Canada: Rent Control In Ontario – A Boom Or Bust For Landlords And Tenants?

Last Updated: February 6 2018
Article by Alan Wainer CA, CPA, CPA (Illinois) and Todd Christenson

As the 2018 calendar year gets underway, it's a good opportunity for a refresher on the significant legislative changes introduced in 2017, which impact tenants and landlords in Ontario.

The expansion of rent control legislation in Ontario, announced in Ontario's Fair Housing Plan, and passed in May 2017 under The Rental Fairness Act (collectively known as the "Rent Control Changes"), implements measures aimed at providing tenants with more price security, and stabilizing the province's long-term rental market.

Regardless of which side of a lease you fall on, you will likely be affected by the Rent Control Changes implemented in Ontario.

Here is a summary of the rental landscape before and after the Rent Control Changes, as well as the implications of the changes for both tenants and landlords.

Rental Landscape Pre-Rent Control Changes

  1. Rental units (including private apartments, condo units and part or all of a house) built or first rented to tenants on or after November 1, 1991 were exempt from rent control.
  2. Tenants of rental units that were not subject to rent control, could face unpredictable and arbitrary rent increases every year, as the increases in rent were not limited by the guidelines published by the Government of Ontario.
  3. Landlords of rental units that were subject to rent control, could apply to the Landlord and Tenant Board for rental increases above the guidelines. Rental increases that exceeded the guidelines were generally granted to landlords to account for extraordinary increases in municipal taxes, utilities, capital expenditures or operating costs.
  4. Landlords were able to evict tenants, without monetary consequence to the landlord, under active leases if the landlord desired to utilize the rental unit for their own, an immediate family member's, or a specified person's, personal use.

Key Changes Post-Rent Control Changes

Rent control guidelines are expanded to apply to most private rental units in Ontario, including those built or first rented to tenants on or after November 1, 1991. Under the Rent Control Changes, landlords cannot increase rent by more than the amount set by the Government of Ontario's rent increase guidelines.

  1. These guidelines do not apply to nursing homes or commercial rental properties, but they do apply to retirement residences.
  2. The Government of Ontario publishes the rent increase guideline by August 31st of each year, which outlines the maximum percentage rent increase applicable for the following year.
    ->The maximum annual rent increase is 1.5% for 2017, and 1.8% for 2018.
    ->The maximum annual rent increase is capped at 2.5% for any given year. The maximum annual rent increase of 2.5% does not include exemptions, which can be provided by the Landlord and Tenant Board, to increase rent beyond the annual cap and are addressed throughout the article.
  3. If a landlord evicts a tenant because they wish to use a rental unit for personal use, the landlord is required to provide compensation to the evicted tenant, equal to one month's rent, or offer another rental unit acceptable to the tenant.
  4. Landlords can no longer apply to the Landlord and Tenant Boards to increase rent above the stated guidelines, due to increases in utility costs. This measure is intended to encourage landlords to make their units more energy efficient.
  5. Ontario's Ministry of Housing is developing a "standard lease agreement", which aims to help tenants and landlords know, and have documented, their rights and responsibilities, while also seeking to reduce disputes between tenants and landlords.
  6. The Rent Control Changes are effective for notices of rent increase, lease renewals, or newly signed leases on or after April 20, 2017.

Implications for Landlords

  1. Landlords can continue to set rent prices for new tenants or units at their sole discretion.
  2. Because annual rent increases may not be sufficient to cover rising operating costs, the Rent Control Changes may result in a reduction in net rental income for landlords who own currently rented units.
  3. There may be a reduction in the construction of new rental buildings, as landlords could have less incentive to do so, given that their future revenue, and hence return on investment, would be limited by the Rent Control Changes.
  4. Landlords can only increase a tenant's rent after the tenant has occupied a unit for a period of not less than 12 months, or 12 months have passed since the last rent increase.
  5. Written notice of an intended rent increase must be provided to a tenant at least 90 days before any such increase becomes effective. The notice must indicate the amount of the increase, and the date on which the increase is effective.
    ->The Landlord and Tenant Board has indicated that only approved formats for these notices may be used and, as such, it is advisable to use the form N1 – Notice of Rent Increase provided by the Landlord and Tenant Board.
  6. Landlords and tenants may agree that the landlord will provide certain services or make improvements to a unit. If such an agreement is made in writing, the landlord and tenant may also agree (in writing), to a rent increase of up to 3% above the published guidelines. If the preceding agreements are made, the landlord is not required to provide 90 day written notice of the rent increase.
    -> An increase in rent that is due to the above agreements, is limited to a list of prescribed services or facilities, such as – providing cable or satellite television, an air conditioner, locker or storage space.
  7. With respect to rental units where care or meal services are provided to tenants (ex: a retirement residence), and the care or meal services are billed to tenants independently of rent, these charges are not subject to the Rent Control Changes.

Implications for Tenants

  1. Tenants renting a unit that was not subject to rent control prior to the Rent Control Changes, and who received a notice of rent increase prior to April 20, 2017, may have their rent increased by any arbitrary amount. Any tenant who received a notice of rent increase after April 20, 2017, is protected by the rent increase limits (1.5% increase for 2017, and 1.8% increase for 2018).
  2. Tenants should carefully review any notices of rent increase to ensure the proposed rent increases do not exceed the allowable percentages. If rent increases exceed the allowable percentages, the amounts paid in excess of the allowable percentages must be refunded by the landlord.
    -> Tenants should request that their landlord refund any excess amount paid.
    -> If the landlord does not refund the excess amount paid, a tenant can file a T1 – Tenant Application for Rebate of Money the Landlord Owes to the Landlord and Tenant Board.
  3. Tenants will now have rent control protections when renting a unit in a newer building (i.e. buildings built after November 1, 1991).
  4. Tenants who continue to rent the same property will benefit from the protection the Rent Control Changes provide. Tenants entering the rental market as new/prospective tenants, or tenants who move to a different rental unit, would not benefit from the Rent Control Changes. In high demand rental markets (ex: Toronto, where vacancy rates are below 3%), bidding wars for rental units may continue, and the Rent Control Changes offer no protection from these bidding wars.
  5. Tenants may have a smaller supply of rental units to choose from, or be subject to higher initial rents, as landlords try to protect their revenue streams and investments.

Although the Rent Control Changes offer protection to existing tenants, these changes may have adverse, and far-reaching, effects on the rental market in Ontario. Some of the adverse effects may include, but are not limited to:

  • A decrease in the supply of rental units in the market, as landlords choose not to construct new buildings, given the limitations put on generating rental revenue;
  • Landlords not renewing leases with existing tenants, so that units can be rented to new tenants, thereby increasing their rental revenues as these new tenants would not be subject to the Rent Control Changes;
  • Landlords choosing not to invest in making improvements or repairs to their units, due to their limitation on recuperating these costs via increased rents;
  • Landlords choosing not to offer units that they, or their immediate family members may require for personal use in the future to the market, due to having to compensate tenants for evicting them for these reasons.

The Rent Control Changes also offer some planning opportunities for developers and landlords. Landlords offering a multitude of services to tenants (retirement residences offering lodging, meals, transportation, recreational services) may choose to unbundle some of the services from the rent charge. To the extent that the fees for these additional services are not included in the tenant's rent, any increases to such fees will not be subject to the Rent Control Changes. Having said this, the unbundling of services would likely have sales tax implications to both the landlord and the tenant, and may end up increasing tenants' out of pocket expenses even further.

Download the full article including a quick-reference table highlighting the significant Rent Control Changes here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Alan Wainer CA, CPA, CPA (Illinois)
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions