Clarifying the Legal Implications of Rent Freezes during the COVID-19 Pandemic
The COVID-19 pandemic has brought a high level of uncertainty and with the current stay-at-home order in effect, the confusion behind rent freezes has been placed at the forefront for landlords and tenants.
Typically, a landlord is permitted to increase their rent once every 12 months based on the maximum guideline. The guideline percentage changes each year. A sample calculation of a rent increase can be found here.
The Ontario government implemented a rent freeze under the Residential Tenancies Act 2006 to the effect that landlords cannot increase rent from the period of January 1, 2021 to December 31, 2021. The immediate concern from this temporary legislation is whether the interests of both landlords and tenants are protected and well-balanced.
Under the rent freeze, landlords are only able to increase their 2021 rent if they applied to the Landlord and Tenant Board for an above guideline increase. To file for an above-guideline increase, landlords must submit the N10: Agreement to Increase the Rent Above the Guideline form, which can be found on the Landlord and Tenant Board list of forms. However, to effect the above-guideline rent increase for January, 2021, the application for above-guideline increase must have been approved by the Board prior to October 1, 2020 and any increase in rent cannot be an “extraordinary increase”. The increase must correlate to repairs or services conducted at the property.
Another way to increase rent despite the rent freeze is upon mutual agreement between a landlord and tenant. This could be for an added facility to the rental property such as parking or air conditioning.
A “freeze” on increasing rent does not mean that tenants are able to skip out on the obligation to pay the agreed-upon rent. Tenants are still required to meet their monthly payments. However, some flexibility is still granted towards tenants that cannot meet their rent. The Protecting Tenants and Strengthening Community Housing Act encourages landlords to negotiate repayment agreements for rent arrears from March 17, 2020 or later in hopes of preventing tenant evictions.
In the event that you as a landlord have missed out on the opportunity to increase rent for 2021, we encourage you to be prepared for the future. Landlords are permitted to give a 90-day notice in anticipation of a rent increase. With the current state of the pandemic, we are unable to predict what events will unfold, but we encourage you to reach out to our real estate lawyers for any government updates related to the Landlord and Tenant Board.