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Residential Landlord and Tenant (Ontario) Legal Guide

Chapter 10 - Rent Fundamentals
(01 September 2020)

  1. Rent and Rent Controls
    (a) Overview
    (b) Rent Defined
    . Overview
    . "Rent" Defined
    . Included Services and Facilities
    (c) Rent Increases
    (d) Other Rent Changes
    (e) Payment Issues
    . Overview
    . Prohibitions on Requiring Certain Forms of Payment
    . Receipts
  2. Notice of Rent Increase
    (a) Overview
    (a1) When Illegal Rent Increases Lawful
    (b) Where No Notice of Rent Increase Required
    . Overview
    . Where "Serious Breach" Order Prohibiting Rent Increases for Non-Repair Remedied
    . Where Agreed Increase in Services Results in Rent Increase
    . Where Agreed Increase Based on Capital Expenditures or Services Increase
  3. "Guideline" Rent Increases
    (a) Overview
    (b) 12-month Rule
    (c) Vacancy De-Control
    (d) The "Guideline"
  4. Lawful Rent
    (a) Overview
    (b) Some Key Principles
    (c) deleted
    (d) Authorized Rent "Discounts"
    . Overview
    . Three-Months per Year Rent-Free Discounts
    . Prompt Payment and Pre-Payment Discounts
    . Other Rent Discounts
    (e) "Regulated" Rent Discounts
    (f) Rent Premium Situations
  5. Non-Rent Charges and Security Deposits
    (a) Overview
    (b) Prohibited Non-Rent Charges
    (c) Allowed Non-Rent Charges
    (d) Security Deposits
    . Overview
    . Requiring a Rent Deposit
    . Where Possession Not Taken or Tenancy Transferred
    . Rent Deposit Amount and Annual Top-Up
    . Rent Deposits and Changing Landlords
    . Rent Deposits and Mortgage Proceedings
    . Interest Accrual on Rent Deposits
    (e) Suite Meter-Related Electricity Charges
  6. Exemptions from Some Rent Control Provisions
    (a) Overview
    (b) Newly-Built or Newly-Available Rental Units After 15 November 2018
    (c) Exempted Rules
    (d) Transitional Rules

Note Re: Special and Exempt Premises:

Some residential rental premises - such as care homes, mobile home parks, land lease communities, student accomodation, superintendent's premises, social housing, premises under mortgage proceedings - and others - may be exempt from all or part of the Residential Tenancies Act (RTA), or may be subject to special RTA provisions. Readers may want to review Ch.2: "Special and Exempt Premises" to check if this is the case for their specific premises.

As well, some premises are exempt from all or most rent control provisions of the RTA. Readers should be sure to review s.6: "Exemptions from Rent Control", in this chapter. Especially note that even "rent control"-exempt premises may require Notice of Rent Increase to be issued to take a rent increase.

Note Re: Offences

Many breaches of the Residential Tenancies Act are also prosecutable offences. Readers may want to review Ch.17: "Offences" regarding specific breaches.

1. Rent and Rent Controls

(a) Overview

The Residential Tenancies Act embodies a limited form of rent control which is often called "vacancy decontrol". It uses the procedural framework familiar to those with experience of previous Ontario rent regulation schemes (Notice of Rent Increase, annual Guideline percentages, "above-guideline" rent increase applications) but abolishes the previous rent registry and - on the occurence of a vacancy in the rental unit - completely disregards the rent level history for future rent determination purposes. Thus, upon the rental unit become vacant - even if only for the few hours at the end of a month before the new tenant moves in - the landlord is free to charge whatever rent the market will bear. Another way of distinguishing vacancy decontrol from full rent control is to point out that the full rent control attaches to rental units, while the vacancy decontrol attaches to individual tenancies.

Thus rent controls are now only pertinent with respect to individual units during the period of any continual occupation by a tenant. Within these periods, landlords may take regular guideline increases with minimal procedural process (Notice of Rent Increase) - and may pursue further "above-guideline" [s.126] rent increases through quite complex applications to the Landlord and Tenant Board. Larger landlords, seeking above-guideline Orders for hundreds of units at a time - and thus being relatively insensitive to periodic vacancies - will be the most persistent users of the s.126 scheme.

