Banked rent increases

A landlord may raise the rent once every 12 months by the allowed annual increase. The Rent Board sets this amount each year, and it changes on March 1.

When a landlord raises the rent, the date the increase takes effect is called the tenant’s anniversary date.

What is a banked increase?

If a landlord does not impose an allowed rent increase, they may be able to “bank” it and use it later.

A skipped increase is only banked if at least 24 full months pass without any rent increase. If less than 24 months pass, the skipped increase is lost and cannot be imposed at a later date.

Imposing a banked increase

Once an increase is properly banked, it does not expire. A landlord may impose it on a future anniversary date, or at another time when they are allowed to raise the rent (as long as at least 12 months have passed since the last increase). This may create a new anniversary date.

A landlord may also combine a banked increase with a regular annual increase.

Partial increases

A landlord does not have to impose the maximum allowed increase.

If only part of the allowable increase is used, the rest is banked. The remaining portion may be imposed at a later time, after at least 12 months have passed, or on a future anniversary date.

Rules about banked increases

• Banking has only been allowed since April 1, 1982. Skipped increases before that date cannot be banked
• There is no limit on how much can be banked
• Banked increases do not expire during a tenancy
• New owners may use banked increases from prior owners
• Banked increases do not carry over to a new tenant

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.

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
• Which part of the increase is banked

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