Ontario landlords can charge any amount for first rent thanks to legal loophole

High rents have been blamed on the “red-hot housing market” but this may not be the only reason.
High rents have been blamed on the “red-hot housing market” but this may not be the only reason. (Photo: iStock)

Rental prices in some of Canada’s largest cities, such as Vancouver and Toronto are quite high, despite the fact that both have rent control.

The high rents have been blamed on the “red-hot housing market” but this may not be the only reason.

Recently a story broke about a couple of Toronto, Ont., tenants who allege that their new landlord told them to either pay a 50% increase in monthly rent or else get out.

The five roommates have lived in their apartment for over three years and their monthly rent was set at $2,350 per month. They claim their new landlord now wants to raise it to $3,500 per month. The tenants only had a verbal agreement with their previous landlord but have receipts to prove they paid rent.

For his part, the landlord claims that the tenants do not legally live at the apartment and that rent receipts are not enough to prove tenancy and plans to file an application with the Ontario Landlord and Tenant Board saying so.

The question is: if the landlord wins and the tenants are not considered tenants, does the landlord have the right to hike their rent by 50%?

Yes, if the landlord wins, because they will be considered new tenants and the apartment will be considered a vacant unit.

See: Rent increases and maximum rent

Even though Ontario has rent control, with the current allowable rent increase being two per cent that applies only to existing tenants, not vacant units. However, once a new tenant signs the lease and pays the landlord the initial rent he or she wants, future rent increases are subject to rent control.

This is known as “vacancy decontrol” and was introduced in the Ontario Residential Tenancies Act, 2006. The concept of vacancy decontrol is that a landlord can charge any amount he or she wants for the initial rent to new tenants.

Call it rent control with a twist, or else a legal loophole.

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