My tenant wants a rent reduction.

My tenant wants a rent decrease!!!

So your tenant (s) have called you and asked for a rent reduction or they can no longer afford living in the property.  It’s a call as a landlord in today’s difficult climate that you could really do with out. With the budget just announced landlords through out the country are felling the pinch, interest rates to increase they say, 2^nd property, PRTB registration rates increasing, water charges around the corner and now your tenants want a rent reduction!

Are they mad I hear you say? But before telling them they can go to hell its worth looking at the facts and figures.

Is the tenant just jumping on the band wagon and looking for a lower rent with all that’s in the media about property prices or is the tenant in genuine financial difficulties. It’s a hard question to answer and if you question it the tenant will give you all the answers you didn’t want to hear.

Typical case

1 bedroom apartment – 850 rent.

You signed the tenants up 6 months ago on a fixed term lease of 12 months at a rent of 850. The tenants request a rent reduction based on market value in the area and look for a reduction of 100 euro’s per month. 

What do you do?

Evaluate the cost of a rent reduction on the remainder of the contract.

What it will cost you to reduce the rent.

So in the above case its 100 x 6 months (remaining time on lease) = 600 euro.

If you choice not to give the tenants a rent reduction

If you are renting your property through a property manager are there re letting fees involved?

Most property managers (ones that value you as a customer) should give you a discount on the fee they charged you.  The fee should only be half of the original fee as you have paid for a year’s service and the tenant is leaving after half the year.

Re letting fee (average fee 5% of annual rent) 290 euros

Down time on property.

Even though the tenants have agreed to let you show the property to potential tenants while they are still living there it can be difficult to find a new tenant with current tenants in place.

Even if you have clean tenants, potential tenants may think it looks too cluttered with personal belongings the current tenants cooking in the air could even turn them off it.

On average it would mean downtime on your property of approx 2 weeks.

Cost of downtime 400 euro.

You may not secure your current rental value with a new tenant and even a 25 euro deduction on your asking price could reduce it by another 300 euro.

On average the price a property is advertised at and let agreed at is 7% lower than the asking price.

Re- registration with PRTB

This currently costs you 70 euro to register a tenant with the PRTB (private residential tenancy board) which is to increase to 90 euro.

A new PRTB registration is required with every new letting regardless of the amount of time the tenant lived at the property.

So the cost of not agreeing to the tenant’s request of a rent reduction has affected your end of year accounts by over a 1000 euro.

This can be avoided the key to do this is in negotiation.

When you speak with your tenant listen to them and understand why they are requesting a rent reduction. Inform the tenant of your own situation with the rental property and extra costs incurred by you as a landlord. Let them see that you are making an effort and could meet them half way so instead of the full amount. Remember negotiation is the key to your bottom line.

If they won’t agree to a part reduction and will only stay at the full reduction agree but only on the signing of a new 12 month fixed term lease.

So you have agreed to a new 12 month lease and its cost you 600 euro on your bottom line. But you have secured a new 12 month lease and also saved on re letting fees in 6 months if your tenant’s were to move out at the end of the lease.

It’s always best to evaluate the situation before making rash decisions.