Of the many complex and confusing things, you’ll have to deal with as a landlord is determining when to raise the rent. While you don’t want to lose your good tenants because of a rent-hike, chances are it can happen as you seek to make decent profits or adjust to market changes.
And thanks to recent adjustments to the Residential Tenancy Act, there are rent guidelines to comply with as well. Some may be unfriendly to your real estate business, but that’s a reality you’ll have to tolerate if you are unable to figure out a better way to navigate the guidelines.
In Ontario, the Ministry of Housing issues the Rent Increase Guidelines by the end of August every year. Usually, they let landlords know at what rate they can raise the rent in a given year. The rate is arrived at by taking into consideration the consumer price index.
Below, we take a look at what you need to know about rent increases in Ontario in 2017 and 2018.
What’s The Rent Increase Guideline?
If you are hearing this term for the first time or have never figured out what it is, the rent increase guideline is the maximum rate at which you, as a landlord, can raise the rent.
Last year, Ontario passed the Rental Fairness Act, 2017, which diversified the list of properties affected by the rent increase guideline. Initially, there was an exemption for rental properties occupied on or after November 1991.
One speculative reason for the new act is the thought that tenants who live in such properties often face arbitrary, unpredictable, and sometimes huge rent increases every year that force some out of their homes.
However, the Ontario Landlord organization believes that the exclusion was simply a strategic act made to persuade and encourage the development of new rental properties in Ontario.
Either way, the new changes now extended rent control to private residential units, including those that were built or occupied on or after November 1991.
What’s unchanged is that the guidelines don’t apply to vacant residential units, nursing homes, social housing units, and commercial properties. Another important thing to mention is that the increase in rent can only be collected 12 months after your tenant moved in or 12 months after the last rent increase.
At What Rate Can I Increase The Rent in 2018?
In July 2017, the Ministry of Housing announced that Ontario landlords could only increase the rent by a maximum of 1.8% (US$18 on rent of US$1000) in 2018. This rate is applicable to rent increases between January 1, 2018, and December 31, 2018.
It’s important to take note of the fact that any rent increase notices given on or after April 20, 2017, are required to comply with the new changes for previously exempt rental units. This means that you can’t give a notice of rent increase to your tenant that is more than the rate allowed by the Rent Increase Guidelines in 2018, except for the units we mentioned earlier.
In 2017, the rent increase guideline was set at 1.5% (US$15 on rent of US$1000). Like in all years, it was applicable to rent increases in 2017 in Ontario that were made between January 1 and December 31.
How Often Can I Increase Rent For My Property?
You are allowed to raise rent 12 months after:
- The day the tenancy began
- The last rent increase (if there was one)
Rent Increase Notice Requirements
The law requires you to give your tenant at least a 90-days written notice prior to the rent increase. In addition to being written in a format endorsed by the Landlord and Tenant Board (LTB), the notice must also specify the date that the rent increase takes effect and the new rent.
Thankfully, the board already has a downloadable rent increase in Ontario 2017 form that you can use. Please note that if you give a notice that does not comply with the board-approved format or you do it less than 90-days to the proposed amount of rent, the rent increase won’t apply, and you’ll be required to give a new notice.
Are There Extra Ways I Can Raise Rent?
Yes. As we mentioned earlier, you can make an application to the Land and Tenants Board (LTB). This type of application is often called an “Above Guideline Increase or AGI”. The board is likely to approve your application if you apply for the following reasons:
- Capital expenses (major renovations, repairs, additions, replacements, etc.) that will last not less than five years and are not part of regular ongoing maintenance
- Exceptionally high increases in municipal charges and tax
- Security services expenses
In the case of capital expenses, the act says that there are only specific types of capital expenses that LTB will permit a rent increase for.
Also, you can agree with your tenant, in writing, to raise the rent above the rent increase guideline if you promise to offer services such as satellite television, cable television, air conditioners, floor space, heat, etc. However, note that the increase in this kind of scenario can’t be above the rent increase guideline, plus 3%.
Just like with the previous situation, you’ll have to comply with rent increase notice requirements. Another thing to note is that the act allows your tenant to cancel the agreement if they have a change of mind regarding the arrangement.
In real estate business, rent increase decisions are inevitable. And given that rent increase guidelines are published every year, make sure all the choices and resolutions you make in relation to rent increases in Ontario in 2017 and 2018 reflect the most recent changes.
Remember to take note of the maximum amount set for the year and rent increase notice requirements. If planning to raise rent above the guidelines, take time to understand the “Above Guidelines Increase” before you act.
One more point and the most important point I’d like to finish with is that as a landlord, make it your priority to find tenants less likely to default on rent and more open to discussions about rent increases when it’s necessary. With the help of a property management company, this is possible as they are specialized in the tenant screening process and understand what it takes to find a great tenant.