Rent Increases: Is my Increase Excessive?

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You were 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.

Start with our Factsheet Rent Increases and Reductions to see whether your landlord has followed the correct process and is allowed to increase the rent. If they have, this factsheet helps you work out whether the size of the increase is excessive or not, and gives you a starting point to negotiate for a fairer amount.

Section 68 of the Residential Tenancies Act 1997 provides a formula to determine who bears the onus of proof when an increase is being reviewed by the Tribunal - ie, whether the landlord has to prove that the increase is not excessive, or whether you have to prove it is excessive.

It also gives a list of factors that the Tribunal must consider when deciding whether an increase is fair, such as the state of repair of the premises and the rent for comparable premises (see section 68(3) below).

The law does not set a limit for rent increases. It does provide you with a figure to use in negotiations with your landlord/agent, and factors for the Tribunal to look at if negotiations are unsuccessful and you apply for a rent review. The formula increase is what your new rent would be if your property was average*, and it
tells you whether your landlord is seeking a larger or smaller percentage increase than the average landlord in Canberra. However, your property may not be average. The factors under section 68(3) may mean that your rent should increase by less or more than the average figure.

Section 68 Factors 68
(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.
 

A relevant factor under section 68(3)(i) is whether you are forced to pay rent through a rent-card that charges you a fee. Also, see whether there are any reasons for you to have the rent reduced under section 71 (See Factsheet Rent Increases and Reductions).

Section 68 Formula
Our website has a Rent Increase Calculator which applies the section 68 formula automatically. It is in the online version of this Tenancy Factsheet. Go to Renting Advice at www.tenantsact.org.au 

Apply the Section 68 Formula Manually
68 Guidelines 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).
(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.

CPI figures
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

2006
June Quarter:           157.1
September Quarter   157.8
December Quarter    159.6

2007
March Quarter:         162.4
June Quarter:           165.6
September Quarter:  167.5
December Quarter:   170.7

2008
March Quarter:         174.6
June Quarter :          177.8
September               180.7
December                185.1

2009
March Quarter          188.1
June Quarter            189.8
September Quarter   191.3
December Quarter    192.9

2010
March Quarter          195.7
June Quarter            197.5
September               199.4
December                202.1

2011
March                      205.9

The June 2011 figure is due for release on 27 July 2011.

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 April quarter figures are not available until the end of July.

An Example Calculation
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) Your tenancy agreement started in April 2010 at a rent of $400/week. In March 2011, you receive notice of a rent increase to take effect in May 2011.
The most recent CPI figure available when you receive the notice is for the December 2010 quarter. Because the increase is after 12 months, you compare the December 2010 CPI figure (202.1) to the figure 12 months earlier, in December 2009 (192.9).

Calculate the difference in CPI figures:
202.1 – 192.9 = 9.2

Express the difference as a % of the initial CPI:
(9.2 ÷ 192.9) x 100 = 4.76%

Apply this to the current rent:
(4.76 ÷ 100) x $400 = $19.04

Work out 20% of that increase:
(20 ÷ 100) x $19.04 = $3.80.

Add both dollar amounts together:
$19.04 + $3.80 = $22.84

If the proposed increase is more than $22.84 (or the new rent is more than $422.84) the landlord or agent must be able to convince the Tribunal why it should be
permitted. The formula increase is a useful starting point for negotiations.

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.

 

Information supplied courtesy of the Tenants Union of ACT

Further information and advice for ACT tenants can be sourced from

www.tenantsact.org.au