Accompanying these standard mechanisms of rent control, the RTA mandates an additional range of supplementary tenant applications, agreements and reductions - many of which are so complex and of such marginal value to tenants that they will be amongst the most under-used procedures in the entire RTA scheme. Foremost amongst these are the "serious breach" rent increase restriction Orders, which demand extreme repair or related landlord non-compliance to commence - and which for the most part lack any robust and independent mechanism to determine when the serious breach is remedied, leaving it to the landlord to decide when they have fully remedied the breach, and thus regained their entitlement to re-commence rent increases.

Aside from simple guideline increase situations, most tenants will find the rent control scheme highly complex and therefore inaccessible. Small landlords will find themselves floundering in all but the simplest of rent-related applications. Large landlords can be expected to delegate rent control matters to accountants and tax professionals, who they will find themselves unopposed by articulate counter-argument. Board members will find themselves challenged - insofar as they can comprehend the s.126 and related schemes - to act as de facto advocates for tenants driven from participation by the complexity and expense of the scheme.

(b) Rent Defined

. Overview

As is the case with any rent control scheme, the RTA requires a clear and exhaustive definition of "rent", along with complementary prohibitions on any additional charges or amounts that landlords may try to impose on tenants. Failure to do this invites a proliferation of landlord "non-rent" charges designed to circumvent rent control [Act s.110]. "Non-rent" charges are discussed below in s.5: "Non-Rent Charges and Security Deposits".

. "Rent" Defined

The definition of "rent" is set out here:
Act s.2(1) "rent"
"rent" includes the amount of any consideration paid or given or required to be paid or given by or on behalf of a tenant to a landlord or the landlord's agent for the right to occupy a rental unit and for any services and facilities and any privilege, accommodation or thing that the landlord provides for the tenant in respect of the occupancy of the rental unit, whether or not a separate charge is made for services and facilities or for the privilege, accommodation or thing, but "rent" does not include,

(a) an amount paid by a tenant to a landlord to reimburse the landlord for property taxes paid by the landlord with respect to a mobile home or a land lease home owned by a tenant, or

(b) an amount that a landlord charges a tenant of a rental unit in a care home for care services or meals; ....
Essentially then, any valuable consideration (which includes both money and things of value) flowing or due (through whatever route and in whatever form) to a landlord for occupation or anything related to the rental premises is "rent", subject only to exceptions for:
  • mobile home park property tax payments;
  • care home services;
  • rent deposits (for last month's rent) [see s.5(d) below]; and
  • allowed non-rent charges [see s.5(c) below].
. Included Services and Facilities

The "services and facilities" which are included within the definition of rent include [Act s.2(1)]:
  • furniture, appliances and furnishings,
  • parking and related facilities,
  • laundry facilities,
  • elevator facilities,
  • common recreational facilities,
  • garbage facilities and related services,
  • cleaning and maintenance services,
  • storage facilities,
  • intercom systems,
  • cable television facilities,
  • heating facilities and services,
  • air-conditioning facilities,
  • utilities and related services [see below], and
  • security services and facilities.
"Utilities" includes "heat, electricity and water" [Act s.2].

Pursuant to RTA 'utility cost apportionment' amendments in force 01 January 2011 [explained in detail in Ch.12, s.9: "Other Rent Proceedings: Apportionment of Utility Costs"], utility (water, heat and electricity) costs that are 'apportioned' to a tenant are removed from the legal definition of 'services and facilities' above, and thus the legal definition of 'rent'. Apportionment is basically an arrangement with the landlord whereby the landlord maintains direct responsibility for the utility, but 'passes through' a share of that expense to the tenant in a separate, non-rent account.

(c) Rent Increases

The topic of rent increases divides naturally into "guideline" and "above-guideline" [s.126] rent increases [above-guideline rent increases are covered more fully in Ch.11].

"Guideline" rent increases are ones that may be taken by the landlord on an annual basis simply (in most circumstances) by the service of proper Notice of Rent Increase on the tenant.

