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Rent increase: what is allowed in Quebec?

#Property Management #Financial questions

Last update : 2024-02-05 09:38:41

Like every year, the rent increase season is upon us. Sometimes a source of tension between landlord and tenant, the process requires knowledge of certain legal information to avoid unnecessary stress.

So, what's allowed in a rent increase? What are the rights and responsibilities of each party? Let's take a look at the regulations in Quebec.

The notice of rent increase on a residential lease

First of all, it's important to know that when a lease comes up for renewal, a landlord is perfectly entitled to ask for a rent increase if he thinks it's reasonable. The landlord will notify the tenant of the increase in one of the following ways:

  • The amount of the new rent;
  • The amount of the increase in dollars;
  • A percentage of the current rent.

Note that tenants are not required to accept the increase. They can formally reject it within one month of receiving the landlord's notice.

Pile of notices of rent increase

What is the maximum rent increase?

In practice, there is no maximum rent increase because it depends mainly on the landlord's common sense. If the proposed increase is disproportionately high, there's a good chance that the tenant will contest it. When this happens, there are two possible outcomes:

  • The parties reach an agreement;
  • The status quo is maintained and the dispute is settled before the Tribunal administratif du logement (TAL).

Good to know: leases are automatically renewed between landlords and tenants if no notice has been exchanged. The increase will also apply if the tenant does not respond to the document.

How do I dispute a rent increase?

Whatever the amount of the rent increase stated in the notice, the tenant has the right to dispute it, without the landlord having the right to evict the tenant for doing so. For this action to be legally valid, the tenant must respond to the notice. The tenant can then

  • Simply state that he disagrees;
  • Contest the increase, refuse to come to an agreement and state that he/she will leave the property at the end of the lease.

In all cases, this decision must be received by the owner within one month of receiving the first notice.

For an amicable agreement: calculate the rent increase in 2024

It may be that the tenant disputes the increase but wants to stay in the apartment. In this case, the parties must first try to reach an agreement on the increase without going to court.

To help find a solution to the rent adjustment, the TAL makes an online calculation tool (in French only) available to the public. By entering specific data, the tool confirms or refutes the validity of the landlord's action. Landlords must provide:

Rental income:

  • Monthly rent;
  • Any additional income from operating the building.

Expenses incurred:

  • Municipal and school taxes: the reference period used is the actual variation in costs over the previous 2 years;
  • Insurance: the same calculation criteria are used for municipal and school taxes;
  • Operating expenses: used to maintain the general condition of the building;
  • Energy bills;
  • Other building-related services;
  • Management fees.

Results in percentages

For energy and service costs, the calculation criteria are more specific. In fact, the calculation method for time-invariant expenses is based on adjustment percentages defined in the TAL rent regulations. For management fees, a percentage generally ranging from 5% to 10% of the building's annual gross income is used.

Net income is the difference between gross income and operating expenses. The result is a percentage adjustment to the rule. The landlord can then send this to the tenant for agreement on the increase.

Keys and pen

Settling before the TAL, the former Régie du logement

However, it is possible that each party is convinced of the merits of their case and that an agreement on the increase is simply impossible. Or the tenant or the landlord may not be acting in good faith.

In such a case, it is the landlord's responsibility to act first. Within a maximum of one month of receiving the tenant's refusal, the landlord must apply to the Tribunal administratif du logement to modify the lease. This also means that the parties have one month to reach an out-of-court settlement.

As part of this request, the Tribunal will provide the landlord with the information form necessary to set the rent. The landlord will then have 90 days to provide an official statement of the building's income and savings.

The court will then call the parties to a hearing. The landlord, for his part, will have to provide the necessary documentation, such as invoices, bank statements or any other proof of his situation. At the same time, he or she must provide a copy of this form to the tenant and provide proof of this to the Tribunal.

What is the possible decision?

After reviewing the case, the Tribunal will issue a written decision and send it to the parties.

The Tribunal will then determine the new rent. If the Tribunal finds in favour of the landlord, the arrears owed by the tenant since the beginning of the renewed lease are payable within one month. For example, the tenant must repay the $20 per month increase due for the past 4 months, for a total of $80.

In addition, either party may request an appeal to review the Tribunal's decision. The person making the request must prove that an error has been made and file the request no later than one month after the TAL's decision.

Renewal and rent setting: deadlines and dates to consider

Landlords must be aware of all the stages and deadlines involved in a rent increase procedure. First, the rent increase notice must be sent according to the following conditions:

  • For a lease of 12 months or more: the notice must be sent between 3 and 6 months before the end of the lease.
  • For a residential lease of less than 12 months: the landlord must send his request between 1 and 2 months before the end of the contract.
  • If the contract is perpetual: between 1 and 2 months before the proposed date of change.
  • If the lease is for a single room: between 10 and 20 days before the end of the lease.

An exception for buildings less than 5 years old

However, it's worth mentioning the special case of buildings built 5 years ago or less, including new homes. In this case, the rules on increases do not apply to this type of dwelling.

Increases due to major repairs

It's important to know that any repairs or improvements to a property are not part of the building's annual operating expenses. We're talking about work to repair or modify the major components of the building, such as:

  • Roofing;
  • Insulation
  • Plumbing;
  • Foundation repairs;
  • Floor painting;
  • etc.

Aesthetic renovations can also be included. For example, a homeowner may wish to increase the value of their property by renovating their kitchen or bathroom. Please note that these operations fall within a percentage set annually by the regulations.

Small red houses to rent

What is the legal rent increase for 2024 in Quebec?

The determination of rent in Quebec is governed by the Civil Code of Quebec. It states that the tribunal must determine the rent payable, taking into account the standards set out in the regulation on the criteria for determining rent. The tenant's monthly payments must therefore be objectively adjusted according to the criteria set out above.

If the landlord wants to increase the rent, he can also refer to the quality of the service or the tenant's use of an outbuilding of the building. For example, in a condominium building, this could be a swimming pool or gym.

What is the legal rent increase for 2024 in Canada?

It's important to check with the province where you live to find out more about the legislation in place. For example, in Ontario, the Landlord and Tenant Board (LTB) regulates disputes between tenants and landlords.

As a landlord, how do I raise a rent that's too low?

If you're a landlord and you think your tenant's rent is too low, you can raise it. All you have to do is wait for the deadline to send out notices of increase. You won't be able to apply it to the current rent.

What to keep in mind

There are no precise rules that the landlord must follow when proposing a rent increase.

However, the legal framework requires him to justify his action if the tenant objects. In case of persistent disagreement, the final decision rests with the Housing Administrative Tribunal.

It is therefore preferable for the landlord to propose a fair and reasonable rent increase from the outset.

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