Top 11 Misconceptions - Landlord and Tenant Rights

$500 damage deposit.  No pets allowed.  Landlord requires 6 months deposit up front.  Post-dated cheques required.  WRONG.

It’s been almost a year – a year since the Standard Form of Lease was made available by the Government of Ontario to help clear up the inconsistencies that you typically see in rental agreements/contracts.  This form lays it all out – the details about the specific unit (i.e. parking, utilities, etc.) along with the rights and responsibilities of both tenant and landlord as per the Residential Tenancies Act.  Any landlord entering into an agreement to lease for either a single family home, apartment unit, condo unit or secondary unit like a basement apartment must complete this form (as of April 30th, 2018) and provide it to their tenant to sign.  

Unfortunately, even with this new form, inconsistencies and misunderstandings still come up all the time in rental agreements and listings.  Based on our experience, we wanted to outline the top 11 misunderstandings we witness regarding rentals.

1. Landlord won't supply the keys unless 10 post-dated cheques for the remaining rent term are provided: WRONG.  The tenant can elect to pay by post-dated cheques but they are not required to do so.
2. Landlord is charging an administration charge for a NSF cheque: RIGHT.  But it can only be A MAXIMUM of $20.
3. Rent deposits are not allowed: WRONG.  A rent deposit is allowed but it can only be the amount of one rental period and can only be applied to the last month that the tenant is living in the unit - NOT the last month of that rental period.  For example, if a tenant signs a one year lease beginning in January and provides a deposit of one month's rent to be applied to December, if the tenant then elects to stay in the rental property longer, that deposit is carried forward until the last month that the tenant is actually living in the unit.  In addition, the landlord is required to pay interest on the deposit amount each year.
4. The landlord cannot charge a key deposit: WRONG.  A landlord is allowed to charge a key deposit BUT the cost of this deposit can only represent the true cost of replacing the keys and cannot be applied to anything else (i.e damage).  This deposit must be refunded once the tenant returns the keys when they move out.
5. The landlord cannot stop a tenant from smoking in the property: WRONG.  While the Residential Tenancies Act doesn't address smoking, the Standard Form of Lease does provide space to address this concern.  The Landlord can outline smoking rules and prohibit smoking (including cannabis products) if they choose to do so.  
6. The landlord can require the tenant to obtain liability insurance: RIGHT.  The landlord is allowed to ask the tenant to obtain liability insurance and ask for proof of coverage.
7. Common clause seen in rental agreements: "Tenant is responsible for paying the first $100 of all repairs to the unit." - WRONG.  Has anyone seen this clause in an agreement to lease before?  Probably, yes.  This is not allowed. The tenant IS responsible for the full cost of repairs due to their own negligence but owe nothing when it comes to regular maintenance and other issues commonly encountered in any property (i.e. appliance stops working, plumbing issues, etc.).  The landlord must keep the rental unit and property in good repair and comply with all health, safety and maintenance standards.
8. Landlord can evict a tenant for having a pet: RIGHT. BUT for only the following reasons:
   • The pet makes too much noise, damages the unit or causes other tenants to have allergic reactions
   • The breed or species is inherently dangerous, or
   • The rules of the condominium corporation do not allow pets.

The landlord cannot enforce a no pet rule for reasons beyond those noted above - this is an unenforceable term.  In addition, the landlord cannot charge a pet deposit in case of doggy damage.  Of course, the tenant is responsible for their pet and must repair any damages as a result of that pet.  If a tenant has been charged a damage or pet deposit, they can apply to the Landlord and Tenant Board to get the money back.

9. Landlord can require tenant to sign for another year rental period after the first year is over: WRONG.  The tenant and landlord can agree to another fixed term tenancy but are not required to.  If the tenant was originally on a fixed year term, they will automatically go month to month unless both parties agree to another fixed term lease.

10. Landlord is selling the rental property so the Tenant must move out.  WRONG.   The tenant must move out (with the proper 60 days notice) only IF the new owner of the property wants to occupy the unit him/herself or has a family member occupying the unit.  This notice can be provided once an agreement to purchase has been finalized and it's been determined that the new owner plans to use the home for personal reasons.

11. Tenant can hold back rent payments while waiting for the landlord to fix or make repairs to the property.  WRONG.  The tenant must pay their rent but if the landlord isn't keeping the property in good repair, the tenant may apply to the Landlord and Tenant Board for assistance.

What's the deal with rent increases?  If you've been listening to the news, you've probably been hearing some changes to rent increase guidelines over the past couple of years.  It's important to understand your rights as a landlord and as a tenant when it comes to this important piece of the rent equation:

• Landlord must give 90 days notice for any rent increase and provide notice on the proper Landlord and Tenant Board Form (N1)
• Landlord has the right to increase rent every 12 months
• Landlord can only increase the rent by the guideline amount (based on CPI) up to a maximum of 2.5% (even if CPI is higher than this).  Coincidentally, the interest the landlord must pay on the last month's rent deposit is equal to this same amount.
• Landlord can apply to the Landlord and Tenant Board using form L5 to increase rent beyond the rent guideline for the following reasons:
  • Their municipal taxes have increased by more than the guideline plus 50 per cent. (For example, if the guideline is 1.8%, the taxes must have increased by more than 2.7 %).
  • They incurred operating costs related to security services.
  • They incurred eligible capital expenditures.
• IF a unit was first occupied as a residential space after November 15, 2018, these units DO NOT fall under the rent control guidelines and therefore, landlords can charge whatever increase they want while still following the 90 days notice and only one increase per year rule.  A similar loophole (dubbed the 1991 loophole) was just abolished in 2017 by the Liberal Government.  We'll see how long this new loophole lasts but it's important for tenants to be aware of this rule when searching for a new property to rent.

There you have it - your review of the rental rules in Ontario.  If you are a landlord, tenant or Realtor, please read through the Standard Form of Lease in its entirety.  It's important to know your/your client's rights and responsibilities.  In addition, if you see a clause in a rental listing or agreement that goes against the rules, make sure to point it out so that these common misconceptions can start to clear up with each and every new rental agreement.