Post-Registration Course 3 - Real Estate as an Investment Strategy - Residential Properties

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Module 1: Introduction to Residential Investment Properties Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 1: Introduction to Residential Investment Properties This module guides you through topics related to requirements and considerations for working with a client who is interested in residential investments of four units or less. This includes a review of different major dwelling types, with a focus on those that are most commonly purchased for investment purposes. Taxes and considerations regarding obtaining financing and ownership for both resident and non-resident clients are also discussed. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails Accessible PDF.

and References from the module are added to support your learning throughout this

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Menu: Introduction to Residential Investment Properties

Number of Lessons

Lesson Number

9 Lessons

Lesson Name

Lesson 1

Requirements and Key Considerations

Lesson 2

Representing Non-Resident Clients

Lesson 3

Types of Residential Properties

Lesson 4

Ownership Options

Lesson 5

Obtaining Financing

Lesson 6

Third-Party Service Providers

Lesson 7

Due Diligence, Disclosure, and Responsibilities

Lesson 8

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 15

Lesson 1: Requirements and Key Considerations This lesson outlines how to address the needs of clients interested in residential investment properties of four units or less. Ownership options, such as sole proprietorship and corporate ownership and tax considerations, are also discussed.

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Lesson 1 | Page 2 of 15

There are several requirements that a client should be aware of when trading in residential investments. This lesson explains how to assess the needs of clients interested in residential investment properties of four units or less. Ownership options and tax considerations will also be discussed. Upon completion of this lesson, you will be able to: • Identify the requirements for a client trading in residential investment properties of four units or less • Identify the key considerations for a client trading in residential investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 15

When representing a client trading in residential investment properties, it is important for you to understand how to meet their needs by first understanding their investment strategy.

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Lesson 1 | Page 4 of 15

Key Requirements for Clients As you know, a well-informed investor must know the rewards and pitfalls of real estate to make an informed decision. You are required to have clear and comprehensive knowledge of the issues and legislation affecting residential investment properties, in order to assist the client in making well informed decisions. When performing a needs assessment, you should speak to your client to determine the following: • Motivation: Generate cash flow, high rate of return • Market: Local plus regional, national, and international • Mortgaging: Funding may depend in part on the property’s ability to generate income

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• Type of Ownership: Various options: sole proprietorship, corporation, partnership, joint venture, Real Estate Investment Trust (REIT), etc. • Length of Ownership: Flexible – dependent on cash flows, investor objectives, and return • Type of Occupancy: Tenant-occupied, owner-occupied The objectives of an investor may include an expected rate of return, a stated period to hold an investment, the tax sheltering opportunities available for a purchase, or a long-term strategy to diversify real estate holdings through leverage. To determine the objectives of an investor, you need to understand your client’s needs, and to determine the risk of their investment. It is also important to assess whether a specific offering can achieve anticipated returns or profit given inherent risks. A needs assessment is completed to help address matters such as: • What the investor intends to do with the property (e.g., sourcing and selecting properties to show that align with intended use) • The investment return that the investor is seeking (e.g., referring investor to the appropriate third-party service provider, such as an accountant or a business advisor) • What the investor is hoping to accomplish (e.g., showing properties that align with investor’s overall objective)

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Lesson 1 | Page 5 of 15

Assisting Investor Sellers When working with a client who is selling their residential investment property, you must work with the investor seller to make sure that there are no outstanding maintenance or safety issues prior to listing the property. These issues may include roof repairs or repairs to heating or electrical equipment. This helps to ensure that the client receives the best value for the sale of their property. From an investment perspective, this also ensures that costs related to maintenance can be factored into risk analysis and return calculations.

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When working with an investor who may be selling their investment property, you must inform them that any gains associated with the sale may be subject to capital gains tax. A capital gain is a gain on the sale or exchange of capital assets that meets the criteria for a capital gain as set out in the Income Tax Act. Capital gain is described as the gain from the disposition of capital property, a percentage of which must be added to taxable income on disposition of the asset. Capital property includes any item from which a capital gain or a loss would be realized and includes depreciable property. A capital gain is a gain on the sale or exchange of capital assets that meets the criteria for a capital gain as set out in the Income Tax Act.

