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Rent Increases:Is my Increase Excessive?
** last updated: 28/07/10 ** Download a .pdf version of this tipsheet
You have been given the correct notice but the increase is way too high…..
There is something you can do…….
Apply the formula……. try negotiation or have it reviewed
Our Tips Sheet “Rent — Increases and Reductions” details the processes relating to increases, this sheet provides you with the framework for determining whether your increase is excessive and a starting point for negotiations for a fairer amount.
Section 68 of the Residential Tenancies Act 1997 is used by the ACT Civil and Administrative Tribunal to determine who bears the onus of proof when an increase is being reviewed - ie, whether the landlord has to prove that the increase is not excessive, or whether you have to provide it is excessive.
It also states the factors the Tribunal must consider when deciding if an increase is fair.
The law does not set a limit for increases. It does provide you with a figure to use in negotiations with your landlord/agent.
68 Guideline for orders (1) The tribunal must allow a rental rate increase that is in accordance with the standard residential tenancy terms unless the increase is excessive. (2) For subsection (1)— (a) unless the tenant satisfies the tribunal otherwise, a rental rate increase is not excessive if it is less than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later); and (b) unless the lessor satisfies the tribunal otherwise, a rental rate increase is excessive if it is more than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later). (3) If a tenant or lessor proposes that a rental rate increase is or is not excessive, the tribunal, in considering whether it is satisfied about the proposal, must consider the following matters: (a) the rental rate before the proposed increase; (b) if the lessor previously increased the rental rate while the relevant tenant was tenant— (i) the amount of the last increase before the proposed increase; and (ii) the period since that increase; (c) outgoings or costs of the lessor in relation to the premises; (d) services provided by the lessor to the tenant; (e) the value of fixtures and goods supplied by the lessor as part of the tenancy; (f) the state of repair of the premises; (g) rental rates for comparable premises; (h) the value of any work performed or improvements carried out by the tenant with the lessor’s consent; (i) any other matter the tribunal considers relevant. (4) If the tribunal considers a proposed rental rate increase is excessive but a lesser increase would not be, it may disallow so much of the increase as is excessive. (5) In subsection (2):
index number means the rents component of the housing group of the Consumer Price Index for Canberra published from time to time by the Australian statistician.
Listed below are the relevant CPI figures from the Australian Bureau of Statistics, as well as an example of how to use the formula.
CPI figures
The figures below are sourced from the Consumer Price Index Report, produced quarterly by the Australian Bureau of Statistics.
The complete list of CPI figures for ACT dwelling rents can be found in TABLE 13. CPI: Group, Sub-group and Expenditure Class, Index Numbers by Capital City
The index numbers for ACT dwelling rents:
Upcoming release dates for CPI rates:
Explanation of quarters.
Quarters relate to the 3 preceding months, as follows:
NOTE: The figures are released by the ABS at the end of the month following the end of the quarter, eg June quarter figures are not available until the end of July.
How to find your index number:
For the initial CPI (this applies to the time when the rent was last increased or the tenancy began), find the relevant quarter according to the chart. So for example, if your last rent increase was in May 2008 (or the tenancy started then), refer to the June 2008 CPI. For the current CPI, you need to use the most current available figures. This can lead to some confusion because the figures that cover the current month might not yet be available. So for example, if the increase is to take effect in October 2009, but you receive your 8 weeks notice in August 2009, the most recent available figure at that time will be for the previous quarter—June 2009.
Using the CPI figures and the RTA formula:
The onus of proof is determined by applying the formula in Section 68(2): …unless the lessor satisfies the Tribunal otherwise, a rental rate increase is excessive if it is more than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later)…
An example: A tenancy agreement began in April 2008 (applicable CPI: June 2008 = 177.8), rent was $380/week.
A rent increase notice is received in March 2009 for an increase in to take effect in May (the most current CPI: Dec 2008 = 185.1)
Calculate the difference in the index numbers (i.e. the CPI rates): 185.1 - 177.8 = 7.3
To use the difference, express it as a percentage of the initial CPI:
There has been a 4.10% increase in the index number over the period.
Apply this to the existing rent: 4.10% x $380 = $15.60
Finally, add 20% : 20% x $15.60 = $3.10 $15.60 + $3.10= $18.70
If the increase is over $18.70, the landlord or agent must be able to convince the Tribunal why it should be permitted. This figure is useful as a starting point for negotiations about increases.
Note that the Tribunal must also consider the issues listed in Section 68 such as rent for comparable properties and the state of repair of the property.
This is a summary of your rights and
responsibilities.
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