An investment in real property comes with ongoing costs to related to municipal taxes and charges in addition to some eligible operating expenses.
In Ontario, any building used for residential purposes prior to November 18, 2018 is subject to rent control which limits yearly increases to a guideline amount set by regulation using the Ontario Consumer Price Index. The guideline is capped at 2.5% regardless of inflation.
Under s. 126, a landlord who incurs a significant increase in municipal taxes and charges or certain operating expenses may apply to the Landlord and Tenant Board to approve an increase above the guideline. This allows landlords to recover out of pocket costs by allocating a portion of the costs to each eligible unit.
If a landlord fails to file an above guideline increase application in the prescribed time, the chance to recover these funds is lost.
These applications can benefit both large and small landlords and require calculations to determine the justifiable increase to be applied prior to filing the application.
Examples of eligible expenses and justifiable increases:
A small landlord with one multi unit property for rent incurs an increase in municipal taxes of 7.8%. This landlord is eligible to apply for an increase of 0.5%.