When a tenant agrees to rent a property from a landlord, the rate is usually predetermined for the length of the term. In most standard 1-year residential leases, the rent payable remains the same for every month. However, should a tenant choose to stay, the landlord can begin increasing the cost of the lease. Rent control provisions govern how much and how quickly a landlord can raise the rent.
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What is Rent Control?
In Ontario, residential rent control guidelines are restrictions that landlords must follow when raising the rent payable for a dwelling unit.
In order to understand how rent control in Ontario works, it is first important to understand the standard residential tenancy in Ontario.
Fixed vs Periodic Tenancy
Most standard residential leases in Ontario a for a fixed term; typically one year. During the term, the rent payable is set at a fixed rate per month.
However, upon expiration of the term, the agreement does not automatically renew for additional 1 year increments. Instead, the tenancy converts from fixed to periodic.
For example, instead of a 1 year term of 12 months, the tenancy becomes month-to-month, with each month being seen as its own “term”.
In periodic tenancies, the landlord and tenant have no further obligations to one another beyond the current period (except for some notice provisions).
For example, with proper notice, the tenant can vacate the unit. Similarly, the landlord can ask the tenant to leave under certain circumstances.
Once per year, the landlord is permitted to raise the rent payable – often within the rent increase guidelines. The restrictions imposed on the landlord in raising the rent is referred to as rent control.
Rent Guideline increase for Ontario
In Ontario, the government publishes an annual guideline limit for rent increases. This sets the maximum amount that landlords can raise rent per year.
The previous rent control guideline increases have been:
Compounding Rent Guideline Increase
A common question regarding rental increases relates to missed guideline increases. If a landlord didn’t raise rent in a prior year, they cannot compound the prior missed guideline increases. The Guideline increase limit represents the maximum a landlord can raise the rent for a tenant in a year.
Exemption from Rent Control
New Buildings, built and first occupied after November 15, 2018 are exempt from Rent Control. If the property was built and occupied after this date, landlords can raise rent by how much ever they want.
There are two important things to note regarding units exempt from Rent Control. First, as with non-exempt buildings, Landlords can raise rent only after the tenancy converts to periodic. Any tenancy on a fixed term (for example, a 1 year agreement) is locked in for the duration of the term. Second, even if there is no limit to the amount a landlord can raise rent, the landlord can only do so once per year.
This law was enacted by the Ford Government in 2018 to promote construction and housing availability in Ontario.
A tenant that left an older building during COVID for cheaper rent, might now be facing significant rent increases because of the building occupancy date.
How to Raise the Rent in Ontario
All rental increases must be accompanied by notice in writing via form N1 or N2. Notice must be given a minimum of 90 days in advance.
Rent Control: Tying Up Loose Ends
Rent control exists to protect both Landlords and Tenants in Ontario. At times, above guideline increases may be required to promote the health and safety of a unit. In these cases, the Landlord can apply to the Landlord & Tenant Board (LTB) for an above-guideline increase.
Examples of situations where this might occur are extraordinary increases in operating expenses, or completion of large capital expenditure projects.
Before applying to the LTB, it’s best to speak with your tenant to see if a compromise can be made. Remember: Good tenants are hard to find!
Do you have questions regarding Rent Control in Ontario? Contact Us.