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Lesson 1 | Page 6 of 15

A salesperson is meeting a new client who has expressed interest in purchasing a triplex as a residential investment property. The client indicates that they are relatively inexperienced with real estate as an investment but intend to enlist the assistance of a property manager to oversee repair and maintenance responsibilities. Which of the following questions can be used to better understand the client’s overall investment strategy? There are four options. There are multiple correct answers.

1

What are you hoping to gain from the investment property?

2

What is the location you are hoping to invest in?

3

How long do you intend to hold the investment property?

4

Are you familiar with the vacancy rates of this particular trading area?

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Lesson 1 | Page 7 of 15

When representing a client trading in residential investment properties, it is important for you to help them understand considerations such as ownership options and potential tax implications.

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Lesson 1 | Page 8 of 15

Sole Proprietor and Corporate Ownership Ownership options commonly associated with real estate investments include sole proprietorship, partnership, limited partnership, corporation, trust, and joint venture. However, as sole proprietorship and corporation are the two most common forms of ownership, their considerations are discussed in detail later. A sole proprietorship involves a business operation owned by one person who operates individually or with the assistance of employees. The sole proprietor owns all assets and is responsible for all debts, entitled to the profits, and accountable for any losses.

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A corporation is a business entity created by statute law and established by articles of incorporation. Corporations vary from small, privately held operations to large offering or public companies. The corporation, unlike the sole proprietor, provides a distinction between the business operation and its owner(s).

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Lesson 1 | Page 9 of 15

Benefits and Implications of Sole Proprietor Ownership Benefits: • Easy to set up (i.e., little or no cost to create the business entity as a sole proprietor) • Can normally be initiated immediately and involves little paperwork • Free from many governmental regulations imposed on corporations within Ontario Implications: • Unlimited owner liability (e.g., if the investor defaults on the mortgage or is involved in a lawsuit, the creditors may sue the sole proprietor and seize personal assets) • Growth of a sole proprietorship can be limited by the amount of the owner’s capital resources and individual borrowing power • No separation between business and personal income (e.g., all profits are treated as regular income for taxes, however business expenses can be deducted from this income) • Lack of continuity (e.g., after the death of the owner, the business would be dissolved by the executor or administrator of the deceased proprietor) • Personal liability (e.g., the investor may be personally liable if any legal issues arise with their investment property)

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Lesson 1 | Page 10 of 15

Benefits and Implications of Corporate Ownership Benefits: • Creation of a separate legal entity (e.g., incorporating creates a new legal entity with the same rights and laws under Canadian law as an individual person). A corporation can acquire assets, obtain a loan, enter into contracts, sue or be sued, and even be found guilty of committing a crime. • Limited liability for shareholders towards debts and bankruptcy (e.g., shareholders of a corporation are not responsible for its debts). If a corporation goes bankrupt, the shareholders do not lose more than their investment (except shareholders who have provided personal guarantees for the corporation's debts). • Limited liability for shareholders towards legal action (e.g., creditors cannot sue a corporation’s shareholders for their liabilities, even though the shareholders are the owners of the corporation). However, if a shareholder holds another role within the corporation, such as a director, then that person may, in some circumstances, be personally liable for the debts of the corporation. These circumstances may include particular employee entitlements and issues involving the Canada Revenue Agency (CRA). • Lower corporate tax rates (i.e., the taxable income of a corporation involves a different structure than the taxable income of an individual or sole proprietor). • Continuous existence: Corporations continue to exist even if every shareholder and director dies. In most cases, and depending on the conditions attached to the share issue, the deceased’s interest in the corporation would simply transfer to their estate. Implications: • Higher start-up costs: Incorporation carries higher start-up costs (including set-up costs and ongoing professional fees for legal and accounting services) than sole proprietorship or partnership. • Administrative requirements: An incorporated business must file certain documents with Ministry of Public and Business Service, including articles of incorporation, annual returns, notices of changes in the board of directors and in the address of the registered office, and articles of amendment if changes to the structure of the corporation are made.

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• More complex structure (e.g., addition considerations for tax structure, signing authority, etc.). • Access to capital and grants: Even though the borrower is a corporation, the lender must apply their strict due diligence obligations when considering the creditworthiness of the corporation and, in many cases, asks the principal(s) to provide personal guarantees to secure the debt.

