The Annual Rent Increase: What You Need to Know [Updated]

Each July City of Beverly Hills posts the maximum allowed annual rent increase percentage for Chapter 6 tenants that is available to landlords for a 12-month period concluding the following June. The percentage rent increase available for Chapter 5 tenants is recalculated each month. Both percentages are indexed to inflation but determined by different formulas. Like much about Beverly Hills rent stabilization it is complicated but poorly explained on the city’s website. Let Renters Alliance explain the annual rent increase in plain language using specific examples.

The Maximum Allowed Annual Rent Increase in a Nutshell

• 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.

The regulations related to the magnitude of the rent increase are enumerated in the Beverly Hills rent stabilization ordinance. The regulations related to proper service are enumerated in state law. Yes it is complicated! Landlord-tenant law is a layer cake of federal, state and local laws.

How it Works

The Bureau of Labor Statistics every month releases new price data for goods and services consumed by urban residents in the Los Angeles-Long Beach-Anaheim region. The data are posted monthly (for example May of 2023). Beverly Hills, like other rent control cities, indexes the maximum allowed rent increase percentage for rent-stabilized tenants to the rate of inflation by using using data from the consumer price index (CPI).

For Chapter 6 tenants specifically, the May-to-May CPI percentage determines the maximum allowed annual rent increase. It takes effect on July 1st for those households. For Chapter 5 tenants the maximum percentage increase is calculated differently: once each month using a rolling average of the annual change in consumer prices. The percentages for Chapters 5 and 6 are published on the city’s rent increase webpage.

Here we summarize the key points and then clarify each concept grounded in the particulars of relevant state and local laws. First let’s look at the key concepts individually and then wrap-up with FAQs that explore different scenarios.

How Much Can the Rent Be Raised?

Chapter 6 rent increases

Ninety-eight percent of rent-stabilized households are Chapter 6 and the rent increase is regulated by ordinance subsection 4–6–3(B):

Such increases shall not exceed the greater of: 1) three percent (3%) of the rental rate then in effect, or 2) the percentage equal to the percentage increase, if any, of the Consumer Price Index for the Los Angeles/Riverside/Orange County Area, as published by the United States Department of Labor, Bureau of Labor Statistics between May 1 of the then current year and May 1 of the immediately preceding year.

The Rent Stabilization Division publishes the allowable annual increase for Chapter 6 tenants every June on the website.

Note that Chapter 6 of the ordinance says “the greater of” 3% or the percentage of CPI. That effectively establishes a 3% floor on the rent increase that provides a subsidy to the landlord when inflation is below 3% as it has been many years. That is, the Chapter 6 floor allows the landlord to ride the tide of inflation ever higher without limit, but when inflation declines the landlord can still demand a rent increase of 3% — even if inflation is zero. (We decry it as an effective landlord subsidy in our commentary: Make the Chapter 6 Maximum Rent Increase Floor-Free!)

Chapter 5 rent increases

Chapter 5 tenants are the 2% of all rent-stabilized households that started with a rent of $600 or less. These households are regulated by the original system of rent control which is Chapter 5 of the ordinance. The rent increase is calculated differently: the maximum allowable percentage is calculated each month according to CPI data but instead of a year-over-year percentage change the formula employs a rolling average for the preceding two years. B.H.M.C 4-5-303(A) says:

For annual increases effective on any date between May 31, 1979, and May 30, 1980, inclusive, no such increase shall exceed an amount computed in accordance with the latest published figure reflecting the increase for a twelve (12) month period in the Urban All Items Consumer Price Index (CPI) for Los Angeles (or any successor equivalent), as published by the United States Department of Labor, Bureau of Labor Statistics. The proper method for computing such an increase in the CPI shall be as follows: The latest published CPI figure shall be added along with such figures for the preceding eleven (11) individual months, and, from the sum reached, there shall be deducted the sum of such figures for the twelve (12) months further preceding the last such twelve (12) months. That remainder shall then be divided by the lower of the two (2) sums heretofore mentioned, and the resulting figure shall indicate the permissible maximum percentage by which the base rent may be increased by virtue of the rise in the CPI.