While landlord "above-quideline" rent increases [Act s.126] similarly require the issuance of proper Notice of Rent Increase [Act s.116(2)], they also require either an Application to the Board (or agreement with the tenant) to increase rent. While landlords may normally combine several different types of applications respecting one tenant into one Board application filing, this is not the case with rent increase applications, each of which must be filed separately [Act s.186(3)].
Case Note: 1086891 Ontario Inc v Barber (Div Ct, 2007)

In this case (decided under the Tenant Protection Act) two members (another dissenting) of the Divisional Court held that an agreement between landlord and tenant to 'freeze' rent levels for a period longer than one year was unenforceable by virtual of the non-waiver provisions of TPA s.2(1) [the similar provision in the RTA is s.3(1)].
(d) Other Rent Changes

In addition to the more 'traditional' rent increases mentioned above, the RTA also provides for a range of other mechanisms to increase or decrease rent outside of the "guideline" limits. These include:
  • tenant's application to decrease rent on reduction in services [Act s.130][see Ch.12, s.3];

  • tenant's application to decrease rent on reduction of municipal taxes and charges [Act s.133][see Ch.12, s.2];

  • municipal notice of rent reduction on property tax reduction [Act s.131][see Ch.12, s.2];

  • agreement to increase rent on increase in prescribed services [Act s.123][see Ch.12, s.4];

  • prescribed rent reduction on decrease in prescribed services [Act s.125][see Ch.12, s.4] ;

  • agreement to increase rent on capital expenditure or other increase in services [Act s.121][see Ch.12, s.5].
(e) Payment Issues

. Overview

Payment of rent by post-dated cheques, by periodic credit card charges, or direct debit from a tenant's account is often favoured by landlord as a practical means of securing timely payment of rent. However, this practice has disadvantages for tenants who may wish - for whatever reason - to terminate such 'automatic' payments quickly. For instance, outstanding post-dated cheques require positive action and expense by the tenant to "put a stop payment" on them, and similarly quick action is required to terminate a direct debit or credit card arrangement.

A tenant's failure to effectively and promptly terminate these arrangements may leave the landlord with a disputed rent payment in hand which strengthens their hand in any later rent or damages dispute with the tenant, and even a strengthened right to sue (eg. an NSF cheque is a legal cause of action by itself, independent of the rent claim).

The best payment method may be Interac, which requires the tenant actually authorize the payment each and every time.

. Prohibitions on Requiring Certain Forms of Payment

Under the RTA, landlords are prohibited from "requiring" tenants or prospective tenants to pay rent by way of post-dated cheques "or other negotiable instruments", or by way of automatic charges on a debit card, credit card or otherwise [Act s.108].

This prohibition applies to such landlord "requirements" when they are made by a landlord as a condition of the tenancy, but they do not prevent tenants or prospective tenants from voluntarily establishing such arrangements at their option outside of the contractual lease terms. The prohibition applies where landlords purport to make such payment terms their right under the tenancy agreement - be it written, oral or implied.

. Receipts

In order to provide a tenant with evidence of payment of rent, current tenants are entitled - on request - to receive receipts for any rent or other payment made to their landlord [Act s.109(1)] - apparently regardless of how long ago the payment was made. Landlords are prohibited from charging a fee for providing receipts.

This right extends to former tenants, but only to the expiration of one year after the tenancy terminates [Act s.109(2)].

Receipts must minimally comply with the following particulars [Reg s.9]:
  • address of the rental unit to which the payment relates;

  • names of the tenants to whom the payment relates;

  • amounts, dates and purposes of any payments;

  • landlord's name;

  • signature of landlord or authorized agent.

2. Notice of Rent Increase

(a) Overview

In order to assert a right to a rent increase (subject to the below-discussed exceptions), landlords are required to serve their tenants with proper written Notice of Rent Increase (NRI) at least 90 days before the date that the increase takes effect [Act s.116(1)]. The NRI must be in the Board-approved form and "shall set out the landlord's intention to increase the rent and the amount of the new rent" [Act s.116(3)]. Failure to comply with this Notice requirement voids the landlord's right to take that rent increase [Act s.116(4)].

Form N1: Notice of Rent Increase

There are uncertainties as to the effect of any failure of the NRI to fully comply with the form's information requirements. While non-compliance with such important issues as the 90-day notice period, the stated amount of the new rent, and use of the proper form will be viewed as fatal to the increase, the RTA is otherwise forgiving of mere 'technical' (ie. minor or non-prejudicial) lapses in form completion:
s.212
Substantial compliance with this Act respecting the contents of forms, notices or documents is sufficient.
(a1) When Illegal Rent Increases Lawful

With Bill 184 [s.24], rent increases given illegally [ie. without proper notice under RTA 116(4)] are deemed to be lawful "if the tenant has paid the increased rent in respect of each rental period for at least 12 consecutive months" [RTA 135.1(1,3-4)]. This rule does not apply if the tenant challenges the issue by, "within one year after the date the increase was first charged, made an application in which the validity of the rent increase is in issue" [RTA 135.1(2)]. This new rule (passed 21 July 2020) is retroactive such that applies "with respect to an increase in rent even if it was first charged before 21 July 2020, provided the validity of the rent increase was not finally determined by the Board before" that date [RTA 135.1(5)].

