Can I raise rent that has been to low for a long time. Canton, OH

Question

I have a friend that owns a number of single family homes she rents very cheap. My friend is going through a divorce and has asked me to help manage her properties. The first thing I noticed is that she is renting her houses out way to cheap compared to similar rentals in the area. For instance, one home is a one bedroom, one bath house on half an acre that she rents for $400/mo all utilities included except electric. Similar homes rent for $550 to $650.

All of her properties are rented and the people have been there for a long time. None of her properties have leases and she has never required a security deposit.

My questions are:

1) Can I write up a lease with a rent increase to the market standards? Is there a cap on how much I can increase the rent if they never had a lease to being with?

2) Can I include in the new lease agreement a security deposit? How about a last months rent?

All of the properties are located in the area of Canton Ohio. Any advice would be very much appreciated as I am new to this line of work. I'm been trying to do some research about this, but am having a hard time finding anything helpful, because of the renters never having a lease to being with.

Thank you to all who respond :)

Bob Collett · Answer

@Jason Campbell ... Brandon is correct. You are not allowed to do any property management in Ohio without a real estate license. Moreover, you are not allowed to write a lease unless you are an attorney. This is true even for friends. The only exception is if you are a regular employee of the owner.Nonetheless, it is very kind of you to try to help and many non-licensed individuals do it anyway. The fine is up to $1000 per day if someone gets mad enough to throw the book at you. This would probably only happen if something really bad happened... such as a discrimination lawsuit or excessive damage cause by something you did or did not you.Also, in Ohio a property management agreement must be in writing with a start date and end date.All rents must be deposited into a state audited trust account.Good luck.

Jason Campbell · Answer

Thanks for the advice. I'll take another look at the landlord-tenant laws in Ohio. I'm not taking any money from her. I'm just trying to help her out the best I can, as she is stressed out with everything going on in her life right now.

Brandon Battle · Answer

Jason Campbell,first off all let me say I am sorry she is going through a tough time with her divorce and I hope it works out for the best.Second,you must be careful not to break the law by accepting money from her for managing her properties unless you are currently a licensed real estate agent.Most states including yours probably demands a license and business taxes to be paid for property management services provided and you can get into serious trouble if you are taking money from her while being unlicensed and uninsured.You need to familiarize yourself with all the laws and regulations of property management (assuming your are licensed at this time) to safely and effectively manage the tenants and get the full market rent she desires.Rents can be increased with proper notice as well as security deposits.The law will probably specify 60 days notice of rent increases and deposit collections to give them a chance to move out to a new apt to avoid the increase.Before you go do that however,take a good look at your local competition and see what they offer for that higher price ( new appliances,paint,carpeting,etc.) and decide if your client needs to spend thousands of dollars on upgrades and remodeling costs in order to compete with the other landlords at that price point.

Penny Clark · Answer

@Jason Campbell, I would consult the laws of your state (just google landlord-tenant law, State of Ohio) first to better understand what options are available to your friend. In the meantime, ask to see a copy of the rental agreement. I am not familiar with the laws in your state, but if the tenants are on a month to month, your friend may be able to issue them notice to increase the rent or meet with them to sign a new lease with new increase. Before issuing any increases, check what the legal increase limit is in your state.You will have to check with an attorney to see about acquiring a security deposit. At the very least, your friend should with the proper notice and paperwork be able to gradually increase the rent to market rate. If they are good tenants and have been paying their rent on time, you want to do this gradually if you want to retain them. Good luck!