So, You Want to be a Landlord?

There seem to be many misconceptions relating Landlords. People seem to think it’s a lottery ticket. People seem to think it’s a sure-fire way of having someone else pay down their mortgage. People seem to think it’s an investment. I’m here to tell you that it’s none of the above; it’s a full-time job, and it’s not easy. Ok, maybe it can be viewed as an investment, but not in the traditional sense. Typical investments have you fronting the money after you’ve researched and decided on a sound option. Once you’ve invested the money, you typically sit back, monitor and hope for the best. With a landlord investment, the work doesn’t stop after you’ve fronted the money. That’s when the work begins.

Now, I’m not trying to dissuade anyone from becoming a landlord; in fact, it can be incredibly lucrative. But it’s no cake walk, and you should know that. So, before deciding on becoming a landlord, here are a few factors to consider:

Being a Landlord is a Full-Time Job, Not a Winning Lottery Ticket

Right in line with my opening statements, being a landlord is a lot of work. You constantly need to keep up with rules and regulations, you need to go through vigorous screening processes when finding tenant candidates, you need to be able to moderate relationships, you need to monitor and maintain upkeep of the unit. The list goes on and on. Granted, the work can be incredibly rewarding both financially as well as emotionally, but you need to be prepared for it.

You Need to do it Legally

Some municipalities don’t issue permits for secondary suites. If you build one without the proper permits, you may find yourself in a world of trouble. You may be forced to pay obscene fines, or even be forced to tear the unit down. Zoning issues and fire codes all need to be adhered to, along with building permits. Just because you have the space for a rental unit, doesn’t mean you can legally pull it off. Do the research, and make sure you are following the legalities. There have been scenarios of disgruntled neighbors reporting illegal units, and that’s a scenario that you don’t want to put yourself in.

The Entire Monthly Rental Amount is Not Pocketed

Tenants may wish to claim their rent on their income tax forms. You’ll need to be prepared to issue your tenants with receipts for the rent they pay you. Even if the tenant doesn’t wish to claim the rent come tax season, you’ll be expected to claim the income and pay tax on it accordingly. Moreover, Landlords face many other expenses that can eat away at their profits. Home maintenance and upkeep of the rental property is typically the responsibility of the landlord. In between tenants, landlords are usually faced with many costs in the process of making the unit desirable for the next tenant. Otherwise, they’ll have a very hard time attracting the type of tenants they want. Which brings me to my next point.

Bad Tenants are a Dime a Dozen

No landlord wants to be faced with a tenant from hell scenario. Bad tenants will end up costing a landlord more than they’re worth, regarding both finances as well as mental health. A bad tenant can be an extreme source of stress, and stress can lead to a multitude of mental and physical issues. It’s just not worth it. Thorough screening processes are key to avoiding such a scenario, and even so, some bad tenants will fall through the cracks.

Once the Tenant Has Moved In, It’s Hard to Get Them Out

Regarding bad tenants falling through the cracks, getting them out once they’re in can be next to impossible. The Landlord and Tenant Board tends to favour tenants, and many landlords have been stuck in the impossible situations of dealing with a bad tenant. This can be incredibly costly and detrimental to a landlord’s livelihood, and it can take months to evict. In some scenarios, an eviction will not even be granted. This is perhaps the biggest issue that landlords face today.

This is simply cracking the surface when it comes to landlord need-to-knows, but it should give you a general idea of what Landlords must deal with. So, don’t go jumping into this endeavour thinking it will be easy-breezy, because chances are, it won’t. That said, if you’re prepared to research and put in the work, being a landlord can be a smart move – just don’t jump in blind.

 

*Photo Source: http://vipgloballistings.com

Can’t Afford to Buy in Toronto? Here are your Options

If you’ve been priced out of the market, you’re not alone. Toronto’s real estate values have skyrocketed year over year, and it’s reached a point where many of the top Canadian income earners can’t even afford an average priced home in the city. Some of you might be thinking that this is an exaggeration. Guess again.

As of February 2017, Canada’s real estate association, better known as CREA, reported an average home cost of $835, 000 in Toronto. This represents a 23.8% increase year over year, and contrasts with a $500,000 average across Canada. Ok, despite the alarming year over year increase and the distressingly high price compared to the rest of Canada, that’s not so bad that even the “rich” can’t afford an average priced home, right? Here’s the thing; that number includes Condos and Townhomes. When we look at strictly detached properties, that number shoots up to a whopping $1.57 million in Toronto’s 416 area code.

