What Must a Landlord Do to Properly Increase Rent?
Within Ontario, If a Tenancy Is Regulated By the Residential Tenancies Act, 2006, Notice of Rent Increase Must Be Proper or Any Increase Is Unlawful. Rent May Be Increased Only Once In Twelve Months. The Notice of Rent Increase Must Be Via the Prescribed Form With a Minimum Ninety (90) Days Warning.
Understanding the Proper Manner For Issuing a Notice of Rent Increase
When a landlord wishes to change the rate of rent, proper notice must be provided. In legal circles, this process is referred to as a NORI which is an abbreviation for Notice of Rent Increase. To provide proper notice requires use of the mandatory form, being the Form N1, Form N2, or Form N3, depending on the circumstances, as well as by providing the notice at least ninety (90) days in advance of the date the rent rate change will take effect. Additionally, a rent increase is permitted only once witin a twelve month period and the first rent increase must be at least twelve months from the beginning of the tenancy. Failure to provide proper notice makes any change unlawful, void, and unenforceable. These requirements were confirmed by the Landlord Tenant Board in the case of S.A. v. M.J.J.G., et al, TEL-99928-19 (Re), 2019 CanLII 126938 where it was said:
8. The issue before the Board in this situation is whether or not the NORI was served appropriately on the Tenants.
10. In Price v. Turnbull's Grove Inc. the Court considered provisions as they existed in the former legislation that are basically the equivalent of the current subsections 116(4), 136(1) and (2). Those subsections read as follows:
116. (4) An increase in rent is void if the landlord has not given the notice required by this section, and the landlord must give a new notice before the landlord can take the increase.
136. (1) Rent charged one or more years earlier shall be deemed to be lawful rent unless an application has been made within one year after the date that amount was first charged and the lawfulness of the rent charged is in issue in the application.
(2) An increase in rent shall be deemed to be lawful unless an application has been made within one year after the date the increase was first charged and the lawfulness of the rent increase is in issue in the application.
11. To meet the requirements of s. 116 a NORI must be in the prescribed form, it must set out the landlord’s intention to increase the rent and the amount of the new rent, and it must be served at least 90 days in advance of the effective date of the rent increase. Pursuant to s. 116(4) a NORI that does not meet these requirements is “void”.
Furthermore, in the past it was generally understood that if a tenant failed to object to an improper notice and instead accepted and paid an improper increase, the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17, allowed the tenant, per section 135 to pursue a 'claw back' of any unlawful monies collected by the landlord for, per section 135(4), up to one year; however, if the tenant failed to properly object to an improper rent increase by bringing an Application to the Landlord Tenant Board within that one year, per section 136, the improper rent increase was deemed lawful. With this said, such was a previous understanding; however, with recent changes to, and interpretation of, section 116, as well as the Divisional Court reasoning within the Price case, it is now recognized that an improper notice of rent increase is void and that section 136 is unable to save something deemed void and therefore a nullity. This was confirmed in S.A. where it was said:
12. The rule set out by the Court in Price v. Turnbull's Grove Inc. is that a NORI that is “void” because it does not meet the requirements of what is now s. 116 cannot be saved or deemed to be a valid increase by operation of s. 136. This is because the word “void” means the notice is a nullity just like if it had never been served at all.
Accordingly, while section 135 may entitle a tenant to retroactively 'claw back' an unlawful excess portion of rent paid for up to one year, section 136 fails to make the unlawful excess portion of rent lawful if the tenant failed to object to the unlawfulness within one year; and as such, if a tenant fails to pay rent on time, or reverts to paying the rent rate as applicable prior to an improper notice of rent increase, a landlord may have great difficulty determining what is the proper amount due and should the landlord take steps towards an eviction for non-payment of rent, being non-payment of an unlawful increase due to failure of proper notice, it is quite possible that the landlord will find the process quite troubled.
When a landlord wishes to increase rent by issuing a Notice of Rent Increase, the landlord must be very careful to use the proper form, being either an N1, N2, or N3, and to provide the proper ninety (90) day minimum advance notice of the forthcoming rate change. Furthermore, the landlord will be required to keep the sum of the increase within the maximum allowable increase. Failure to provide proper notice will void and nullify the increase and make any monies received based upon an improper notice unlawful.