Can I increase rent during a fixed-term tenancy?

Only if the tenancy agreement specifically includes a rent review clause that allows increases during the fixed term. Without such a clause, rent cannot be increased until the fixed term ends. Even with a clause, the 12-month and 60-day notice rules still apply.

What happens if I forget to give the full 60 days notice?

If you give less than 60 days notice, the rent increase is not valid on the date specified. The increase can only take effect 60 days from when the notice was actually given. It is best to give notice early to avoid complications.

Can tenants refuse to pay an increased rent?

If the rent increase is lawful and proper notice was given, tenants cannot simply refuse to pay. If they continue paying the old amount, they would be in arrears. However, they can apply to the Tenancy Tribunal if they believe the increase takes the rent substantially above market rate.

Should I increase rent if my tenant is struggling financially?

This is a judgment call. Consider the tenant's overall value, the risk of them leaving or falling into arrears, and your own financial needs. A smaller increase or delayed increase may be appropriate, but do not let compassion lead to chronic under-renting that threatens your investment viability.

Rent Reviews: Timing and Approach for NZ Landlords

Regular rent reviews are essential for maintaining the financial viability of your investment property. However, getting the timing and approach right is crucial for both maximising returns and keeping quality tenants.

Many landlords are hesitant to raise rents, fearing they will lose good tenants. Others increase rent without proper research, risking vacancies when tenants move to better-value properties. The key is finding the balance: fair market rent that keeps your investment performing while retaining reliable tenants.

Legal Requirements for Rent Reviews

Under the Residential Tenancies Act 1986, there are strict rules about when and how you can increase rent on a residential tenancy.

Key Legal Requirements:

Frequency: Rent can only be increased once every 12 months
Notice period: At least 60 days written notice required
Form: Must use the prescribed form or include all required information
Fixed-term tenancies: Rent cannot be increased during a fixed term unless the agreement specifically allows it

The notice must state the current rent, the new rent amount, the date the increase takes effect, and how payment should be made. Using Tenancy Services' official form ensures you meet all requirements.

When to Review Rent

Annual Reviews

Most landlords conduct rent reviews annually, typically around the anniversary of the tenancy starting or when a fixed-term agreement is up for renewal. This regular schedule helps ensure your rent keeps pace with market conditions and rising costs.

Market Triggers

Beyond annual reviews, consider reviewing rent when significant market changes occur. If rents in your area have risen substantially, you may be leaving money on the table. Conversely, if the market has softened, attempting a large increase could push tenants to move.

After Property Improvements

If you have made significant upgrades to the property, such as installing a heat pump, upgrading the kitchen, or adding insulation beyond minimum requirements, a rent review may be justified. Document the improvements and how they benefit the tenant.

Researching Market Rent

Before setting a new rent figure, thorough research is essential. You need to understand what comparable properties in your area are renting for.

Research Methods:

☐ Check Trade Me Property for similar listings in your suburb
☐ Review the Tenancy Services market rent tool
☐ Ask local property managers about current market rates
☐ Compare properties with similar bedrooms, condition, and features
☐ Consider location factors like proximity to transport and schools

Remember that advertised rents are asking prices, not necessarily achieved rents. Properties may sit vacant or landlords may negotiate lower. Your property manager, if you have one, can provide valuable insight into actual market rents.

Deciding on the Increase Amount

Once you know the market rate, you need to decide how much to increase. This is not always as simple as jumping straight to market rent.

Consider Your Current Tenants

A reliable, long-term tenant who pays on time and looks after your property has significant value. The cost of vacancy, re-letting fees, and the risk of getting a less reliable tenant should factor into your decision. Sometimes a smaller increase to retain a great tenant is the smarter financial choice.

Gradual Increases vs Large Jumps

If your rent has fallen well below market, consider whether to make one large adjustment or several smaller increases over time. A sudden $100 per week increase may shock tenants into leaving, while $30 to $40 increases annually may be more palatable.

Factor in Your Costs

Your costs are rising too. Rates, insurance, maintenance, and mortgage interest all increase over time. A rent increase that keeps pace with your cost increases is reasonable and necessary for your investment to remain viable.

Communicating the Increase

How you communicate a rent increase matters as much as the amount. Poor communication can damage tenant relationships and prompt good tenants to leave.

Communication Best Practices:

Give advance warning: Mention the upcoming review before sending formal notice
Be transparent: Explain that the increase reflects market conditions and rising costs
Be respectful: Acknowledge the impact on the tenant's budget
Highlight value: Remind tenants of recent maintenance or improvements
Follow up: Ensure the formal notice is received and understood

A brief conversation or email before the formal notice gives tenants time to process the news and shows respect for the relationship. Some tenants may negotiate or ask questions; be prepared to explain your reasoning calmly.

What If Tenants Push Back?

Tenants may express concern or ask for a smaller increase. Listen to their perspective; they may have valid points about property condition or personal circumstances. You are not obligated to negotiate, but flexibility can sometimes preserve a valuable tenancy.

If a tenant believes the increase is excessive, they can apply to the Tenancy Tribunal to have the rent reviewed. The Tribunal will consider whether the rent is substantially above market rent for comparable properties. Having solid research to support your figure protects you in this scenario.

The Bottom Line

Regular rent reviews are part of responsible property investment. They ensure your rental income keeps pace with the market and your rising costs. The key is approaching reviews strategically: research the market thoroughly, consider the value of your current tenant, communicate respectfully, and always follow the legal requirements.

A well-handled rent review maintains your investment returns while preserving positive tenant relationships. Skip the reviews, and you risk your property underperforming. Handle them poorly, and you risk losing good tenants. Get it right, and everyone benefits.