The province recently announced a rent freeze for 2021 and the introduction of Bill 204, Helping Tenants and Small Businesses Act, 2020 followed shortly thereafter. The legislation freezes residential rents, with a few exceptions, for 2021 was passed by the Legislature on September 30, 2020 and received Royal Assent on October 1, 2020.
The 2020 guideline applies to rent increases that take effect between January 1, 2020 and December 31, 2020.
Under normal circumstances, landlords may increase the rent once every 12 months by the guideline amount only for a sitting tenant without seeking approval from the Landlord and Tenant Board. Landlords must provide 90 days written notice using the prescribed Landlord and Tenant Board Form N1. Following amendments to the Residential Tenancies Act, 2006 which became effective on April 20, 2017, rental units which were previously exempt from the guideline are now subject to it.
How the Annual Guideline is calculated:
The annual rent increase guideline is determined according to section 120 (2) of the Residential Tenancies Act, 2006 which averages the monthly Ontario Consumer Price Index over a twelve month period that ends at the end of May of the previous calendar year.
If the calculation for the annual guideline amount exceeds 2.5% in any given year it will be reduced to 2.5%. The RTA was amended in 2012 when a maximum cap of 2.5% was implemented for all guideline increases.
If an increase of more than 2.5% is required, the landlord must follow the process to seek approval for an Above Guideline Increase.
Rent Increase Guidelines
November 15, 2018 pursuant to Bill 57, the Restoring Trust, Transparency and Accountability Act, 2018, amendments to the Residential Tenancies Act, 2006 (RTA) created an exemption from rental control for new residential units came into force. Section 6.1 of the RTA provides details of the amendment for the rent control exemption which refers to two types of rental units: 1) A building, mobile home park or land leased community, no part of which was occupied for residential purposes on or before November 15, 2018; and 2) Rental units located in detached, semi-detached and row houses which meet and are subject to specific requirements.
The exemption for new rental units located in detached houses, semi-detached houses or row houses, not occupied for residential purposes on or before Nov. 15, 2018, are subject to the following:
- the detached, semi-detached or row house contained not more than two residential units on or any time before November 15, 2018;
- the residential unit has its own bathroom and kitchen facilities; has one or more exterior and interior entrances; at each entrance the unit has a door equipped so it can be secured from the inside of the unit; and at least one door is capable of being locked from the outside;
- the owner, or one of the owners, lived in another residential unit in the house; or the house was unfinished space immediately before the rental unit became a residential unit.
April 20, 2017 pursuant to Bill 124, An Act to amend the Residential Tenancies Act, 2006, properties which had a date-based exemption from rent control and the annual rent increase guideline have been eliminated. The annual guideline now applies to most residential rental properties in Ontario, including the following units which were previously date-based exempt:
- The rental unit was not occupied for any purpose before June 17, 1998 – meaning it is either in a new building (often a condominium building) built since 1998, or an older building with a new unit or never occupied, residentially or otherwise, before June 17, 1998;
- It is a rental unit no part of which has been previously rented since July 29, 1975 – meaning only the owner has used or occupied the unit since 1975; or
- No part of the building, mobile home park or land lease community was occupied for residential purposes before November 1, 1991 – meaning the building was probably commercially used before 1991 and then was converted to residential use.
In the above situations, the rental unit is now subject to the annual rent increase and a N1 form should be given to increase rent only by the guideline. Landlords are required to provide 90 days written notice when increasing the rent using the N1 form, available online at: http://www.sjto.gov.on.ca/ltb/forms/
Important information regarding Bill 124 and the impact on notices of rent increases served:
- A notice of rent increase that exceeds the guideline, given on or after April 20, 2017 but before Royal Assent, is capped at the guideline amount.
- For notices of rent increase given before April 20, 2017, the notice is valid and the landlord may proceed with the rent increase as set out in the notice.
- Landlords will be required to refund any rent increases collected for rental units previously exempt which were served on or after April 20, 2017 and allow tenants to deduct such amount from future rent if the landlord fails to reimburse.