While still technically alive in the statute, this is perhaps the death knell of what remained of effective rent controls in Ontario - having succumbed to the combination of the conservative ideological opposition to statutory intervention in the market and the unprecedented supply drop in residential rental housing.

(b) Where No Notice of Rent Increase Required

. Overview

There are some specialized and infrequent circumstances where no Notice of Rent Increase is required - they are are explained in this sub-section.

. Where "Serious Breach" Order Prohibiting Rent Increases for Non-Repair Remedied

Where the landlord is subject to a "serious breach" Order restricting rent increases due to non-repair of the premises [see Ch.3, s.5(c)], then the right to take rent increases from any issued Notices of Rent Increase is suspended. However when the landlord later makes (or claims to have made) the repairs they may re-commence taking the "suspended" rent increase without further Notice of Rent Increase. In effect, rent increases are prohibited during the "serious" non-compliance determined by the Board, and allowed once the landlord claims the serious breach is remedied.

Situations where Notice of Rent Increase is not required also arise in some circumstances where a new tenant has moved into premises subject to such a "serious breach Order", and the landlord then reasserts their right to increase rent based on an assertion that they have complied with the Order [see Ch.12, s.6: "Other Rent Proceedings: Serious Breach Rent Increase Restriction Orders and New Tenants"].

. Where Agreed Increase in Services Results in Rent Increase

The duty to give Notice of Rent Increase does not apply to rent increases resulting from an increase in services agreed to between landlord and tenant under s.123 [see Ch.12, s.4: "Other Rent Proceedings: Changes in Rent on Agreement to Change Prescribed Services etc"].

. Where Agreed Increase Based on Capital Expenditures or Services Increase

The duty to give Notice of Rent Increase does not apply to agreements to increase rent as a result of increased (or promised increases) in capital expenditures or services under s.121 [see Ch.12, s.5: "Other Rent Proceedings: Agreements to Increase Rent on Capital Expenditures and Other Service Increases"] [Act s.121(6)].

Further, while generally the failure of a tenant to terminate a tenancy after receiving a Notice of Rent Increase acts to condone (accept) the increase [Act s.118], this is not the case where the landlord and tenant enter into an agreement to increase rent based on an increase in capital expenditures and/or services. In that case any prior Notice of Rent Increase that is not yet in effect before the agreement comes into effect is voided [Act s.121(7)].


3. "Guideline" Rent Increases

(a) Overview

In a "guideline" rent increase, a landlord may increase the rent of a tenant annually "during the term of their tenancy", by any amount up to the applicable current "guideline increase" (see below) [Act s.120(1)].

Note however that the guideline amount [Act s.120(1)] does not apply to rent increases resulting from an agreed increase in services under s.123 [see Ch.12, s.4: "Other Rent Proceedings: Changes in Rent on Agreement to Change Prescribed Services etc"] [Act s.123(2)]. Of course, Board-approved s.126 "above-guideline" rent increases are also an exception [see Ch.11].

(b) 12-month Rule

"Annually" here is counted from the date of the last increase, or the date that the premises were first rented to the present tenant, whichever applies [Act s.119(1)]. This is called the "12 month rule". It basically only allows rent increases once every 12 months, but if the landlord "misses" a rent increase they may not 'catch-up' and resume the same annual schedule later on. In that case the date of the most recent rent increase taken establishes a new anniversary.

Note that the 12-month rule does not apply to rent increases resulting from an agreed increase in services under s.123 [see Ch.12, s.4] [Act s.119(2), 123(2)].

(c) Vacancy De-Control

Note the phrase "during the term of their tenancy" quoted in (a) above from s.120(1). This means that the guideline increase limits only apply to continuing tenants (and "assignees": see Ch.1, s.5]. The rent charged to "new tenants" is not subject to the "guideline increase" [Act s.113] - thus allowing the landlord to ask of the new tenant whatever rent amount they want (ie. market rent).

This rent control structuring is generally called "vacancy de-control", though a more accurate phrase might be: "occupancy control". Vacancy de-control has been perhaps the most contentious political aspect of the Residential Tenancies Act. The elimination of the rent registry, which formerly registered "legal rents" unit-by-unit in previous times of true rent control (which attached to units, regardless of occupancy), is also an aspect of the RTA's "vacancy de-control" system.

