Banked rent increases

What is a "banked rent increase"

A landlord may increase a tenant’s rent by the annual allowable amount each year on the tenant’s anniversary date. 

If the landlord does not increase the rent in a year they could have, they may save (or “bank”) the skipped increase.

They may then add the skipped amount to the next rent increase as long as it has been at least 24 full months since the last time they increased the rent.

If it has not been more than 24 months since the last increase, a skipped annual increase is not considered a “banked” increase. In that case, the landlord may only increase the tenant’s rent by the current annual increase amount. This will change the tenant’s anniversary date and a new rent increase may not be imposed for a full 12 months.

Partially banked increases

There is no requirement that the entire banked rent increase be imposed at one time.

When only a portion of an annual allowable increase has been imposed on the tenant’s anniversary date, the remaining portion is banked. 

It may be imposed after 12 full months have elapsed or on any subsequent anniversary date.

Calculating banked increases

Banked increases do not have to be approved by the Rent Board, but must be calculated correctly. They cannot be compounded or prorated. 

To calculate the total banked rent increase, add the percentage amounts for each year banked together. Then multiply the banked percentage amount by the tenant’s current base rent.

There is no limit to the amount of rent increases the landlord can bank (back to April 1, 1982).

For example, suppose a tenant moved in on August 1, 2022 at an initial base rent of $1,300.00 and the landlord wants to increase the tenant’s rent for the first time on August 1, 2025. Since the landlord did not impose the annual allowable rent increases on August 1, 2023 (3.6%) and August 1, 2024 (1.7%), the total amount of banked increases that could be imposed on August 1, 2025 is 5.3% (3.6% + 1.7% = 5.3%). In addition, the landlord is entitled to impose the annual allowable increase in effect on August 1, 2025 (1.4%).

In order to determine the amount of the allowable rent increase, the landlord would add the total percentage of banked rent increases (5.3%) to the annual allowable rent increase in effect on August 1, 2024 (1.4%), which results in a total allowable increase of 6.7% (5.3% banked + 1.4% annual = 6.7%). The landlord would then multiply the tenant’s base rent of $1,300.00 by 6.7% to determine the dollar amount of the allowable rent increase as follows: $1,300.00 x .067 (6.7%) = $87.10.

Thus, the tenant’s new base rent is $1,387.10 ($1,300.00 + $87.10 = $1387.10). The tenant’s anniversary date remains August 1.

Giving notice

Effective July 1, 2022 (or March 1, 2023 for condominiums and buildings with 1-9 residential units), a landlord must obtain a rent increase "license" before imposing annual allowable and/or banked rent increases on a tenant. 

In addition, the landlord must give the tenant a: 

• 30-day written notice of the proposed rent increase
• 90-day written notice if the increase (either by itself or combined with another increase in the same year) is more than 10%

If the notice is mailed, the landlord must give the tenant 5 more days.

The rent increase notice should include the:

• Dollar amount of the increase
• Percentage amount of the increase
• Date the increase will go into effect

The landlord should use the percentage that will be in effect on the date of the increase, not the percentage in effect on the date they serve the notice.

Topic: 503