The financial rewards of investing in multifamily commercial real estate properties or leasing out space you already own can be significant. Having a steady flow of monthly rental income can offer you greater financial freedom both now and in the future.
Still, landlord-tenant relationships can be complicated. If you’re considering becoming a landlord in Ontario, an in-depth understanding of landlord and tenant responsibilities under Ontario’s Residential Tenancies Act can help make your single or multifamily rental an amicable and profitable business venture.
What is Landlord-Tenant Law?
Landlord-tenant law refers to the various provincial and territorial legislations that outline the rights and responsibilities of landlords and tenants involved in residential and commercial leases and may also govern rental application and screening processes.
In this article, we’ll focus on the residential side of the act.
The Residential Tenancies Act (RTA) in Ontario
The Ontario RTA (formerly known as the Ontario Landlord and Tenant Act) sets out landlord-tenant rights and responsibilities once the parties enter into a tenancy agreement. Ontario’s Landlord and Tenant Board (LTB) ensures the rights and obligations of both landlords and tenants are balanced and is a tribunal with the authority to resolve disagreements between landlords and tenants.
Tenancy Agreements
So what exactly is a tenancy agreement? Simply put, a tenancy agreement – also known as a rental agreement or lease – is a contract between a landlord and a tenant stating that the tenant will pay an agreed monthly rent in exchange for the right to occupy a residential rental space or property.
Residential tenancies refer to situations in which a tenant is renting private living space, such as in a:
- Room
- Basement or basement suite
- House
- Duplex
- Townhouse
- Apartment
Ontario’s Residential Tenancy Act includes information regarding:
- Tenancy agreements
- Landlord-tenant responsibilities
- Maintenance standards
- Rules related to rent and rent increases
- Subletting rental units
- Apportionment of utility costs
- Termination of tenancies
- Privacy requirements
- Landlord and Tenant Board responsibilities and powers
Tenant Screening: The Secret to Profit and Positive Landlord-Tenant Relationships
As a landlord, your business depends on keeping vacancy rates as low as possible. But you don’t want just anyone renting one of your units. You want a tenant who pays their rent on time, keeps their rental unit in good condition and respects other tenants and the community around them.
The RTA sets out what can and can’t be asked during tenant screening processes so landlords can acquire the information they need in a non-discriminatory way.
When screening applicants, landlords can ask only for the following:
- Rental history (although if a person does not have a history of renting – as in the case of student housing or newcomers to Canada – this cannot legally be used against them)
- Permission to run credit checks and credit references
- Legal name, address and date of birth (to conduct a credit check)
- Information about a prospective tenant’s passport, driver’s license, source of income and expenses, but only for:
-obtaining a more detailed credit report
-ensuring the credit check is being done on the correct person and not someone with the same name and date of birth
-the number and names of any persons that will be living in the rental unit
Landlords cannot explicitly ask about or refuse to rent to a tenant based on their:
- Age
- Race
- Creed
- Colour
- Religion
- Nationality
- Ethnic origin and place of origin
- Gender, gender identity or gender expression
- Sexual orientation
- Marital or family status
- Physical or mental disabilities
- Political belief or association
- Lawful source of income
- Pardoned criminal conviction
Standardized Lease Requirements
In Ontario, landlords must use a Standardized Lease developed by the provincial government for most residential tenancy agreements.
Available in multiple languages, from Arabic to Vietnamese, the form uses plain language to clarify landlords’ and tenants’ roles and responsibilities. When complete, it creates a binding contract between the landlord and tenant.
Landlord Responsibilities
In addition to obeying Ontario’s laws and complying with the terms of a tenant’s lease, landlords must:
Respect Tenant Privacy
As a landlord, you must respect and protect your tenants’ privacy, especially when it comes to the information you may have collected about them in your tenant-screening processes.
In most of Canada, landlords must comply with the government of Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA).
According to PIPEDA, landlords must:
- Identify the reasons for collecting personal information before or at the time of collection
- Obtain a tenant’s consent when collecting, using or disclosing a tenant’s personal information
- Use a tenant’s personal information only for the intended reasons
- Provide tenants with access to the personal information that you hold about them and allow them to challenge its accuracy.
- Protect a tenant’s personal information with appropriate physical or digital safeguards.