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Lesson 1 | Page 11 of 15

Tax Considerations A shareholder of a corporation has limited liability, meaning they are not responsible for the corporation's debts. However, limited liability may not always protect shareholders from creditors. For example, if a smaller, more closely held corporation wants to borrow money from a bank or other creditor, the creditor may ask for the shareholder's guarantee that the debt is to be repaid. If the shareholders agree to this condition, they are personally liable for that debt if the corporation does not pay it back. This applies to taxes owing as well. A corporation usually pays its taxes in monthly or quarterly instalments. If the corporation owes taxes and has obtained capital through lending, an advance under that lending tool can be seized

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on account of the corporation's tax arrears. Even though the proceeds of the advance have been paid to the CRA, the corporation is deemed to have received the advance and is liable to the lender. If any of the shareholders have personally guaranteed the loan or the line of credit for the corporation, then those shareholders and the corporation are jointly and severally liable for the amounts seized. Directors may also be liable to pay amounts owed by the corporation if it has failed to deduct, withhold, remit or pay amounts as required by the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan, the Excise Act, and the Excise Tax Act. Corporations are taxed separately from their owners. Because the corporate tax rate is generally lower than the individual tax rate, incorporation can offer some fiscal advantages. It is important to explain to your client that matters related to taxes for properties should be referred to by the appropriate thirdparty service provider (i.e., accountant, business advisor, etc.).

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Lesson 1 | Page 12 of 15

Tax Considerations when Selling Investment Properties When working with an investor that may be selling their investment property, you must inform them that any gains associated with the sale may be subject to capital gains tax. A capital gain is a gain on the sale or exchange of capital assets that meets the criteria for a capital gain as set out in the Income Tax Act. Capital gain is described as the gain from the disposition of capital property, a percentage of which must be added to taxable income on disposition of the asset. Capital property includes any item from which a capital gain or a loss would be realized and includes depreciable property. A capital gain is a gain on the sale or exchange of capital assets that meets the criteria for a capital gain as set out in the Income Tax Act.

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Lesson 1 | Page 13 of 15

A salesperson is working with a buyer client who is interested in purchasing a duplex as their first investment property. Furthermore, this client is considering buying the property either through their corporation or under their personal name. The client asks their salesperson to provide insight as to how they should hold ownership. The salesperson explains that advice from a lawyer or an accountant is required and offers a high-level explanation of some factors that the buyer client may want to discuss with their third-party advisor. What could the salesperson tell the client to compare ownership by a sole proprietorship and ownership through a corporation? There are four options. There are multiple correct answers.

1

There is no benefit to sole proprietorship when compared to corporate ownership.

2

A corporation may be entitled to tax benefits and limited liability that a sole proprietorship would not.

3

A sole proprietor has risks of being held personally liable by a tenant.

4

Corporate tax rates are generally lower than individual tax rates.

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Lesson 1 | Page 14 of 15

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the requirements for a client trading in residential investment properties of four units or less • Identify the key considerations for a client trading in residential investment properties of four units or less There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Understanding your client’s needs

To understand client needs, you should begin with a needs assessment to discover what they are looking for. This may include the client’s motivation for investing, the market in which they are investing, or the mortgage they are considering. The needs assessment may also consider type and length of ownership, in addition to the type of occupancy being considered by the client.

Risk in decision making

The element of risk applies to all investment decisions. Risk refers to the uncertainty, chance, exposure, and vulnerability imposed on an investor, with particular regard to any financial loss that may accrue from an investment.

Types of risk

It is important to work with your clients to discover what types of risk they are willing to take. These risks may be related to a number of factors, including financial, market, business, or building maintenance issues.

Ownership options

Ownership options associated with real estate investments include sole proprietorship, partnership, limited partnership, corporation, trust, and joint venture. The most common methods, however, are sole proprietorship and corporations.

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Lesson 1 | Page 15 of 15

There are four sections on this page with a summary of the additional key topics that were discussed in this lesson.

Benefits of purchasing using personal name

If an investor purchases a property using their personal name, any positive cash flow from their investment property would be taxed as personal income. Also, the investor may be personally liable if any legal issues arise with their investment property.

Implications of purchasing using personal name

Ownership under a personal name may mean personal liability, including legal liability, as there is no separation between business and personal responsibilities. This may also create unlimited owner liability if the investor defaults on the mortgage or is involved in a lawsuit. Furthermore, growth of a sole proprietorship can be limited by the amount of the owner’s capital resources and individual borrowing power.

