Problem Tenants!

[Jason Fang]

I inherited some problem tenants from a rental property I recently purchased.  I closed at the beginning of the month, we talked about bring their rent up to market rents, and then they went on vacation.  Their current rent is about 25% under market.  When they return, they ask us to confirm that we are increasing their rent then they say that we must give them 30 day written notice of any rent increase.  Their previous lease had been terminated by the seller.  Do they have any grounds?  There is no contractual relationship between the tenants and me, correct?  I have a right to charge the market rent, is that correct?  Because they insisted, I lowered my first month's rent as a gesture of goodwill but I feel like I've been cheated just because they are being stubborn.  She comes back from vacation and then tells me she cannot afford an increase of $105?  Really?

Who is in the right here?

[Walt Payne]

@Jason Fang  

The real answer is the dreaded "it depends". Some if not all states consider a tenant living in a property without a lease to be monthly tenants by default. Then there is the question of how much notice your landlord laws (state and/or local) require for a monthly lease. My guess is that the tenants are correct, that is a normal amount of notice. In writing. Another issue to check into is rent control. Is there a legal limit on how much you can raise the rent of an existing tenant? 

They came back from vacation, and then can't afford $105 per month? How obnoxious. Just because they saved up and scheduled that vacation for a year, how dare they say they can't afford to pay you the amount you demand! In other words, there is another side to that.

I disagree with @Curt Davis about not raising rent on an existing tenant. Price increases are part of any profitable business. But so is knowing when and how to do so. 

Raising the rent by $105 per month sounds like a pretty high percentage no matter what they are paying. Even if you can do so legally, do you really think that is a reasonable amount at one time? I would put them on a month to month contracted lease, with your rules, and not raise it the full amount at this time. Find out if they are good tenants, bad tenants, or average. Why screw over potentially good tenants? If they turn out to be good tenants, raise it by a reasonable amount once a year. If they are bad, the month to month lease lets you get them out whenever you decide it is necessary. And if that happens, you can raise the rent to market level.