Provide Safe and Habitable Housing
Landlords need to provide safe and habitable housing by ensuring:
- The property they rent meets applicable housing codes, zoning laws, and fire and environmental regulations.
- The rental unit and property are structurally sound
- The rental unit and property’s entrances have working locks
- Electrical, plumbing and HVAC systems are maintained
- Hazards are removed from the property
- Steps are taken to prevent pest infestations
- Repairs are performed in a timely manner
Disagreement on what constitutes the proper level of building maintenance or timeliness, in the case of repairs, can lead to disputes that can quickly turn ugly. Neglecting to complete a repair could cause a tenant to file a Tenant Application with the LTB, which could decide to remedy the situation by requiring you to reimburse the tenant for any damages caused to their property, the cost of the repair (if the tenant hired someone else to perform the repair work) or even require you to offer future rent abatements as compensation for the tenant having to live in a building in a dilapidated state.
Landlords cannot retaliate against a tenant for making such a complaint. When you’re ready to fulfill your obligations and make repairs, you’ll need to give your tenant adequate notice (typically a minimum of 24 hours before entering the unit) and let them know how long you’ll need to be in their space.
Follow Guidelines On Allowable Rent Increases
- Ontario guidelines dictate the maximum percentage a landlord can increase most tenants’ rent by during a year without the approval of the Landlord and Tenant Board.This guideline applies to tenants living in:
- Rented houses, apartments, basement apartments and condos
- Care homes
- Mobile homes
- Land lease communities
It does not apply to:
- New buildings, additions to existing buildings and most new basement apartments that are occupied for residential purposes for the first time after November 15, 2018 (as these are exempt from rent control)
- Rental units upon turnover of a tenancy
- Community housing units
- Long-term care homes
- Commercial properties
Follow Guidelines on Tenant Evictions
Landlords cannot evict tenants on a whim. Landlords must follow a process even when they want to evict for a “no cause” reason. Notice periods also vary depending on the cause.
In Ontario, tenants have security of tenancy. This means that a tenant can continue to occupy a rental unit until:
- The tenant decides to leave and gives the landlord proper notice that they intend to move out
- The landlord and tenant agree to end the tenancy, or
- The landlord gives the tenant a notice to end the tenancy for a reason allowed by the Ontario Residential Tenancies Act, and
- The tenant agrees to move, or
- The tenant disagrees with the landlord’s notice, the landlord applies to the LTB, and the LTB issues an eviction order
Examples of “for cause” reasons for ending a tenancy include:
- Not paying the rent in full
- Causing damage to the rental property
- Disturbing other tenants or the landlord
- Illegal activity in the rental unit or residential complex
- There are also reasons for ending a tenancy unrelated to what a tenant has or hasn’t done. These are called “no-fault” reasons.
Examples of “no-fault” reasons for ending a tenancy include:
- The landlord plans to do major repairs or renovations that require a building permit, and they can’t do the work unless the rental unit is empty
- The landlord requires the rental unit because the landlord, a member of the landlord’s immediate family or caregiver wishes to move into the unit.
- The landlord has agreed to sell the property, and the purchaser requires all or part of the property because the purchaser, a member of the purchaser’s immediate family or caregiver, wishes to move into the unit. (This reason for eviction only applies in rental buildings with three or fewer units or condominium units)
In most cases, the landlord must compensate the tenant if they evict them for a “no-fault” reason. The amount of compensation varies depending on the basis and the number of units in the building.
While the parties resolve an eviction notice, landlords cannot prevent tenants from entering or occupying their rental unit or remove their tenant’s personal possessions from the space.
Eviction tends to be a time-intensive and costly process for landlords, making effective tenant-screening processes and resolving maintenance, repair and relationship issues between landlords and their tenants crucial to long-term business success.
Are You Ready To Become A Landlord In Ontario?
Though the profit potential is substantial, being a landlord isn’t a “set-it-and-forget-it” sort of thing. Rental properties can require significant upfront costs for renovations and refurbishments, ongoing time and financing related to property management, maintenance and repairs, plus entail cash outlays for insurance and property taxes.
If you decide to take the plunge and become a landlord in Ontario, make it your goal to learn, understand, comply with and stay up to date on all aspects of Ontario’s Residential Tenancies Act to have the best chance of building a business that delivers high earning and harmonious landlord-tenant relationships.