The Chapter 5 formula is so needlessly complex that even the city misapplied for who knows how long. That provided an added advantage to Chapter 5 tenants in that it kept the rents lower than they should have been even under rent control.  Read more: City Has Been Incorrectly Calculating Chapter 5 Increases.

How to Verify the Landlord’s Rent Increase?

When the rent rises a tenant may ask, “Is my landlord allowed to raise my rent by that much?” This is easy to answer. Indeed every tenant should understand how to find the lawful maximum rent-increase percentage and how to calculate the percentage change between the old rent and the new rent.

The correct rent increase percentages are posted on the city’s Rent Stabilization Division website. Note that there is a percentage indicated for Chapter 5 households and a different percentage for Chapter 6 households.

Whichever percentage applies know that the percentage increase affects only the base rent — not any additional charges such as for shared utilities or facility fees. However there are two exceptions: 1) rent for storage or parking may be increased by the allowed percentage; and 2) the ‘additional tenant’ surcharge under Chapter 5 households (pursuant to B.H.M.C. 4-5-307) which is considered rent and subject to a rent increase.

To calculate the percentage increase we take the dollar difference between the original rent and the rent after the increase and by dividing the difference by the original rent we find the percentage increase. For a rent that was raised from $2,000 to $2,062:

1. Take the higher new rent and subtract from it the rent amount prior to the increase. Example: $2,062 – $2,000 = $62.
2. Divide that monthly dollar difference by the original rent. Example: $62 / $2,000 = .031
3. Multiply the numeric increase over the prior rent (it is .031 higher) by 100 to arrive at a percentage expression of that figure. Example: .031 X 100 = 3.1%.

If the answer is a negative number then it represents a percentage decrease. But we expect few to no tenants to be finding a rent decrease in our hot rental market!

To calculate the dollar difference of a rent increases from a percentage we express the percentage as a whole number and then multiply the current rent by the decimal number. When we add that dollar-denominated product to the current rent we arrive at the new rent after the rent increase. For a 3.1% increase on a $2000 rent:

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

We go into more detail about calculating past rent increases in our standalone explainer: Landlord Raised My Rent. Is it a Lawful Rent Increase?

The Rent Can be Raised Only Once Every 12 Months

The Beverly Hills rent stabilization ordinance limits the frequency of the rent increase to one increase every 12 months pursuant to B.H.M.C. 4–6–3(A):

Only one increase shall be permissible within any twelve (12) month period; provided, further, that a twelve (12) month period shall have elapsed since the last increase.

That’s why we call it the maximum allowed annual rent increase. Not only does the rent stabilization ordinance establish a cap on the amount of the rent increase for rent-stabilized tenants; it also keeps the landlord from coming back for another rent increase within 12 months even if the landlord had not previously raised the rent to the maximum allowed. There is no second bite at the apple until 12 months have elapsed!

Proper Notice of a Rent Increase is Required

A rent increase notice must be properly served to be lawful. An improperly-served notice renders the rent increase not enforceable. Civil Code § 827 subsection (b)(1) is very specific about proper noticing:

In all leases of a residential dwelling, or of any interest therein, from week to week, month to month, or other period less than a month, the landlord may increase the rent provided in the lease or rental agreement, upon giving written notice to the tenant, as follows, by either of the following procedures:
(A) By delivering a copy to the tenant personally.
(B) By serving a copy by mail under the procedures prescribed in Section 1013 of the Code of Civil Procedure.

Note that proper services does not include email, text, phone or any other means . Simply posting a notice of rent increase on the tenant’s door is not proper notice either. The landlord must make some effort to personally contact a tenant when the notice is served personally. Now, the tenant is within her rights to refuse the notice in which case the landlord, having made personal contact, can now post it or slip it under the door. We go into greater detail about the specifics of proper noticing in our explainer: What is Proper Notice for a Rent Increase?