I bet I know what you’re thinking now too: “ok, buy in the suburbs!”. While that is sound logic, you’d better guess again. When we look at The Greater Toronto Areas (GTA) 905 area code, the price point remains unattainable at $1.11 million. So, when I say that many of the top Canadian income earners can’t even afford an average priced home in Toronto, I’m not blowing smoke. For example, a couple who earns an annual income of $250, 000 (which would put them close to the top 1%) would only be able to afford a maximum price of $987, 289. This is factoring in down payment requirements and  the rate at which a $250K earner would be taxed (a whopping 53.53%). This simply isn’t enough to afford an average detached home in Toronto, or anywhere else in the GTA. And when we look at the average price of a home including condos and townhomes, the story doesn’t get a whole lot better: to afford an $800, 000 home, one would need to earn an annual income of $143,342. When we look at the median family income in Toronto, according to the most recent reports from Statistics Canada, the number floats around $75,270 annually. So where does this leave most Torontonians? It means we’re looking at Condos or maybe a townhouse if we’re lucky. Even then, an overwhelmingly high number of us are priced out of the market all together.

Even so, the bidding wars have continued in Toronto. It’s yet to be determined what 2017 holds, and with new legislation in the works, we may start to see the market even itself out. One things for sure, these trends cannot continue, as sooner or later there will be nobody left in the market who can purchase. Everything evens out over time, but until then, you do have some options.

Buy Small

Clearly there are still plenty of people buying homes in the city. Otherwise the market wouldn’t be trending the way it has been. So, let’s not start to think it’s all grim yet! Many are in fact turning to Condos or townhomes, and the way the market has been going, they should see some strong equity within a few years. At that stage, they can sell off their property and upgrade to the detached that they want. If your finances allow for a smaller purchase, it may be worth considering.

Look Outside the Suburbs

It may not be ideal, but you have the option of relocating or taking on a commute. For example, about an hour drive West of the city, Hamilton-Burlington offers an average home price of $507,131. This is significantly lower than anything you’ll find in the GTA, and would save you money even when factoring in gas costs and wear and tear on your car. With plans for the city to expand West in any case, this is a wonderful option.

Split the Cost

Have a friend or family member who you can stomach living with? It’s becoming more and more common for friends and family to split the cost of a home. Not only will the financial burden be shared, but you’ll have a lively home with plenty of helping hands to handle the maintenance and upkeep. Just make sure you choose your partner(s) wisely.

Rent and Wait

The final option: find a rental unit and wait it out. In heated housing markets, renting can often be a smart financial decision. The key though, is to ensure you are saving throughout the process. Living pay cheque to pay cheque when renting makes zero financial sense, but if the lower monthly costs of renting a unit allows you to save money monthly, that is the safest move. What goes up must come down. The Canadian government will do everything in it’s power to ensure people don’t lose out on their equity when buying in a heated market, but sooner or later the cost of living will align with the cost of homes in the city. So, if you are in no urgent need of stepping into the market, rent for the time being and make sure you have the down payment when things cool down.

 

Image Source: Shutterstock. https://www.timeout.com/toronto

There’s a New Legislation in Town

Ontario Landlords have been feeling the short end of the stick for a long time now. Many have raised complaints and asked for more fairness when dealing with tenant/landlord issues. It seems the general consensus among landlords, is that the board favors tenants. Granted, the relationship between tenant and landlord is a dicey one, and the powers that be certainly have no easy task on their hands when it comes to managing these relationships. With that said, Ontario has proposed new rental legislation that some landlords may feel continues the trend of favoring tenants. The Rental Fairness Act is set to for public hearings in Toronto on Tuesday May 9th and Wednesday May 10th 2017. The Standing Committee will be considering those who wish to make an oral hearing on either date. The proposed legislation is officially known as Bill 124, and any current and prospective landlords should absolutely be aware of its proposed changes and what they would potentially mean.

One of the biggest take homes of Bill 124, is that Landlords who wish to evict a tenant for “own use”, will now be forced to either pay the tenant one month’s worth of rent, or offer the tenant another unit as a replacement. For large scale landlords, this may not be an issue; they may have a new unit or be able to arrange for one. For the small-scale landlord, however, they may be forced to pay back the month worth of rent, as they may simply not have another unit to offer. In either case, this will be reality if the bill is passed. In such a scenario, the landlord will also be required to put in writing to the Landlord and Tenant Board that they need the unit for at least a year, and are acting “in good faith”. So, any landlords who wish to evict for “own use” had better make sure they really do need the unit for personal reasons for at least one year. If the unit goes up on advertising sites within the 12-month time frame of eviction, it will be the landlord’s responsibility to explain themselves to the board. Many are arguing that this will kill the small-scale landlord, as they will simply sell off their units finding the headache to simply not be worth it. This in turn will minimize supply.

