Can you impose a rental agreement on your new tenants?

5 Replies

Hello everyone,

I am considering purchasing a MFU 4plex with current tenants in 3 of the 4 units that have been in the property for some time. The rents are BELOW market value and NONE of them have written long term leases in place.  All are on a month to month agreement.

What are my options?

1) Can I interview the current tenants and demand they sign a long term lease with a new increase? or am I stuck with this scenario?

Thanks,

Jamie

Hi Jamie,

It depends on the laws in your area. You should definitely consult a real estate attorney in Ontario to be sure so that you won't break any laws during the process.

Well first and foremost check your local landlord tenant law or speak with an attorney. Different areas can have regulations and even rent controls that dictate how much you can charge/increase.

I have never dealt with the situation personally, but if they don't have a lease signed for a specific amount of time and are just on a month to month agreement, go ahead and raise the rents up closer to market. I would give them all a 30 day notice that saying that rent will increase X amount. Then if the sign a year lease you can discount 10% or six months 5%. But I would think you would want all of them to at least sign "your" rental agreement with your rules and expectations so you have grounds to evict if they are not up to your standards. Good Luck. 

You should contact an attorney, as @Cierra Seay  said.  At least the way it works in most US jurisdictions is that a month-to-month lease tenant can be terminated with 30 days notice.  Thus, at least here, you could give them 30 days to sign a new lease at market rents or vacate the premises.

However, you should weigh vacancy risk into your calculation.  How far below market are the rents?  Are you making a good return at current rents?  What is the vacancy rate in your area?  Can you afford to have vacant apartments and for how long?  You might not want to raise their rents all the way to market, but rather raise them a bit in the direction of market.  That might be far better for you than to have a market-rate apartment vacant for a month or two.  You should definitely run the numbers before you make a move.

Here is a partial answer to your question from the Ontario Landlord and Tenant Act:

The answers are actually meant for Tenants but I thought it would be useful. 

Regulation of the rent only applies while you are living in the apartment; This is not considered "Rent Control" by tenant advocates and housing experts though the government is claiming they have "brought back real Rent Controls".

Note, under Section 5, Exemptions from the Act, not all tenants are covered, and additionally under Section 6, Other Exemptions, that tenants such as those who are living in any part of any building, or mobile home park, or land lease community, where that space was never previously occupied for residential purposes before November 1, 1991, arenot covered at all by rent controls.

12 months for as long as you remain in that unit. The landlord must give you at least 90 days' notice in writing of any rent increase, or you do not have to pay the increase, but you still have to pay the rent. Annual Guideline Increase is an amount set each year by the government. The "Annual Guideline Increase" is 2.6% for 2007. For previous years see the:Ontario Rent Increase Guidelines.

The landlord can apply to the Landlord and Tenant Board for an above-guideline rent increase. They can get annual increases of up to 3% above the "Annual Guideline Increase" amount for things such as repairs or renovations or new security measures, and those increases can be carry-forwarded for an additional two years. And by exclusion from Section 126, subsection 11 it appears landlords can also get rent increases with no maximums for increases in municipal property taxes, municipals fees, or increased utility costs.

The landlord can not charge you above the "Annual Guideline Increase" without first getting approval from the Landlord and Tenant Board. Under the law, the landlord must make available to you a copy of their "Application For An Above Guideline Increase" and inform you of the date for the hearing. You can challenge the landlord's application if you have good reasons. See Part VII - Rents, Rent Increases and Decreases particularly sections 116 through 136.

Many landlords will include bills for ineligble items, or even work not yet completed that should not be permitted for an increase, so get advice from your legal representative or legal clinic on what to do. If you do wish to challenge the landlord's application it is usually wise to do it as a group, and the easiest way to do this is to form a building tenants' association.

Agreement Section 121. Be very careful what you agree to! If you do sign such an agreement, you have 5 days to inform the landlord in writing if you have changed your mind. And remember in this situationSection 116 no longer applies.

You may want to sign an agreement for an added service the landlord has offered such as a dishwasher put into your unit and may want to agree to pay more for that, but check the price, you will likely find it is cheaper to buy it yourself.

Some landlords may ask tenants to sign an agreement for an increase in rent to replace faulty refrigerators or stoves. Remember that if your apartment came with these appliances, it is the landlord's responsibility to make sure you have working ones; the landlord does not have to provide you with new appliances, only working ones. So don't offer to pay extra for what is the landlord's responsibility to provide!

Short answer is your stuck with them.

The rental increase for 2014 is 0.8% and for 2015 it is 1.6%. But you can only increase once every 12 months and you have to provide them with 90 days notice.

Sometimes tenants will leave because of the rental increase.

Perhaps offer them cash to leave.

You can have them sign a new month to month rental agreement but at their current rate.

Read the Ontario LTB rules and with all due respect to other investors only take advice form people that have experience with the Ontario LTB.

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