House rent re-negotiation is a critical process once you have already spent at least a year in your current apartment and are contemplating to extend your stay. It’s important because your landlord would rightfully expect an increase in rental income, however a good negotiation optimises the value of the rental expense for tenants. Here’s a list of step by step guidelines for entering into re-negotiation of rent with your landlord
- Plan in Advance: Yes because no-one wants a last minute surprise. Also, in an adverse case if the negotiation doesn’t go well then you will be left with little choice but to either concede to your landlord’s demands or vacate the place with little time to find a new suitable place to stay. I have seen few of my bachelor friends staying in Oyo apartments for a few days because they didn’t plan in advance. So I would recommend a minimum of one month’s time in hand by when you start discussing your future tenancy.
- To Involve the Broker or Not to? There is no generic answer to this question. It depends upon how much help do you expect from your broker. Mostly, brokers act just as a mediator to get brokerage from the tenants. Also, if you are in direct touch with your landlord then it’s advisable to approach him/her directly. Involving the broker would cost you both- you and your landlord brokerage(minimum of half month’s rent from each). However, some landlords don’t prefer interacting with the tenants directly in which case you are left with no other option but to go through your broker again.
- Set Your Rent Range Beforehand- I’m sure you would have thought through this as how much increase on rent you would like to concede. However, you should also consider the tax benefit you get on rental expenses. So an increase in rent doesn’t necessarily increase your total expenses by the same amount. Increase in net expense after adjusting for the tax benefit would be less than equal to the absolute increase in rent.
- No-Brokerage Benefit? I’ve heard some landlords putting on the argument that by continuing your stay you will be saving on the brokerage amount and hence a slightly higher rent should be looked after adjusting for the brokerage benefit. It’s true that tenants save brokerage by extending their stay but it should also be noted that landlords also save brokerage which they pay to their brokers. Also by continuing, you are doing favour to your landlord for the amount equivalent to the lost rent for the period during which the apartment will be vacant in case you choose to vacate as usually there is at least one week’s gap between the two tenants occupancy. So you should not concede to the brokerage saving argument and if put through, should counter with these counter arguments.
- Do a Research on Prevailing Market Rate- The more information you have about local market rate, the more advantage you hold over your counterpart. If the prevailing rate is higher than your rent then wisely stay silent about it. In not, then bring this point on your negotiation table. Also, while doing market rate research don’t just believe the rate mentioned on rental apartment websites as they are inflated and the actual deal is done after negotiation. I believe the best way to get the market rate is to talk to your neighbours, other tenants in your circle.
- Highlight Your Tenancy- Assuming you have been a decent tenant throughout your tenancy period, you must highlight this to your landlord. Trust me, this becomes a big factor for landlords while deciding on granting extension of tenancy. Every landlord prefers a tried and tested tenant over any uncertainty.
- Ask for Improved Furnishing- This comes handy when the landlord is not accepting your proposal and is insisting a higher rent. In this scenario you can ask for a better furnishing or some additional work done in the apartment. The idea is to never concede anything without any offset benefit.
- Try for a Round Number- For example if you have been paying 29k per month, then propose paying 30k per month instead of negotiating around percentage increase. A round number suits both tenants and landlords. However, this doesn’t work if your rent is in the lower range- let’s say if your rent is 9k then it doesn’t make sense to propose 10k as its more than 10% increase!
I think I have covered most of the basic checks before going for rent re-negotiation. However each negotiation has its own merit and there is no harm in improvisation. Meanwhile I would encourage you to post your apartment review by rating them on specific parameters on www.rentbaba.com