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.
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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.
Repairs: Who is Responsible?
One of the most common issues surrounding landlord/tenant law is the question of repairs to the property. Every tenant has the right to a well-maintained home in a clean and safe building. At the same time, it’s important that a landlord is covered in the instance of an irresponsible tenant mishandling or abusing the property. It’s a very touchy issue, and unfortunately, there are not a lot of clear cut answers. Repairs are often treated on a circumstantial basis, and more often then not, it boils down to who’s willing to fight more: the landlord or the tenant? With that said, let’s look at the specifics to give a broader understanding.
The Residential Tenancy Act does not deal specifically with repairs and maintenance, often causing confusion on the part of both landlord as well as tenant. To find answers, you must look at public health laws; landlords do have a responsibility under public health laws to ensure that their properties are both sanitary, and safe to live in. Legally, it is the landlords job to repair and maintain a tenant’s space. Often, a lease agreement may state otherwise, but the truth of the matter is that it is the landlord’s obligation. Repairs and maintenance are generally looked at as the cost of doing business. This includes any appliances that came with the rental space, as well as the common grounds. But can it really be that black and white?
In short, no, it’s not that black and white. So, before you go and handle all the maintenance and repairs yourself as the landlord, you’ll want to be aware of a few facts. For starters, it is the tenant’s responsibility to keep the unit relatively clean and liveable, and a landlord is not responsible for a tenant’s personal belongings i.e. furniture, clothing or electronics. However, if a landlord directly caused damage to a tenant’s belongings, then yes, the landlord will be held responsible. For example, if a landlord fails to fix a plumbing problem, and a pipe bursts flooding a tenant’s space and ruining personal belongings in the process, then the landlord must pay for the repairs/replacement. Of course, this does go both ways; if a tenant directly causes damage to the property via irresponsible or destructive acts, then the landlord will be within their rights to pass the bill for repairs on to the tenant. Alternatively, the landlord may choose to charge the tenant when they are ready to move, or they may choose to keep some or all the security deposit to cover the costs.
Repairs and maintenance are often handled from a “common sense approach”. This approach would dictate that any “big” repairs are the responsibility of the landlord i.e. installing new light fixtures when the old one’s break, replacing flooring, painting the walls etc. On the other hand, “small” repairs and maintenance are generally handled by the tenant i.e. changing light bulbs, regular cleaning, replacing curtains etc. Here is a more complete list:
The landlord must ensure that:
Moving on to the tenant’s responsibilities. The tenant is typically obligated to:
The Residential Tenancies Act states that to enter a tenant’s unit to do repairs, the landlord must give notice to the tenant, unless the situation is deemed an emergency. Moreover, if there are repairs and maintenance that must be done, the tenant is expected to notify the landlord in writing, and arrange a time when the landlord can enter the unit to handle the repairs.
So, maintenance and repairs are generally the responsibility of the landlord, but it’s also a joint effort, and the landlord does have rights in the case of a bad tenant destroying property. With that said, the eviction process can not only be a nightmare, but take an unfair amount of time for a landlord. More reason to boost resident retention when you’ve found quality tenants. The easiest way to handle these matters, is to have a professional property management team handle your investment. Please contact CMG Toronto with any questions you have related to property management and landlord/tenant negotiations.
Contact the the best property management company in Toronto.
Image Source: http://www.ppbec.org/better-homes-through-home-repair/
Smart Rental Ads to Attract Quality Tenants
Tenants come in all kinds; responsible students, irresponsible students, young professionals fresh out of school, young people without a high school degree, elderly folk whose marriages have recently failed. The list goes on and on. Point being: the type of tenant you end up with can be a coin toss, and minimizing the risk of a problem tenant is crucial to your success as a landlord.
Alerting potential tenants of a vacancy is only half the battle. All too often landlords neglect to give their rental ads the time and attention that they not only deserve, but require, to attract a quality tenant. An intelligently constructed rental advertisement can very easily be the difference between a successful or an unsuccessful tenancy. Good ads attract quality tenants. Of course, there is no such thing as a sure-fire bet, especially considering the issues surrounding the tenant friendly board. But if you can mitigate the risk and improve your chances of a painless experience, why wouldn’t you? Of course, a thorough screening process is the most important aspect related to mitigating the risk, but you can make the screening process much easier by starting with an effective and savvy rental advertisement. A good advertisement will attract a larger group of quality tenants, and dissuade those looking for an easy target.