Benefits of purchasing under a corporation

There are several benefits of purchasing under a corporation, some of which include the creation of a separate legal entity, limited liability, and lower corporate tax rates. Benefits of purchasing under a corporation may also include better access to capital and grants, as well as the benefit of continuous existence.

Implications of purchasing under a corporation

The implications of purchasing under a corporation include higher start-up costs in additional to administrative, maintenance, and reporting requirements. Implications may also include a more complex ownership structure (e.g., multiple shareholders), and ongoing expenses, typically in the form of professional fees.

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Lesson 2 | Page 1 of 11

Lesson 2: Representing Non-Resident Clients This lesson covers considerations and requirements for representing non-resident clients interested in residential investment properties of four units or less. Challenges, such as verification of personal information and FINTRAC requirements, are also discussed.

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Lesson 2 | Page 2 of 11

There are certain special considerations that apply to non-resident clients including Canadian citizens who reside outside Canada, who may be interested in residential investment. This lesson outlines the requirements related to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), taxation, restrictions, and key considerations regarding representing corporations for non-resident clients interested in residential investment properties of four units or less. This lesson also explains challenges such as verification of personal information and FINTRAC requirements. Upon completion of this lesson, you will be able to: • Identify key considerations when representing non-resident clients trading in residential investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 11

When representing non-resident clients, it is important for you to implement the various FINTRAC requirements and considerations.

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Lesson 2 | Page 4 of 11

FINTRAC Considerations for Non-Resident Clients It is important that you understand the FINTRAC considerations and requirements when working with clients. However, when representing non-resident clients, it is important for you to know that the FINTRAC rules are the same for non-resident investors as they are for residents. As part of the identification review process, it is recommended to have documents verified by a third party, local to the client if you are not able to verify the client’s identity yourself, in person. If you are working with a non-resident client and there is no option for a face-to-face meeting, then you must use a mandatary to verify the client’s identity. A Canadian Embassy or Consulate may provide the service, or you may engage a lawyer or real estate salesperson local to the client. You or your brokerage may contact the mandatary and

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arrange for an agreement. You or your brokerage then provide the client with information on verification through the mandatary. The Canadian Real Estate Association (CREA) has a mandatary agreement form that is to be used. The mandatary may charge a fee for this service. It is important to note that you are legally responsible for verifying the identity of your client, even if you rely on another entity, agent, known as a mandatary, to complete this task. If you have any concerns about the methods or information used to identify an individual, then you must ask the mandatary to re-verify the client’s identity. To identify an individual, you can rely on: • A domestic or non-resident affiliate of their entity • A financial entity that is a member of a financial services co-operative or credit union central • An agent or mandatary acting on their behalf Entities, agents, or mandataries that identify an individual must use one of the methods described in the regulations in place at the time and the information in their records must match the name, address, and date of birth that the individual provided. You may also rely on an affiliate to review client identification documents. This affiliate must also meet the definition of a bank, authorized foreign bank, co-operative credit society, savings and credit union, caisse populaire, life insurance company, trust company, loan company, or securities dealer.

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Lesson 2 | Page 5 of 11

Challenges Regarding Verification of Non-Resident Clients In order to verify non-resident clients, you must obtain all the identification information referred to by the entity, agent, or mandatary, and must be satisfied that the information collected by the entity, the agent, or the mandatary is valid and current, and that the individual was identified using the client identification methods. Anyone identifying an individual on your behalf must meet the requirements listed under each client identification method in this guideline and the information must match what the individual provided. The records must include: • The full name of the entity, the agent, or the mandatary that identified the individual • Information regarding the client identification method that was used

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• The information that was gathered by the entity, the agent, or the mandatary to verify the identity of the individual • The date on which the entity, the agent, or the mandatary verified the identity of the individual • The date you referred to the client identification information provided by the entity, the agent, or the mandatary • If client identification was conducted by an agent or a mandatary, you must maintain a copy of the agreement If the name, address, or date of birth in the information received from the agent or the mandatary does not match the information you collected from the individual, then you cannot rely on it for client identification purposes. When working with a non-resident client, you should also search the United Nations Security Council Consolidated List to ensure the client has not been engaged in any terrorist activity. You can rely on client identification information previously collected by an agent or a mandatary. Information from a third-party who is not verified is not considered reliable (e.g., a representative from a corporation submits scanned copies of the corporation documents, but the salesperson does not receive third-party verification confirming the identity).

