Becoming a successful landlord in Ontario can be challenging. If you’re an investment property owner or new landlord living in Ontario, familiarize yourself with the local rental market and learn how to navigate essential Ontario rental agreements and documents.
In this article, you will also learn about national and regional laws for tenancies and determine if rent control may apply to your rental property. We’ll explore Ontario’s rental market and how landlords and real estate investors can ensure a successful landlord-tenant relationship.
Essential Ontario rental agreements & documents
When hosting a showing for a rental property, a property manager or real estate agent should keep a rental application form accessible for all prospective tenants, which outlines the following:
- Basic information of the primary applicant
- Basic information about other potential renters
- Current address
- SIN (optional)
- List of previous landlords
- Rental history
- Consent to conduct a credit check
As part of the rental application process, landlords may also ask potential tenants to provide the following:
To ensure a smooth rental process, begin the tenant screening once you have consent and notify the applicant promptly whether they have been approved.
Documents to start a tenancy
Once the application is approved, landlords must collect the following documents before the move-in date to secure monthly rent on time, a security deposit, and a pet deposit (if applicable). Property owners must also conduct an inspection of the premises (ideally with the tenant) before the move-in date and provide a rent receipt to the tenant to show proof of payment.
These are some of the Ontario rental documents needed once a tenant is approved:
- Residential Tenancy Agreement: Ontario rental agreements come in a standard form that is provided by the government.
- Move-in/Move-out Inspection Report
- Rent Receipt
Pro Tip: Landlords may protect themselves by using addendums in the rental agreement to include additional rules that are specific to the rental property.
Documents during the tenancy
During the tenancy, landlords should have all addendums or disclosures related to the property, including:
- N1: Notice of Rent Increase with instructions
- N2: Notice of Rent Increase (Unit Partially Exempt) with instructions
- N3: Notice to Increase the Rent and/or Charges for Care Services and Meals with instructions
- N10: Agreement to Increase the Rent Above the Guideline with instructions
- Notice of Intent to Enter
Documents to end the tenancy
Evicting a tenant can be a tricky process. There are strict guidelines and legal procedures that each landlord must follow before asking a tenant to leave the premises or having them removed.
Before initiating the eviction process, landlords should consult with an attorney to ensure they are not violating the rental agreement or provincial or national laws. In order to end a tenancy, landlords must submit the appropriate forms depending on the circumstances. These forms may include:
- N4: Notice to End your Tenancy Early for Non-payment of Rent with instructions
- N5: Notice to End your Tenancy for Interfering with Others, Damage or Overcrowding with instructions
- N6: Notice to End your Tenancy for Illegal Acts or Misrepresenting Income in a Rent-Geared-to-Income Rental Unit with instructions
- N7: Notice to End your Tenancy for Causing Serious Problems in the Rental Unit or Residential Complex with instructions
- N8: Notice to End your Tenancy at the End of the Term with instructions
- N11: Agreement to End the Tenancy
- N12: Notice to End your Tenancy Because the Landlord, a Purchaser or a Family Member Requires the Rental Unit with instructions
- N13: Notice to End your Tenancy Because the Landlord Wants to Demolish the Rental Unit, Repair it or Convert it to Another Use with instructions
Important considerations for property managers
When deciding what to charge their tenants, property owners should consider many costs, including the following:
Hard costs are incurred every month and include:
- Rent
- Mortgage payment
- Property taxes
- Insurance
- Property management fees (even if you plan to do this yourself)
- Bookkeeping/accounting
- Utilities (if applicable)
Soft costs vary and may include:
- Vacancy rate (budget at one month vacancy, which equals 8%)
- Repairs and maintenance (dependent and specific to the rental property)
- Reserve funds (i.e. emergency fund, safety net, etc.)
Understanding which regulations apply to your rental property under the Ontario RTA, Human Rights Code (Ontario) and the Freedom of Information and Protection of Privacy Act (FIPPA) and which documents are needed for each rental-related circumstance will help improve the management process.
Many landlords have the misfortune of dealing with unpaid rents, increased vacancy rates due to a competitive market, and the additional expenses and tasks of keeping up with vital services, maintenance costs, or property damages.
There’s also the possibility of a rent freeze in an unstable rental climate, maintenance issues that can become an emergency situation, illegal activity on the premises, and disputes between landlords and tenants.
