Bill 124, The Rental Fairness Act
In the late spring of this year, with the passing of Bill 124, the Residential Tenancies Act was revised and new protections were offered to tenants. If you care to brush up on the whole thing, you can find it here. A word of warning though, it isn’t a light read. For Cole’s notes version of recent changes, just stay with me.
The new act is called Bill 124, the Rental Fairness Act and it mainly offers new protections to tenants. Some cities in Ontario, especially Toronto, have very low vacancy rates. This has caused a rental crisis in the city, and these measures are meant to address this.
Most notable of these changes is the expansion of rent control across the province. Previously any rental unit constructed after 1991 was not covered by rent control, meaning landlords could increase monthly rent above the province’s rent increase guideline after the first year lease period was up. In a city like Toronto, which meant for tenants, most rental condos were a bit of a gamble. You may sign your first lease for a sum that matches your budget. But as the first lease comes up, tenants could be in for an increase in any amount the landlord saw fit. Obviously, problematic for tenants.
There were some landlords who took full advantage of this loophole. Many steady tenants saw their rent increase unpredictably, arbitrarily, and sometimes massively, year over year. In a world-class city like Toronto, with an ever-increasing population leading to a very low vacancy rate, coupled with a white-hot real estate market, the climate for renters was looking pretty bleak.
This change now means that rent control extends to virtually all private rental units in Ontario. In real terms that means, if you rent a condo or a single-family home, in 2018, the rent can only increase by 1.8% according to the provincially set rent increase guideline. This guideline is pegged to inflation, for 2017, the rent increase guideline was 1.5%.
How Does a Landlord Increase Rent?
Legally in Ontario, a landlord must provide tenants with a Notice to Increase Rent form at least 90 (ninety) days before any increase is to take effect. It’s best to use the form provided by the Landlord Tenant Board to ensure it complies with all current rules. (Here’s the form). Rent increases can only occur once every 12 (twelve) months.
Above Guideline Increase
A landlord can also apply for what’s called an “Above Guideline Rent Increase” if the landlord has made certain repairs, renovations, or replacements over and above standard maintenance. This application is done formally through the Landlord Tenant Board.
The new bill, however, does stipulate that rent increases to address the rising cost of utilities is no longer a relevant reason to apply for an Above Guideline Rent Increase. This protects tenants from carbon costs and encourages landlords to make their buildings more energy efficient.
As well, a landlord cannot apply for the Above Guideline Rent increase in cases where there are elevator work orders outstanding. This stems from the huge number of elevator related complaints tenants make year after year.
A landlord and tenant can also agree in writing to a rent increase above the guideline if the landlord promises to make certain improvements and/or services available (for instance, the landlord will start providing a storage locker or other storage space, air conditioning, or cable/satellite television. The full list can be found here.)
Other changes to the Residential Tenancies Act in Bill 124
Other changes that took effect in 2017 as part of The Rental Fairness Act include:
- Enabling a standard lease to help both tenants and landlords know their rights and responsibilities. It’s expected that by adopting a standardized lease, legal disputes that come before the board will be dramatically reduced.
- Protecting tenants from eviction by abuse of the “landlord’s own use” provision
Previously some landlords would evict tenants by claiming that a family member needed to move into the rental unit currently inhabited by tenants. In some cases, there really was no family waiting in the wings. Rather the landlord just wanted the unit empty so that it could be rented again for more money. Sneaky, right? We sure don’t abide by this behavior. As of September 1st, the Rental Fairness Act requires tenants to be compensated by a month’s rent or be given a comparable rental unit. Hopefully, this cuts down on this sort of behavior.
- Ensuring landlords can’t pursue the tenant for unauthorized charges
Generally speaking, the only deposit legally allowed in Ontario is a rent deposit, known as “last month’s rent”. Landlords are also legally obligated to pay interest on last month’s rent.
Reactions to Bill 124
The response to The Rental Fairness Act has been mixed. Many tenant’s rights advocate so these changes as a win.
The response from those in the rental industry has not been overwhelmingly positive, as you can imagine. They see some of these changes as short sighted.
There has been a real dearth of purpose-built rental housing in Ontario, especially in Toronto where we really are dealing with a rental crisis. Tying the hands of rental housing developers and other prospective landlords is hardly going to help. What will help is getting new rental units to the market. And these new units are sorely needed. Toronto’s population is continually increasing.
In recent years we have begun to see developers set their sights on apartment buildings given how hot the real estate market is. Without this new stock, the low vacancy rate will continue to push rental market rates up. It’s already out of reach for some families.
So for stakeholders in the income properties themselves, The Rental Fairness Act has been viewed as potentially limiting. It possibly reduces the profitability of new purpose-built rental units. Already, at least one rental project has been reconsidered. Several other developers are reevaluating whether investing in rental units is truly best for them.
What do you think of these new protections? Where do you fall in this debate?
Want to read more? Here’s our article on the pleasures and pitfalls of renting in Toronto