How to negotiate rental escalations

How to negotiate rental escalations

Private Property South Africa
RE/MAX

Rental increases are, unfortunately, inevitable – even in this downturned market. What many fail to realise is that the tenant does not have to accept whatever percentage upon which the landlord decides. Those who have been reliable tenants may be in a position to negotiate a more manageable escalation.

“The South African rental market is reflecting negative growth for the first time in years, which puts tenants in a good position if they want to negotiate their rental price with their landlord. The record-low interest rates have made it possible for the repayments on a home loan to be lower than the rent one would pay on the same property. Tenants can use this information as leverage when negotiating against a rental increase,” advises Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

However, Goslett warns that a landlord does not need to forgo the increase and may choose not to renew the lease once it has expired. “At the end of the stipulated period within the lease agreement, the rental agent and/or landlord will need to decide two things: firstly, whether to renew and secondly what escalation will apply. It is unlikely that a tenant’s lease will be renewed if they have made late rental payments or have had neighbours or HOAs complain about their behaviour. It is also unlikely that the lease will be renewed if they have made too many unreasonable demands, have been regularly uncooperative, or have caused damage to the property,” he cautions.

On the other hand, tenants who have been reliable and easy to work with will have gained favour with the landlord. Because reliable tenants are difficult to find (especially within the current market), Goslett explains that landlords will want to do what they can to keep these tenants on.

Tenants who hope to establish themselves in a good position with their landlord thereby placing themselves in a good position when it comes to negotiating rental escalations should consider the below recommendations provided by Grant Rea, Rental Specialist at RE/MAX Living:

  1. Paying your rent on time and in full (this may mean consistently paying one day before the rent is due) will ensure that all utilities are paid promptly, which may give you leverage to negotiate a lower rental increase.

  2. Good communication is key and keeping the agent/landlord informed of any necessary maintenance issues and being flexible with access for repairs, will make you stand out as a reasonable tenant.

  3. Be reasonable and understanding that the agent or landlord cannot be obliged to attend to any and every small maintenance item. Sometimes fixing it yourself will aid your cause when negotiating a lower increase.

  4. Keeping the property neat, clean, and presentable goes towards establishing you as a good tenant that the landlord will want to keep on. This can help with your negotiations.

  5. Keep a record of items you have attended to or improved within the property. Remind the agent or landlord of these without trying to coerce a lower increase.

“Those who are nervous about negotiating their rental increase can reach out to a real estate professional who’ll be able to offer advice and guidance on how to approach the landlord. Those who have already decided not to renew the lease should make the most of the record-low interest rates and start the search for a home to purchase instead of rent,” Goslett concludes.

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