Landlords can greatly reduce the risk of delinquent rental payments by thoroughly vetting and implementing a tenant screening process through online tenant screening services that provide extensive credit reports, background checks, income source verification, and much more.
Demand in Ontario’s rental market
Ontario has some of Canada’s most expensive living costs and is the country’s most populated province. The following contributing factors increase the demand for rental properties:
- Population growth
- The limited supply of rental stock
- Inflation rate
As inflation rises, so does the possibility of mortgage rates increasing. High mortgage rates give buyers less-than-favourable purchasing power, leading to more people looking to rent. The demand for rental properties can benefit landlords since they have a larger selection of applicants allowing them to be more selective.
Key update to Ontario’s rent increase guidelines
In 2023, Premier Doug Ford raised rent increase limits to 2.5% annually. For instance, if a current tenant’s rent is $1,000 and after 12 months, the landlord decides to increase the rent, the landlord may only raise the rent to $1,025—a 2.5% increase. If the landlord wants to increase the rent by more than 2.5%, they must get approval from the Landlord and Tenant Board (LTB), which is generally granted under special circumstances and is uncommon.
What is the purpose of the Landlord and Tenant Board?
The LTB protects residential tenants from unlawful rent increases and evictions. Their purpose is to balance the rights of landlords and tenants. Additionally, they manage disputes between residential landlords and tenants concerning all eviction applications filed by housing co-operatives. A landlord can only increase the rent on a current tenant higher than 2.5% annually with the approval of the LBT.
It takes a minimum of eight months for the LTB to resolve a dispute if there have been no errors in the filing. If a mistake has been made, it will take significantly longer. This is a frustrating situation for both landlords and tenants that will hopefully be remedied with the recent budget announcement.
How often can a landlord increase the rent?
A landlord can increase rental prices every 12 months but must give a three-month notice to each tenant. This isn’t a concrete rule that every landlord must abide by––there are some exceptions to these rules. Landlords must be aware of the exceptions to these rules and be transparent about them in their dealings with potential tenants when drafting the lease agreement. The exceptions to rent control include:
- In a retirement home, rent increase guidelines only apply to the rental cost but not to the cost of services, including nursing, food, and cleaning services.
- For new buildings or additions to existing buildings that are rented and occupied for the first time after November 15, 2018, there is no limit to the amount a landlord can increase rent. To maintain a good landlord-tenant relationship, the landlord should ideally be transparent about this law for unfamiliar tenants.
The Residential Tenancies Act: how it applies to landlords
The rental industry is highly regulated by the Residential Tenancies Act (RTA). Some of the RTA laws do not apply when a tenant and landlord share a kitchen or bathroom. Landlords must comply with all other applicable laws in the RTA. The RTA covers a landlord’s responsibilities, including repairs, services, consent to enter premises, tenant applications, the eviction process, and more.
FAQ: Ontario rental agreements & standard documents
Being a landlord in Ontario can be very rewarding, but the answer depends on the person’s skillset, willingness to learn, risk tolerance, and ability to take on new challenges, among many other things. Choosing your renters carefully will make a big difference in whether the rewards of being a landlord outweigh the grief. With the benefits a tenant screening service provides, a landlord can protect their rental income.
As of 2023, landlords can only raise rent by 2.5% annually. However, some exceptions will allow landlords to raise rents by a higher percentage. For instance, in retirement home properties, rent increases may only be applied to the rental cost and not to other services the home provides, such as food and cleaning services. And for new buildings or additions made after November 15, 2018, the landlord is not limited to the amount the rent may be increased.
There are laws in place to protect tenants in Ontario, so landlords must be knowledgeable about these laws to avoid lawsuits. Some laws stipulate that a landlord cannot impose repayment agreements on tenants or break lease agreements. They must also provide proper notice of intent to enter and not discriminate against prospective tenants.
Our final thoughts
Maintaining files with important Ontario rental documents, such as rental agreements and lease addendums, in a digital vault is a great way to stay organized and ensure your documents remain secure. Sensitive personal information can be protected with digital vault solutions that allow you to store and control who can access your rental documents.
Knowing how to manage these critical files, conduct thorough move-in/move-out inspections, and provide proper notice of entry and rent increases can help you manage your properties effectively and within legal boundaries. Learn more about risk-free renting with SingleKey’s Tenant Screening Report. You’ll get a comprehensive profile of your potential tenant, including a credit check, social media scan, and employment verification.
