The Changing Legal Landscape for Landlords and Investment Property Owners

Carl Langschmidt
by Carl Langschmidt July 28, 2014 / No Comments

This is a guest post from Condos.ca, a Toronto condo database and brokerage.

If you’re one of the many Canadians who own and rent out investment properties, you’ve already navigated through the more complex process of taking out an investment property mortgage with a lender. But what about the legal specifics of renting it out? If you’ve recently purchased a home or condo as an investment property, there are a long list of rental regulations to get up to speed on.

What you can and can’t do as a landlord varies from province-to-province. In British Columbia or Alberta, for example, a landlord may request that a tenant provide post-dated cheques for future rental payments; in Quebec, however, this isn’t allowed. Other common issues include whether or not a tenant can sublet the property, whether a landlord can request a security deposit, and how much notice a tenant must be given in instances of developments such as rent increases or evictions.

One thing to note is that landlord-tenant laws can change over time. A recent example of this took place just this past spring, when the Ontario Superior Court issued a ruling on a case regarding the payment of rent upfront. According to a Toronto Star account of the legal proceedings, Alison Corvers, a UK citizen in Canada on a visitor’s visa, rented a home in Mississauga, Ontario. She paid one year’s rent in advance—$90,000—in addition to a security deposit, to assure Tanveer Bumbia, the landlord, that she would be able to cover her rental costs. Before this, Bumbia had rejected her rental application.

Shortly after moving in, Corvers discovered it was illegal for landlords in Ontario to request the deposit and prepayments, and took Bumbia to court. The issue, however, was that Corvers had offered the prepayment herself. Despite an appeal, both judges presiding over the case decided that, because the landlord had not requested or required the prepaid rent, the transaction was legal. The security deposit and any interest earned on the entire prepaid amount, however, had to be paid back to Corvers.

The appealed ruling, which was issued on February 12, 2014, now means that while landlords in Ontario still cannot require anything beyond first and last month’s rent as a condition of a lease, if a prospective tenant offers a security deposit or post-dated cheques on his or her own account then a landlord can legally accept it. With that in mind, however, it would still be wise for a landlord to get that voluntary offer of prepayment in writing first.

The Canada Mortgage and Housing Corporation (CMHC) has a useful province-by-province guide that lists some of the more common landlord-tenant law details that tend to differ. As the CMHC notes, though, the best way to find the most up-to-date information for your area is to check with your province or territory’s rental authority, or to ask a legal expert.

The moral of the story: if you’re new to being a landlord in any part of the country, do your research on what the rental regulations are in your province, before you post an ad saying that your property is for rent. The legalities around what you can and cannot request from your tenant – and even what they can expect from you – are constantly changing, so it’s important to educate yourself on the ins and outs of how things work. Remember: It’s never a bad thing to be overly-cautious, when renting your property to others; it is your greatest asset, after all.

Flickr: el_ramon