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Lesson 2 | Page 6 of 11

Harmonized Sales Tax Considerations Harmonized Sales Tax (HST) is not applicable for resale residential properties but is applicable for all buyers of newbuild residential properties. Most purchases of new housing require the payment of HST on the purchase price, although a partial rebate is available. Most purchases of resale homes do not require the payment of HST; however, confirmation of this fact should be obtained. HST is also payable on lawyer’s fees and most disbursements. When working with clients, it is important to refer tax related inquiries to a tax specialist. An error, such as assuming that a specific property is exempt from HST without determining its precise status, can lead to complications and additional costs in a real estate transaction.

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Lesson 2 | Page 7 of 11

Tax Considerations for Non-Resident Clients When working with non-resident clients, it is important that you provide information regarding the different types of tax that may be relevant to the transaction. This section covers Non-Resident Speculation Tax (NRST). The following five sections contain information on tax considerations for non-resident clients. For more information on Tax Considerations for Non-Resident Clients, review Non-Resident Speculation Tax from the Ministry of Finance, Ontario.

Introduction to Non-Resident Speculation Tax (NRST) Non-resident investors or non-resident corporations that are not Canadian, purchasing residential investment property within the Province of Ontario, are subject to a 25 per cent Non-Resident Speculation Tax (NRST) upon closing.

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Types of properties that are applicable for NRST The NRST applies to the transfer of land that contains one to six single-family residences. Land containing one single family residence includes detached or semidetached houses, townhouses, or condominium units. For the purchase of multiple condominium units, each unit would be considered land containing one single family residence. Examples of land containing more than one single family residence subject to this tax include duplexes, triplexes, fourplexes, fiveplexes, and sixplexes.

Application of the NRST The NRST applies on the value of the consideration for the residential property. If the land transferred includes both residential property and another type of property, the NRST applies on the value of the residential portion of the property. For example, if the purchase price of the transaction is $1,000,000 and contains one single family residence with a value of the consideration of $400,000, and commercial land with a value of the consideration of $600,000, the 25 per cent NRST would apply to only the $400,000 portion.

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Rules of non-payment of NRST The 25 per cent NRST applies to the value of the consideration for a transfer of residential property, if any one of the transferees is a non-resident entity or taxable trustee. For example, if a transfer of residential property is made to four transferees, one of whom is a nonresident entity that acquires a 25 per cent share in the land, the NRST would apply to 100 per cent of the value of the consideration for the transfer. Each transferee is jointly and severally liable for any NRST payable. If a non-resident entity or taxable trustee does not pay the NRST, the other transferees are required to pay the tax. This applies even if the other transferees are Canadian citizens or permanent residents of Canada. The NRST does not apply when a person purchases or acquires residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust. The NRST applies to unregistered dispositions of a beneficial interest in residential property. This includes purchases and acquisitions of residential property, as per the Land Transfer Tax Act.

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NRST rebates A rebate of the NRST is available for those that meet the following criteria: • A foreign national who becomes a permanent resident of Canada (within four years of the date of property purchase) • An international student enrolled full-time for a continuous period of at least two years from the date of property purchase • A foreign national legally working full-time in Ontario for a continuous period of at least one year since the date of property purchase As the details and specific requirements of the NRST may vary, this information is to be used only as a reference. Information regarding NRST rebates can be obtained through the Government of Ontario. To qualify for the NRST rebate, a non-resident must exclusively hold the property, or hold the property exclusively with their spouse. The property must also have been occupied as the non-resident’s (and if applicable their spouse's) principal residence for the duration of the period that begins within 60 days after the date of the purchase or acquisition. A non-resident investor is not eligible for a rebate, as the rebate only applies to non-residents who choose to make their property their principal residence.

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Lesson 2 | Page 8 of 11

Restrictions and Considerations for Non-Resident Sellers and Buyers Transactions involving non-resident owners can pose challenges for you. Legislative restrictions impact the acquisition or disposition of land by individuals or other entities, defined as non-residents, pursuant to provincial and federal statutes. Section 116 of the Income Tax Act sets out provisions for the collection of capital gains tax payable by non-resident sellers. The Income Tax Act establishes a procedure requiring the non-resident seller to remit, in advance of the disposition, a calculated amount to obtain a certificate from the Minister of National Revenue. Alternatively, such funds can be remitted by the buyer on the seller’s behalf within 10 days following sale completion. So, if income tax

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is not collected from the non-resident seller, the buyer may be liable to pay it. A third-party service provider such as a tax accountant should be consulted in those circumstances. The specified percentage required by the ministry is calculated using the amount by which the sale proceeds (or anticipated proceeds in the case of an advance payment) exceed the property’s adjusted cost base. For example, a capital gain (i.e., sales proceeds) of $269,852, which factors in the adjusted cost base would receive a taxable capital gain of 50 per cent. Therefore, this amount would be $134,926 and considered the taxable capital gain. You should also be aware that disposition of depreciable property may complicate the situation, as recapture comes into play when establishing the calculated amount.

