The Rental Fairness Act, (the “RFA”) is part of Ontario’s Fair Housing Plan, a strategy released in April 2017 to promote affordable housing in Toronto. The RFA, which received Royal Assent on May 30, 2017, eliminates the exemption to rent increase rules and requires landlords to compensate tenants if they wish to terminate a tenancy for personal use. Below are some of the key amendments to the Residential Tenancies Act, (the “Act”) and what they mean for affordable housing in Ontario.
1. Rent increases
With the proclamation of the RFA, units that were previously exempt from the rent control rules prescribed by the Act will no longer be exempt. The following units will now be subject to the guideline amount outlined by the RFA:
a. Units that were not occupied before June 17, 1998;
b. Units that were not rented since July 29, 1975; and
c. Units that were not occupied for residential purposes before November 1, 1991.
For these previously exempted units, landlords may no longer increase rent unless at least 12 months have lapsed from the date on which the tenancy began or the rent was last increased, will not be permitted to implement a rent increase of more than the guideline amount, and will be required to give at least 90 days’ notice in order to implement the increase. If landlords wish to increase the rent by more than the guideline amount ‑- which will rise from 1.5 per cent to 1.8 per cent for 2018 ‑- they will be required to apply to the Landlord and Tenant Board (the LTB), the tribunal that administers the Act.
2. Transition period for rent increase
Though the RFA received Royal Assent on May 30, it sets April 20 as the date on which rent increases can take effect. Specifically, if the landlord of a previously exempt rental unit has given notice of an above‑guideline rent increase, and the notice is given before April 20, 2017, the previously exempt rental unit continues to be exempt and the amount of the new rent will be the amount set out in the notice. If the notice is given on or after April 20, 2017 and new rent takes effect before the exemption repeal date (May 30, 2017), the amount of new rent is to be decreased by an amount equal to the sum of the amount of rent charged before the rent increase took effect and a rent increase equal to the guideline increase. In the case of notice given on or after April 20, 2017, the landlord must, within 60 days of the repeal date, pay the tenant the amount of new rent paid before the exemption repeal date that is in excess of the amount that would have been paid had the rent increase been equal to the guideline increase for the calendar year.
3. Terminating tenancies
Under the RFA, landlords can still terminate the tenancy for “personal use” if they, their spouse, child, or caregiver intend to move into the unit. However, the RFA requires the landlord to compensate the tenant for one month’s rent, or offer another unit that is acceptable to the tenant, in order to do so, and no eviction order will be issued until the required compensation is paid. If a landlord fails to pay the required amount, tenants are entitled to apply to the LTB. Unlike the amendments regarding rent increase, which are effective as of April 20, this amendment has not yet come into effect, a delay which has been criticized by the NDP.
If at any time between delivering the notice of termination and one year after the tenant vacates the unit, the landlord advertises the rental unit, enters into a separate tenancy agreement, demolishes the rental unit, or takes any step to convert the rental unit, the RFA creates an inference of bad faith, and the tenant may apply to the LTB within a year for:
a) All or a portion of any increased rent incurred for a one-year period after vacating the rental unit;
b) Reasonable out-of-pocket moving, storage, and other expenses;
c) Abatement of rent;
d) An administrative fine for an amount up to $25,0000.00.
By introducing the compensation requirement and requiring landlords to rebut the presumption of bad faith (rather than requiring tenants to prove that landlords have acted in bad faith), the RFA will, hopefully, dissuade landlords from illegally evicting tenants from rental units in order to increase rental prices.
4. Above‑guideline rent increases
A landlord could previously apply to the LTB for an above-guideline rent increase due to an “extraordinary increase” in municipal taxes, utilities, or both. With the proclamation of the RFA, landlords may no longer impose above‑guideline rent increases on account of the cost of utilities. Moreover, as part of any application of an above-guideline rent increase, landlords must now submit any item in an outstanding work order relating to one or more elevators in the building, unaddressed orders made by the Technical Standards and Safety Act, 2000 relating to elevators, and any specified repairs or replacements ordered by the LTB with respect to elevators in the residential complex. The effect of this amendment is to prevent landlords from increasing rent in an amount above the guideline where they have failed to keep their elevators in a state of good repair. This addition says nothing about the landlord’s failure to maintain other aspects of the building. Moreover, like the rule requiring landlords to pay compensation to the tenant if they intend to move into the unit, this amendment has not yet come into effect.
Ontario remains ahead of a number of Canadian provinces, including Alberta, Saskatchewan, Newfoundland and Nova Scotia, which have little to no rent control, and British Columbia, where the laws allow for considerable increases to rent (the rate of inflation plus 2 per cent). The RFA -‑ once enforced in full -‑ represents another step in the right direction. Still, tenants in Ontario remain vulnerable to staggering rent hikes in between tenancies. Economists have long been skeptical of imposing rent caps to promote affordable housing, and if Berlin is any example, their skepticism is justified: in that context, it is upper-income households who have benefited from the imposition of rent caps. In addition to passing legislation to protect tenants in the private rental market, the province would do well to renew its commitment to the non‑profit housing sector, which is an important source of housing for low- and middle-income households.
Iler Campbell LLP is a law firm serving co-ops, not-for-profits, charities and socially-minded small business and individuals in Ontario.
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