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Landlords find “loophole” to Rent Control in Ontario

Rent control loophole

Landlords find “loophole” to Rent Control in Ontario

Most people are under a misunderstanding about Rent Control in Ontario.  They believe that landlords can only increase rental rates each year according to guidelines as set out by the Ministry.  And it is true that this is the case for many rentals, however….

A little known “loophole” {Section 6 (2)} in the Residential Tenancy Act (RTA) is being used more and more frequently by landlords to increase rent above the provincially fixed rent guideline.

This “loophole” excludes landlords from the rental increase guidelines if the property was first occupied for residential purposes after November 1, 1991.  This includes all types of residential buildings: houses, townhouses, condos and apartments.  It also includes older buildings that were used for commercial purposes but have been retrofitted as residential after November 1, 1991 (think lofts).

Why did this not come up sooner?

Until recently, most landlords in the city would adhere to the rental increase guideline even if they were exempt from it by this “loophole.” Why?  Well, a few reasons.  Firstly, there was no way a landlord could increase the rent more than a couple of percentage points without running the risk of losing a tenant. Secondly, the cost of finding a new tenant made it not worthwhile to raise the rent excessively.  And finally, until recently, most landlords were not even aware of this “loophole”.  This is all changing rapidly as the demand for units exceeded the supply. The landlords are now educated and are asking for dramatic increases in rent.  All Points has seen cases of landlords asking for 5%, 10% and as high as 23% rental increases in the past few months.  We now suspect this is the new norm until the market changes.

In essence, “rent control” in Ontario is a reality for a small portion of the population.  There is nothing you can do as a tenant to contest an increase if the property was occupied first for residential purposes after November 1, 1991.  And this landlord behaviour is extending to the suburbs.

What does this mean for corporations that relocate assignees?

For those that relocate assignees to Toronto and who are paying their housing costs, you could receive a costly surprise after the first year of the lease. Most assignment cost models can predict modest rental increases per year, but do not take into account the possibility of significantly higher increases.

It also can mean the necessity of a move upon localization.  If an employee has found her rental price has increased by 5% year after year, and then is localized, she may have to find inferior housing or housing in a new location in order to afford to live in the same lifestyle.

Will taking out a multi-year lease protect me from arbitrarily high annual increases?

 Unfortunately, no.  A multi-year contract agreed upon at a set rate still does not protect the lessee from large rental increases.  A landlord may still increase the rent once per annum even in a fixed lease term for longer than a year.

What Can a Tenant Do When Rent is Increased?

 A tenant may choose to end the tenancy or agree to pay the increase.

As the rest of the city’s property prices continue to go up and up, to the tune of almost 12% in the last quarter alone, many tenants may elect to stay put.

Posted on March 8, 2017 in Relolert

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About the Author

Sarah Chandler has been with All Points since 2003. Sarah completed her degree in International Development Studies at Dalhousie University. She also has personal experience in relocation, having lived and worked in England for two years. In England, Sarah worked in an Estate Agents’ office, assisting in the marketing, sale, and letting of properties. Sarah was promoted to the position of Manager, Destination Services in 2004. Since that time, she has expanded All Points’ training practices, created quarterly training sessions and has personally overseen the opening of All Points’ regional branches, including the training of its Relocation Counsellors. Sarah has spearheaded the development of All Points’ GRM division and overseen its growth as the premier Canadian Destination Service provider. Sarah has been a huge part of All Points’ growth story and her fingerprints can be found just about everywhere from standard operating procedures, to operational technology and to Compass+. Sarah is a CERC Relocation Specialist and has her GMS designation

Response (1)

  1. Roger Ibell
    March 8, 2017 at 2:43 pm · Reply

    Excellent summary in addition to the recent email and posts pertaining to – Understanding Rent Control in Ontario.

    Roger I.

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