The proposed legislation runs much deeper than this, however, and any landlords in Ontario should certainly take the time to read the entire proposal. Among the other changes, the new legislation eliminates the “1991 Exemption”, which basically means that landlords will be restricted to set guidelines in terms of how much they are able to raise their rent on a year to year basis. Moreover, new rent control rules will also come into effect once the bill is passed. Landlords will still have the options to raise their rates above the guideline, but to do so they will be forced to apply to the Landlord and Tenant board and follow the often-lengthy timeframes of gaining an approval. One thing that any landlords looking to raise rent above the guidelines must know, however, is that “increased utilities cost” will not be an approved reason.

Also, oral tenancy agreements will still be an option for those who wish, but any landlord who wants a written lease will now have to use a standard government lease. This is meant to prevent dishonest landlords from sneaking in illegal clauses such as prohibiting pets, or demanding security deposits. On this note, the bill will also make it an offence for landlords to go after tenants for any rent accumulated in the period after the tenant has vacated the unit, key fees or any other illegal charges.

One important note, fortunate for the landlord, is that they will still have vacancy decontrol. This basically means that a landlord can raise their rent as much as they want in-between tenants. They simply cannot do so with a current tenant who wishes to stay past the initial tenancy period.

Many landlords are perceiving the proposed changed as draconian in nature. They feel as though these changes will make it very difficult for landlords to conduct their business in a profitable manner. With that said, any landlords who feel that these proposed changes are unfair, should certainly reach out to the Clerk of the Standing Committee to voice their concerns this coming Tuesday and Wednesday.

 

 

*Image Source: http://www.ehouse411.com/Canada/view/6801.htm

Ontario Implemented a “Fair Housing Plan”

What exactly is going on in the Canadian Real Estate market? It seems like everyone is talking about the crazy increase in home pricing, the lack of supply to meet the demand, and trying hard to pin point reasons for the seemingly unstable market. But very few measures have been implemented by the powers that be to bring harmony back to the industry. This is largely due to the controversy surrounding why the market has spiralled out of control to begin with; everyone seems to have a different idea. Some have pin pointed foreign buyers, whereas others have deemed a lack of supply as the culprit. At this stage, it should be evident that there are numerous factors at play, and without measures being taken to tame the market, Canada runs the risk of a market crash. To what extent is debatable.

It’s been a long time coming, but the Ontario government has finally introduced a “Fair Housing Plan” in response to growing concerns. The plan is a comprehensive package meant to address the ability for Ontario residents to find affordable housing (duh, right?), increase supply, protect buyers and renters, and to finally bring stability back to the real estate market. Let’s take a look one by one:

Addressing Demand: The issue of demand relates directly to foreign investors swooping in and purchasing Canadian properties. There is no doubt that foreign investors have been a culprit in the continually increased pricing. It happened in BC, and it’s happened in Ontario as well. In 2016, BC acted and implemented a foreign buyers tax. Simply put, it worked to help bring some harmony back to the market. The Ontario government held off for quite some time, concerned with the fact that immigration has been such an integral aspect of our economies overall growth; they didn’t want it to appear as though Ontario doesn’t welcome new comers. Walking a fine line, the government is implementing a new 15 percent Non-Resident-Speculation-Tax (NRST) on the price of homes in the Greater Golden Horseshoe purchased by individuals or corporations who are not citizens or permanent residents of Canada. This is meant to address unsustainable demand by slowing the rate at which foreigners look to purchase in Canada. In theory, this will make housing more available and affordable for Canadian residents.

Addressing Supply: Hand in hand with the issue of Demand, is that of supply. There simply has not been enough supply to support the increased demand, and this has been a massive cause of increased pricing: Bidding wars drive up the average home cost. There will be action to increase production of new homes throughout Ontario, legislation to encourage landlords of vacant lots to either sell or rent out the property, legislation to encourage builders to build more new-purpose rental housing, provide municipalities with the flexibility to help unlock development opportunities, and more.

What About Renters? As house pricing rises, rental units tend to follow, albeit at a typically slower rate. The issue here, is that home pricing has been rising at a rate exceeding that of inflation. Renters are typically renting because they cannot afford to buy a home, and it’s unrealistic to expect them to keep up with the increased home pricing as a result. The act will expand rent control to all private rental units in Ontario, including those built after 1991. Under the proposed changes, landlords will still be able to apply vacancy decontrol and seek above guideline increases where permitted, but the standard will ensure that the majority of increases in rental costs will only rise at the rate posted in the annual provincial rent increase guideline, which has averaged 2% per year over the last 10 years. The government is also implementing changes to the Residential Tenancies Act to further protect tenants, and to create more predictability for landlords. A “standard lease” will be developed which will tighten provisions for “landlords own use” evictions. This will ensure that tenants are adequately compensated if forced to vacate under this rule. They will also be making “technical changes” to the Landlord-Tenant Board meant to make processes easier and fairer for both landlords and tenants.

