For people who like to read the Residential Tenancies Act, they will have come across section 136 of the Residential Tenancies Act. That section provides that: Rent charged one or more years earlier shall be deemed to be lawful rent unless an application has been made within one year after the date that amount was first charged and the lawfulness of the rent charged is in issue in the application. 2006, c. 17, s. 136 (1)
The plain reading of this section suggests that rent increases, taken more than one year ago, that have not been challenged by the tenant in legal proceedings are deemed to be lawful. Presumably, this section should offer some protection to the landlord who called me today. Unfortunately, this is not the case as the Ontario Court of Appeal in Price v. Turnbull's Grove explained that this section does not mean what it at first blush appears to say. In essence, the Court of Appeal explains that where the process of increasing the rent has not been followed (i.e. serving a notice of rent increase), that the rent so charged is not in fact deemed lawful with the passage of time. This means that landlords who impose rent increases, notwithstanding any agreement of a tenant, are exposing themselves to claims for refunds potentially years after the charges were made. It is an interesting question, based on this case law, whether a landlord can cure a past mis-step by following the rent increase process in subsequent years while using the "illegal rent" as the base for the lawful annual guideline rent increase amount.
Ultimately, this case reinforces the fact that the rent increase process is highly technical and needs to be carefully followed to avoid nasty claims for rent refunds from tenants many years after the fact.
Quinn Thiele Mineault Grodzki LLP
Michael K. E. Thiele
310 O'Connor Street, Ottawa, Ontario