Consider for a moment two scenarios: scenario one has a landlord posting an ad with very little thought or craft. The listing includes very little information related to the property besides a few crooked pictures that were taken in poor lighting immediately after the old tenant moved out, the space is still a mess, and the listing simply states “available now”. Scenario two, on the other hand, is well thought out. It has quality pictures taken in good lighting after the space has been given a thorough cleaning and has undergone any necessary renovations. The listing says a lot more than just “available now”; it carries with it a 400-500-word narrative explaining the unit’s features, amenities, a walk-score, and it clearly and concisely states the all-important aspects of “credit check”, “background check”, “first and last months rent required upfront” and “previous landlord and employment history required”. Which ad do you think will attract more quality tenants?
The answer is obvious, yet too many landlords fail to think about this when it comes time to search for a tenant. Advertisement number two will come out on top, time and time again, whereas advertisement number one will consistently attract the type of tenant looking for easy prey. Make no mistake, professional tenants exist, and they are always on the lookout for poorly constructed advertisements suggesting that the landlord a.) doesn’t know what they’re doing, b.) won’t be following through with any sort of background check, and c.) likely won’t even ask for a deposit. On the flip side, advertisement number two is exactly what these tenants try to avoid. They do not have positive references, they have poor credit and they know that you’re the type of landlord who will put them on the spot. In turn, advertisement number two will make your screening process a breeze. The tenants who respond are not concerned, because they know they are good, responsible tenants. They have good credit, they have good references, they have steady income and they take their word seriously.
Again, there will always be a handful of tenants who slip through the cracks; people can be crafty and manipulative. But handling your rental advertisement with a savvy attention to detail will serve to make your landlord business easier to handle. Pay mind to the photos you choose to advertise your unit. Hiring a professional is of course a great idea if it falls within your budget. If not, be sure to take your shots during the day, with the blinds open. Lighting is key to an attractive photograph. Centre your shots, and don’t shoot random spaces. Every shot should be highlighting a feature of the unit. Staging the space prior to photographing may take some time, but you’ll end up with much nicer shots. At the same time, don’t oversell the unit. Overselling will result in disappointment when the candidates come to check the space out. Make sure your advertisement is representative of what you’re offering, while highlighting the selling points. Be sure to list your terms and expectations clearly and concisely as to weed out the underqualified, and avoid indirect or redundant language. If taking these factors into account, you’ll start to see your ads work for you, year after year.
Advice for the Small-Scale Landlord
Typically, landlords fall into two categories: large corporate landlords, and small business residential landlords. Many of you may find yourselves in the latter of the two groups; you own a small rental property with one or only a small handful of tenants, or perhaps you rent out a basement/room in your personal residential living space. For many Canadians, working as a small business residential landlord has proven to be an incredibly lucrative investment that helps them to cover the high cost of living in most of Canada’s major cities, pay down their mortgage, and build equity for their long-term goals. However, despite many ill-informed opinions, being a small business residential landlord can be a ton of work as well as a major cause of stress. Large corporate landlords may have a bigger task on their plates, but they also have way more help, resources, and less risk; large corporate landlords have what is called “economies of scale”, meaning they have hundreds of rental spaces in a building. Point being, if one or two tenants are persistently causing issues, or not paying rent, the potential loss is minimized by the volume of tenants they are dealing with. Financial hardship is not threatened in these cases. For the small business residential landlord, on the other hand, they may only have 1 or 2 tenants. If these tenants start to cause problems, or fail to pay their rent, the risk of financial and mental hardship drastically increases.