What Else? The Fair Housing Plan has many other facets to it. It aims to work with both the real estate industry as well as consumers to help mitigate pains. The government plans to “modernize its rules”, discourage “paper flipping” (the act of entering into a contractual agreement to buy a residential property and assigning it to another person prior to closing), it aims to establish a housing advisory group that will meet quarterly to inform the government of their insights related to the market and the changes being implemented, and much more.

All in all, this new act is meant to increase collaboration among the powers that be, stabilize the market, and to educate consumers. There has been much debate among professionals on whether it will help to level out the market, or if it will cause more turmoil. It’s great to finally see the Ontario government take some action, but we’ll all have to wait and see what kind of effects this initiative will have on the housing market and economy.

 

Image Source: Chris Selley, April 21, 2017. Chris Selley: A simpleton’s guide to Ontario’s ‘Fair Housing Plan’. http://news.nationalpost.com/full-comment/chris-selley-a-simpletons-guide-to-ontarios-fair-housing-plan

New Condo Purchase: Pre Construction or Resale?

Toronto Condos are quickly becoming one of the cities hottest commodities. It seems every month there are plans laid out for a new project in or around the city. With real estate pricing continuing its seemingly an unstoppable upward trend, many first-time buyers and investors alike are turning to Condos as an entry point into the GTA market. When exploring a new condo purchase, there are two options to consider: Pre construction or Re-sale. A pre construction condo is a brand-new unit with no previous owners or tenants. A resale property has a history of past owners or inhabitants. Upon initial consideration, it may seem like pre construction is the obvious choice; why would you want to purchase an old unit when you can buy a brand-new unit? Unfortunately, it’s far from being this simple. Both options provide clear-cut advantages and disadvantages. The right choice would depend entirely on the individual purchasing and their circumstance.  Here are some important factors to keep in mind:

Resale Value is one of the most important factors to consider when making your choice. Nobody wants to come out in the hole, and ideally, you’ll want to treat this purchase as an investment. That is the “American dream” after all. Generally, pre construction units are a better choice when it comes to resale value. With that said, nobody can predict the future of the market. If there is a crash, or a downwards trajectory, you may see that resale value disappear regardless. But pre construction projects are typically priced lower than the average resale unit, and will usually see an immediate increase in equity once the unit is finished and ready for occupancy. So, you’ll spend a little less in total, and may see an almost immediate rise in equity if all goes according to plan. However, price point and immediate equity are not the only factors to consider. You must look at overall value. Is the unit in a good neighborhood that has seen strong growth? Is the builder reputable? You’ll also need a realtor with a background in pre construction to determine if you’ve negotiated beyond just the price point: Did you negotiate a cap on builder’s fees? Did you negotiate upgrades to the unit? If you’re an investor whose main goal is a quick  turnaround, then pre construction is typically a better option. But it’s easy to make bad decisions in relation to pre construction; if you haven’t done your research and negotiated strongly, you can be left with the short end of the stick. Pre construction is a better choice only for a seasoned veteran who understands the ins and outs.

Down Payment is another important factor.  A pre construction unit will require a full 20% down payment, whereas resale units may require less upfront; some resale units can have you paying as little as 5% upfront. With that said, the 20% down payment on pre construction is broken into a series of smaller payments between the time of signing the deal and the day you move in (occupancy). So, you won’t be required to pay the full 20% in one shot, but rather over the course of a few months. If starting funds are an issue, you may need to consider resale.

Time Frame is arguably the biggest factor. If you need a place to live now, forget pre construction. Pre construction condos need to be built, and there are often time delays ranging anywhere from 6 months to a few years after the projected finish date; builders can delay for a plethora of reasons, and unfortunately, you move at their schedule. Resale will have concrete move in dates and you’ll typically be able to move in immediately after signing a deal.

Knowing Exactly What You’re Buying is the big one. With re-sale, you can see the unit before you buy it. You can inspect it, analyze it, envision how you’ll stylize and furnish it. It’s more of a “try before you buy” process, so to speak. Pre construction comes with the risk of not actually seeing the unit before you buy it. You are essentially buying based off floor plans. With that said, a smart buyer may be able to make small tweaks and additions to a pre construction unit’s floor plans, thus setting it apart from other units in the building and creating a potentially higher resale value. Moreover, there is no risk of wear and tear on a brand-new unit. With resale, you will have a better idea of what the space will look and feel like.

So, What is the Better Option? As I’m sure you’ve gathered at this point, there is no clear cut “better option”. This depends entirely on the individual and their needs. An investor looking for a quick return will likely consider pre construction. But they will need to be well versed leading up to the negotiations as to avoid being left with a dud of a unit. If you need a living space for yourself, however, resale is a much more straight-forward and reliable option. Ideally, you’ll see a nice return if you plan to live in the space for an extended period in any case.

