Ontario’s Residential Tenancy Agreement, Updates

As the renter’s market continues to gain traction in the GTA, it becomes increasingly important for realtors to stay on top of the upcoming changes in the tenancy agreement. As of April 30, 2018, every Ontario residential lease will be required to have the standard Residential Tenancy Agreement. 

We had Mark Weisleder from RealEstateLawyers.ca in for visit to take us through the lease conditions as well as the stipulations and clauses Realtors should be mindful of.

Download the Residential Tenancy Agreement here.

General Principles

• The first most important thing to know about this new agreement is that every residential lease in Ontario is required to use one. There are considerable consequences for failure to do so:
  • If the tenant requests/demands this form, they have the right to hold back a month’s rent unless the landlord gives it to them within 21 days of entering the lease.
  • If the landlord fails to provide the agreement to the tenant, the tenants will have the right to cancel the lease altogether.
• If any activity by the tenant or landlord violates the Act, the lease becomes void.
• Permitted deposits: first and last month’s rent, as requested by the landlord, replacement cost of keys, fobs, etc.
• Non-permitted deposits: security deposit.
• Prepaid rent is now permitted – only if offered by the tenant. It is recommended that this offer is received in writing.
• Interest on last month’s rent: 1.8% in 2018.
• Rent increase rate in 2018: 1.8%
• The Act does not apply if the Tenant and Landlord share a kitchen or bathroom.
• Access to the unit still requires 24 hours notice, between 8am-8pm, unless there is an emergency or the tenants agree otherwise.

On Qualifying Tenants

• Landlords must always take care to comply with the Human Rights Act.
• Call every reference, especially their prior landlord(s).
• Do a social media background check.
• Ask tenant to pay utilities.
• Interview tenants at their current address.
  • Tenant behaviours to watch out for:
    • Short answers
    • Fidgety behaviour
    • Faulty recall
    • Changing subjects
    • Overly polite / pleasant
    • Avoiding of eye contact
  • How to turn down a Tenant:
    • “We have preferred another applicant.”
    • “We are still reviewing applications.”

Terminating Tenancies

• Tenant must give 60 day’s notice to terminate month to month tenancies
• Tenant does not need to give a reason

Landlord Notices (required days)

• Non-payment of Rent: 14 days
• Conduct: 20 days, for bothering other tenants
• Conduct: 10 days, if serious damage has been caused
• Family use reason: 60 days
  • This may include families wanting to move back in to the property
  • Use Form N12
  • Family means landlord, spouse, child, parent or caregiver to the family (as long as person cared for is in the house)
  • NEW requirement: Tenant must be compensated an extra month’s rent to have their tenancy terminated under this reason
  • Landlord or family must occupy the home for one year
  • Failure to do so may result in a penalty of up to $25,000
• Buyer requires vacant possession: 60 days
  • This is applicable when the property is being sold, and the Buyer requires possession for their own family on closing
  • This is only allowed if the building is 3 units or less
  • Seller may have to apply to the Board early, if it looks as though the tenant will not be leaving
  • As realtors, it is important to stay very involved in the deal to ensure closing
  • Demolition, Renovation, Change of Use: 120 days

Consider using the following Clauses in your Offers to Purchase:

Clause for use when representing a Buyer wanting vacant possession on a property that has a month-to-month type tenancy in place or has a tenant with a lease expiring within 60 days of completion date of agreement. (Buyer has right to terminate agreement if tenant does not ultimately vacate before closing.)

The buyer reserves the right to present the seller with an undertaking that they or their immediate family intend to move into the property upon completion of this agreement. Should the buyer deliver such an undertaking to the seller, the seller agrees to provide the applicable 60-day termination notice to the tenant using Form N12 under the Residential Tenancies Act, on behalf of the buyer. In such case, the buyer also agrees to provide whatever support information may be required to demonstrate that the buyer or their immediate family will in good faith be moving into the property on closing and intending to remain in the property for at least one year after closing. The buyer agrees to also provide indemnification to the seller for any damages that may be suffered by the seller if the buyer or his family does not, in fact, remain in the property for at least one year after closing

In the event that the tenant disputes the above notice as given, then the parties herein agree to extend the closing of this transaction for a period of not more than 30 days, in order to effect an eviction of the tenant. In the event that vacant possession still cannot be obtained prior to closing, as extended, for any reason, then the buyer shall have the right, but not the obligation, to complete the transaction and accept the tenant, or terminate the agreement and have any deposit returned, without interest or deduction.

Clause to insert into Schedule B when listing a tenanted property with the tenant on a month-to-month basis. (If tenant does not move out before completion buyer must still close transaction.)

