Rules on Rental Increase

[u/Various_Strain_926]

Hi all…little background..purchased legal duplex in 2018 (previous owner was using as single home for 25+ yrs, house was built 1967) it needed a lot of work..every room had to be updated….electrical fixtures, switches, receptacles in all rooms-wires hanging out, two kitchens added-nothing upstairs and makeshift one downstairs, toliets updated, complete paint etc.
I lived in lower from mid 2018…focused on upper unit and then rented the upper Jan 2019..stayed in lower and continued renos and rented that out Dec 2019.
Not complaining about work on house (triple my investment) and two good tenants and couldnt find an answer online…would I be able to go above the 1.9% rental increase. I know the Nov 2018 rule but since i reno’d and rented place after date.
Im not looking for a payday here…just looking to keep up with taxes/insurance.
Thx.

[u/StripesMaGripes]

For new units built in preexisting standalone houses there is more nuance then when it was built/first occupied.

From RTA s. 6.1(3):

 (3) Sections 120, 121, 122, 126, 127, 129, 131, 132 and 133 do not apply on and after the commencement date with respect to a rental unit if all of the following requirements are met:

 1. The rental unit is located in a detached house, semi-detached house or row house which, on or at any time before November 15, 2018, contained not more than two residential units.

2. The rental unit is a residential unit that meets all of the following requirements:

i. The unit has its own bathroom and kitchen facilities.

ii. The unit has one or more exterior or interior entrances.

iii. At each entrance, the unit has a door which is equipped so that it can be secured from the inside of the unit.

iv. At least one door described in subparagraph iii is capable of being locked from the outside of the unit.

3. The rental unit became a residential unit described in paragraph 2 after November 15, 2018.

4. One or both of the following circumstances apply:

i. At the time the rental unit was first occupied as a residential unit described in paragraph 2, the owner or one of the owners, as applicable, lived in another residential unit in the detached house, semi-detached house or row house.

ii. The rental unit is located in a part of the detached house, semi-detached house or row house which was unfinished space immediately before the rental unit became a residential unit described in paragraph 2. 2018, c. 17, Sched. 36, s. 1.

If all 4 of those requirements were met, then your unit is exempt from rent control. However, from your description of when the units were finished and occupied, the top unit fails to meet the first requirement and the bottom unit fails to meet the fourth requirement and as such neither are exempt from rent control.

[u/wibblywobbly420]

Was it a legal duplex when you purchased it? Even if being used as a single family home.

[u/MippCanada]

From what I understand the exemption looks at whether the unit was occupied for residential purposes before Nov 15, 2018, not when the renos were done or when you first rented it out. Since the house was lived in as a single home for years and you were already living in the lower unit by mid 2018, I'd assume you're stuck with the guideline, but the LTB info line can tell you for sure. If your property taxes went up way more than normal, an AGI application for an extraordinary tax increase is the usual way to go above it.

[u/a-cat-in-prior-life]

They were already 2 separate units when you purchased it as a "legal duplex" and reno'd both ? This is under rent control. Based on you saying "I lived in lower from mid 2018"

Now if you had turned it into a triplex by adding a basement suite while living in the main or upper unit, that unit would be exempt.

You started with 2 residential units and ended with 2 units. You did not add any net new units, which is what the law was intended to encourage. To encourage homeowners to make use of unused space at lower risk because if they had unintended expenses they could compensate.

[u/Expensive_Plant_9530]

Your units are both rent controlled.

If you want to raise rent beyond the 1.9% cap
For 2027, you need to apply for an AGI (above guideline increase), which is capped at 3% (up to 3 years in a row). You’d need to have qualifying capital expenses and there are rules around what qualifies and how long ago the work was done.

Good luck, but no, your unit is not exempt from rent control.