 

Renting out a Toronto Condo: What to Know

Renting out a Toronto Condo can be an incredibly lucrative endeavour, but it’s no walk in the park. Make no mistake, being a landlord is a full-time job. Like any job, there are certain factors that you’ll need to consider prior to jumping into the position of landlord. Preparation is the only way to ensure a successful and stress-free investment that is both lucrative, as well as, manageable. Here’s what you should know.

The RTA and Condominium Act

There are two major pieces of documentation that essentially act as the “rule books” to renting out your condo: the Residential Tenancy Act (RTA), and the Condominium Act. As a condominium landlord, you have responsibilities under both pieces of legislation. For starters, you’ll need to familiarize yourself with the rules that apply to the rental of condominiums in accordance with the corporation guidelines outlined in the Condominium Act. The RTA, however, is not specific to condos; it outlines laws related to most landlord and tenant situations. Like any legal arrangement, responsibilities and expectations land on both sides of the arrangement; landlord as well as tenant. Understanding what is required essential to a smooth tenancy. Here are some highlighting points:

Keeping your Condominium Corporation Informed – The corporation needs to be informed if you intend to rent out your unit. You are required to notify them within 20 days of the tenancy starting. You’ll need to provide the tenant’s full legal name(s), your full legal name, your current residing address, and the amount that you will be charging the tenant monthly. Once you’ve determined a tenancy end date, you are required to provide the corporation with a notification of the tenancy ending as well. This notification must be provided within 20 days of the end date.

Condo Fees – Most people are aware that condos accompany condominium contribution fees, commonly known as Condo Fees. A landlord does have the option of passing these fees off to their tenant, or they can choose to pay the fees themselves. If you plan on passing the fees off to your tenant, you’ll need to clearly outline this in the lease agreement. If these fees go unpaid while renting out your condo, the corporation can enforce the tenant’s rental charges to be paid to the corporation instead of the landlord to cover the lost fees. Failing to pay these fees is a direct breach of your condo agreement.

Know the Condo Bylaws – Condo bylaws are designed to outline codes of behavior that you and your tenant are required to adhere to. A responsible landlord will know the bylaws, provide the tenant with a copy of them, discuss it with them during the agreement process, and include them in the lease agreement.

Length of Tenancy Agreements – Leases are typically based on a 12-month time commitment. With that said, you can specify a shorter or longer arrangement depending. Requesting first and last month’s rent upfront is a standard part of the agreement. Once the initial term is finished, the agreement is typically moved to a “month to month” arrangement. At this stage, the tenant is required to provide you with 60 days’ notice if they intend to end the tenancy.

Pets – This is a topic that comes with many ill-informed opinions. Generally, a “no pets” clause is not enforceable by law. You can include a no pets clause on the agreement, but you have no means of legal counter action if a tenant were to lie on an application. With that said, condos can be the exception. It depends entirely on the specific building, as some corporations allow pets and some do not. If your corporation does not allow pets, then you can enforce the rule. If they do, then your hands are tied.

You’re Condominium Corporation May Ask You for a Security Deposit – The thing to keep in mind here is that a landlord owns the unit, not the building. Your condominium corporation may ask for a security deposit in anticipation of potential damages that may be caused to the common grounds by your tenant. The maximum amount that your corporation can ask of you is the equivalent of one month’s rent.

Reviewing both acts in detail will keep you on your game, and ensure a smooth venture. With that said, there are a ton of details to cover, which is typically why landlords choose to partner with a property management company. A company like CMG Toronto can alleviate much of the headache and stress that comes with renting out your Condominium unit by making sure all guidelines are adhered to, drafting legal documents, posting listings to MLS, and determining the best price point for your property.

 

*Image Source: http://eastonsgroup.com/

Handling a Rental Application

When it comes down to selecting a new tenant, the application process is one that cannot be skimped. The rental application is the first step in weeding out tenants who will cause you grief. Without it, you have very little information at hand to help you make your choice, and you’d be just as well rolling a dice. Think about it this way: if you were an employer looking to make a new hire, you’d require the candidate to fill out and provide an application form along with their resume, yes? Well this is the same thing, or at least should be looked at as such; being a landlord is a business venture in and of itself, making you the head of the company, and giving you the responsibility of selecting candidates to man the front lines. In this analogy, the tenant is that candidate. You wouldn’t want an incompetent employee manning your storefront, would you? So why would you want an unqualified individual running your rental property? By undergoing a thorough application process you’ll be able to collect pertinent information on your prospects, obtain consent to gather and disclose said information, set out terms and conditions of the potential tenancy, and collect a security deposit once an offer of lease is executed. All of this will aid your end goal of a successful tenancy.

