How to Handle Rent Increases: Legal Clauses to Include

2 December 2025

Raising the rent is never an easy conversation, whether you’re a landlord trying to keep up with property expenses or a tenant worrying about affordability. But guess what? Rent increases are a natural part of the rental market, and when handled correctly, they can be fair, predictable, and legally sound.

The key is having the right legal clauses in your lease to set expectations from the start. Let’s dive into the essentials of handling rent increases, the legal clauses you should include, and how to make the process as smooth as possible.

Why Do Landlords Increase Rent?

Before we get into the nitty-gritty of legal clauses, let's tackle the most obvious question: Why do landlords raise the rent in the first place?

1. Inflation and Market Trends – As property values and demand go up, so do rental prices.
2. Maintenance and Repairs – Keeping a property in top shape costs money, and those expenses often lead to rent adjustments.
3. Property Taxes and Insurance – When these costs rise, landlords pass some of that burden onto tenants.
4. Utility Costs and HOA Fees – If a landlord covers utilities or homeowners’ association fees, an increase in these can lead to higher rent.
5. Profitability – At the end of the day, real estate is an investment, and landlords need to ensure they’re maintaining a reasonable return.

Understanding these factors helps tenants see rent increases from a landlord’s perspective, reducing frustration when those inevitable hikes occur.

Legal Considerations for Rent Increases

While landlords have the right to raise the rent, they can’t do so whenever and however they please—there are legal guidelines that must be followed.

1. Rental Laws Vary by Location

Every city and state has unique laws governing rent increases. Some areas have rent control laws, limiting how much rent can increase in a given period. Always check your local regulations before drafting lease agreements.

2. Proper Notice Requirements

Landlords can’t spring a rent hike on tenants overnight. Most jurisdictions require landlords to give written notice—typically 30 to 90 days—before increasing rent. Including a rent increase notice clause in the lease ensures everyone is on the same page.

3. Frequency of Rent Increases

In many places, landlords can’t raise the rent in the middle of a lease—only when it’s time to renew. Some states also limit how often landlords can increase rent, usually once per lease term.

4. Discrimination and Retaliation

Raising the rent out of retaliation (for example, because a tenant complained about a maintenance issue) or based on discrimination (race, gender, age, etc.) is illegal. Rent increases must align with market trends and property expenses.

By ensuring rent increases remain fair and legal, landlords can avoid disputes and costly legal battles.

Legal Clauses to Include in a Lease Agreement

To prevent misunderstandings and build trust with tenants, landlords should include specific rent increase clauses in the lease. Here are the must-haves:

1. Rent Adjustment Clause

A rent adjustment clause outlines how and when rent increases can happen. It should include:

- The terms under which rent may increase (e.g., annually based on market rates).
- The maximum percentage or amount rent may increase per year.
- A commitment to providing written notice within a set timeframe.

Example:

"The landlord reserves the right to increase rent at the end of each lease term. Any rent adjustments will not exceed 5% per year and will be communicated to the tenant in writing at least 60 days prior to taking effect."

2. Cost-Based Rent Adjustment Clause

If property expenses (like taxes, insurance, or HOA fees) significantly increase, a cost-based adjustment clause allows the landlord to pass on some of those costs to the tenant.

Example:

"If property taxes, insurance costs, or utility fees rise by more than 10% within a lease term, the landlord may adjust the rent accordingly with 60 days’ notice to the tenant."

3. Fair Market Rent Clause

A fair market rent clause ties rent increases to changes in the local rental market rather than an arbitrary number.

Example:

"The rent may be adjusted annually based on the fair market value of comparable properties within a 5-mile radius. Any increase will be subject to a maximum of 7% per year and requires 60 days' prior written notice."

4. Automatic Renewal Clause With Rent Adjustment

If a lease has an automatic renewal policy, it should outline what happens to the rent upon renewal.

Example:

"Upon automatic lease renewal, the rent may increase by up to 4% per year based on local market conditions. The tenant will receive a written notice of any increase no less than 60 days before renewal."

5. Negotiation Clause

Some landlords allow tenants to negotiate small rent increases in exchange for longer lease commitments. This builds tenant loyalty and ensures stable rental income.

Example:

"The tenant may propose adjustments to the rent increase in exchange for a lease extension. Any negotiated change must be agreed upon in writing by both parties."

By including these clauses, landlords can increase rent fairly while maintaining transparency with tenants.

Handling Rent Increases the Right Way

Even with the right legal clauses, the way a landlord approaches rent increases can make or break tenant relationships.

1. Give Plenty of Notice

A sudden rent increase feels like a slap in the face. Giving at least 60–90 days’ notice allows tenants to plan their budgets or decide whether to renew.

2. Justify the Increase

Providing a clear reason—whether it’s higher taxes, market adjustments, or maintenance costs—makes the increase easier to accept. A well-communicated justification builds trust.

3. Offer Incentives for Long-Term Tenants

If you have great tenants, consider offering discounts or smaller increases for lease renewals. A reliable tenant is often more valuable than a higher rent payment.

4. Be Open to Discussion

Not all tenants will blindly accept a rent increase. Allowing for some negotiation can result in a win-win situation—perhaps they agree to a slightly lower increase in exchange for a longer lease commitment.

5. Keep It Professional and Respectful

At the end of the day, rental properties are a business, but that doesn’t mean communication should be cold and impersonal. A friendly and respectful approach can go a long way in keeping good tenants happy.

Final Thoughts

Rent increases don’t have to be a nightmare. With the right legal clauses in your lease and a professional approach, landlords can ensure steady rental income while keeping tenants informed and prepared.

By including key clauses such as rent adjustment, cost-based increases, fair market rent, and negotiation options, landlords can protect themselves legally while maintaining trust with tenants.

If you’re a landlord, take the time to draft a lease that includes clear rent increase policies—it’ll save you headaches down the line. And if you’re a tenant, read your lease carefully so you know exactly what to expect when renewal time rolls around!