In one of our previous posts, we shared a step-by-step process that allows anyone to check the accuracy of the guideline for rent increases using data published by Statistics Canada, and we provided some examples.
Now let's consider the guideline for 2023. Of course, as of today, we do not know yet the CPI numbers for Ontario from November 2021 till May 2022, i.e. we only have the first 5 data points from Statistics Canada out of the necessary 12, so we cannot calculate the guideline for 2023 yet. The first five CPI numbers show steadily growing inflation with no signs of slowing down yet.
Usually, CPI data would be issued mid-month for previous month. For example, as we know from a press release by Statistics Canada:
"The Consumer Price Index for November will be released on December 15, 2021."
However, based on the limited data that we have (see summary table above), we can already see that the average of the first five CPI numbers is 4%, which is much greater than the statutory cap of 2.5% from RTA subsection 120(2)2, which was introduced by Bill 19, Residential Tenancies Amendment Act (Rent Increase Guideline) back in 2012.
This means that even if the CPI numbers were to produce a greater guideline naturally under RTA ss. 120(2)1, the guideline has to be capped at 2.5%, as per RTA ss. 120(2)2. And this is potentially a big deal, especially if one expects to see similar or higher inflation during 2022, because the statutory cap of 2.5% makes it impossible to pass on higher inflation to a sitting tenant, and these pressures could lead to more abuses of the N12 and/or N13 process in order to dislodge long-standing tenants, and/or reduction in repairs/maintenance for long-standing tenants, and/or harassment, illegal demands to pay higher rent (e.g. using threats of moving in, selling, blacklisting, etc), if inflation cannot be reasonably covered via lawful rent increases. The delays at the LTB and issues with enforcement can make it harder to stop harassment in practice. (You can also read about administrative closure of some applications due to delays in our previous post.)
Additionally, as we know, parties cannot agree to higher rent unless it is done in accordance with the RTA, i.e. either in exchange for agreed-upon capital expenditures under RTA section 121 (N10 agreement, capped at 3% above the guideline) or in exchange for additional services / amenities / facilities under RTA section 123 (capped at the "actual cost" of the additional service / amenity / facility to the landlord or, if there is no actual cost to the landlord or if the actual cost "cannot be established", a "reasonable amount based on the value" of the service / amenity / facility, see O. Reg. 516/06 ss. 16(2)). It is also impossible to contract out of statutory rights and obligations under the RTA (RTA s. 3 and 4). See an example in the Court of Appeal case in Honsberger v. Grant Lake Forest Resources Ltd., 2019 ONCA 44 (CanLII), <https://canlii.ca/t/hx688> (it was covered previously in this blog). This means that even completely voluntary rent increases are unlawful unless they are done in accordance with the RTA.
In the future, do you think we might see legislation to remove or amend the 2.5% cap under RTA subsection 120(2)2 to allow greater flexibility to adjust for inflation? Or any other measures to handle these inflationary pressures for units subject to guideline under RTA section 120, e.g. perhaps removal of the guideline altogether or expansion of items that can fall under an application for an above the guideline rent increase (AGI)? Or would you expect the opposite, e.g. a move towards full rent control / vacancy control (something like Bill 23, Rent Stabilization Act, 2021 proposed in the past by NDP) or perhaps removal of RTA section 6.1 exemption from the guideline or tighter rules for AGIs?
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(1)
Note: As a reminder, applications for Above the Guideline Rent Increases (L5 applications under RTA section 126) do not cover inflation directly (LTB Interpretation Guideline 14 about AGIs).
And landlords can increase rent by any amount for units that are exempt from the Guideline (i.e. first occupied for residential use after November 15, 2018, under RTA section 6.1), but still not more frequently than every 12 months (RTA section 119) and still with minimum 90 days' notice (RTA section 116).
"Guideline
(2) The Minister shall determine the guideline in effect for each calendar year as follows:
1. Subject to the limitation set out in paragraph 2, the guideline for a calendar year is the percentage change from year to year in the Consumer Price Index for Ontario for prices of goods and services as reported monthly by Statistics Canada, averaged over the 12-month period that ends at the end of May of the previous calendar year, rounded to the first decimal point.
2. The guideline for a calendar year shall be not more than 2.5 per cent. 2012, c. 6, s. 1."
(3)
* For those who want to recalculate the numbers in the summary table above:
June 2021: 3.2%
July 2021: 3.5%
August 2021: 4%
September 2021: 4.4%
October 2021: 4.9%
Source:
Average for the first 5 data points: (3.2% + 3.5% + 4% + 4.4% + 4.9%) / 5 = 4%
More:
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