Rent Increases Under the Residential Tenancies Act (“RTA”)

In Ontario, the Residential Tenancies Act (“RTA”) is a comprehensive law that sets out the rights and responsibilities of residential landlords and tenants. The RTA is applicable to virtually all residential rental housing situations.

The RTA governs when an Ontario landlord may increase the rent a tenant pays for their rental unit.

The Rent Increase Guideline

Specifically, section 120(2) of the RTA provides a percentage guideline by which Ontario landlords can increase the rent on their tenants on an annual basis. The percentage is calculated by averaging the monthly Ontario Consumer Price Index over a 12-month period ending the month of May of the previous calendar year.

It should also be noted that an amendment to the RTA in 2012 set a maximum cap of 2.5% for the rent increase guideline. This means that any annual guideline amount exceeding 2.5% would be reduced to 2.5%.

In 2022, the rent increase guideline amount was 1.2%. In 2023, despite significant inflation where the rent increase guideline should have been 5.3% (according to the Government of Ontario), the rent increase guideline will instead will be capped at 2.5%.

For an up-to-date list of past and future rent increase guidelines in Ontario, click here.

When Will a Rent Increase by my Landlord be Effective?

Ontario landlords may only increase rents beginning on January 1, 2023. They may increase rents only after 12 months since their last rent increase or 12 months since the tenant moved in.

Ontario landlords must give their tenants 90 days written notice before a rental increase is to take effect. Written notice must be in the form of a “N1: Notice of Rent Increase”.

If the above rules are followed, an Ontario landlord may raise the rent on their tenants up to the annual rent increase guideline without the approval of the Ontario Landlord & Tenant Board.

In some cases, landlords can apply for approval to raise the rent by more than the rent increase guideline by submitting a “L5: Application for an Above Guideline Increase” to the Landlord & Tenant Board. An extraordinary municipal tax increase is one example of a reason landlords can apply for a rent increase above the guideline.

Do the Rent Increase Guidelines Apply to Me?

If you are a tenant in an Ontario rental unit, the rent increase guidelines described above may not apply to you. The situations when the rent increase guidelines do not apply include:

• New buildings, additions to existing buildings and most new basement apartments that are occupied for the first time for residential purposes after November 15, 2018
• vacant residential units
• community housing units
• long-term care homes
• commercial properties

As such, if you a perspective tenant in Ontario, be informed about your legal rights when considering any of the aforementioned rental units. In particular, be informed about your legal rights when looking at a rental unit built after November 15, 2018 or one that first became occupied as a residential rental unit after November 15, 2018.  

A Sample Calculation of a Rent Increase

Your monthly rent is $1,000 when you sign a lease on June 1, 2022 to rent a rental unit built in 2020. The guideline for 2023 is 2.5%. Therefore:

• Your landlord cannot increase your rent until June 1, 2023
• An increase of 2.5% on $1,000 = $25.00
• $1,000 + $25.00 = $1,025.00
• Your landlord could lawfully increase your rent payment beginning on June 1, 2023 up to $1,025.00 per month
• Your landlord would need to provide you written notice at least 90 days before June 1, 2023

Disputes Regarding Rent Increases

If your landlord has not provided the proper notice, or you believe that your rent has been raised by an improper amount, you can dispute it at the Landlord and Tenant Board within 12 months after the amount was first charged.

Are you a tenant looking for more information? Read up on some of our other blog posts on Landlord & Tenant issues.

DISCLAIMER: articles posted in this blog are for informational purposes only. It may not be up-to-date, is not intended to serve as a comprehensive treatment of the topic, and may not be accurate. It shall not be construed as legal advice. No solicitor-client relationship is established from accessing this website and/or webpage. Nothing replaces retaining a qualified, competent lawyer or other legal professional, well versed in this area of the law to provide you legal advice.