Notice Must Be Legally Sufficient

A sufficient notice will state the date of the notice and the effective date of the rent increase. It will also state the amount of the new rent. It may also note the current rent and/or the percentage rent increase however this is optional. Additionally, the notice must identify who on behalf of the landlord is serving the notice and be signed by that individual. Optionally the notice may indicate the means and date of service.

A deficient notice cannot be corrected or amended; it must be corrected and reissued. Because a deficient notice in the eyes of the law is tantamount to no notice. The landlord must serve the corrected notice again (30 or 35 days in advance of the rent increase). The landlord cannot simply replace a deficient notice with a sufficient notice and keep to the same effective date of rent increase unless that date is more than 30 or 35 days in the future. Any question about a defective notice should be directed to the Rent Stabilization Program office at (310) 285–1031.

What About the Deposit?

The landlord may demand an increase in the security deposit to reflect the new higher rent. Ordinance subsection 4-5-303(D) for Chapter 5 tenants says that explicitly:

Any security deposit lawfully imposed by the landlord on a tenant may be increased by the same percentage as the base rent may be increased, in accordance with the provisions of this section, at such time as the base rent is recomputed.

Chapter 6 is silent about the effect of the rent increase on the security deposit. The issue is regulated by the state’s Civil Code 1950.5 which limits the maximum security deposit to the equivalent of two (2) months of the base rent but is otherwise silent on changes to the deposit amount at time of rent increase. However the rental agreement may have specific language about the deposit and how it may be increased. Any question about an increase in the deposit should be directed to the Rent Stabilization Program office at (310) 285–1031.

Other Changes to Terms-of-Tenancy?

The landlord may change other terms-of-tenancy with 30 days notice at the same time that the rent is raised (or any other time). The notice of rent increase is actually a change in the terms-of-tenancy so the landlord may use the opportunity to, say, reassign tenant parking to a different space or notify tenants about a change in the facility-related fees separate from the base rent. Note that when a ‘housing service’ like parking or storage is included pursuant to the rental agreement then it cannot be removed even with a change in terms-of-tenancy.

Frequently Asked Questions About the Rent Increase

Question: A notice of rent increase is personally serviced or mailed but before it takes effect the city publishes the maximum allowed percentage which is higher. Can the landlord amend the notice to reflect the higher allowed percentage?

Answer: No. The landlord would have to rescind the original notice and issue a new notice with the higher percentage with the required 30 or 35 days notice. However if the tenant has already paid the rent increase as first noticed then the tenant has locked it in:  that will be the rent increase for the next 12 months. The landlord’s tough luck!

Question: The landlord properly notices a rent increase that is in excess of the maximum allowed percentage and the tenant pays that rent increase. A year down the line the error is discovered. What about a claw-back?

Answer: The landlord cannot keep excess rent. In this instance the excess rent is the dollar value of the portion of the rent increase beyond what the law allows and the overcharge is the cumulative total of excess rent paid throughout all periods subsequent to the unlawful rent increase. Rent overcharges should be available for claw-back going back at least three years.

Question: A tenant has been overpaying the rent due to a long-ago error. What is the tenant’s first step?

Answer: If the error is discovered when the landlord re-registers the unit once per year, as required, then the tenant can appeal the ‘rent amount reported by the landlord’ during the 15-day window after the tenant receives that form. Otherwise at any other time the tenant will request a certificate showing the certified rent for the unit and then file an appeal on that basis with the Rent Stabilization Division. The process is described on the rent appeals information webpage

Question: When can the landlord raise the rent?

Answer: A rent increase is available to the landlord at any time during the year, irrespective of the city’s posted maximum percentages, as long as twelve months have elapsed between the date of last increase and the effective date of the current rent increase. Rent increases for Chapter 6 tenants tend to occur around August which is greater than 30 days after the city posts the allowed percentages. In contrast the Chapter 5 rent increase is recalculated monthly and thus the increase is not tied to the annual posted percentage for Chapter 6. Read more at the Rent Stabilization Division webpage.