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Lesson 2 | Page 9 of 11

Foreign Corporations Corporations controlled by non-residents or non-resident companies, regardless if they are incorporated in Canada or not, are required to pay the Non-Resident Speculation Tax (NRST) when they purchase or acquire an interest in residential property located in the Greater Golden Horseshoe Region. You should exercise caution when dealing with a client who is a representative of a corporation and is considering buying a residential property with not more than six units, as the NRST may apply. You should advise your client to find out if such tax is applicable to them by consulting a third-party service provider, such as a real estate lawyer or an accountant.

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Lesson 2 | Page 10 of 11

An investor client, a Canadian citizen who is living in the United States contacts a salesperson from Southern Ontario from their website. The client is looking to purchase a residential investment property in Southern Ontario. The client has lived in the United States for over 10 years. The salesperson explains that this purchase may have additional tax implications and recommends that the client contact an accountant regarding details of the purchase. The salesperson also tells this client that they must verify their identity to move forward with the transaction. What other information can the salesperson tell this client in regard to their intended purchase? There are four options. There are multiple correct answers.

1

This client must provide a scanned copy of appropriate identification in order to meet FINTRAC requirements.

2

A third party must sign mandatary agreements with the salesperson and their brokerage in order to meet FINTRAC requirements.

3

The NRST only applies to non-resident investors that are not Canadian citizens.

4

There are no provincial or federal regulations for non-resident investors.

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Lesson 2 | Page 11 of 11

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify key considerations when representing non-resident clients trading in residential investment properties of four units or less There are four sections on this page with a summary of the key topics that were discussed in this lesson.

FINTRAC considerations

FINTRAC rules are the same for non-resident investors as they are for residents of Canada. As part of the identification review process, if the investor is not available for a face-to-face meeting, special provisions apply for the verification of their identity. Usually, the use of a mandatary is a requirement in this regard.

Harmonized Sales Harmonized Sales Tax (HST) is not applicable for resale residential properties but is applicable for all buyers of all other types of real estate, including newly constructed Tax (HST) residential properties.

Non-Resident Speculation Tax (NRST)

Non-resident investors, or non-resident corporations that are not Canadian, purchasing residential investment property within the Province of Ontario, are subject to a 25 per cent Non-Resident Speculation Tax (NRST) upon closing.

Legislative restrictions

A non-resident seller (whether or not they are a Canadian citizen) must pay capital gains tax on the sale of a property before it can close, or the tax is the responsibility of the investor. Special provisions exist for the protection of the buyer.

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Lesson 3 | Page 1 of 12

Lesson 3: Types of Residential Properties This lesson reviews the types of residential properties commonly encountered when representing clients interested in residential investment properties of four units or less. Tenant-occupied income producing properties, special residential projects, condominiums, and co-operatives are also discussed.

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Lesson 3 | Page 2 of 12

There are different types of residential properties that investors may be interested in. This lesson reviews the definition of a residential dwelling unit and explains the differences between the major dwelling types. You will recognize various considerations regarding the most common tenant-occupied income producing properties. By knowing the different types of units, you will be better able to assist your clients that are interested in residential investment properties. Upon completion of this lesson, you will be able to: • Differentiate between the types of residential properties commonly encountered when trading in residential real estate investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 12

When working with both sellers and buyers, it is important that you understand the definition of a residential dwelling unit and know the differences between the major dwelling types. This eliminates the potential for confusion when you speak with clients and show units that align with their needs.

