Right around this time of year, the provincial government announces its annual rent increase guideline for the coming calendar year.
The guideline is based on the Ontario Consumer Price Index (CPI), which is a measure of inflation calculated monthly by Statistics Canada. The rate of allowable rent increases for 2016 will be 2 percent.
The guideline is the maximum amount that most landlords can increase a tenant’s rent during the year without making an application to the Landlord and Tenant Board.
In most cases, the rent for a unit can be increased if at least 12 months have passed since the tenant first moved in, or since his or her last rent increase.
The tenant must be given proper written notice of the rental increase at least 90 days before the rent increase takes effect.
The 2016 guideline applies to rent increases between January 1 and December 31, 2016.
The Guideline Formula
The 2016 rent increase guideline is calculated by averaging the percentage change in the Ontario Consumer Price Index during the previous 12 months, from June 2014 to May 2015, as required by the Residential Tenancies Act, 2006 (the RTA).
Note: The RTA sets out that the rent increase guideline cannot exceed 2.5 percent, even if the CPI calculation is higher.
Sample Rent Increase Guideline
The monthly rent of an apartment is $800 beginning August 1, 2015. With proper written 90 days notice to the tenant, the landlord could lawfully increase the rent 12 months later on August 1, 2016. For example: The guideline for 2016 is 2 percent.
The rental increase is 2 percent of $800 = $16. Therefore, the new rent on August 1, 2016 could be up to $816 ($800 + $16).
Above Guideline Increases
Landlords can apply to the Landlord and Tenant Board for an increase above the guideline, if their costs for the municipal taxes or utilities have increased by more than the guideline plus 50 percent.
Landlords can also apply for an increase above the guideline for operating costs related to security services and for eligible capital expenditures.
Sample Above Guideline Increase
The 2016 rent increase guideline is 2 percent. Fifty percent of this guideline is 1 percent.
To claim an above guideline increase related to municipal taxes, costs should increase by more than 3 percent (2 %+ 1% = 3%)
In 2015, a landlord’s municipal taxes were $10,000. In 2016, the landlord’s municipal taxes increased to $10,500 – an increase of 5 percent.
Therefore, the landlord is eligible to apply for an above guideline increase because the landlord’s municipal taxes increased by more than 3 percent.
Guideline & Rent Deposits
A landlord can collect a rent deposit from a new tenant on or before the start of a new tenancy. The rent deposit can only be used as the rent payment for the last month or week before the tenant moves out.
The landlord must pay the tenant interest on the rent deposit every year. Under the Residential Tenancies Act, 2006, the interest rate is the same as the rent increase guideline.
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