Landlords of Newly Constructed Units in Ontario CAN Increase Your Rent by over 100%
Did you know, your landlord may be able to increase your rent next year by 100% (or more) if your unit was first occupied after November 15, 2018?
If you’re not following the Toronto or Ontario real estate market, you may have missed this change in legislation. We’ve decided to break it down so you know exactly what you may be getting yourself into by renting in a newly constructed condo.
What you should know Before Signing A Residential Lease in a newly built condo in ontario
As of November 15, 2018, rent control on new units in Ontario has been removed.
We’ve noticed over the past year that a lot of our clients and even fellow realtors simply weren’t aware of this change.
Let’s break this down.
What is Rent Control?
For rental units first occupied BEFORE November 15, 2018:
Your landlords can NOT increase your rent in Ontario by more than the yearly published guideline.
According to the Landlord and Tenant Board of Ontario, the rental increase guideline for 2020 was 2.2% and was to apply to most private residential rental accommodation covered by the Residential Tenancies Act, however this was paused for the year due to Covid-19. Generally, the guideline is the most a landlord can increase the rent without applying to the LTB.
There are however some exceptions to this rule.
- Their municipal taxes have increased by more than the guideline plus 50 per cent. (For example, if the guideline is 2.2%, the taxes must have increased by more than 3.3%).
- They have incurred operating costs related to security services.
- They have incurred operating costs related to security services.
- A landlord may also increase the rent at any time if the landlord and the tenant agree that the landlord will add a new service or facility such as a parking space, air conditioner or storage locker. (Landlord and Tenant Board of Ontario, 2019).
What Changed?
On November 15, 2018, the province of Ontario introduced Bill 57’s new legislation for rental control which states:
What this means is the recommended rental increase rate proposed by the province would not apply to new units, and new unit owners can raise your rent as much as they want.
There is no limit to how much a landlord can increase the rent each year for units which fall under these “newly built” or “first occupied” categories.
How Can this affect you?
Here’s a perfect example,
Let’s say you and your spouse are looking for your next home and stumble across a beautiful newly constructed unit. You immediately fall in love with the amenities. The floor plan is exactly what you’ve been looking for, and to top it off the finishes are to die for!
You’ve been renting in Ontario for the past 5 years and know how the process works, or so you thought. You’re ready to place an offer for full ask, $2,000/month, and your realtor does not advise you of these new rent control changes.
Your offer is accepted! You pack your things, move in, and begin settling into your new Toronto condo.
The year flies by and before you know it, there are 90 days left on your lease. From your experience, you know that you or the landlord must give notice within 60 days of your intentions to stay in the unit, or their intentions of selling/renovating/moving into the unit themselves.
You’re open a new email from your Toronto landlord and notice they’ve decided to increase your rent from $2,000/month to $2,850/month!
After catching your breath, you quickly search “what is the rental increase guideline in Ontario?” and discover the rate was 2.2% for 2020.
Confused, you call your real estate agent to clarify what you should do since you were under the interpretation rental increases in Ontario must fall within the rental increase guideline, and sadly at this point is when your now ex-realtor says “the landlord is allowed to increase rent as much as they want since the unit was first occupied after the November 15, 2018 date.“
You question why you weren’t advised this and your realtor responds “I thought you knew.”
You then go digging for further information on the topic and stumble across this blog post.
You learn that landlords of newly constructed condos in Ontario do not have to follow any rental increase guideline, and to top it off – they don’t need ANY reason to justify the increase in rent.
Now What?
Your landlord may be able to increase your rent next year by 100% or more.
Since the landlord does not need any reason to increase rent, and it may be in their best interest to increase it to be in line with fair market value, and you’re left with two choices:
- You agree to the rental increase, whether it’s 2% or 200% and continue living in your Toronto condo rental, or
- You begin your search for a new home and vacate the property at the end of your one year lease term.
How do I Avoid steep rent hikes?
You don’t want to be in this situation again, so what do you do to avoid your landlord fiscally evicting you?
Firstly, search for a condo that was first occupied BEFORE November 15, 2018. It’s best to contact a professional realtor to conduct this search for you, as you may not be able to find all pertinent information, and public information may be outdated.
For example, often occupancy dates get delayed, and you may not be able to discover when occupancy truly took place for a Toronto condominium.
Secondly, when communicating with your real estate agent make sure they understand this is not a situation you want to be in again and let them search for your next home for you. *Remember the landlords pay the realtor, it’s a completely free service to you*
Thirdly, contact us if you need any further clarification or real estate tips – we’re on the Pulse and here to help!
