When a landlord can apply for above guideline rent increase application?

A landlord can apply for a rent increase above the guideline for any of the following reasons:

• The landlord’s costs for municipal taxes and/or utilities (heat, water and electricity combined) have increased by an “extraordinary” amount.
• The landlord did extraordinary or significant renovations, repairs, replacements or new additions to the building or to individual units. This type of work is called a “capital expenditure”.
• The landlord’s costs for security services increased, or the landlord began providing security services for the first time. [RTA s. 126(1)]

When is an increase in costs for taxes or utilities extraordinary?

An increase in costs for taxes or utilities is considered “extraordinary” if it is greater than 150% of the rent increase guideline for the calendar year in which the first rent increase requested in the application will take effect. Example:

First rent increase requested in the application to take effect on September 1, 2014.

2014 guideline is 0.8% x 1.50 (150%) = 1.2%

If the increase in taxes or utilities is greater than 1.2%, it is considered “extraordinary.” [O. Reg. 516/06, s. 28]

What is a capital expenditure?

A capital expenditure is an amount that was spent for an extraordinary or significant renovation, repair, replacement or new addition that has an expected benefit of at least five years. It does not include:

• routine or ordinary work;
• regular maintenance work,
• work that is considered substantially cosmetic in nature or,
• work that is designed to enhance the level of prestige or luxury offered by the complex. (O. Reg. 516/06, s. 18)

To be considered for an AGI, a capital expenditure must be “eligible”. An item is an eligible capital expenditure if:

• It is necessary to protect or restore the physical integrity of the residential complex or part of it;
• It is necessary to comply with repair and maintenance responsibilities under the RTA (Board or municipal work order);
• It is necessary to maintain the provision of a plumbing, heating, mechanical, electrical, ventilation or air conditioning system;
• It provides access for persons with disabilities;
• It promotes energy or water conservation; or
• It maintains or improves the security of the residential complex or part of it. [RTA s. 126(7)]

Exceptions:

1. Capital expenditure to replace a system or item is not eligible if the system or item did not require major repair or replacement unless the replacement promotes o access for persons with disabilities, o energy or water conservation or o security of the residential complex [RTA s. 126(8)]

2. A capital expenditure with respect to a rental unit is not eligible if a new tenant entered into a new tenancy agreement and the tenancy agreement took effect after the capital expenditure was completed. [RTA s. 126(9)]

Access to the evidence relied on by Landlord [Ss 126(4) RTA]

If the landlord includes a claim for capital expenditures, the landlord shall make available to the tenant information about the capital expenditures. Upon the request of an affected tenant, the landlord shall provide the material to the tenant as a compact disc for a charge of $5 or a photocopy or an email [O. Reg. 516/06, s. 23(2).

Security Services

To be eligible for an AGI, security service cannot be provided by an employee of the landlord and the service must still exist at the time of the hearing. Start-up costs and increases in the operating costs may both be allowed. [RTA 126(1) 3.; [O. Reg. 516/06, s. 30(2)]

Rules for New Tenant

Rent increases included in an order cannot be charged to a new tenant who moved into the unit after the landlord’s deadline to file the application. The landlord’s deadline to file is 90 days before the date of the first rent increase requested in the application. [RTA 126(14)] Any part of an increase based on capital expenditures does not apply to tenants who moved in after the work was completed. [RTA 126(9)]

Outstanding Maintenance Issues

In applications to raise the rent above the guideline, affected tenants can raise issues concerning outstanding repairs and maintenance. If the Board finds there is a serious breach, the Board may dismiss the landlord’s application or stay the rent increase until the Board is satisfied the landlord has met their responsibilities under the RTA. [RTA Ss. 126(12), (13)]

A cap on Above-Guideline Increases

Above guideline increases for capital expenditures and operating costs for security services are capped at 3% per year, but may be spread out for up to three years. [RTA s. 126(11)]

There is no limit on the percentage rent increase above the guideline allowed for an extraordinary increase in the cost for municipal taxes and charges or utilities. However, these increases are not usually large and are almost always part of an application that includes a claim for capital expenditures.

Costs No Longer Borne

If the Board issues an order for extraordinary increases in utility costs, the landlord is required to provide information to the Tenant about utility costs and reduce the rent if costs decrease. [RTA s. 128]

When the expected lifetime of capital expenditure is over, the rent of any tenant affected by an AGI Order that continues to occupy their unit is reduced by the percentage allowed for that expenditure. [RTA s. 129]