Ok, so we’ve established the importance of the rental application process. What kind of information should the application process set out to gather? For starters, you’ll want some proof of identification. This could be a valid driver’s license, a health card, or any other form of government ID. You’ll also want to know if the applicant is currently renting, and if so, who is the current landlord? Furthermore, past landlords will be equally as pertinent. When asking for this information, be sure to request move in and move out dates to judge their moving patterns. If the applicant seems to move every 6 months, meanwhile you’re looking for a long-term tenancy, that should be a sign that this applicant is not the right fit. Collecting employment verification, proof of income and length of employment will also be important as it will directly reflect the applicant’s likelihood of paying rent on time, every month. Requesting the prospects S.I.N is considered an acceptable business practice under Section 21 (3) of the Ontario Human Rights Code.

In addition, credit checks, personal references as well as professional references will be a necessity. In terms of the credit check, you have the choice of requesting the prospect to provide it or obtaining it yourself using the applicant’s S.I.N, as running a credit check does come with a small fee. If the tenant refuses the credit check, there’s a good chance they are trying to cover up a bad credit score. With that said, they may just be worried about an inquiry affecting their credit score. Be prepared to ask the applicant questions in this type of scenario, and to use your best judgement when gauging their answers. Paired with the credit check, you’ll want to run a background check. Typically, you’ll only need the applicants S.I.N for this as well.

Once you’ve gathered all the necessary information, you’ll be at the point in which you’ll need to make some phone calls. For starters, you’ll want to contact the tenant’s employer. Speaking with the employer will give you peace of mind knowing that the prospect has steady work with a consistent flow of income. Moreover, the employer may be able to provide insights into the prospects character and personality. On that note, you’ll also want to reach out to both the personal references as well as the past landlords. I would argue that past landlords are of utmost importance; personal references can easily feel that they must provide a glowing reference in hopes of helping the applicant out. After all, a personal reference is typically a friend or family member who will only want the best for the applicant. Past landlords on the other hand are more likely to give you the type of information you’re looking for, unbiased. One thing to keep in mind, a current landlord may give a glowing reference in hopes of getting the prospect out of their rental space. So be wary when dealing with current landlords, and be sure to match up what they tell you compared to past landlords.

Assuming the applicant has made it this far, it’s this stage where you’ll want to interview the applicant one on one. It’s often one on one meetings in which you gather the most important insights.

By following these guidelines, you’ll greatly reduce the risk of a bad tenancy.

Do I Need Landlord Insurance?

If you’re a landlord, whether you’re a small business landlord renting out a single room in your home, or a big business landlord renting out an entire building, you should be familiar with landlord insurance. Some of you may only rent out a room for a few weeks per year, in which case you can disregard this post; homeowner’s insurance will typically do the trick. For the rest of us, landlord insurance is a necessity, as your homeowner’s policy simply will not suffice.

Having said that, for those of you who are subletting a room in a home that you also occupy, you may have the option to endorse your homeowner’s policy with “unit rented to others” coverage, as opposed to buying a separate policy. This is something you’ll want to discuss directly with your insurance representative. Relying on your homeowner’s policy alone, however, can be risky; many claims that you make may not be covered. A homeowner’s insurance company will not take rented space into account when they issue your policy. If the policy doesn’t indicate any coverage related to rental space, your coverage will likely be denied in the case of a home related accident. So, endorsing the coverage in these types of scenarios is crucial.

If you don’t live in the same space as your tenant, whether you rent out a condo unit, an entire house, an apartment space or several apartment spaces in an entire building, you will need a separate policy. Now, when I say you’ll “need” one, I’m not talking from the stance of the law, as landlord insurance is not a requirement by law. But if you fail to issue a policy you’ll be jeopardizing your entire business venture; you’ll run the risk of financial loss related to damages due to fire, break-in, severe weather and more. If you aren’t covered and your property encounters damages of any kind, those costs will come out of your pocket. Would you really want to cover damages exceeding $100,000 due to a fire, for example? Would you even be able to comfortably do so? With a good landlord insurance policy, you can sleep well at night knowing that your rental unit is covered in the off chance that it becomes uninhabitable due to circumstances beyond your control.

Landlord insurance will typically provide several important types of coverage, but the exact policy would depend on the insurance company that you choose to work with, and the options that you choose to include. Your policy may consist of one, or all of the following:

Property Damage: This will cover any costs associated with damage to your property due to storm damage, fire, theft, vandalism or tenant damage. When opting for this coverage, it’s important to ensure that this clause will cover the replacement costs for your entire property in the rare event of a total loss.