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Lesson 3 | Page 4 of 12

Residential Dwelling Unit As you learned in Pre-Registration, a dwelling unit can refer to several different property types, including detached, semi-detached, and multiple dwelling units, among others. Understanding that a dwelling unit is a single unit of residence for a household of one or more persons eliminates the potential for confusion when showing units to your clients. As you know, the term residential dwelling unit is formally defined in zoning bylaws, as well as statutorily such as in the Residential Tenancies Act. Other commonly used terms include residential unit or dwelling unit. The following is a list of characteristics of residential dwelling units, which must:

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• Consist of a self-contained set of rooms in a building or structure • Be used, or intended for use, as residential premises, and contain kitchen and bathroom facilities that are for the use of that unit • Have a means of egress to the outside of the building but it may be through another residential unit Major dwelling types can also include cottage, detached home, link home, mobile or modular home, semi-detached home, stacked townhome, townhouse or rowhouse, and townhouse end-unit. The following information focuses on the most commonly encountered residential dwelling units for clients interested in residential real estate investments of four or fewer units.

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Lesson 3 | Page 5 of 12

Tenant-Occupied Income Producing Properties I The previous topic covered the different types of residential dwelling units. This topic focuses on residential multifamily dwellings, specifically those that are most commonly tenant occupied. There are many different configurations of multi-family dwellings that you are likely to encounter when working in real estate. The following four sections contain information on tenant-occupied income producing properties.

Duplex A duplex consists of two self-contained units built either side by side or one above the other. Both units have separate entrances. A duplex property can be considered a suitable real estate investment for some, as it may require a lower down payment than other multi-family options but can still generate rental income through the two available units. A client may also choose to live in one unit and rent out the other unit. One potential drawback is that when selling a duplex, an investor may experience a lower sale price as opposed to larger multi-family dwelling types, given the potentially lower purchase price they paid for acquisition.

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Triplex A triplex consists of three self-contained units built either side by side or above each other. All units have separate entrances or are accessible through a common vestibule. Like other multi-family properties, the available units can be used to generate rental income or, alternatively, a client may choose to live in one unit and rent the remaining units. One potential drawback is that when selling a triplex, an investor may experience a lower sale price compared to larger multifamily dwelling types, given the potentially lower purchase price they paid for acquisition.

Fourplex A fourplex consists of four self-contained units either built at ground level or built on two levels. All units have separate entrances or access through a common vestibule. One potential drawback is that when selling a fourplex, an investor may experience a lower sale price compared to larger multi-family dwelling types, given the potentially lower purchase price they paid for acquisition.

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Rowhouse or townhouse Rowhouses or townhouses are self-contained units joined together at the sides. Each unit has a separate entrance at the ground level. Rowhouses or townhouses may provide more affordable rent to a prospective tenant, which may return in the property having a lower vacancy rate than that of other residential properties. One potential drawback to townhouse ownership is that due to sharing a physical wall with neighbouring units, a tenant may feel less privacy than that of detached properties.

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Lesson 3 | Page 6 of 12

Tenant-Occupied Income Producing Properties II The previous topic covered the different types of residential dwelling units. This topic focuses on residential multifamily dwellings, specifically those that are most commonly tenant occupied. There are many different configurations of multi-family dwellings that you are likely to encounter when working in real estate. The following four sections contain information on additional tenant-occupied income producing properties.

Low-rise building A low-rise is a multi-unit residential building having only a few storeys. The building has a wood frame or masonry construction and the lobby and hallways are common to all units. Some low-rise units have elevators. However, one drawback is that this is not always the case, which may be considered a major detriment to a prospective tenant. Low-rise buildings that do not have elevators are sometimes called walkups.

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Accessory unit An accessory unit is an additional living area independent of the primary residential dwelling unit that includes a fully functioning kitchen and bathroom. An accessory unit may or may not be attached to the primary residential dwelling unit. A living area over a garage or in a basement are two examples of this type of unit. You will learn more about accessory units and how they relate to residential real estate investment later.

High-rise building A multi-unit residential building with many storeys and has concrete or steel construction. The lobby, elevators, and hallways are common to all units. Due to the size and complexity of high-rise apartment buildings, an onsite building manager is usually hired to oversee daily operations. Part-time or full-time staff are also usually hired to clean and perform daily repairs and maintenance.

