Landlords - Reasons For Ending a Residential Tenancy Early in Ontario

In dealing with our investor/landlord clients, we often come across situations where a residential tenancy agreement needs to be terminated early.  Because this can be a technical process sometimes the rules are misunderstood.  Today we are going to cover the legal reasons for ending a residential tenancy agreement early so you don’t get yourself in trouble.

Reasons for Ending a Tenancy Early

1.   The landlord and tenant mutually agree to end the tenancy early.  This can be for whatever reason.  Form N11 should be used for this process.

2.   Ending an agreement for “cause”.  Some examples include:

I).   Not paying the rent in full

II).   Causing damage to the rental property

III).   Disturbing other tenants or the landlord

IV).   Illegal activity in the unit or complex

3.  There are also other reasons for ending a tenancy that are not related to what the tenant has done, or not done.  These are sometimes called "no fault" reasons for ending a tenancy and can include:

I).   The landlord plans to do major repairs or renovations that require a building permit and the work cannot be done unless the rental unit is empty.

II).   The landlord requires the rental unit because the landlord, a member of the landlord’s immediate family or their caregiver wish to move into the unit.

III).   The landlord has agreed to sell the property and the purchaser requires all or part of the property because the purchaser, a member of the purchaser’s immediate family or their caregiver wish to move into the unit.  (This reason for eviction only applies in rental buildings with three or fewer units and in condominiums.)

4.  There is a long list of other technical reasons.  They can be read here Ontario Landlord & Tenant board website:

http://www.sjto.gov.on.ca/documents/ltb/Brochures/How%20a%20Landlord%20Can%20End%20a%20Tenancy%20(EN).pdf

Now that you know some of the reasons a residential tenancy agreement can be terminated early in Ontario, you can protect yourself.  Next time we will be discuss the forms, notices, time periods, etc you need to know to follow through on this process.

Readers, have you ever had to end a tenancy agreement early?  How did it go?

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Raising the Rent In Ontario - Everything You Need to Know

This one is for all you landlords or aspiring landlords out there.  Raising the rent on a residential tenancy in Ontario is a pretty technical process compared to many other jurisdictions.  Today we will touch on what, when, how and why so you don’t make any costly mistakes along the way.

How Much Am I Allowed to Raise the Rent?

In Ontario in 2019 you are allowed to raise the rent 1.8%.  In 2020 the rate will be 2.2%.

Where does this rate come from?

The rent increase guideline is based on the Ontario Consumer Price Index (CPI), which is calculated monthly by Statistics Canada.  The 2019 guideline is calculated by averaging the percentage increase in the Ontario Consumer Price Index during the 12 months from June 2017 to May 2018.  By law, the rent increase guideline cannot be more than 2.5 per cent, even if the CPI increase is higher.

How Often am I allowed to raise the rent?

In most cases, the rent for a unit can be increased 12 months after a tenant first moved in or 12 months since the tenant's last rent increase.

How Much Notice Do I Need to Give a Tenant Regarding the Increase? Hey 

A tenant must be served a notice of a rent increase with a Landlord and Tenant Board approved form at least 90 days before the rent increase is to take effect.

Is There A Special Form I Must Use For Notice?

You must use a form called an N1: Notice of Rent Increase.  You can find the form at this link:

http://www.sjto.gov.on.ca/ltb/forms/

The allowed increase rate is so small.  Why should I even bother?

Your expenses are increasing usually in line with the inflation (CPI) rate, so if you aren’t increasing the rent, on a real return basis your rents will be decreasing.  Also if you don’t or delay, you’ll missing out on some valuable compounding of your rent increases.  This is especially important in multiunit buildings where if you are not doing these increases, the cash flow of the building will be going down and therefore the value of the building too based on that cash flow.

Are there exceptions to these rules?

Yes there are exceptions for certain situations where the landlord can apply to the Landlord Tenant Board to increase the rent more due to higher costs or capital expenditures.  There are also some types of rental units that are exempt from these increase guidelines.  You can read more about this on the Ontario landlord tenant board website - http://www.sjto.gov.on.ca/ltb/.

Increasing the rent is an important topic and this guide should help you avoid any issues.  If you ever have any questions regarding residential tenancies don’t hesitate to reach out to us.

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Rental Property Investing - Confirming the Data

When we consider investment property options, doing the math is generally straightforward as we determine  ROI’s, cashflow projections, and the like. It’s how those numbers are arrived at and the ‘legitimacy’ of them, that is the next important exercise.

On the income side, we need to review the current lease agreements in place and confirm the rental amounts, in order to reconcile the gross revenue numbers which are represented.  The lease will contain the balance of the term(s) remaining with the lease - including future increases, balance of time  remaining, renewal details, and deposits which may apply. As a matter of best practice, time should be taken to review all leases in their entirety, to ensure there are not provisions which you may not be aware of (ie. early termination clause, additional rent caps, expiration of personal guarantees - just to name a few).

On the expense data, year end reports are typically provided and are ok for the initial review.  But best practice is to verify the amounts against the owner’s income tax return(s), depending on the corresponding years being considered.  Three years history is probably a reasonable period and again, we are looking for the figures to balance against what has been represented.

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In any type of rental property investing, as they say -- ‘the devil is in the details’.  Make sure you verify those details, before proceeding to finalize any purchase.

Next up…discussing strategies and objectives with rental properties. Again, seek out experienced commercial realtors within your market to assist in finding the best rental properties available.

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