Loss of Income:  On the off chance that your rental property becomes uninhabitable due to a covered loss i.e. fire, this coverage will reimburse you for all the “lost rent” you’ve incurred while the unit is being made habitable once again.

Liability Insurance:  This may be the most important aspect as it will protect you against liability claims and lawsuits. Without it, if a tenant or visitor injures themselves in your property, you can end up in a mess of hot water. Liability insurance will help to cover the costs associated with bodily injury claims on your property, including but not limited to funeral costs, medical payments, settlement costs and legal fees. You’ll also be covered if you are found to be responsible for damage to any of your tenants’ property. For example, if you neglect to fix a broken water pipe in the unit, and it bursts causing damage to the tenants’ personal belongings.

You can also buy additional or “optional coverage” depending on what you deem to be necessary, but the above 3 coverages are of utmost importance. In addition, you may wish to have coverage related to natural disasters, or you may wish to add employer liability insurance, rent guarantee insurance, or even landlord contents insurance; landlord contents insurance will cover any of your own personal belongings that are within the rental space i.e. carpeting, furnishings, paintings etc.

The cost of landlord insurance can vary greatly depending on the scope of the coverage. Some policies can be as little as $500 per year or less (this is mainly the case for small rental units); other policies can run into thousands of dollars a year (mainly for larger units). Keep in mind, landlord insurance is tax deductible, as being a landlord is a business endeavor.

So, landlord insurance may not be necessary by law, but failing to issue the coverage is a rookie mistake.

What Landlord Actions are Prohibited?

Over the years, rules and regulations related to landlord and tenant management in Ontario have become increasingly complex. Prior to 2007, the Tenant Protection Act of 1997 (TPA) was the main governing force determining what behaviours were acceptable under the landlord/tenant relationship. This act was implemented by the Progressive Conservative government of Mike Harris, and was officially proclaimed in June 1998. This signified a simpler time for Landlords; under the TPA, a landlord could request eviction for any reason, and it was automatically granted without a hearing unless the tenant filed a notice of dispute within 5 days of the request being filed. Now, as wonderful as that may sound to some of you, let’s be serious here for a second: Problem tenants aside, this is not fair and understandably became the focus of scrutiny. With the TPA under the microscope, the Ontario government went back to the drawing board to create a new act. On January 31st 2007, the Residential Tenancies Act (RTA) was officially implemented, replacing the TPA. Along with this new act came a new governing body, the Landlord and Tenant Board (LTB).

The main purpose of the act was, and is, to protect tenants from unlawful rent increases and unlawful evictions, as well as to better govern the landlord/tenant relationship. This, however, is a grossly oversimplified explanation. The act itself runs hundreds of pages in length. With that said, let’s focus on what actions a Landlord CANNOT do.

For starters, a landlord cannot interfere with the supply of vital services to the tenant. Ok, what does that mean? Think heat, water, security, carbon testers etc. One aspect that is exempt, is air conditioning. This is not considered a vital service.

Moreover, a landlord is prohibited from interfering with the tenant’s reasonable enjoyment of the unit or property. But who defines what is reasonable? Unfortunately, there are no clear-cut guidelines. For the most part, it’s safe to say that you can interfere if the tenants are a.) breaking the law, or b.) interfering with other tenant’s enjoyment of their rental units i.e. excessive noise.

A landlord is also prohibited from harassing, obstructing, coercing or threatening the tenant. This type of behaviour will be particularly scrutinized during the eviction process. Of course, these are behaviors that should be avoided in life from a general standpoint. On the topic of eviction, the landlord is also prohibited from issuing an eviction notice to the tenant and forcing them to move out for a reason that the landlord knows is untrue. In other words, no making things up.

A landlord cannot take a tenant’s belongings without following the rules set forth by the RTA, and they also cannot charge or attempt to charge a fee of any type over and above the rent amount. Thus, a landlord is only able to hold the equivalent of one month’s rent as a deposit, which is to be used towards the tenant’s final month in the unit.

Landlords cannot refuse to provide a receipt for rent paid, charge or attempt to charge a damage deposit, demand or attempt to collect post dated cheques or pre-authorized payments, or pressure the tenant to accept an unauthorized rent increase.

Regarding subletting, this may come as a surprise: A landlord cannot arbitrarily withhold consent to sublet the rental unit. If a tenant wishes to sublet their unit, they are within their rights. Not as surprisingly, a landlord cannot refuse to rent to a tenant based on their race, sexual orientation or because they have children. A landlord also cannot refuse to rent to a minor aged 16 or 17-year-old. Furthermore, a landlord cannot refuse rent to a potential tenant who has a service animal.