For many small business landlords, the LTB (Landlord and Tenant Board) is not viewed as their friend. They feel the board favors the tenants, which in turn makes the landlord feel as if they have no one in their corner if things go awry. Granted, the landlord/tenant relationship is a very complicated beast, and the LTB doesn’t have an easy task on their hands. It’s important for small landlords to understand this, and to familiarize themselves with the rules and regulations. If you are honest with yourselves, many of you have likely opted to not even contact the board in cases of issues with your tenants. This is not recommended. Yes, you may be given answers that you don’t want to hear, but without speaking with the board, your hands are tied in any case. Remember, the LTB is meant to moderate these issues. You may feel that the board is not fully seeing your perspective, and you may be right, but there have been many cases where the landlord comes out on top. At very least, by contacting the board you are a.) showing your tenant that you mean business and will not sit back while they mess you around, and b.) you are helping the LTB to collect information and adjust their rules and regulations moving forward; change doesn’t happen without persistence. In fact, the Minister of Housing has recently acknowledged that the rules for landlords need to change, otherwise the entire industry will be negatively affected as home owners will simply stop seeing the value in investment properties. So contact the board when you have issues!
More importantly, understanding how the LTB works will give you a much stronger perspective related to minimizing your risk moving forward. Things like a thorough screening process, understanding the eviction process and boosting residence retention are crucial to your success. Finding the right tenants from the get-go will make your life infinitely easier as a small business landlord, and understanding how to keep those tenants will maintain that ease of process. With that said, professional tenants often fall through the cracks. After-all, they have earned the title of “professional tenant”. But what’s possibly even more important to keep in mind, is the fact that even good tenants can take advantage of the system. Most landlords and tenants are familiar with the “pro-tenant” stance that the LTB typically takes, and even otherwise great tenants can find ways to benefit from the system. It’s not uncommon for tenants to lie about having pets, or behave absent mindedly with their rental space seeing as, hey, it’s not their property after-all, they are just renting it: guests become full-time tenants, pet’s cause smells and stains, smoke smell lingers, and wear/tear starts to cause maintenance issues. These are problems even the best of tenants brings with them into a tenant/landlord relationship.
Being a small business residential landlord can be an incredible way to pay down a mortgage, build equity and secure future wealth. But understanding the landscape you are dealing with will be crucial to your success and happiness. If you feel the LTB just isn’t giving you the help you need, you can look elsewhere: most of the rental business in Canada is created by small business people, so your community is rich. For example, there are organizations like The Ontario Landlords Association who can help you along the way, and property management companies like CMG Toronto who can drastically minimize your risk and stress level.
Landlord Challenges: Is it Right for You?
Real Estate is big business. There’s money to be made. But looking at it as a sure-fire bet, is a fast track to failure. Here’s the truth: investing in property as an income source must be treated like a full-time job. As the old saying goes: nothing worthwhile in life comes easy. In the case of real estate, this couldn’t be truer. If you want your real estate endeavor to be profitable, you must treat it like a job. Like any worthwhile job, neglecting the work will result in failure. So before jumping into real estate from an investment standpoint, you should thoroughly research and consider the challenges. For the sake of this blog, we’ll work off a list, but there really is no concrete order to these challenges.
Finding the right property is challenge number 1. Investing in a “bad” property will cost you more then you’ll make. Is it in a bad neighborhood? Good luck finding a quality tenant for top dollar. How are the property taxes? What many people fail to realize is that property taxes are not the same across the board. With that said, high property tax doesn’t automatically equate to a “bad investment”; you must ask yourself if the neighborhood will attract high-quality, long-term tenants. Going hand in hand with the neighborhood is crime rates. Rental spaces in high crime areas are almost never a good investment; what quality tenant wants to live in a high crime neighborhood? How’s the job market? High job growth typically correlates with a fantastic investment neighborhood. Are there good amenities? Gyms, schools, grocery stores and shopping malls should all be present in the neighborhood, and easily accessible.
Finding the right tenants is challenge number 2. This can be a very tricky process. Implementing a diligent screening process is crucial, and this can be time consuming not to mention headache inducing. Bad tenants will make you wish you never bought that investment property to begin with. You’ll spend all your time and energy dealing with issues, and fearing the next problem.