Just to be clear, "statutory tenants" (those whose continued possession of premises after the expiration of a term lease by law converts the tenancy to a periodic monthly tenancy) [see Ch.1, s.2(f): "Fundamentals: Formation of a Tenancy: Statutory versus Contractual Tenancies"] are 'continuing' tenants for purposes of guideline increases [Act s.38(1)].
Case Note: Honsberger et al. v. Grant Lake Forest Resources Ltd.

In Honsberger et al. v. Grant Lake Forest Resources Ltd. (Ont CA, 2019) the Court of Appeal considered a novel landlord attempt to equate a 'renewal' with the creation of a new tenancy, and thus bring the situation under vacancy decontrol [RTA 113]. The landlord tried, unsuccessfully, to argue that a renewal under RTA 38(1) [deemed month-to-month statutory renewal where no notice after a term lease has expired], constituted a new tenancy:
[26] As mentioned, the crux of the appellant’s argument is that when the Tenants entered into the new one-year tenancy agreements, the term of the tenancies was severed, and thus the rental increase and notice provisions of the RTA were inapplicable, and the new rent lawful.

[27] There are strong factors weighing against the appellant’s interpretation of the RTA.

[28] First, s. 113 [SS: vacancy decontrol] of the RTA expressly permits the establishment of a new rental rate with a new tenant. Recognition of a similar carve-out for an existing relationship involving the same tenant, the same landlord, and the same premises would undermine the purpose of the Act. A renewing tenant is not a new tenant. Put differently, the appellant’s proposed statutory interpretation is inconsistent with the scheme of the RTA’s rent control provisions considered as a whole. The structure and purpose of the Act would be undercut if at the commencement of each year, a landlord could increase the rent simply by entering into a new tenancy agreement. A tenancy agreement involving the same parties and the same premises requires the landlord to give 90 days’ notice of an increase pursuant to the clear provisions of the RTA. This conclusion is also consistent with this court’s decisions in Matthews and Nanne v. 3011650 Nova Scotia Limited (Michipicoten Forest esources), 2015 ONCA 391.
. Schell v. Clarke

In Schell v. Clarke (Div Ct, 2020) the Divisional Court re-stated the result in Honsberger (above):
[6] Subsequent to the LTB’s Decision, the Court of Appeal for Ontario released its decision in Honsberger et al. v. Grant Lake Forest Resources Ltd., [2019] ONCA 44, which clarified that upon the expiry of an existing lease, where the parties and premises that are the subject of a tenancy agreement do not change, a new tenancy agreement cannot be created outside of the rental increase constraints of s.120 [SS: guideline increases] of the RTA.
(d) The "Guideline"

The amount of each annual guideline increase is determined by the Ministry of Municipal Affairs and Housing in relation to the federal Statistics Canada Consumer Price Index, but in no year shall be greater than 2.5% [Act s.2(1) "guideline", 120(2)].

Recent annual rent increases guidelines are published at these links, and each year thereafter no later than 31 August of the preceding year [Act 120(3)]:

2013-2020 Rent Increase Guideline.


4. Lawful Rent

(a) Overview

No rent control scheme can operate without the obvious provision that:
Act s.111(1)
No landlord shall charge rent for a rental unit in an amount that is greater than the lawful rent permitted under this Part.
The topic of "lawful rent" involves the basic question: what is the rent that the tenant is legally required to pay for their rental unit? Determining "lawful rent" is not always obvious, and - even when not dealing with complex s.126 "above-guideline" rent increases - can involve complex analyses of amounts of past rent, timing issues of Notices of Rent Increase, past discounts in rent, existence of rent increase restrictions, and a number of other issues.

Establishing "lawful rent" over past periods is the foundation upon which any claims to recover "illegal" rents paid are based [see Ch.12, s.7: "Other Rent Proceedings: General Application to Recover Illegally-Paid Monies"].

Also discussed in this section are provisions accomodating for the effect of various "rent discount" and "rent premium" arrangements on "lawful rent", without which the amount of "lawful rent" would be distorted by virtue of the main vacancy decontrol rule that the "lawful rent" for a new tenant is the rent first charged them [Act s.113]. Some of these provisions are - for what they purport to achieve - amongst the most ludicrously complicated to be found in legislation already significantly guilty of that sin.

