The overall increase in residential rental fees over the last few years created a perception of poor Return on investment (ROI) condition for most landlords. Faced with a very low allowable annual increase in rent for existing tenants, many landlords want to get rid of them and start with new tenants under an inflated rental fee more aligned with fair market value.
Some landlords had elected to leave the rental market and sell their property while the real estate market is hot. Others want to take back the property under the pretense of major renovations or personal/family members occupation. Unfortunate for them, these two avenues are addressed by Bill 124 (Rental Fairness Act, Ontario) in 2017 and measures are in place to protect the tenants and the availability of rental units in the market.
Under the old Act, a landlord was allowed to give a termination notice if the landlord requires possession of the rental unit for the purpose of residential occupation by the landlord, a member of the landlord's family or other specified persons. Family member are defined as the landlord, the spouse, the parents, the spouse's parents, the children, and the spouse's children only.
After the Bill 124 amendments, any re-possession by the landlord must only be for residential occupation by himself or designated family members under the Act and for at least one year. A landlord who gives a termination notice above is required to compensate the tenant in an amount equal to one month's rent or to offer the tenant another unit acceptable to the tenant in lieu of the compensation.
Re-possession for selling the unit is tightly controlled by a document named “Form N12”. The purchaser will likely want the seller (the landlord) to give notice of termination to a tenant on his behalf to avoid any responsibilities under the Act. The agreement of purchase and sale will probably have to identify and stipulate that the purchaser, in good faith, requires possession of the complex or the unit for residential occupation by the purchaser, his or her spouse, or a child or parent of one of them.
The Landlord and Tenants Board (LTB) may dismiss the application (N12) to re-possess the unit if it determines that the purchase is a pretense created for the purpose of evicting the tenant. For example, a transfer to a family member or a sale for much less than market value may raise questions.
A notice of termination can also be executed if the landlord intends to - demolish the rental unit, convert it to a purpose other than residential premises; or do repairs or renovations to it that are so extensive that they require a building permit and vacant possession of the rental unit.
Recently, an apartment complex in downtown Toronto renovated the units but did not allow the tenants to move back into the rental units afterwards and at the same rental fees. The purchaser rented out the units at more than 3 times the original rents and were taken to court. They were penalize for $75,000 for terminating a tenancy in bad faith. This is the maximum fine of $25,000 per unit under the law and they are still getting ahead in the rental income after the penalties. They are not out of the woods yet since they did not offer the evicted tenants the “right of first refusal” or first chance at moving back into the units under the old rental rates. The potential fines are up to $300,000 when the court date comes up in August.
After seeing the complications and headaches with property rentals, will you as a reader consider buying an investment property for rental? I have made up my mind to stay away from this kind of venture already.
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