we can look to the original base rent at the beginning of the tenancy (what is on the lease) and in our calculation apply each successive rent increase.

If for example the base rent at the beginning of the tenancy was $2,000 then we simply step through the subsequent rent increases:

- Year 2 allowed a 3.1% increase, according to the city, so after the first rent increase the new rent would have been $2,062.
- Year 3 allowed a 1.6% increase, according to the city, so after the second increase the new rent would have been $2,095.

And so on. We work our way through each rent increase period through to the current period.

When might this kind of calculation be useful? When we want to verify whether the current rent is actually the lawful rent relative to the base year taking into account successive rent increases. One or more excessive rent increases can have a significant effect due to cumulative payments in excess of the lawful rent as well as annual compounding of the rent increases each year.

Here is an example where the current rent is not the lawful rent relative to the base year. This hypothetical nine year tenancy shows how two early unlawfully high rent increases (in red) over time add up to $51 in excess rent each month.

The *cumulative* impact of those early excessive rent increases is very significant! In the final year the tenant has overpaid the landlord by $612 but over the entire nine year tenancy the tenant overpaid the landlord by $4,080…all because those early two rent increases were excessive.

We encourage every tenant to review the entire rent record at least once when the city sends out the ‘notice of rent amount reported by the landlord.’ That is a great time to document over-payment and take action to claw-back the excess payment of rent. To do that on paper download our rent increase worksheet. For more about the notice of rent reported by the landlord see our explainer: Rental Unit Registration: What You Need to Know.