Some useful advice for both landlords and  tenants.

Over the past two years, housing rental costs have almost doubled. An average home that was renting for $2,000 in 2020 is now fetching $4,000. Many landlords are asking if they can increase their rent to market value or stick to the rent increase guideline. The answer is it depends.

Jaquline rented a newly built condo in 2021 for $1750. Her monthly rental payment after the first year ballooned to $2650. That’s a provocative 51.42 percent when Ontario’s rent increase guideline is only 1.8 percent. In November 2018, the Ontario government ditched rental control on newly built apartments. This is outlined in Bill 57’s new rent control legislation. Without rent control, landlords can raise rent above the rental guideline. Rental accommodations, such as newly built homes, condos, and basement apartments, built after November 2018, are not bound by rent control. It is not a requisite for landlords to inform tenants in the lease agreement that the unit is exempted from rent control. However, it is advisable that this information is disclosed to the tenant in the standard lease agreement.

To increase rent, a landlord must give at least 90 days written notice of the rental increase before it is effective. Rent can only be increased once in a 12-month period from the last rental increase or from the start of tenancy. Landlords must use the prescribed form, N2, Notice of Rent Increase. This is available on Tribunals Ontario website, https://tribunalsontario.ca/ltb. Landlords do not need permission from the Rental Tribunal to increase rent. The notice can be served by mail, in person, sliding it under the door or by placing in the mailbox. Now, notices can be served by email. Written consent from the tenant is key.

Landlords should keep any evidence if their rental was built after November 2018. Building permits, applications and plans, occupancy permits, new home warranty documents and contractor’s invoices are reasonable. In addition, keep before and after pictures of the rental space.  These documents are proof that the rental is exempted from the Provincial rent increase guidelines.

If the rental property was occupied before November 2018, then, the old rule applies. Owners can increase rent subject to the guidelines. Despite that, a landlord and a tenant can mutually agree on a rental increase above the guideline.  It is advisable that both parties sign an N10 (Agreement to increase the rent above the Guideline). Once the tenant agrees to the rental increase, the tenant cannot revert to the old rent. Landlords cannot pressure tenants for a rental increase above the guideline. Tenants can request a hearing with the Rental Tribunal. 

Many tenants who are living in a rental before November 2018 are paying below market rent. Some landlords are unhappy with that deal. They are scrutinizing ways to evict tenants. One of the easiest ways to evict a tenant is because of late payments. As a tenant, avoid late payments. Record keeping is important. Tenants who pay rent in cash should always ask for a receipt. The receipt must have the date the rent was paid.  

Landlords can evict a tenant for many other reasons. Some are nonpayment of rent, damaging the property, overcrowding or for the owner’s or a family member or a buyer personal use. If the owner wants the rental accommodation for personal use or for a family member or a buyer, the owner must compensate the tenant with a minimum of one month’s rent. The landlord, purchaser or family member must intend to live in that rental unit for at least one year. If the landlord acted in bad faith; advertises or re-rents the accommodation, they can face a fine of $50,000.

When a tenant gives last month’s deposit, their landlord must pay interest yearly on that deposit. The interest is calculated based on the same interest rate increase of that year’s rental guideline. Along with the notice for rental increase, landlords should ask for a written acknowledgement from the tenant that the interest on the last month’s deposit shall be credited towards topping up the last month’s rent. In the event that the landlord chooses not to increase rent, the landlord must credit the tenant for the interest portion on the last month’s rent. This is critical because in the event of a hearing, the Tribunal will ask if interest on the deposit was paid. If it is not paid, then that would be considered as a negative strike against the landlord.

My advice to tenants: know your rights. The Tribunal Ontario website is informative. Consider rental as a way to transition to ownership. To landlords, look at the bigger picture. A rental property might be under performing but your tenants are awesome. Over the years, property value goes up and the remaining mortgage erodes. As the saying goes, “If you have more roof, then prepare to shovel more snow.”