Leasing Tips

Landlords

I have sold many of my own properties since I ventured into real estate, and I have come to regret every sale. That said, I don’t enjoy being a landlord in Ontario, given how much the Residential Tenancies Act favours tenants. Nevertheless, while there are many unpleasant tenant stories out there, having the option of leasing a property instead of selling it is a rare privilege and a guaranteed way to grow wealth. And for many, generational wealth. If you have any questions on becoming a landlord, don’t hesitate to contact me.

Among the most important things to know is that residential tenants in Ontario are granted a privilege known as “security of tenancy.” It essentially guarantees the tenant the right to continue their tenancy for as long as they wish (assuming they make their payments and aren’t acting untoward). For example, you have a 2 year contract with a tenant and the end of the tenancy is approaching. If the tenant wishes to remain in the property, you cannot deny them. The tenancy will transition to a month-to-month tenancy wherein the tenant can give the landlord 60 days’ notice to terminate the lease and vacate the premises. The reverse, however, is not true: you cannot evict a tenant at the end of the rental period in either a fixed term or month-to-month tenancy. UNLESS. There are prescribed circumstances under which a landlord can end a tenancy. The most common reasons for ending a tenancy are: (i) for personal use, of the landlord or their immediate family, (ii) for renovation, sometimes referred to derisively as “renoviction,” though the landlord is obligated to offer the unit to the same tenant at the same rent after the renovations are complete, and (iii) for demolition of the property. Note: ending a tenancy can only be done at the end of a fixed-term contract or with a minimum 60 days notice. If a tenant can prove that the landlord evicted them “in bad faith,” the tenant can file a complaint that results in penalties for the landlord, including a $25,000 penalty + other fees. 

As a rule, if you have a property that you intend to redevelop or sell in the near future, ensure that the benefits of renting it in the meantime are worth the risks. Of course, the majority of tenants are great, pay their rent on time, take care of your property (their home), and don’t disturb the peace. As always, go in with your eyes open, be informed, and do your homework on any prospective tenant (background checks, income verification, reference checks, credit checks, google, etc).

A couple other things to be aware of: you cannot prevent your tenant from having pets, and you cannot unreasonably deny a tenant the option of sub-letting the property to someone else. If you’re renting out a basement apartment, know that most basement apartments in Ontario are not “legal” units. For a basement apartment to be legal, it must meet certain building & fire code requirements, and this is true of only a minority of such rental units.

Unlike the purchase and sale of property that are mostly effectuated with Realtors, rentals are just as likely to be leased privately by the owner than by a Realtor. Social media sites, kijiji, etc, make renting a home an effortless task for homeowners and would-be landlords. Realtors, however, can be worth the small fee. Unlike purchase and sale, the commission Realtors commonly charge on rentals equates to a month’s rent. If both the landlord and the tenant are represented by a Realtor, they share the one-month’s rent fifty-fifty. So the cost of using a Realtor can be modest for the benefits they bring, those being the visibility of a listing on the Multiple Listing Service & realtor.ca, marketing, and documentation. Notably, in April 2019, the Province standardized rental agreements, so whether you are using a Realtor or renting your property privately, all residential tenancies must be reduced to writing on the Province’s standardized rental agreement form (see Resources for a copy of the form). As part of this standardization, the Province also clarified what Landlords can and cannot charge a tenant. For example, there is a limit to the “admin fee” a landlord can charge a tenant for a returned payment. Security deposits cannot be charged. Post-dated cheques cannot be solicited. In most cases, a landlord can require first and last month’s rent upfront, but little else. 

Tenants

Some people are tenants for life, and some people are tenants for a period of time. Whatever your reason, renting a property brings certain freedoms vis-a-vis owning a property with all its responsibilities. Notably, renting vs owning often allows people to use their capital on other activities, instead of tying up this capital in home equity. Renting can also be great for transition periods in a person’s life. And some people have been renting so long that with the benefit of rent controls, they can’t own a property in the same neighbourhood for nearly the same payment. 

All of this said, I strongly advocate for owning vs renting, for people who have the option. Capital tie-ups are less of an issue with many lenders allowing for down payments of as little as 5%, and in a real estate market like Toronto’s, there is no time like the present to buy a property. Supply and demand in Toronto’s market is so unbalanced that even an historic pandemic could not impede the endless rise of Toronto’s home prices (a blip in condos notwithstanding). Home ownership is one of the most reliable and common forms of wealth accumulation and generational wealth. With historically low mortage rates, and until recently, historically high rental rates, one can find many examples of mortgage & property tax payments being lower than rental payments. 

If you have any questions on residential tenancies, don’t hesitate to contact me. 

Renting a property became a more transparent process in April 2019. That’s thanks to the Province creating a standardized residential rental agreement that all landlords and tenants must use in Ontario. Realtors may have their own forms but none of those forms supersedes or replaces the Ontario form (see Resources). Tenants in Ontario are well-protected by the Residential Tenancies Act, though there are no shortage of stories about shady landlords who do not keep rental properties in proper working order or find clever ways to end tenancies. Bottom line: you have resources at your disposal to hold landlords accountable. Generally speaking, regardless of the term of your rental agreement – whether it’s a 1 year or 2 year fixed term agreement or a month-to-month agreement – a landlord cannot end a tenancy on a whim. Once a fixed term contract is within 60 days of expiring or at any point in a month-to-month tenancy, the landlord must provide the tenant with a minimum of 60 days’ notice to end a tenancy, and can only do so for prescribed reasons, including personal use, renovation, or demolition, most commonly. If a landlord terminates a lease for personal use, the landlord must pay the tenant one months’ rent. There are a number of forms that a landlord or tenant may use, from time to time, and ending a tenancy by either party requires written notice and use of a Provincial form. 

Tenants should know that a landlord is authorized to enter the property with 24 hours advance written notice. Furthermore, a landlord cannot increase rents beyond a capped percentage tied to inflation that is defined by the Province. There are exceptions in the case of upgrades and unforeseeable expenses, but in most cases, the inflation percentage is the cap. A landlord may also list and sell a property while it is tenanted. A tenant cannot interfere with this process, provided the landlord is meeting their obligation of advance notice for showings. The tenant may choose to remain in the property or leave during showings – the choice is the tenant’s, not the landlord’s. Notably, if a property you are renting is sold, the new buyer effectively becomes your new landlord and is obligated to assume the existing terms of the tenancy, including monthly rent, term, etc. If you are in a month-to-month arrangement, then the new buyer can serve you 60 days notice, with a Provincial form, to end the tenancy for, most commonly, personal use.

A tenant is, unsurprisingly, expect to keep the unit free from damage or excess wear and tear, and is required to honour any rules or restrictions that govern the property. For example, most condos have an extensive list of bylaws and whether you are an owner-resident or a tenant-resident, you are required to respect those bylaws. Failure to do so could result in your eviction. 

Do you need a Realtor to find you a rental? It depends. Anyone with a reliable wifi connection (ie, everyone except Rogers Customers) has ready access to rentals: whether you’re looking on kijiji, realtor.ca, or viewit.ca, there are options aplenty for doing your own research. A Realtor who understands you and knows what you’re after can greatly simplify this process for you, however, by helping you find the handful of optimal properties that check all your boxes while you spend your time on other matters, like eating, working, rearing kids, or finally listening to your parents’ sage counsel. Even though Realtors don’t earn much commission on rentals, the savvy ones know that a renter-client today could be a purchaser-client tomorrow and will ensure they give you great service today for the hope of your business tomorrow. Another advantage of using a Realtor is avoiding those craigslist and kijiji horror stories that you hear from time to time. 

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