Most Landlords that I have had the pleasure of serving have been completely unaware that rents can be raised every year without the approval of the Landlord & Tenant Board. The Residential Tenancies Act, 2006 gives this power to landlords through section 116. This provision allows for a rent increase after 90 days on proper notice. The notice form can be found here. If your tenant is under a one –year lease, then notice will have to be served at least 90 days before the end of the lease. If your tenant is on a month-to-month tenancy, then your tenant has to be served at least 90 days before the end of the rental period. For example, if rent is due on the 1st of August, then the notice has to be sent at least 90 days before July 31st. A pre-condition to raising the rent is that there has been no rent increases for the previous twelve-month period.

Rent increases are subject to government control. Guidelines are published by the Government of Ontario and are determined by the Ministry of Municipal Affairs and Housing by using the Consumer Price Index for Ontario in any given year. The current guideline increase for 2014 is 0.8%. Just recently, the Province of Ontario capped the guideline increase for 2015 to 1.6%. In any year, there is a 2.5% cap on rents, regardless of what the Consumer Price Index actually is.

The way that the Province of Ontario determines what the Guideline Increase is based upon section 120(2) of the Residential Tenancies Act, 2006.  It is the percentage change from year to year in the Consumer Price Index for Ontario as reported by Statistics Canada, averaged over the 12-month period (from June 1 to May 31), and rounded to the first decimal point.  The historical high-point of the Guideline Increase was 8% in the mid-1970’s.

Some internet landlord forums have wondered aloud as to whether the guideline increase is worth it as opposed to selling an income property outright. Some also fear that raising rents at this time will only provoke good tenants into leaving a tenancy. It may, however, persuade difficult tenants into finding new accommodations. Average rents have gone up since 2013 by 1.6% (Source: Canadian Mortgage and Housing Corporation, Rental Market Report, Spring 2014).
These landlord forums forget that new capital costs can result in an increase above the guideline through an application to the Landlord & Tenant Board. If the LTB is satisfied that the increase is justified, then the Board can allow an increase up to 3% over the stated guideline increase. In addition, you and your tenant can always agree privately to increase the rent.

In private agreements to raise the rent, it has to be in exchange for some capital expenditure or for some new or additional service.  This is captured in s. 121 of the Act.  A “capital expenditure” includes a significant renovation, repair, replacement or new addition where the expected benefit is to extend beyond five years.  The definition also includes work undertaken by a municipality, local board or public utility, other than work undertaken because to the landlord’s failure to carry out that work.  Specific exemptions are general building maintenance and grounds-keeping or  appliance repair.  Also exempted are cosmetic changes designed to raise the level of prestige or luxury to the rental unit or residential complex.  Full details can be found in Ontario Regulation 516/06 under the Residential Tenancies Act, 2006.

You will have to serve a form N10 for private rent increases.  Just like the s. 116 notice, there has to have been no additional increases in rent within the previous 12 months.  However, instead of the 90-day notice period, when the agreement is signed, the agreement goes into effect six days later.  The tenant has the right to cancel the agreement within five days of signing.  The maximum amount of the increase is the Guideline + 3%.

The definition of “services or facilities” include, but are not limited to:  cable television, satellite television, air conditioners, extra electricity for air conditioners, extra electricity for a washer/dryer in the rental unit, blockheater plug-ins, lockers or other storage space, heat, electricity, water or sewage services (not capital work) or floor space (increase).  There is no cap on raising the rent on services or facilities, as long as it is the actual cost to the landlord of the service or facility.  If it can’t be determined what that cost is, it will be based upon the “reasonable” value of the service or facility.  When it comes to floor space, the rent increase is determined by the percentage increase in floor space.  There is no form for this kind of rent increase, but as always, a written agreement is trump.

If you want help to increase your rents, do not hesitate to contact me.

Other “How to be a Better Landlord” Posts:

Part 1

Part 2