19
Mar
12

it’s the law (rent increases)…

 

Many questions are asked by both landlords and tenants about rent and the increases that a landlord can and will charge.  There are different rules depending at what point you are at – negotiating a lease or already into a tenancy agreement.

When a unit is vacant, and a landlord is looking to rent the unit we have what is known as a ‘Free Market Rent System”.  The landlord has the right to establish whatever rent they want to charge, and the tenant has the right to negotiate whatever rent they are willing to pay.  Once both parties come to an agreement, then everything changes.

Upon an agreed upon rent and lease, the rental unit now typically falls under what is known as “Rent Control”.  Simple rules are as follows:

  • Increases can only happen once every 12 months
  • To do an increase, a tenant must be given at least 90 days notice
  • The maximum increase allowed without an application to tribunal is set by the provincial government.  (It is based on the previous year’s rate of inflation)
  • You can’t go back and retroactively increase for past years

For 2012 the increase guideline set by the province of Ontario is 3.1%.  A landlord may decide to increase a tenants rent any amount between 0% and 3.1%.  This increase has to be provided in writing to the tenant using the proper form through the Tribunal, and must be delivered at least 90 days before the increase takes effect.  Once increased, there can’t be an additional increase for a period of at least 12 more months.

There are some conditions where increases can be greater than 3.1% but these require an application to Tribunal, and approval on such an increase.

As a side note, some things to consider when giving an increase:

  • If you are already at the top end of the market rent in the area, could an increase force a great tenant to look somewhere else and possibly cost you a vacancy?
  • If your unit is at the low end of the market rents you should look for the maximum increase available.
  • If your increase timetable is at the end of the year you might want to check out next years increase rate before processing.  For example, the 2011 increase was 0.7% .  If a landlord put an increase through for November, then the maximum they could get for 12 months was 0.7%.  But if they waited to Jan 1, then they could put an increase through for the full 3.1%.

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