Keeping the good tenants is challenge number 3. Ok, so you’ve found a great property, you implemented the screening process and found a great tenant. Now your goal is to keep them around. This means regular maintenance, incentivizing renewals, implementing periodic property upgrades, being responsive and easy to reach, and much more. On this note:
Maintaining the property is challenge number 4. With maintenance comes surprise expenses and time commitment. Appliances break, general wear and tear will deteriorate the living space, and it is your legal responsibility as the landlord to handle all of this. If a furnace breaks, or a refrigerator stops working, or the hard-wood floors need replacement etc, you need to dish out the cash to fix and/or replace. Never underestimate how much this can cost you. In the case of a bad tenant who tears your space down, you may end up in the hole.
Tax planning is challenge number 5. Collecting rent creates another form of income, making your tax return a little more complicated. You do have tax write offs as a landlord, such as the interest that you pay on the mortgage as well as all expenses towards the property, but the amount that you collect in rent going towards the principle is not. Owning a single investment property won’t be too difficult to track and file when tax season arrives, but once you have multiple investment properties, things will get a little trickier.
Finding a reliable emergency contact is challenge number 6. We all need time off, and surely the day will come when you want to take a vacation. Being a landlord, you’re on call. If a tenant has an issue with their property i.e. an appliance breaks down, you need to be around to help. Not being readily available can create personal issues between you and the tenant, as well as legal issues should the tenant decide to pursue retribution on a legal ground. This means that if you’re planning a vacation, you need a reliable emergency contact on duty who can help in the case of a tenant emergency.
Being a landlord can be incredibly lucrative, as we’ve explored in past posts. But jumping into this business venture blind is a horrible idea. Despite some popular beliefs, being a landlord is a NOT a passive income. It requires time, money, aid and patience.
How Important are References?
As landlords, we skimp out on the incredibly important screening process all too often. This is never wise, and I’ll be the first to preach to you about just how important this process is. Skimping out will increase the likelihood of you ending up with a tenant from hell, who will give you nothing but headache, heartache, and most of all, wallet-ache. Professional debtors, as many like to refer to them, do exist, and they will squeeze you for everything they can. In fact, many landlords would argue that the board favors tenants. With the processes, and time required to successfully evict, it’s much wiser to do your due diligence right from the start.
References are quite possibly the most important aspect of the screening process; who better to provide insights on a tenant than the tenants past landlords? With that said, it’s shockingly frightening just how many landlords fail to properly follow up with the references provided by their potential tenants. Being the head of CMG Toronto, I handle a wealth of landlord properties, so I see it firsthand. In fact, this month alone we’ve had 5 tenants move out to new properties. Not one of their future landlords contacted us for a reference. This shocks me.
Your rental property is your investment, and you should protect it. A bad tenant can cause thousands of dollars in damages, and guess who will be left to pick up the bill? It won’t be the tenant. They’ll have moved on to a new property, and you’ll be left to pick up the pieces. This just may be enough for you to leave the landlord game for good, despite the potential for a strong return on investment. Bad tenant experiences are the number one reason why landlords sell their property in search of greener pastures.
So, follow up with references, and implement the entire screening process, religiously. With all of this said, I’d like to shed some honesty here: Many landlords will lie in order to get the tenant out of their space. You need to be privy to this, as a landlord with a bad tenant will likely have reached their wits end, and be willing to do whatever it takes to get the tenant out of their rental space. This can give you a false sense of security. So equally as important as following up with the references, is to know what questions to ask, and how to interpret the answers.
Some standard questions that you should include are as follows:
How long did this person live in the rental space?
When did he/she rent from you?
Did he/she consistently pay rent on time?
Did they have any pets?
Did the tenant cause any damage beyond normal wear and tear?
Was the tenant generally respectful of you and your property?
Did any other tenants issue complaints about him/her?
Did the tenant give you proper notice to end the tenancy?
Would you rent to this tenant again?
Some more open ended questions in which you should gauge the response (in these scenarios, you are fishing for any dishonesty in the initial answers):
Can you tell me an instance in which you had difficulty with the tenant?
How did the tenant handle this situation?
When the tenant failed to pay rent by the due date, did they openly communicate with you regarding why? And did they pay as soon as they were able? How quickly were they able?
What sort of wear and tear did you notice in the property?
What kind of instance can you think of in which you had a difficult time dealing with the tenant?
