29th Jan 2018
In the spring of 2017, the Government of Ontario announced its Fair Housing Plan, a multi-pronged initiative to reign in Ontario’s sky-rocketing housing market and promote affordability.
Amongst the concerns highlighted by the plan was the state of the Ontario rental housing market. The Rental Fairness Act, 2017, received Royal Assent on May 30, 2017, ushering in amendments to the Residential Tenancies Act, 2006, which markedly change the rights and balance of power between landlords and tenants.
As a realtor, you need to be aware of how these new rules may affect your clients.
A Government-prescribed Tenancy Agreement
Landlords will soon be required to use a standard form lease created by the Government of Ontario for all tenancies.
If a landlord does not provide the tenant with the government-prescribed lease within 21 days of the tenant making a written demand for the standard form lease (which the tenant may only do once!), the tenant may withhold a maximum of one month’s rent.
However, if the landlord provides the government-prescribed lease within 30 days of the tenant withholding the rent, or if the tenant refuses to sign the government-issued lease, then the landlord can demand that the tenant pay the landlord the withheld rent.
Not using a lease that conforms with to government-prescribed lease does not render the tenancy void, voidable or unenforceable, but a tenant may use either the landlord’s refusal to provide a government-prescribed lease within 21 days, or the tenant’s decision not to sign the lease, to terminate the tenancy by providing 60 days’ notice ending on the last day of the rental period, within 30 days after the landlord provides the tenant with the government-prescribed lease.
The Ontario government has yet to release the prescribed leases, but once in force, we will review the leases and advise our clients on the provisions.
Rent Control, Eliminating over-the-limit increases for utilities, and Elevators
Effective April 20, 2017, all private rental units in Ontario, including units that were previously exempt, became subject to rent control. In 2017, the annual rent increase guideline was 1.5%. In 2018 the annual rent increase guideline is 1.8%.
Landlords may no longer apply for an “above guideline” rent increase on the basis of an extraordinary increase in the cost of utilities, such as rising electricity costs. The province has confirmed that the intent of this provision is to encourage landlords to utilize its utilities more efficiently, and to be in compliance with Ontario’s climate change plan. Landlords, especially of older buildings with inclusive hydro costs, will need to strategize on how to manage these potentially soaring costs.
Further, landlords will be subject to stricter rules regarding seeking an above guideline rent increase for capital expenditures, such as requiring that any outstanding work orders on elevators in the building be completed before permitting an increase. We would be happy to work with landlords and realtors in how to make a successful application in light of these changes.
New “Personal Use by Landlord” Rules
Removing a tenant to increase your client’s property value just got harder.
The new measures implement strict controls on provision of the Act that permits tenancies to be terminated on the basis that the landlord wishes to use the rental unit for personal use or use by its immediate family members, or for demolition or repair purposes.
Because rent in Ontario remains deregulated between tenancies, it had become commonplace for landlords to claim the personal use exemption, evict the tenant, and then substantially increase the rent and lease the unit out to new tenants.
The Rental Fairness Act, 2017 introduces new restrictions on the right of the landlord to terminate a tenancy on the basis of personal use. The landlord or their immediately family must now use the rental unit for a minimum of one year before putting the unit back on the market (thereby losing one year of rental income). The landlord must pay the tenant one month’s rent as compensation for the termination of the tenancy, or offer the tenant another comparable unit, to the tenant’s satisfaction. This means that a homeowner renting out their house for one year, may only end up with 11 months’ rent. Similar provisions apply to terminating a tenancy for the purpose of demolition or renovation, upon 120 days’ notice, with the tenant having the right to reoccupy the unit after completion of the renovation, at the same rent.
If a landlord advertises or rents out the unit within one year of terminating the tenancy for the above reasons, there is now a presumption of bad faith against the landlord. The tenant may make an application to the Landlord and Tenant Board for the landlord to pay the tenant all or a portion of the rent the tenant has incurred, the tenant’s out of pocket costs related to moving, and an administrative fine of up to $25,000. The onus is on the landlord to rebut the presumption of bad faith in its actions.
Whether or not any of these measures will actually have an effect on the affordability of the rental housing market, or lead to an increase in applications to the Landlord and Tenant Board, or create a less affordable rental market with sky-rocketing inter-vacancy increases in rent to make-up for the strict limitations imposed on landlords, remains to be seen. With more changes in the works, we will continue to monitor the Government’s action plan for any changes that may affect you and your clients.