(b) Some Key Principles

Aside from the basic issues of the 12-month rule [see s.3(b) above] and Notice of Rent Increase notice period [see s.2(a) above], there are some basic rent principles that have a large impact on the issue of lawful rent.

The first is that any rent - regardless of legality at the time it was charged -is "deemed" lawful if not challenged by a tenant's recovery application made to the Board within one year [Act s.136(1); see Ch.12, s.7].

With Bill 184 [s.24], rent increases given illegally [ie. without proper notice under RTA 116(4)] are deemed to be lawful "if the tenant has paid the increased rent in respect of each rental period for at least 12 consecutive months" [RTA 135.1(1,3-4)]. This rule does not apply if the tenant challenges the issue by, "within one year after the date the increase was first charged, made an application in which the validity of the rent increase is in issue" [RTA 135.1(2)]. This new rule (passed 21 July 2020) is retroactive such that applies "with respect to an increase in rent even if it was first charged before 21 July 2020, provided the validity of the rent increase was not finally determined by the Board before" that date [RTA 135.1(5)].

Another principle is that the landlord's "right" to take rent increases is not cumulative. That is, if authorized guideline increases are not taken on the anniversary, then that right is permanently delayed and may not be "caught-up" later on. In that case the date of the most recent rent increase taken establishes a new anniversary. This is the case with Board-approved above-guideline rent increases as well [see Ch.11, s.2(c): "Above-Guideline [s.126] Rent Increases: Important Timing Issues: Take It or Lose It Increases"] - which additionally may be permanently lost if not properly taken.

Further, the destruction of the rent registry brought about by the RTA effectively terminates any near-future political drive towards "true" rent controls (tied to units with a supporting permanent rent registry), and reaffirms the "vacancy decontrol" started in the TPA. Vacancy decontrol ties rent regulation to tenancy agreements rather than to rental units, and essentially 'cancels' the rent history of any prior tenants upon the occurence of a vacancy in the rental unit (ie. the current tenant moving out, whether a new tenant is coming in or not). Upon the occurence of a vacancy the landlord is free to charge a "market rent", if of course the prospective tenant will pay for it [Act s.113].

Lastly, one form of rent charge, used more commonly in commercial landlord and tenant contexts, is the "acceleration clause". Typically this is structured as a provision that renders all rent due over the entire future course of the lease on the occurence of even slight default by the tenant (which is typically specified to be non-payment or late payment of rent). Such charges are expressly made illegal under the RTA and in any event would constitute a gross violation of basic rent control and security of tenure principles [Act s.15].

(c) deleted

(d) Authorized Rent "Discounts"

. Overview

Landlords may offer temporarily free rents as a market inducement, or reduced rents in exchange for prompt rent payment or pre-payment. Such practices are given limited accomodation (I call them "authorized" rent discounts) within the RTA rent regulation regime by eliminating the negative effect that these discounts would otherwise have on the "lawful rent" level [Act 111(3)]. It is necessary to have these special RTA discounted rent provisions (explained below) as otherwise the basic vacancy decontrol rule would assert itself: ie. "the lawful rent for the first rental period for a new tenant under a new tenancy agreement is the rent first charged to the tenant" [Act s.113]. But for these special discount rules the legal rent would be permanently lowered by the discount.

The several forms of such "authorized" rent discounts as explained below. If more than one form of authorized rent discount operates within a tenancy then the 'legal rent' preservation effect still applies [Act s.111(2.2)].

. Three-Months per Year Rent-Free Discounts

Rent-free month discounts of up to three months in any 12-month period (including at commencement of the tenancy) are "authorized" without negative impact on the lawful rent that may be charged when the discount ends [Act s.111(2.1)1].

However, in order to qualify as "authorized" the arrangement must be set out in a written agreement, and must take actual 'rent-free period' form [Reg s.10(1)]. The law is structured to ensure that these are truly 'rent-free periods' and not partial discounts spread over longer periods (for instance, a "three month" discount 'spread' over 12 months is effectively an "unauthorized" year-long 25% discount).

Therefore, where rent is paid monthly, such a discount must be 'given' - insofar as possible - in full month periods. Thus - for example - a rent discount of 2.5 months must be 'given' in two full months and one half-month rent-free period/s. Similarly, where rent is paid weekly, a discount must be given in periods of a week or more. The periods need not be consecutive.

