Tuesday, 20 March 2018

Raising the Rent in Ontario--Any limits?

So what has really changed, in the year 2018, in the Residential Tenancies Act with respect to increasing the rent for a rental unit covered by the Residential Tenancies Act in Ontario?  

The law still allows a landlord to charge any amount of rent at the commencement of a tenancy.  This means that between tenancies (i.e. a tenant moves out and a new lease is entered into with a new tenant) the landlord may charge any amount of rent that the market will bear.  There is no rent control and nothing stopping the landlord from getting whatever amount of rent possible for the rental unit.  The changes in 2017/18 under the Rental Fairness Act have not changed this part of the law.

How much is the landlord allowed to increase the rent for an existing tenant?  The rules for this have indeed been changed.  There used to be different rules for apartments that were exempted from the Rent Increase Rules  under the Residential Tenancies Act.   You may recall that the law allowed a landlord of a "newer" apartment complex to raise the rent on an annual basis by any percentage that they wished because that rental unit was exempt from rent control.  That WAS indeed the case and it is this law that has dramatically changed.  How was this accomplished?

The Residential Tenancies Act in section 120 limits the amount of an annual rent increase to a government established guideline amount.  The government is required, on an annual basis, to publish the maximum guideline amount that a landlord may increase the rent for each calendar year.  The very highest percentage increase that the Guideline may allow is 2.5%.  This is set out in section 120(2)(2) RTA.

The law limiting rent increases to once every 12 months has not changed and the manner of notification and the need to use the proper Rent Increase Form (Form N1) has also not changed.  The Form itself contains great notes at the end of the page to follow.  A tenant is still entitled to 90 days notice and still has termination rights if they do not wish to pay the rent increase amount.

The exemption to the percentage rent increase that many landlords enjoyed was connected to the age of a rental unit or its use as residential housing.   Until the recent passage of the Rental Fairness Act that exemption was implemented by exempting certain rental units through a complex definition.  That definition was contained in section 6(2) of the Residential Tenancies Act and it provided that section 120, the rent increase provision, did not apply to rental units that were not occupied for any purpose before June 17, 1998, or it was a rental unit no part of which has been previously rented since July 29, 1975, or no part of the building, mobile home park or land lease community was occupied for residential purposes before November 1, 1991.

Section 6(2) RTA operated to basically allow landlords of newer buildings to raise the rent by any percentage amount they wished so long as they gave proper 90 days notice and only did so once a year.   The big big change to the RTA, under the Rental Fairness Act, is that section 6(2) was repealed (i.e. deleted).  

The effect of repealing section 6(2) is that all rental units in Ontario are now subject to the rent increase guideline amount.  No rent may be increased more than by the guideline and in accordance with the other rules.  There are transition rules for rental units that were in the midst of a rent increase when the law was made effective but for the most part, increases now will be subject to the maximum guideline amount.

So what is the guideline in the year 2018?  The maximum amount that rent may be increased is 1.8%.

I have heard arguments that assert that the exemption still applies to rental units in buildings that were subject to the exemption at the time the tenancy was entered into.  This, in my view, is false.  There is no "grandfathering" of the exemption and it doesn't matter if a lease was entered into with the exemption as a part of the terms of the lease.

The new rules make rent increase calculations quite simple and straight forward.  Tenants do not have to worry about massive rent increases through this method as there is a cap even for the government is setting the annual guideline amount.

Michael K. E. Thiele

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