On September 17, 2020, Minister Clark tabled Bill 204 – the Helping Tenants and Small Businesses Act – which includes an unprecedented rent freeze set to begin January 1, 2021.
Many Ontario landlords, who felt blindsided when news of the legislation first dropped last month, are now fretting about the ramifications the new terms will have on their already strained operations. With no end to COVID in sight, and the heightened measures and expenses needed to remain safely operational, the future looks daunting for smaller landlords in particular.
“It is clear from the government’s own figures that inflation is running at 1.5 per cent and without a rent increase to offset the added expenses for cleaning, maintenance and administration relative to COVID, many smaller operators will be feeling the pinch,” says Paul Cappa, paralegal with Cohen Highley LLP. “Landlords were hopeful that there would have been at least a corresponding freeze on property tax and utility increases for 2021. Unfortunately, the rent freeze is untargeted and does little to assist the most vulnerable tenants that have lost their income due to COVID.”
Here, Cappa offers legal advice and clarification for landlords soon to be impacted by the terms of upcoming Bill 204:
Rent freeze terms & exemptions
Beginning January 1, 2021, landlords will not be permitted to increase rents unless they currently have an AGI order, phase in, pending unapproved AGI application, or they fall into one of the exemption categories outlined below.
The rent freeze also applies to rental units that are otherwise exempt under the legislation from guideline increases – i.e. buildings and additions first occupied after November 15, 2018. “Even though these units are not bound by annual guideline increases, they are caught by the rent freeze and no increase may be given to take effect during 2021,” explains Cappa.
For those with N10 agreements to increase rent for more than the guideline, landlords will be entitled to move forward with the increase in 2021 because of capital work completed at the property or unit.
Similarly, where a landlord and a tenant agreed to a rent increase based on the provision of prescribed services (parking spaces, AC units, cablevision, electricity, etc.) the increase is valid even if taken during the rent freeze period.
For all rent increases lost to the rent freeze, these may be taken January 1, 2022 – “unless the Province blindsides the industry again by imposing an extension,” says Cappa, noting that landlords would need to issue a NORI by the end of September 2021 for it to take effect January 1, 2022.
Room for “tweaks”
According to Cappa, the legislature seems to have recognized that there may be implementation issues, and as such, a few legislative tweaks may follow. “For example, there is no guidance for landlords who must file an AGI and corresponding NORI in order to meet timelines imposed by the RTA,” he notes, pointing to the 18-month window for filing.
In addition, Cappa says if a landlord is issued a Notice of Rent Reduction by a municipality, the rent is subject to the rent freeze and must be reduced accordingly— “which amounts to a double loss for landlords who receive such notices.”
Waived rent increases
For those landlords who waived rent increases at the start of the pandemic, Cappa suggests they consider un-waiving them before the rent freeze takes effect.
“In cases where landlords gave rent increases, but waived collection of the increase portion “until further notice”, [they] should consider giving notice to end the waiver effective, at the latest, December 1, 2020,” advises. “While it is arguable that revoking the waiver at some point in 2021 is not a rent increase, many tenants and even some board members, may not see it that way, so to minimize the risk, a December termination of the waiver period is a safer choice.”
For a complete summary on Bill 204, and for ongoing legal advice from Cohen Highley LLP, click here: http://cohenhighley.com/news-and-articles/articles/covid-19/