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Ontario Bill 112 – Making Matters Worse for Landlords

by Andrew C. MacDonald on November 16, 2010

The Legislative Assembly of OntarioLast week another investor brought Bill 112 to my attention. If you’re a landlord, you’re not going to like this one, and it has unfortunately carried in its first reading.

Bill 112 and its proposed amendments to the Rental Tenancy Act can be seen here:

http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=2408

Proposed Changes

The amendments take what is already a very pro-tenant stance in our Province, and give tenants additional power. They key changes proposed include the following:

  1. The Bill increases the time limit for most tenant and some landlord applications to the Landlord and Tenant Board from one to two years. Tenants can now go back 2 years to file a complaint.
  2. The Bill requires a landlord who terminates a tenancy for personal use to compensate the tenant and expands the circumstances in which a landlord is required to compensate a tenant if the landlord terminates a tenancy for the purpose of demolition or conversion to non-residential use. Compensation is an amount equal to three months rent, or offer the tenant another rental unit acceptable to the tenant.
  3. The Bill prohibits a landlord from increasing the rent charged to a new tenant by more than the guideline and abolishes landlord applications to the Board for above guideline rent increases where there has been a significant increase in the cost of utilities.This means no new rent increases to market rent beyond the guideline even when you have tenant turnover. This would effectively establish rent control in Ontario.
  4. The Bill requires that the Board dismiss an application from a landlord who has been given a work order under section 225 of the Act or an order under section 15.2 of the Building Code Act, 1992 and has not completed the items in the work order or the order.If a landlord has any outstanding work orders from the LTB, any new applications from that landlord will be ignored.
  5. The Bill requires a landlord to obtain a licence with respect to a rental unit in a residential complex containing six or more rental units in order to enter into a tenancy agreement or renew an existing tenancy agreement. This amounts to nothing more than a cash grab from multi-family investors.

What You Can Do About It

Thankfully we live in a democracy and you can make your voice known. To do so, find your Ontario MPP here, and let them know how you feel. Contact your local MPP and make sure they understand both sides of the argument. Many people think landlords are wealthy fat cat investors who own hundreds of units and oppress the masses, but as you all know, that simply isn’t the case. Let your MPP know there are individual landlords out there too, and that these changes will hurt both tenants and landlords. Please voice your opinion on the proposed changes and share this with others.

If you are looking for some ideas, here is what I wrote:

From a regulatory perspective, Ontario is a very pro-tenant province, and the Rental Tenancy Act is already skewed in favour of tenants. This bill serves only to exaggerate this bias, and is unfair to landlords like myself. Despite the image of evil, cigar chomping, fat cat landlords that many people conjure up, many landlords are regular hard working men and women simply looking for a stable investment that will provide a better future for themselves and their families.

Of the five proposed changes, the third item is perhaps the worst:

3. The Bill prohibits a landlord from increasing the rent charged to a new tenant by more than the guideline and abolishes landlord applications to the Board for above guideline rent increases where there has been a significant increase in the cost of utilities.”

The annual rent increase guideline is typically established at levels too low to even keep pace with the real rate of inflation in any given year. In 2010, where utilities became subject to an additional 8% tax through the introduction of HST, the rental increase rate was pegged at just 2.1%. Each year the operating margins of landlords throughout the province are reduced due to arbitrarily low rental increase guidelines. The real problem with this proposed change outlined by Bill 112 is that landlords can no longer raise rents to market value when renting a unit to new tenants. It is an economic fact that a home is worth what the market is willing to pay, not 2.1% (or any other arbitrary percentage) more than it was worth last year.

Effectively this bill creates a Provincial rent control program that will be detrimental to both tenants and landlords. Previous studies show that the introduction of rent control reduces the quantity and quality of housing available. It also leads to illegal discrimination as landlords become increasingly cautious when selecting tenants. Landlords will also try to offset their lost margin by resorting to black market tactics such as forcing tenants to use their affiliated moving company or demanding under-the-table “key money” deposits. If Ontario continues to become increasingly pro-tenant, it only encourages speculation, flipping and black market real estate tactics as a preferred way to make money in the industry. Is this the business model we intend to encourage in our society?

My goal as a real estate investor is not to speculate on the market, but instead to purchase and maintain quality cash flowing properties while providing great accommodations my tenants are proud to call home. The current laws already heavily favour tenants while subjecting landlords to an unfair amount of risk, but the amendments outlined in Bill 112 would only make matters worse. Rather than pander to the “professional tenants” who use the system to have it their way, let’s make things fair for us all.

The fact of the matter is that rent control is poor economic policy and is detrimental to both landlords and tenants alike. Please consider the true impacts of these amendments and whether they are fair to both groups.

I truly hope that you will take action and vote against Bill 112 in its second reading.

Sincerely,
Andrew C. MacDonald

Unless the idea of shrinking NOI appeals to you, please take just a few minutes to voice your concern as a landlord to your Member of Provincial Parliament!

