It's like they are deliberately trying to dis incentivise small landlords from investing in Condo Properties? Then who will? Landlords are trapped by these changes.
The Residential Tenancies Act, 2006 (RTA) was recently amended by the Rental Fairness Act, 2017 to address loopholes or abuses by some “small” landlords under the current RTA. Most of the amendments will take effect on proclamation by Ontario's lieutenant-governor within the next few months. Lawyers who advise small landlords on the operation, purchase or sale of small residential rental properties should ensure their clients are aware of the legislative changes.
Owners of rental units who want to increase the value of their property will seek to raise rental income, as that will greatly enhance the value of the building for sale or financing purposes. However, the RTA prohibits substantial rent increases and termination of tenancies to allow re-rental of apartments at higher rents.
A strategy engaged in by some owners and vendors of small rental properties, including individually rented condominium units, has been to seek termination of tenancy on the grounds that the landlord intends to reside in the rental unit, thereby freeing the unit from rent control so that it can be re-rented at a higher market rent. Other landlords have used the strategy to simply get rid of an unwanted tenant.
The RTA permits termination for “landlord’s own use,” as long as it is a bona fide request and the tenancy itself is not subject to a fixed term. It is the lack of bona fides by some landlords in deploying these strategies that has prompted the legislative amendments. The RTA amendment (to s. 48) states that a minimum of one year’s residential occupancy is required for a landlord (or member of a landlord’s family) who seeks to terminate a tenancy based on use by the landlord or member of the landlord’s family; furthermore, the landlord must pay the vacating tenant compensation of one month's rent.
If, within one year of the tenant vacating the unit, the landlord advertises the unit for rent; advertises the rental unit or the building it is in for sale; enters into a lease with someone other than the former tenant; demolishes the rental unit or the building it is in; or takes any step to convert the use of the rental building or unit it is in, it will be presumed that the landlord gave the notice in bad faith, thus exposing the landlord to fines of up to $50,000 and a payment of compensation to the tenant who vacated. The amendment also prohibits a corporate landlord from giving a “landlord’s own use” notice of termination.
The RTA amendment (to s. 47) requires a landlord to use a written “prescribed” form of lease that must be signed by the landlord and the tenant. Failure to use the prescribed lease and provide a copy of the signed lease to the tenant will entitle the tenant to demand a copy of same within 21 days, failing which the tenant is entitled to withhold a maximum of one month's rent until such time as the prescribed form of lease is provided and presented for signature.
If the landlord fails to provide the prescribed lease within 30 days of the tenant withholding a month's rent, the tenant is not required to repay the sum to the landlord. Upon presentation of the prescribed lease following the demand, it is open to the tenant to reject the lease, regardless of its proposed term, and to give 60 days' notice to terminate the tenancy prior to the end of a rental period.
Another RTA amendment (to s. 134) prohibits a landlord from collecting or attempting to collect from a former tenant of a rental unit any amount of money "purporting to be rent" with respect to any period after the tenancy has terminated and the tenant has vacated the rental unit. In situations where a tenant wishes to “break” a fixed-term lease, a usual tactic is deliberate non-payment of rent or to hold a "lease-breaking party," in order to receive an eviction notice from the landlord. The eviction notice requires the tenant to vacate the unit within a matter of weeks, and if the tenant does so, the tenancy is terminated.
Prior to the RTA amendments, it was common for landlords to demand or formally claim any lost rent pending re-rental of the unit as “damages” for the tenant’s deliberate breach of contract. Now, such a claim is prohibited, and where a landlord makes demand for same, the landlord is also exposed to substantial fines.
The amendments referred to above are three components of the full range of amendments found in the Rental Fairness Act, 2017. However, they are changes that can directly affect the operations of small landlords in particular. The amendments to ss. 47 and 48 are not yet in force, but the s. 134 amendment is currently in force and will affect demands for recovery of damages made after May 30, 2017, or those outstanding in any proceeding after that date.
Joe Hoffer is a partner with Cohen Highley LLP who specializes in residential tenancies law. https://www.thelawyersdaily.ca/articles/4204/advising-landlords-on-traps-in-ontario-s-new-rental-fairness-act