As you have probably heard by now, there is a new standard lease that came into effect on April 30th, 2018 across all of Ontario. This standard lease applies to all residential leases including, single, semi-detached, detached, townhome, multi-dwelling family homes, apartments, condos, secondary suites, and student rentals. Essentially, it covers all common forms of residence.
The Fear Factor – One of the fears of being a landlord and investing is that one may think they will have to deal with the 3 am clogged toilet calls. In reality though, this is usually not the case, especially if you are a condo investor where property management is actually rather easy.
This new standard lease has struck some fear into potential investors and existing landlords. As with most changes, especially government-related ones, the fear of the unknown is real. In this Insight Article, I will address those fears, debunk some myths, and let you know that everything will be okay.
The New Lease on the Block – So without further adieu, allow me to shed some light on what exactly the new Ontario standard lease is. It has all of the typical components of a lease such as rent, the term of the lease, deposits, tenant insurance, utilities, maintenance, etc. The new standard lease is written in accordance with the Residential Tenancy Act (RTA), but it is also written in easy-to-understand language.
Simply put, it is a document that very clearly spells out what landlords and tenants CAN and CANNOT do. Nothing more. It is actually a well put together document. If you would like a copy of it, you can download it by clicking here.
The RTA Runs the Show – As a Landlord, it actually doesn’t matter what you write in your own personalized lease agreement (even your existing one), if it is not written in accordance with the RTA. Should there ever be a dispute, and if your lease cannot be supported by the RTA, you would have a tough time enacting your lease on the tenant.
A prime example of this is pets. Although many condo leases prohibit the tenants from having a pet, this prohibition is actually not allowed in the RTA. The only way a pet can be banned from a condo is if the condo bylaws forbid it (this is very rare, and although some condos have size restrictions for pets, condo management will not actually weigh nor measure your dog). So the misconception that you can evict a tenant for having a pet is actually just a myth. You can only evict a tenant for having a pet if the pet has caused damages or disturbed other people in the condo.
The same misconception applies for smoking. We’ll talk about marijuana smoking later on in the months to come, as I know it is a hot topic given that the Cannabis Act will kick into effect on July 1, 2018.
Another reason why some landlords are freaking out about the new standard lease is that there is no section for them to add in standard condo clauses that we’re so used to seeing, such as key fobs, first $75 dollars of damages, and more than 2 months of deposit. Do not worry though, this section actually does exist! In Section #15, there is room for “additional clauses”. Any clauses you want to add that are not addressed in the first 14 sections can be added there (similar to a Schedule B). Just keep in mind, any language you use, if it cannot be held up in the RTA it’ll get dismissed in a dispute. However, that’s not to say that you can’t still put them in your leases.Just be mindful of it if there comes a time that you have a dispute over it.
The Transition – So how do we transition from the original leases that we have to the new ones? Basically, a new lease that is signed starting on April 30th, 2018 MUST use the new standard lease, no exemptions. All existing original leases, however, will be grandfathered.
If an existing tenant wishes to use the new standard lease, then you MUST comply with their request. You would have 21 days to issue the new standard lease, otherwise the tenant is allowed to hold out 1 month worth of rent from you. This was the real sticking point that some of my clients have been concerned about. Rest assured though because technically, nothing bad should happen if your tenant requests a new lease apart from there being a bit of paperwork for you.
The Silver Lining – If the tenant requests for the existing lease to be transitioned into a new standard lease, then you are allowed to increase the rent above the normal rent control limits since it is a new lease and not just simply a renewal. Ding Ding Ding!! If you are currently at below market rent with your tenant, then this is a golden opportunity for you to bring their rent up to the market value. If your tenant does not agree to the new terms, then they have 60 days to give you notice to terminate. If your tenant wants to stay forever and never wants to sign the new standard lease, then all terms of the grandfathered lease will remain valid except for the clauses that do not abide by the RTA.
The Wrap – Hopefully this gives you some clarity on the new standard lease. As investors, finding a great deal on a property is just one of the first steps in the process. Finding a great tenant will be just as important of a factor in it becoming a successful investment property.
Not to worry though – if you purchase your next investment property through PPTO, we will guide you from start to finish. As part of our full package of services, we will help you find your first tenant FREE of charge upon closing! PPTO will help ensure that you’re well on your way to becoming a successful real estate investor, and beyond.