Last 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.
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:
- 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.
- 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.
- 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.
- 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.
- 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.
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!
photo credit: scazon
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