Of course, a landlord absolutely cannot evict a tenant without following the rules set forth by the RTA. Regarding rent raises, a landlord is entitled to rent increase every 12 months within the guideline, but they are not able to implement a rent increase unless 12 months have passed since the last increase. The landlord is also required to provide the tenant with proper notice and cannot increase the rent beyond the guideline. A landlord also has rules that they are required to follow prior to entering a tenant’s unit, including written notices with at least 24 hours in advance of entry.

A landlord may change the locks on a rental unit, but they may not do so without providing the tenant with proper notice and providing a new set of keys.

Long list so far, right? Well, there’s just a little more:

A landlord cannot restrict access to a rental unit or complex, make a tenant buy anything from the landlord or previous tenant as a condition occupancy, or charge a fee to a tenant for giving consent to sublet, except for out of pocket expenses. Finally, a landlord cannot charge late fees, apply to the LTB to recover unpaid utilities, or claim N.S.F. fees on the notice of early termination for non-payment of rent notice.

Well folks, thanks for staying with me! I know that was a little much, but many landlords find themselves in hot water simply for not understanding these basic rules. Take the time to review and understand these regulations; knowledge will give you the power needed to successfully manage your landlord business.

What are the Responsibilities of my Tenant?

Communication – an important factor in any relationship. Expressing your requirements and expectations as a landlord is the only way to set the base for a successful tenancy. To do this, you first need to understand what you can legally enforce. The unfortunate truth is that an overwhelming percentage of small business landlords and tenants alike have very little idea of what responsibilities land on the tenant’s shoulders, and what responsibilities land on the landlord’s shoulders. This lack of knowledge often leads to confrontations, built up resentment, fights, and ultimately – legal battles. Before allowing your relationship with your tenant to go down this path, familiarize yourself with what you can legally expect of your tenant.

Time is Money; Don’t Wait for Yours

The first and most obvious point: your tenant must pay their rent, in full, on time. Well duh, right? The issue is that people don’t like paying for things that they already have. With something like rent, many tenants will put it in the back of their minds, and pay late. Not necessarily because they’re trying to get away with not paying, but because they aren’t receiving any immediate satisfaction of now possessing something new upon paying; they already live in the space, it’s their home. Of course, they understand that failing to pay rent will inevitably lead to their eviction, but they also know that paying late will likely get them a slap on the wrist at worst. So, it’s quite common that a tenant habitually “forgets” to pay rent by the due date. As a landlord, it would be wise to nip this behaviour in the bud. Speaking with the tenant about the importance of paying on time, and sending written notices when the tenant fails to do so are very important ways of getting the point across. If the tenant is consistently late, you should be contacting the Landlord and Tenant Board (LTB). Now, it’s no secret that the LTB highly favors tenants, so you’ll need to gather evidence. The best evidence in such cases is a collection of N4 notices of termination; if payment is not made on the day it’s due, serve the tenant with a Notice of Termination for non-payment of rent the very next day – do not delay. In the case that the problem continues, you can serve the tenant with not only an N4, but an N8; a notice of termination for consistently paying late. With any luck, the tenant will get the message long before it reaches this boiling point, as the process of eviction can be lengthy and tedious for a landlord, with no promise of receiving past due amounts.

They Break it? They Pay for It!

Last week, we looked at who is responsible for repairs? Unfortunately, most repairs are the responsibility of the landlord. With that said, the tenant is directly responsible for any damage that they directly caused i.e. if the tenant throws a party and a window breaks due to irresponsible behaviour, the landlord can absolutely hold the tenant accountable. With that said, any damage caused by regular wear and tear is the responsibility of the landlord.

Keeping the Home Clean and Liveable

Your tenant is responsible for regular maintenance of the living space i.e. cleaning and uptake. Now, the issue here is that everyone has a different idea of what “clean” is. There are unfortunately no clear-cut criteria outlining what exactly a “clean living space” is. So, this much is open to interpretation. If your tenant is trashing the place, collect evidence like pictures and documented notices, and contact the LTB.

Hey, Keep it Down!

Again, this is a bit of a grey area. What exactly is “reasonably quiet”? Different people will give you different answers. But if the tenant is consistently disturbing other people who live in the building or house, you should be able to collect evidence to state your case. Your best bet is to document complaints from other tenants regarding the noise, or document the noise itself in the case that you live in the same space as your tenant.  Don’t forget to leverage your lease agreement when dealing with the LTB or the tenants themselves.

Break the Law? Not in My Space

The law is the law, plain and simple. Criminal activity in the rental space (or anywhere else for that matter) is a big “no, no” and you should be prepared to act. If your tenant is breaking the law, the solution is simple: contact the authorities.

These are the main responsibilities of your tenant. Know them, communicate them to your tenants, and always outline your expectations clearly and concisely in the lease agreement.