The buyer reserves the right to present the seller with an undertaking that they or their immediate family intend to move into the property upon completion of this agreement. Should the buyer deliver such an undertaking to the seller, the seller agrees to provide the applicable 60-day termination notice to the tenant using Form N12 under the Residential Tenancies Act, on behalf of the buyer. In such case, the buyer also agrees to provide whatever support information may be required to demonstrate that the buyer or their immediate family will in good faith be moving into the property on closing and intending to remain on the property for at least one year after closing. The buyer agrees to also provide indemnification to the seller for any damages that may be suffered by the seller if the buyer or his family does not, in fact, remain in the property for at least one year after closing. In the event that the tenant disputes the above notice as given and does not vacate the real property on or before completion of this agreement then the buyer hereby agrees to assume the tenant and complete the transaction. In such event the Seller agrees to provide all details of tenancy to the Buyer and credit the Buyer with any prepaid rental amounts and/or deposits that have been received by the seller from the tenant.

Can the tenant leave early if they receive either the N12 (60 days) or N13 (120 days) notices?

Yes, they can, by giving 10 days’ notice at any time.
If 10 day period is during any month, then the last month’s rent gets pro-rated.

Tips

1. All of these forms can be downloaded from the website, simply Google “Landlord and Tenant Board”.
2. It is recommended to use Form N11 (Agreement to Terminate a Tenancy), although there will be an associated cost to use this.
3. It is recommended to find the tenant another place to live if possible.
4. If tenant signs the form, but does not move out, what can the landlord do?
   • Landlord must still apply for eviction to the Board, but the process will be simpler.

Eviction Process

• 14 days – N4 Notice; the tenant has 14 days to pay the arrears. This can be served immediately.
• 30 days – to apply to Board for hearing, using L1. Cost is $170.
• 5 days – to get a copy of the order.
• 11 days – given by the Board for tenant to pay.
• 30 days – to go to Sherriff for eviction. Cost is approx. $450.
• The total eviction process can take an average of 90 days. This can be extended. Use a paralegal to assist you, it is too easy to make a mistake in the process, costing you more time and grief.
• Some tactics used by tenants to delay hearings or break a lease include:
  • Adjournments to get a lawyer, or because they are seriously ill
  • Claims that landlord turned off vital services or has not been maintaining the unit, or is otherwise harassing the tenant
  • New section 47 permits tenant to break a lease on 28 days’ notice if they allege domestic abuse

Rent Increases

• 8% for 2018
  • Use Form N1, requires 90 days’ notice
• Must be 12 months since last increase

Basement Apartments

• Must be Legal Use and Legal retrofit
• Be careful not to advertise income property (when listing) if not fully compliant!

Condo Rentals

• Attach declaration and rules to any lease
• Landlord is responsible for all damages to condominium or legal costs as a result of the tenant’s actions. Even a cease and desist letter to the condo board from a corporation lawyer results in a $750 lawyer bill + HST, which becomes a lien if you do not pay!
• On AirBNB:
  • Tenants who sublet using AirBNB are likely making a profit on their daily rental and this is not permitted under the Residential Tenancies Act. See section 134 (3) of the Act. Still, there is no case yet saying that renting for a night is in fact a sublet – so it is not guaranteed you can evict over this issue.

Insurance Issues

• Landlords must inform the insurance company if any unit will be vacant for 30 days, and the first time you are renting an additional unit in the property.
• Principal: any time a risk increase, the insurance company must be informed.
• This is why AirBNB may get in trouble if anything happens – insurance will likely not cover loss if not informed.
• If you have a rental property, you also need to make sure that you have insurance for the rental stream as well, since you will not be able to collect rent the time the building is being repaired or replaced.

Agreement of Purchase and Sale of Rental Property

• Conditional on review of all: Leases, Rent roll, Income and expense lists
• Receiving tenant acknowledgements or seller acknowledgements confirming:
  • The rent, interest on any last month’s rent;
  • That there are no claims against the landlord;
  • That there will be no renegotiation of leases prior to close;
  • That the landlord will provide direction to the tenants to pay all rent after closing to the purchaser.

Guide for Residential Landlords in Ontario

• Review the Main Principles under the Residential Tenancies Act
• Ensure your Residential Lease Agreement is up to date
• Consider an Option to Purchase agreement
• Ensure you have:
  • A rental application form
  • Rental interview form
  • Rental unit condition statement
  • Clauses for any agreement of purchase and sale – rental residential property

Put the Pen Down

• There is an explanation of every clause in the Agreement of Purchase and Sale.
• There is an explanation of every clause in the Listing Agreement and Buyer Representation Agreement.

Real Estate People, Beware (Book)

This is the #1 selling book for real estate salespeople in Ontario. Pay attention to the chapters on Bidding Wars, Home Inspection Condition, and For Sale by Owner Companies.

Source: www.realestatelawyers.ca