Rent increases are not something that landlords can freely decide. If the current rent becomes unreasonable due to changes in prices, tax burden, building prices, neighborhood market prices, etc., the landlord can request an increase. However, the tenant also has the right to request a reduction.
The important thing is whether to treat the rent increase as a "request," "notice," or "forced." Legally, this is a request for increase or decrease in rent based on Article 32 of the Land and House Lease Act, and the appropriate amount will ultimately be determined by agreement or judicial decision.
In this article, we will discuss the reasons why rent increases are more likely to be approved, cases in which they are more likely to be seen as unreasonable, what tenants should do, and how landlords and management companies should proceed to avoid disputes.
What determines the rent?
Rent is not determined solely by the amount requested by the landlord. This is determined by whether a tenant can be found in the market, whether the property is reasonable compared to similar properties in the surrounding area, and whether the building's condition and facilities are worth the rent.
| Elements | Impact on rent | Examples of confirmation documents |
|---|---|---|
| Location | Station distance, living convenience, school district, redevelopment | Surrounding recruitment examples, contract examples |
| Building | Age, structure, earthquake resistance, management status | Building diagnosis, repair history |
| Equipment | Air conditioner, water heater, delivery box, internet | Equipment update record |
| Expenses | Property taxes, insurance premiums, management fees, repair costs | Tax notices, repair estimates |
| Market conditions | Prices, supply and demand, competing properties | Portal listing, management company assessment |
In real estate appraisal, methods such as cost estimation method and rental case comparison method are used. For general rental housing, the practical starting point is often a comparison with similar properties in the neighborhood.
Concept of increase/decrease request stipulated in Article 32 of the Land and Building Lease Act
Article 32 of the Land and House Lease Act stipulates that when the rent of a building becomes inappropriate due to the following circumstances, the parties concerned can request an increase or decrease in the rent going forward.
- Increase or decrease in taxes and other burdens on land and buildings
- Increase or decrease in land/building prices
- Other changes in economic circumstances
- Comparison with rents of similar buildings in the vicinity
In other words, whether or not a price increase is approved is determined not by "because the landlord wants to raise it" but by "whether the current rent is objectively unreasonable." Additionally, if there is a special agreement that does not increase the rent for a certain period of time, that special agreement will take precedence.
Cases where price increases are likely to be approved
Surrounding market prices are clearly rising
If the current rent is clearly lower than properties that are within walking distance of the same station, have the same floor plan, and are in the same age range, it will be more likely to make sense to raise the price to bring it closer to the market price. However, the asking rent may be higher than the contracted rent, so it is not enough to simply collect high-priced examples from portal sites.
Tax burden and maintenance costs are increasing
Property taxes, city planning taxes, fire insurance premiums, management outsourcing fees, and repair costs may increase, and rent adjustments may be necessary to maintain the building. The landlord needs to be able to explain the relationship between the fact of the increased burden and the amount of price increase they are offering.
There will be equipment updates and building value improvements.
If the convenience for tenants or the value of the building increases due to renovations to common areas, addition of security equipment, installation of delivery boxes, insulation renovations, updating of hot water supply equipment, etc., this may be grounds for rent revision. However, normal maintenance and repairs should be explained separately from value-enhancing investments.
Cases that are likely to be seen as unfair
If the reason for the price increase is vague, the amount offered is extreme, or the explanation is one-sided, it will be difficult to convince the tenant.
| Case | Problem |
|---|---|
| Just wants to increase profits | Does not explain objective incommensurability |
| Want to compensate for the landlord's investment failure | It appears to be shifting management risk to the borrower |
| Market data is biased | Cases of high-priced offers alone are weak evidence |
| Price increases are too steep | Difficult to build consensus, increasing risk of eviction |
| Threatening to leave | Easily leads to conflict and damages relationships of trust |
The justification for a rent increase can be seen in both the reason and the amount. Even if there is a reason, if the amount is excessive, the full amount may not be reasonable.
What to do when a tenant receives a notification
Tenants do not have to jump to conclusions even after receiving notice of a price increase. First, we will proceed with recording and confirming the basis.
1. Check the contract
Check the rent revision clause, renewal clause, whether it is a regular or fixed-term lease, and whether there is a special agreement for deferring the rent. In the case of a fixed-term rental contract, a new rent may be presented as a condition for renewing the contract when the contract expires, so the arrangement is different from that of a regular rental contract.