Question: The landlord mails a notice of a rent increase at the percentage in effect on the date of the notice. But on learning of the new, larger, percentage as posted by the city, the landlord rescinds the notice and subsequently mails a new notice with the higher percentage at least 35 days in advance. Can the landlord 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 be raised again for 12 months — even to capture the fraction of a percentage point the original increase didn’t capture. If the tenant has not begun paying the rent increase then the landlord can rescind and reissue the notice at whatever lawful percentage.

Question: A tenant rents a condominium from an individual and the landlord says the city’s percentage does not apply to condominium tenants. Is that true?

Answer: Yes. The city’s posted maximum percentage rent increase applies only to rent-stabilized tenants in Beverly Hills. Condominium tenants, single-family home tenants, and tenants in newer multifamily apartments are exempted from rent stabilization. There may be a cap in place if the dwelling is corporately-owned; state rent control would apply. But if the dwelling is individually-owned, not corporately-owned, then then it is categorically exempted from both local and state rent control. There would not be a cap as the rent increase outside of rent control is regulated by state law.

Question: The landlord personally serves a notice of rent increase within the 30 days, as required, however there was no effort to contact the tenant personally. The tenant came home to find a notice on the door. Is that proper notice?

Answer: No. The landlord should have mailed the notice postmarked 35 days in advance of the effective date of the rent increase. (If the landlord is mailing from out-of-state 40 days in advance.) Or the landlord should have made an effort to personally contact the tenant. The tenant may either overlook the improper service and pay the rent increase; or else notify the landlord before it takes effect that the service was not personal service. The landlord will have to again issue and serve the notice. (Read more: What is Proper Notice for a Rent Increase?)

Question: The landlord didn’t include the date on the notice of rent increase even though it says when the higher rent is payable. Is that lawful?

Answer: No. But it is laughable. The notice must be dated and inform the tenant who on behalf of the landlord is providing the notice. Failure to include that information renders the notice insufficient and it must be corrected and reissued. The clock starts anew.

Question: The notice of rent increase correctly describes the unit address but indicates the prior tenant. Is the notice valid?

Answer: No. The notice must show the current known tenant(s). We have seen some sloppy notices! Minor errors may be permissible but not on the basics like tenant identification and advance notice period. The notice should be corrected and reissued.

Question: The rent increase appears to be more than is allowed but the tenant is afraid to bring it to the attention of the landlord. What should the tenant do?

Answer: Let the city deal with the landlord on the tenant’s behalf. The tenant should contact the Rent Stabilization Division at (310) 285–1031 because the rent increase is an issue that the city will go to bat for on behalf of the tenant as it is explicit in the ordinance. RSO staff should call on the landlord to correct the problem.

Question: A tenant is about to conclude a one-year fixed-term lease and decides to continue the tenancy as a month-to-month tenant. Can the landlord raise the rent — and by how much?

Answer: A rent-stabilized tenant with a fixed-term lease that is about to expire has a choice: leave the unit, sign a new lease, if offered, or stay as a month-to-month tenant. The landlord cannot end the tenancy involuntarily even at the expiration of the lease! But the landlord can raise the rent provided: 1) the rent increase is equal to or less than the percentage for Chapter 6 households as posted on the Rent Stabilization Division website; 2) the rent increase notice is sufficient in all particulars; and 3) it the notice is served properly with the required period in advance (on this point please consult the terms of the lease).

Question: A tenant’s rent-stabilized lease is expiring soon. Can the landlord quote a new rent as a condition for offering a new lease — or allowing the tenant to stay on month-to-month?

Answer: No. The landlord cannot bargain a new rent using the lease expiration as leverage. The only rent increase available to the landlord is the Chapter 6 rent increase regardless of whether the tenant signs a new lease or continues month-to-month (with all tenant protections remaining in place, by the way). In Beverly Hills the landlord cannot force the tenant to sign a new lease on changed terms — and that includes the amount of the rent plus the allowed annual rent increase — however the landlord can, upon expiration of the fixed-term, require the tenant to sign a new lease on the same terms (see B.H.M.C. 4-6-6(E)).

Please get in touch with Renters Alliance with any question you have concerning the rent increase and we will do our best to answer!