Rents have been increasing big time in downtown Toronto over the past few months, like 10, 20%.
That’s great news for landlords, isn’t it?
But it’s actually making some landlords very painful.
Yes, very painful.
If you own a unit in a relatively new building with occupancy date after November 15, 2018, then you can increase your rent to any amount you like.
If the tenants don’t like the increase, they can just leave and you would be able to relist the unit at market rent.
But if your unit is in an older building with occupancy date before November 15, 2018, then your unit is under rent control.
The maximum increase you can do in 2022 is 1.2%.
It will be increased to 2.5% in 2023.
But still, that’s nothing compared to inflation.
If you rented your unit at discounted rates during the pandemic and now you’re stuck with the 1.2% increase.
Of course, you want your tenant out so you can relist your unit at market rent.
Now, the million dollar question, how can you do that legitimately?
According to the Landlord and Tenant Board, there are only 2 legitimate reasons.
You or your immediate family needs to take the unit back for self-use.
And in this case, you must pay one month’s rent to the tenant for compensation.
You sold the unit to someone else and the new buyer needs the unit for self-use.
In this case, you don’t need to pay any compensation to the tenant.
Many landlords out there just take random advice from their friends or from the internet, they simply kick the tenant out by saying that they need the unit back for self-use.
Then they relist the unit again at market rent.
Are there any consequences in doing so?
Before I answer that question, I want to share a case study with you.
The Seller listed his condo unit for sale with a Tenant living in the unit.
An interested Buyer came in and said he wanted to purchase the unit for self-use.
The Buyer and the Seller signed a purchase agreement saying that the Seller would be responsible for giving proper notice to the current Tenant, so the vacant unit could be given to the Buyer for self-use.
The Seller served an N12 to the Tenant.
N12 is the “Notice to End your Tenancy because the Landlord, a Purchaser or a Family Member Requires the Rental Unit”.
It is an official form from the Landlord and Tenant Board.
So the Tenant moved out and the Buyer became the new owner of the unit.
It is done deal and the Seller moved on with his life.
A year later, the Seller suddenly received a hearing notice from the Landlord and Tenant Board because the Tenant in that sold unit filed a claim against him.
Approximately 6 months after the Tenant moved out, he somehow discovered that the unit was rented out to a new tenant and the Buyer did not actually move in.
So he filed a claim against the Seller for terminating the tenancy in bad faith.
He wanted around $25,000 compensation for his increased rent, moving expenses and emotional damages.
The Tenant, the Buyer and the Seller were all put in front of the hearing.
It was black and white in the purchase agreement that the Buyer or the Buyer’s immediate family would occupy the unit after the sale.
And the Landlord and Tenant Board was well aware of that.
The Buyer defended saying that his original intention was for his in-laws to move into the unit, but then they didn’t like the unit so he rented it out instead.
He also testified that his agent did not advise him of any consequences for not moving in themselves.
So who’s fault is it in this case?
And who should be paying compensation to the Tenant?
Obviously, the Buyer, right?
But no, it doesn’t work this way.
The case dragged on for like 2 years and the final verdict was shocking!
And very frustrating.
The Seller was ordered to pay almost $10,000 to the Tenant as compensation because he terminated the tenancy in bad faith.
The Seller was the Landlord who had the lease agreement with the Tenant and the Landlord was the one who served the notice to end the tenancy.
Even though the Buyer was the one who caused the actual damage, from the eyes of the Landlord and Tenant Board, it did not matter.
The Seller was the one who needed to be penalized.
It is ridiculous.
Is there anything the Seller can do?
He could sue the Buyer in Small Claims Court.
It was in the purchase agreement that the Buyer was buying the unit for self-use.
Typically, our lawyer would also ask the Buyer to sign an affidavit declaring self-use.
But of course, there would be time and lawyer fees involved.
Here’s the thing.
Both the Buyer and the Buyer’s agent are not educated, otherwise they wouldn’t buy this unit.
Even though the Seller was the one ordered to pay, the Buyer had to put in time and effort, as well as paralegal fees, for all the hearings.
And the Buyer may face another court case should the Seller decide to sue him for damages.
So it’s really a lose-lose situation for both the Buyer and Seller.
The Buyer should have bought a vacant unit or assumed an existing tenant if he wanted to do rental.
This is a rare unfortunate case.
We need to make sure both the Seller and Buyer agents are well educated to prevent this from happening.
I’m sharing this with you in case you’re thinking about terminating your tenant.
Make sure you’re doing it legitimately.
Rental is a vital part of your investment because it generates an income stream that keeps your investment running.
It really needs to be handled with professional skills and knowledge.
It’s just like, starting a business is not the hardest part, keep it running is.
That’s why we designed our rental management program to deliver a rewarding investment experience for our investors.
It is offered at a very low flat rate and is only available to our investors as a privilege, it’s not open to the public anymore.
If you’re looking for an unparalleled investment experience, you can schedule a call with me at the link below.
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