A rent increase is one of the most sensitive moments in a tenancy. Done well, it keeps your income in step with costs and the market while keeping a reliable tenant. Done badly, it leads to disputes, vacancies and weeks without rent. This guide sets out how to decide, how to give notice and what the increase means for your tax.

Start with the agreement

The first place to look is the tenancy agreement. Most agreements say whether rent can change during the term and how. Common arrangements are a fixed rent for the whole lease, an annual increase of a stated percentage, or an increase on renewal after written notice. You cannot add an increase that the agreement does not allow: change mid-term needs the tenant's written consent. If your agreement is silent, the safest time to raise rent is at the end of the term, when you agree a new one. For a new tenant, see how to screen tenants and write a tenancy agreement.

Know which rules apply

Residential tenancies below a low rent ceiling in certain areas may fall under the Rent Restriction Act, which controls increases through a tribunal. Business premises are covered by a separate Act that sets a procedure for notices. Most private residential lets are governed by the contract and general law. Because categories overlap, check which regime applies to your property, and ask an advocate if the rent is low or the unit is commercial.

Set a fair figure

Increase rent on evidence, not on impulse:

  1. Check comparable units in the same estate: size, condition, amenities and security.
  2. List your costs. Add land rates, insurance, repairs and agent fees, using your annual income and expense records.
  3. Consider inflation and the tenant's income. A modest annual rise of a few percent is easier to accept than a sudden jump.
  4. Weigh the cost of a vacancy. One empty month can wipe out the gain from a year of higher rent. Use the rental property investment analyser to test it.

Give proper notice

Put the increase in writing, state the new rent, the effective date and the reason in a sentence or two, and deliver it in the way the agreement requires, such as by email and by hand with a signed copy. One to three months' notice is typical, and notice should be at least as long as the rent period. Keep proof of delivery. Offer to discuss: many tenants accept a fair increase when they feel respected, and some will trade a longer lease for a smaller rise.

What the increase means for your tax

Higher rent means higher taxable income. If you pay Monthly Rental Income tax at 7.5% of gross rent, your monthly payment rises in proportion, and you must still file by the 20th of each month. Check whether your annual rent stays within the MRI limits, between KES 288,000 and KES 15,000,000 a year. If the new rent takes you above the upper limit, MRI no longer applies and you move to normal income tax: read MRI or annual tax and try the rental income tax calculator.

If the tenant is a company, they may withhold tax from the new, higher rent, as set out in withholding tax on rent for tenants and agents. For commercial premises, VAT is charged on the rent if you are registered, so the VAT-inclusive figure also changes: see VAT on commercial rent.

Update your records

After the tenant accepts the new rent, update the register and your rent receipts. Use the monthly rental income tracker to show the date the new rent starts, so your returns match. Mistakes here are a frequent cause of mismatches when KRA compares your declared rent with tenant records.

If the tenant refuses

Do not threaten or cut services. Negotiate, offer a phased increase or let the tenancy run to its end and give notice as the agreement allows. Evicting a tenant takes time and cost, as described in unpaid rent and bad debts for landlords. Often the best commercial decision is to accept a smaller increase and keep a tenant who pays on time.

Frequently asked questions

Can I raise rent every year? Only if the agreement or a renewal allows it. Many landlords include a yearly percentage increase in the contract so it is expected.

Does a rent increase need a new agreement? It should be recorded in writing signed by both sides. A short addendum is enough.

Is the increase tax deductible for the tenant? That depends on the tenant. A business tenant can deduct rent as an expense; a private tenant cannot.

What if the tenant's rent is paid by their employer? Raise it in the same way, but also inform the employer or agent so that payment and any tax withholding are adjusted.