2. Ask for the reason for the price increase in writing
If you only communicate over the phone, your understanding will be different later. Please request the reason, amount, applicable start date, and supporting materials by email or in writing.
3. Check surrounding market prices
Check multiple properties with the same conditions. Choose properties that are close to the station, building age, area, facilities, number of floors, and direction, and avoid focusing on extremely expensive or low-priced properties.
4. Consider alternatives
Discussions will progress more easily if you have multiple options for negotiation, such as maintaining the current rent, increasing the rent partially, increasing the rent in stages, adjusting renewal fees, and combining it with equipment repairs.
Materials that should be prepared by the landlord/management company
If the landlord wants to revise the rent, they will need to provide an explanation that the tenant can understand. It will be easier for the management company to prevent disputes if they gather the following materials before providing guidance.
| Materials | Purpose |
|---|---|
| List of rents for similar properties in the surrounding area | Indicating the deviation from the market price |
| Trends in fixed asset taxes, insurance premiums, and management costs | Indicates increased burden |
| Repair history and future repair plans | Showing the need for building maintenance |
| History of current rent | Shows status of long-term deferral |
| Comparison table of proposed revisions | Showing options for lump-sum and step-by-step increases |
How you communicate is also important. Rather than saying, It's been decided,'' we should move forward with an attitude ofWe would like to discuss revisions based on this basis.''
What happens if we can't agree
If no agreement can be reached regarding an increase in the amount, the tenant is only required to pay the amount they deem appropriate until the judgment is finalized. However, if an increase is later determined to be warranted, you may be required to pay the shortfall plus interest.
For this reason, it is important for tenants to continue paying rent and keep payment records. Landlords must be careful not to confuse delinquent payments with disputes over the amount of rent, and not to proceed with emotional demands or demands for eviction.
Rent revisions should be determined by taking into account the risk of eviction
For landlords, increasing rent increases revenue. However, if good tenants move out due to price increases, you will incur vacancy periods, restoration costs, advertising costs, and brokerage fees. An increase of several thousand yen to 10,000 yen per month can result in a worsening of the annual income and expenditure.
Rent revisions should be viewed not only in terms of monthly rent, but also in conjunction with occupancy rates, recruitment competitiveness, and long-term repair plans. Especially for long-term tenants who have no arrears and are living carefully, it is worth considering gradual adjustments without insisting on a full price revision.
I also want to read
- What if the rent increases due to renewal? Conditions that can be refused by the tenant and negotiation procedures
- What is the duty of care for rental properties? Violation risks and practical countermeasures explained by management professionals
- Importance of integrated management and intermediary operation to improve occupancy rate
INA&Associates' philosophy
Rent revision is a theme that easily reveals the relationship of trust between landlords and tenants. Even if a price increase has a legitimate reason, a lack of explanation can lead to mistrust. On the other hand, on the tenant side, it will be difficult to build consensus if the tenant simply refuses without checking the grounds.
We place importance on treating rent revisions not as a matter of winning or losing, but as an adjustment to the conditions that will allow us to maintain the building and continue living there with peace of mind. Looking for a compromise that satisfies the landlord, tenant, and management company from a long-term perspective will lead to stable rental management.
FAQ
Q. Is there a limit to the rent increase?
According to the law, there is no fixed upper limit on the percentage. However, it will be difficult to accept an amount that is disproportionate compared to the surrounding market price or economic circumstances. The reason and the appropriateness of the amount are important.
Q. If I refuse the price increase, can I renew my contract?
In a normal rental contract, a valid reason is required for refusing renewal. Just because you don't agree with the price increase doesn't mean you can't renew immediately. However, this varies depending on individual circumstances, so if there is a large dispute, please consult an expert.
Q. Can I request a reduction in rent?
can. Article 32 of the Land and House Lease Act allows not only increases but also requests for decreases. Possible grounds include a decline in surrounding market prices, deterioration of equipment, and a decline in building value.
Q. How much notice should the landlord give?
In addition to the legal uniform period, it is important that the contract stipulates and that there is a sufficient practical consultation period. Unilateral notification immediately before renewal is likely to cause trouble, so it is advisable to notify the applicant as soon as possible along with supporting documents.
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