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Your tenant is correct, a notice of rent increase must be provided in the Board approved form which is Form N1. A letter is not considered a proper notice to increase rent and therefore is not valid.

The Province has recently passed legislation, Bill 57 – Restoring Trust, Transparency and Accountability Act, 2018, which amends the Residential Tenancies Act, 2006 (RTA) to include an exemption from rental control for new residential rental units.

Section 6.1 of the RTA provides details of the a rent control exemption and 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.

The guideline is usually announced in August for the following year. You can find more information about this on our website at https://landlordselfhelp.com/annual-rent-increase-guideline/ and at https://www.ontario.ca/page/rent-increase-guideline

When you purchase a property with tenants in possession you assume whatever agreement they have in place with the previous owner. Therefore, when you take over as the new owner you are not allowed to increase the rent unless it’s by the allowable guideline and if the tenants have not had an increase in the past twelve months. To increase the rent you must give the tenants a 90 day notice on a prescribed form which is a Form N1.

If you don’t take an increase each year, you will not be able to recover it. In this case you can only increase the rent by this year’s guideline amount. You can find a link to the current amount on our website at http://www.landlordselfhelp.com/RentIncreaseGuideline.htm.

A landlord may increase the rent above the guideline amount due to capital expenditure. The landlord must file an application to the Board for approval to increase the rent above the guideline amount. An above guideline increase cannot exceed the guideline amount plus 3%.

This article refers to Section 6 (2) of the Residential Tenancies Act which provided certain exemptions from the rent control portions of the Act. On 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 were 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/

You are still entitled to the rent increase in this case because this would not be considered a new tenancy. The tenancy continued and remains the same despite the fact that one of the tenants has moved out and she signed a new lease.

Landlords can apply to the Landlord and Tenant Board for an increase above the guideline based on capital expenditures. However, the capital expenditures must be completed and paid for within an 18-month period that ends 90 days before the date of the first rent increase requested in the application. You can read more about this issue at the following link to the Board’s information brochure on applications for rent increase above the guideline, http://www.sjto.gov.on.ca/documents/ltb/Brochures/Information%20about%20AGI%20Applications%20(EN)%20Revised_June12_2018.pdf.

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