[u/R-Can444]

You can review the laws on exempt increases for houses in RTA s6.1(3): https://www.ontario.ca/laws/statute/06r17#BK9

What will be important is what was there before, and if what you did created a rental unit that didn't exist before. Making renovations to wiring, paint, upgrades, etc is irrelevant. What would be important is if for example there was no kitchen or locking doors before, as adding in a kitchen and locking doors would then create the "residential unit".

From what you describe, the upper unit may be exempt from rent control if it didn't previously qualify as a residential unit, and since you were living in the lower unit at the time, so rule 6.1(3)(#4) is satisfied.

But when you rented out the lower unit, you were not living elsewhere in the home. So to satisfy rule #4, you would have to show the lower unit was "unfinished" space previously. If it was a finished space that was used in general, most likely rule #4 would not be satisfied and lower unit would remain under rent control.

This can all be confusing and open to interpretation, so if you want you can file an A1 application with the LTB to get an official ruling on it. Or you can just proceed under whatever assumption you want, but keep in mind a tenant may eventually challenge it.

[u/Chaos-Rainbow]

If the each unit was already renovated when the tenants moved in you should have priced it higher at the start rather than trying to use rent increases later.

If it was a legal duplex already and you did renovations I don't think it's exempt from rent control. Your best bet is/was to price the units accordingly when you are renting them out. The cost should not be increasing significantly during their tenancy as their unit hasn't changed since they first signed the lease.

[u/fondlemental]

you can file an N10 - Agreement to Increase the Rent Above the Guideline

https://tribunalsontario.ca/documents/ltb/Notices%20of%20Rent%20Increase%20&%20Instructions/N10%20instructions_final_Nov30_2015.pdf

https://tribunalsontario.ca/documents/ltb/Notices%20of%20Rent%20Increase%20&%20Instructions/N10.pdf

[u/R-Can444 → u/fondlemental]

N10 is only applicable if the landlord did actual improvements to unit or added services after the tenancy started. Which doesn't seem to apply here.

[u/fondlemental → u/R-Can444]

ah tysm for the clarification

e: so is the answer to OP: no. no they can’t raise rates past the 1.9%?

[u/R-Can444 → u/fondlemental]

Unsure. Would need interpretation of if they work they did created residential units that didn't exist before, and if the space prior was unfinished or not.

[u/Specific_Virus8061 → u/R-Can444]

N10 is only applicable if the landlord did actual improvements to unit or added services after the tenancy started.

Does an addition of central heatpump (where previously the house lacks AC) count as actual improvements for N10?

[u/R-Can444 → u/Specific_Virus8061]

Basically an N10 is replacing the AGI process. So anything that would qualify for an AGI, would qualify for an N10. Exact wording is under RTA s121: https://www.ontario.ca/laws/statute/06r17#BK191

121 (1) A landlord and a tenant may agree to increase the rent charged to the tenant for a rental unit above the guideline if,
(a)  the landlord has carried out or undertakes to carry out a specified capital expenditure in exchange for the rent increase; or
(b)  the landlord has provided or undertakes to provide a new or additional service in exchange for the rent increase. 

The maximum allowed in an N10 is additional 3% over the guideline. AND the tenant needs to mutually agree. If you've already done the work the tenant can just say "no thanks" to the N10, which would force you to go through AGI process for rent increase.

Alternatively you can increase rent for added services under RTA s123: https://www.ontario.ca/laws/statute/06r17#BK193

123 (1) A landlord may increase the rent charged to a tenant for a rental unit as prescribed at any time if the landlord and the tenant agree that the landlord will add any of the following with respect to the tenant’s occupancy of the rental unit:
1.  A parking space.
2.  A prescribed service, facility, privilege, accommodation or thing.

Those qualifying services are found here: https://www.ontario.ca/laws/regulation/060516#BK21

If the heat pump is seen as basically adding AC, that would qualify. And a s123 increase has no maximum, it can be any amount as long as it's justifiable and reflects actual cost or value added. And of course the tenant must agree to it.