The following is not and should not be construed as legal advice. If you are looking for legal assistance with a housing matter, you can book a free 15 or paid 60 minute consultation here. And if you just want to keep up with our work, subscribe to the Green Economy Law Monthly Newsletter here.
Ontario has had residential rent control measures in place for a long time. These measures restrict the annual increase in rent landlords are legally allowed to charge. The purpose of rent control is to protect tenants from sudden and excessive rent increases, thereby making housing more affordable, and paying for it less stressful.
Rent control has been a controversial issue in Ontario. In 2018, the province’s Progressive Conservative government under the leadership of Premier Doug Ford changed the law so that rent control does not apply to rental units in properties first occupied for residential purposes after November 15, 2018. Though this change was intended to spur the construction of new units so housing demand would be offset by increased supply, that has not happened.
Accordingly, as old units get demolished and new ones built, rent controlled units in Ontario are slowly but increasingly disappearing. At the same time, permitted Above Guideline Rent Increases (AGIs) in units subject to rent control are also on the rise. The convergence of these two issues are contributing to Ontario's ever-worsening housing crisis.
What are landlords allowed to charge?
Rent control in Ontario is governed by the Residential Tenancies Act and regulations promulgated under its legislative purview. If a property is subject to rent control, the landlord can only raise a tenant’s rent:
once every 12 months;
in accordance with the limits imposed by the provincial rent increase guidelines; and
with 90 days’ written notice of the rent increase by means of a properly-served N1 form.
But landlords can charge whatever a tenant agrees to pay at the outset of a lease. No regulation applies under these circumstances (i.e., Ontario no longer has any vacancy decontrol laws).
What is an Above Guideline Increase (AGI)?
If a landlord wants to legally charge a tenant more rent than the provincial guidelines allow, they can apply to the Landlord and Tenant Board (LTB) for approval to do so. Approval will only be granted in certain circumstances, such as where the landlord pays for substantial improvements or renovation to the property, or if their property taxes have increased substantially.
To obtain permission for an AGI, the landlord must:
give the tenant an N1 notifying them of the proposed AGI at least 90 days before its proposed implementation;
file an L5 application.
The LTB will then schedule a hearing. All tenants affected by the AGI should receive notice of it at least 30 days before it takes place.
At an AGI hearing, the LTB may:
approve the increase the landlord requested;
approve a smaller increase; or
decide an AGI is unwarranted and dismiss the application.
An approved AGI may be applied retroactively.
When is a rent increase illegal?
A rent increase is illegal if the landlord:
does not serve a proper and timely N1;
attempts to raise the rent more than once in any 12-month period; or
raises rent by more than the guideline amount for that year, without approval from the LTB.
Some landlords may tell tenants that they did not raise their rent the year before by as much as they were allowed, so they are “catching up” by raising rent above an applicable year’s guideline amount. This is illegal. In any 12-month period, the rent increase can only be as high as the guideline for that year allows.
What should tenants do when presented with an above guideline rent increase?
Tenants do not have to pay an AGI unless the landlord has been issued an LTB order approving it. If a landlord claims to have been granted an AGI, the Tenant can and should ask for the landlord to provide them with a copy of the granting order.
Until an AGI is approved, tenants have no obligation to pay the applicable AGI. Should a landlord demand payment of an AGI prior to the LTB granting its request for one, the tenant can simply ignore their landlord, and pay that part of the increase that’s within the guideline for that year. If the landlord files an N4 for arrears based on non-payment of an unapproved AGI, the tenant can attend the hearing and explain that since the LTB has not granted the AGI, they were not required to pay it.
Often landlords attempt to pressure tenants into paying AGIs absent any application for or order granting one. Should this occur, the tenant should tell the landlord in writing that they refuse to pay an illegal AGI and will only pay the amount they are legally required to pay. Charging an unapproved AGI is an offense under the Residential Tenancies Act which can be reported to the Ontario Rental Housing Enforcement Unit. Tenants cannot be subject to retribution for attempting to enforce their rights.
LEGAL ASSISTANCE FIGHTING rENT inCREASES
Our legal professionals can help tenants faced with an illegal rent increase by:
examining the N1 for defects that may invalidate the notice or subsequent L1 eviction application;
discussing your right to only pay rent in accordance with applicable law and legal rent increase guidelines, as applicable; and
outlining and assisting with options and strategies for fighting illegal rent increases or reaching a settlement between the parties.
If you are interested in learning more about our ability to assist with an N1 or AGI situation, take a look at our housing practice page and book a free or paid consultation with us using the button below.