These are just handful of questions that you should consider asking, and really, you should get creative and ask any open ended questions that get the reference talking. The more they talk the better. If they are lying in any way, shape or form, you can find holes in their story by just letting them speak.
But it shouldn’t stop at the landlord references. You should also be calling employer references and personal references. I would argue that personal references are least important, but that’s not to say you shouldn’t follow up. You never know what sort of feedback you may get. The employer will, in all likelihood, be the least biased reference, so do not fail to contact them. In addition to providing feedback on the tenant’s character, they can provide insights into their pay scale which will give you peace of mind in knowing that the tenant does have the money to pay.
Take these tips seriously, and your “bad tenants” will be few and far between.
Building Fire Safety: Annual Inspections
At least once a year, landlords will need to have a fire inspection done in their unit or building; it’s your job as a landlord to ensure that the building and units you rent out are fitted with all of the necessary detectors, in working fashion. You’ll need both fire alarms, as well as carbon monoxide detectors. With that said, you’ll want to be careful about who you hire to do the job. Unfortunately, there are many contractors out there who like to cut corners, and this may put you in a liable spot if the mechanisms fail to function as they should.
It is the landlord’s responsibility to ensure that their rental properties comply with the law, and it is illegal for a tenant of a rental property to remove the batteries or tamper with the alarm in any way. Failure to comply with the Fire Code smoke alarm requirements may result in a $360 ticket or a fine of up to $50,000 for individuals or $100,000 for corporations. Not to mention the guilt of putting someone’s life/lives in danger.
Some Things You Need To Know
Choosing the right alarms is crucial. If choosing an alarm that is electrically powered, it is recommended that it have a battery back-up in case of power failures. You may opt for an alarm that is fully battery powered. If so, this is fine, but you’ll need to ensure that the batteries are always working. Typically, you’ll want to install a new battery once a year, or as recommended by the manufacturer.
You’ll need a smoke alarm installed on every floor if you are renting out an entire house, or building. You’ll also need the alarms to be either on the ceiling, or high on the wall, as smoke rises.
You’ll need a carbon monoxide detector on every floor as well.
The smoke alarms must be less than 10 years old.
The carbon monoxide detectors must be less than 7 years old.
You should test your smoke alarms every single month. You can do this yourself as the landlord, or you can have your tenant do it and report back, provided you can trust that they will actually perform the task.
Dust can clog your alarms, and this is something that most people don’t think about. You’ll want to vacuum your alarms annually to avoid any excessive build up that may prevent them from functioning properly.
Another massive factor as a landlord is the fact that many alarms are overly sensitive. An overly sensitive alarm may go off from simple steam coming from a shower or smoke from a toaster or oven. The issue here is that your tenant may get frustrated with this and turn the alarm off, or tamper with it; yes, this would be illegal, but realistically, the tenant would simply get a slap on the wrist and possibly a small fine. They typically aren’t too worried as a result. Your best bet as a landlord is to handle these “nuisance alarms” before they cause issues. You can try relocating the alarm, you can install a “pause button” that would allow your tenant to temporarily deactivate it, or you can replace these alarms with photo-electric types.
Alarms will need to be situated directly outside of every bedroom/sleeping area of the home/unit.
One thing to avoid: avoid plug in carbon monoxide detectors. They may be convenient, but there is a good chance that your tenant will, eventually, unplug the detector because they “needed the plug”. They will forget to plug it back in, mark my words. Not because they’re stupid, but because people are incredibly absent minded.
Whatever alarms you choose to install in your unit/building/home, don’t skimp out. Buy products that are not easily tampered with, and come from reliable brands. It may cost you a little more up front, but it will cost a lot less than dealing with any legal issues that may come your way if your rental space catches fire. Not to mention, an early detection means less damage to deal with on the off chance that your space does encounter a fire; the proper authorities will be alerted much quicker. And lastly, nobody wants to live with the guilt of having put someone’s life in danger due to a preventable catastrophe.
So do yourself and your tenants a favor: pay them a visit, and make sure the rental spaces are all fitted properly. It just might save a life, and at very least, it will give you peace of mind knowing that you’ve handled your duties as a landlord.