Creative Commons License photo credit: scazon

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{ 12 comments… read them below or add one }

qmanrei November 20, 2010 at 1:09 am

Thanks for offering a template and some ideas.

Andrew C. MacDonald November 20, 2010 at 1:38 pm

Hi Quentin,

Thanks for originally bringing this to my attention. I’ve passed this along to a few investor friends but though posting would be a good way to reach more people. Sometimes the biggest hurdle to contacting an MPP is knowing what to say. I added my letter in hopes that it would offer a template and some ideas to make it easier for people to get involved.

Cheers,
Andrew

Adam Hoffman November 20, 2010 at 3:41 pm

Thank you for taking the time to provide exposure to bill 112. This an unfortunate example of political gain at the expense of good policy.

There will be a long term negative impact if implemented to both tenants and landlords. For tenants this will mean a reduction in quality and availability of rentals in the future. As the incentive for the creation of new supply is reduced there will be fewer choices for tenants. The quality of service, amenities and upgrades being offered will decline. Landlords can look forward to lower asset valuations and income.

Keep getting the word out – if enough voices are heard this will get voted down.

Scott November 22, 2010 at 2:11 pm

It’s great that news about Bill 112 is getting out there for landlords all across the province to see.

However, this bill is only the tip of the iceberg when it comes to anti-landlord, anti-small business legislation and rules when it comes to the McGuinty Liberals, the RTA, and the Landlord and Tenant Board (and LAO!)

Small business landlords are coming together and making changes at: http://www.ontariolandlords.ca

Members of this organization have already spoken with the Housing Minister and many MPPs and Bill 112 will NOT pass.

Randy Dalton November 22, 2010 at 2:47 pm

Thanks for bringing this to our attention and giving us some templates to use. Rent controls will result in a devaluation of real estate for investors and reduced choices and availability of quality units for tenants.

CK November 23, 2010 at 11:25 pm

Thank you for this post, greatly appreciate you providing this information as its non-existent in the media.

David November 26, 2010 at 10:13 pm

Here’s an idea. How about introducing as part of this new bill a proponent that prohibits landlords from including utitlies in monthly rent. Then you don’t have to worry about Dalton’s 46% hydro increase over the next five years (when you can only raise the rent 5×2%). As a landlord, I’m extremely frustrated by landlords who include utilites in the rent because it makes it harder for the rest of us. I have never done this, and I always hear it from potential tenants that so and so is all inclusive.

Why should landlords absorb the cost of Dalton’s skyrocketting out of control hydro system when the tenants leave all the lights on and doors open in the winter? Tenants should have to deal with this hydro problem too. Maybe if they did, they’d realize Dalton is no good.

Without increasing utility costs, I think 2% rent increase per year is sufficient to keep up with rising landlord expenses like insurance and taxes.

I do believe landlords should be allowed to pay tenants’ rent and think this should be included in this new Bill or landlords should get together and collectively pass on the Hydro problem to tenants instead of bearing it on their behalf.

Richard Killeen-Payne January 3, 2011 at 9:11 pm

Hi Andrew,
I have just listened (in horror!) to the REIN cd’s discussing this. I live in Nova Scotia but have 2 properties in Hamilton and am looking for some advice as to what I can do given my residing province. Can I still find the MPP based on where my properties are and send a letter?

Andrew C. MacDonald January 3, 2011 at 9:25 pm

Hi Richard,

I wrote to the MPP where I work, the MPP where I live, and the MPP where my rental properties are. Just let them know why you’re writing them (because you own property in the area) and make your concerns known! Whether you reside in that area or not, pushing the issue will still help.

Cheers,
Andrew

Rick February 16, 2011 at 5:37 am

Hi Andrew

All this push towards socializing housing and taking away the responsibility of the individual tenants is a Liberal/socialist agenda that the Mc Guinty government follows.
As an investor it is scary to know that my livelyhood is adversely affected by their warpped sense of balance. God forbids tha Bob Rae enters at the federal level or any level at all.
As of today I had enough dealings with the LTB to start praying for a STOP on the civil servants playing Judges or interpreters of any law.
We need to get the liberals out of office and put in a Conservative government.
We need to get the liberals out of office and put in a Conservative government
We need to get the liberals out of office and put in a Conservative government

Let’s hope for the best

Rick

R Arora February 16, 2011 at 2:32 pm

Thank you for this article and the links and your ltr. I too have sent an email to the MPPs of the areas we invested in. I didnt even know about this-we cant raise rents even for a new tenant!!!! n they can increase property taxes, add HST to PM fees etc etc and we just are supposed to grin and bear it!? Are there no landlords in the Govt who understand how unfair the system here is!???

Andrew C. MacDonald February 16, 2011 at 2:39 pm

Hi Rasna,

These changes haven’t gone through yet, so you can still increase your rent to any price you like for new tenants.

Each party will try to make changes in the interests of their voter base, and in an election year it is clear that some parties are trying to win the tenant vote. Don’t just grin and bear it, take action and contact your MPP. When enough people stand against silly changes like these, they can be stopped.

Cheers,
Andrew

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