Small investors who rely on the real estate market for extra income risk running afoul of the law if they don’t pay close attention to new rules introduced earlier this year through Ontario’s Fair Housing Plan.
Small investors who rely on the real estate market for extra income risk running afoul of the law if they don’t pay close attention to new rules introduced earlier this year through Ontario’s Fair Housing Plan.
The initiative introduced a series of amendments to the Residential Tenancies Act aimed at protecting tenants. The changes tighten the regulations on some of the tactics used by landlords and alters some of the legal strategies many had employed, says Joe Hoffer, partner at Cohen Highley LLP Lawyers, with offices in London, Kitchener, Chatham and Sarnia, Ont.
Hoffer points to the landlords’ ability to vacate tenants by taking possession of the unit for use by themselves, a family member or a caregiver.
In the past, landlords might have used their ability to take personal possession of a unit as a way to get rid of bothersome tenants, he says. Once the unit was vacant, the landlord might then rent it to another tenant, perhaps for more rent.
But through this year’s amendments, the onus is on the landlord to prove legitimate use of the unit if challenged. Corporate landlords are prohibited from giving the landlord’s own use notice of termination.
“It’s the smaller landlords and lawyers who advise small landlords that need to be wary,” says Hoffer, adding that it is a change that smaller landlords may not be aware of.
For example, the landlord or family member must now occupy a unit for at least a year and provide a month’s rent compensation if a tenant is evicted to accommodate a relative. And, if a former tenant believes the landlord or family member didn’t occupy the unit for a year but simply rented it out to someone else, the process to challenge the landlord before the Landlord and Tenant Board and seek compensation is meant to be easier for the former tenant.
It is up to landlords now to prove that they did not act in bad faith in evicting the tenant, says Hoffer. The landlord also faces fines if found to be in the wrong.
Kenneth Hale, director of legal services for the Advocacy Centre for Tenants Ontario, expects the clamping down on the landlord’s own use provisions will have a significant impact. He says it will discourage landlords from using that provision to evict tenants simply because they no longer want them there.
Landlords “get tenants to move so they could create that vacancy and create a new opportunity to set a new rent.” The new regulations now make it clear that this is not allowed.
“Sometimes, in the past, ‘I changed my mind’ seemed to be adequate,” he says.
The biggest impact of the new initiatives is extending rent control to rental units built after 1991.
Previously, only rental units constructed before 1991 were subject to annual increase caps. Now, landlords cannot raise the rent beyond a percentage set by the provincial government, no matter when the units were built.
That move, says Hale, reaffirms the government’s commitment to rent regulation as a policy tool for housing when other provinces have moved in the other direction, opting for deregulation.
But the government did not make changes to the landlord’s ability to raise the rents at their discretion, without limitation, in between tenants. That provides encouragement to landlords to turn over their tenants in search of higher rents when they see opportunities in the rental market, says Hale.
“If you think about all the housing that has been built since 1991, it’s not a huge number of giant highrises. But all those subdivisions out in far-flung areas of the [Greater Toronto Area], those basement apartments . . . those are all now brought into the rent regulation system,” he says.
Many small landlords were unfamiliar with the exemption to limits on annual rent increases for post-1991 units, says Doug Levitt, senior partner at Horlick Levitt Di Lella LLP, who regularly represents landlords. The issue eventually came to the fore through the news media when some landlords demanded dramatic increases for units built after 1991 on which there were no controls.
“This exemption was great for condos, because that was the real new build over the last 20 years. There hasn’t been a whole ton of purpose-built construction for multi-unit apartment buildings, although that had begun to change over the last few years. But, really, the big popular types of developments have been condominiums,” says Levitt.
That exemption, he says, has provided incentive for developers to build multi-unit residential complexes. He feels the removal of the exemption has put a chill on current plans to build rental accommodation.
Hoffer warns that any purchaser considering buying property with rental space faces a risk if they are considering occupying the unit themselves.
If the new owner identifies in the purchase and sale agreement their intent to occupy the space prior to closing, they won’t be subject to the rules governing landlords.
But if the new purchaser does not indicate in the documents at the time of purchase that they want to occupy the rental unit, they are subject to the new rules and may be responsible for costs to evict the tenant.
“It’s a big deal for vendors and purchasers of small rental properties,” he says.
