Canada: Fixing A Loophole – B.C. To Restrict Fixed-Term Residential Leases

On October 26, 2017, the provincial government introduced Bill 16, which amends the Residential Tenancy Act (RTA) and other acts. The proposed amendments were introduced in the context of public concern about alleged loopholes in the RTA relating to fixed-term leases and rent control. The government's intention with these changes is to prohibit a practice apparently used by some landlords to bypass rent control by requiring an existing tenant to sign a new lease for the same rental unit at a rent higher than permitted by the legislation. Bill 16 is expected to pass and become law in the near future, fulfilling a campaign pledge from the last provincial election.

FIXED NO MORE

Bill 16 will eliminate the RTA provision that currently permits landlords to require that tenants vacate the rental unit at the end of the fixed term. Consequential changes are made to the provisions setting out when a tenancy agreement ends and when a landlord can seek an order of possession. With these changes, a tenancy agreement can only require a tenant to vacate a rental unit at the end of a fixed term in circumstances to be set by regulation or if the tenancy agreement is a sublease. The government has not yet released the draft regulations, but the Ministry of Municipal Affairs and Housing indicated that such circumstances are expected to include when a landlord rents property during an extended absence for work or travel but has firm plans to return on a particular date. It is unclear if the government will prescribe further exceptions of relevance for landlords of purpose-built residential rental properties.

The effect of the changes is that all fixed-term tenancies will generally be deemed to have renewed on a month-to-month basis at the end of the fixed term unless one of the prescribed circumstances applies, the tenancy agreement is a sublease, or the RTA otherwise allows a party to terminate (for example, for cause). Landlords who want to increase the rent in a fixed-term lease that renews month-to-month may still do so every 12 months in accordance with the RTA and the regulations.

EXISTING LEASES AFFECTED

If passed, the changes will apply retroactively to existing fixed-term leases. Vacate clauses in such leases will cease to have any effect except in the circumstances specified above or if, before October 26, 2017, a landlord had either (a) entered into a lease with a new tenant to begin after the expiry of an existing lease that contains a vacate clause or (b) received an order of possession.

COMMENTARY

The changes introduced by Bill 16 address a long-standing public concern about the inconsistent application of rent control legislation in B.C. Regardless of one's political views on rent control generally, the proposed amendments clarify its application to fixed-term leases and align the RTA with the overall spirit and intent of the rent control legislation.

Landlords are cautioned that if their existing tenancy agreements include a clause requiring a tenant to vacate at the end of a fixed term, those clauses may no longer be enforceable. This includes landlords making use of the Residential Tenancy Branch's standard Residential Tenancy Agreement, which is expected to be updated to reflect the proposed amendments. All landlords should review and update their leasing programs accordingly.

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