Again, the goal of these provisions is to avoid longer-term partial discounts, which would strain the credibility of these "legal rent" discount exceptions.

. Prompt Payment and Pre-Payment Discounts

Further, rent "discounts" of no more than 2 per cent of the rent may be given at anytime during a tenancy (including commencement), without negative impact on the lawful rent, if given as an inducement for prompt rent payment or longer term rent pre-payment [Act s.111(2)].

In order to preserve their "authorized" status the law only requires that such arrangements "must be provided for in a written or oral agreement" [Reg s.10(0.1)] - a perhaps unnecessary stipulation.

. Other Rent Discounts

Additional "authorized" rent discounts are allowed in various amounts and various allocations over the below-designated 12-month periods.

The "authorized" discount structures include any of the following, as long as the arrangement is provided for in writing [Act s.111(2.1)2; Reg s.11(1):
  • up to one month's rent discount, allocated anywhere in the first eight months of the 12-month period;

  • up to two month's rent discount, with no more than one month's discount being allocated to the first seven months of the 12-month period, and the balance to the last five months in one month only [this may be designed for eight-month (two-semester) student rentals].
For purposes of these provisions, the "12-month period" during which such a discount is permitted (without negative effect on the 'legal rent' level) is any of the following 12-month periods, as applicable [Reg s.11(2)]:
  • the next 12 months after commencement of the tenancy;

  • where a rent increase is taken, the next 12 months after that. However this does not apply to a rent increase brought about subsequent to an agreement between the parties to add services under s.123 [see Ch.12, s.4: "Other Rent Proceedings: Changes in Rent on Agreement to Change Prescribed Services"];

  • where a rent increase has been taken in past but has not been taken on the next anniversary when it could have been, the 12-month period following the most recent anniversary of the last rent increase properly taken;

  • where no rent increase has ever been taken, the next 12 months following the anniversary of the commencement of the tenancy."
A discount is also authorized if contained in a "tenancy agreement that operates under the Strong Communities Housing Allowance Program - Toronto Pilot, if the landlord sets out the discounted rent and the undiscounted rent in the written tenancy agreement and in a written notice to the tenant accompanying any notice of rent increase given to the tenant".

(e) "Regulated" Rent Discounts

"Regulated" (author's term) here simply means that a discount was given that did not conform to the above [(d)] "authorized" discount rules. As such it can negatively impact on the amount of "lawful rent" - however this impact is itself regulated, as follows [Act s.111(3)].

The "lawful rent" determination in a "regulated" rent discount situation is as per the following General Regulation provision. These provisions, for the amount of use that they are likely to have, are ludicrously complex and do not benefit from summarization, so I just link them in raw form:

RTA General Regulation s.12

When determining the amount of "lawful rent" for this purpose, the following amounts will be disregarded as "rent" [Reg s.14]:
  • rent increases during the "12-month period" (above) resulting from agreements to increase services under s.123 [see Ch.12, s.4];

  • rent decreases during the "12-month period" (above) resulting from agreements to decrease services under s.123 and 125 [see Ch.12, s.4], and

  • "amounts which cannot be lawfully charged for a reason other than the operation of section Regs 12 or 13" (other generally illegal rent charges, excepting lawful rent discounts).
(f) Rent Premium Situations

Under previous rent control regimes landlords would sometimes try to establish a legal maximum rent level higher than even market rent, but then 'drop' the actual rent down to a market level - effectively circumventing rent controls by giving themselves constant freedom to raise the rent up to the artificial "maximum" allowed.

Under the present RTA regime, a similar tactic is conceivable if a landlord charges a rent premium (raised rent) in the first month of a tenancy higher than the regular rent charged for the balance of the year. Thus the "lawful rent" is artificially high. In a provision designed to prevent this tactic, the RTA will deem the "lawful rent" to be the "regular" non-premium amount by disregarding the inflated premium rent from its calculations [Act 111(4); Reg s.13].

Additionally, when determining the amount of "lawful rent" for this purpose, the following amounts will be disregarded as "rent" [Reg s.14]:
  • rent increases during the "12-month period" (above) resulting from agreements to increase services under s.123 [see Ch.12, s.4];

  • rent decreases during the "12-month period" (above) resulting from agreements to decrease services under s.125 [see Ch.12, s.4]; and

  • "amounts which cannot be lawfully charged for a reason other than the operation of section Regs 12 or 13;" (other generally illegal rent charges, excepting lawful rent discounts).

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