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Condominiums and co-operatives You should understand the benefits and drawbacks of both condominiums and co-operatives. This information helps you to work with clients that may be interested in both options. Condominiums and cooperatives may be an easier investment to manage for a landlord, as they require less maintenance by the investor. The maintenance is completed by the condominium or co-operative management. Most maintenance costs are covered in a monthly maintenance fee. Typically, condominiums are available at a lower purchase price point compared to single-family homes. In addition, investors like these types of properties as they may include amenities that attract tenants, such as a pool or a workout facility. While these amenities may be attractive to potential renters, the presence of these amenities may force the maintenance fees to increase as the amenities age. Another drawback of investing in a condominium or a co-operative is that the rental income may not cover all of the costs, due to potentially high maintenance fees. As an investor, it is important to determine the stipulations for renting out a unit, as some buildings only allow a certain percentage of renters, or some do not allow renters at all.

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Lesson 3 | Page 7 of 12

A salesperson is working with an investor client who asks for advice on which type of residential investment might be right for them. The client gives the salesperson a list of features that they are interested in for their investment property. The salesperson shows their client several advertisement descriptions for currently listed properties, to help explain how different property types might meet their needs. One such advertisement description is: “Originally built in late 1800s and newly redesigned. Great character! Unit A is approx. 1,200 sq. ft. Unit B is approx. 1,100 sq. ft. Parking for 3 cars. Great Location!” Which of the following property characteristics align with the given advertised property description? There are four options. There is only one correct answer.

1

Smaller investment and easier to self-manage

2

Multiple units in one location and the client may live in one unit and rent out another

3

Smaller investment and very little maintenance for the investor or landlord

4

Very little maintenance for the investor or landlord and parks and green spaces nearby

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Lesson 3 | Page 8 of 12

A salesperson is working with an investor client who asks for advice on which type of residential investment might be right for them. The client gives the salesperson a list of features that they are interested in for their investment property. The salesperson shows their client several advertisement descriptions for currently listed properties, to help explain how different property types might meet their needs. Another advertisement description is: “Triple A tenant. All units have large windows. Lower level units completely above grade at rear. Upper level units have skylights. Great potential!” Which of the following property characteristics align with the given advertised property description? There are four options. There is only one correct answer.

1

Smaller investment and easier to self-manage

2

Multiple units in one location and the client may live in one unit and rent out another

3

Smaller investment and very little maintenance for the investor or landlord

4

Very little maintenance for the investor or landlord and parks and green spaces nearby

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 9 of 12

A salesperson is working with an investor client who asks for advice on which type of residential investment might be right for them. The client gives the salesperson a list of features that they are interested in for their investment property. The salesperson shows their client several advertisement descriptions for currently listed properties, to help explain how different property types might meet their needs. One such advertisement description is: “Location! 2 bedrooms, 2 bathrooms. Premium parking spot and locker location. Indoor pool. Walking distance to all amenities, shopping, transportation, and more!” Which of the following property characteristics align with the given advertised property description? There are four options. There is only one correct answer.

1

Smaller investment and easier to self-manage

2

Very little maintenance for the investor or landlord and parks and green spaces nearby

3

Smaller investment and very little maintenance for the investor or landlord

4

Multiple units in one location and the client may live in one unit and rent out another

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 10 of 12

A salesperson is working with an investor client who asks for advice on which type of residential investment might be right for them. The client gives the salesperson a list of features that they are interested in for their investment property. The salesperson shows their client several advertisement descriptions for currently listed properties, to help explain how different property types might meet their needs. One such advertisement description is: “Highly sought-after school district! Chef’s kitchen with walkout to deck. Short distance to public transportation, highways, shopping, and dining.” Which of the following property characteristics align with the given advertised property description? There are four options. There is only one correct answer.

1

Smaller investment and easier to self-manage

2

Very little maintenance for the investor or landlord and parks and green spaces nearby

3

Smaller investment and very little maintenance for the investor or landlord

4

Multiple units in one location and the client may live in one unit and rent out another

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Lesson 3 | Page 11 of 12

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Differentiate between the types of residential properties commonly encountered when trading in residential real estate investment properties of four units or less There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Residential dwelling unit

For a property to be considered a residential dwelling, it must consist of a self-contained set of rooms in a building or structure, be used (or intended for use) as residential premises, contain kitchen and bathroom facilities that are for the use of that unit, and have a means of egress to the outside of the building (but may be through another residential unit).

Duplex

A duplex consists of two self-contained units-built side by side or one above the other. Both units have separate entrances. The available two units can be used to generate rental income, or alternatively a client may choose to live in one unit and rent the remaining units. A client may also choose to live in one unit and rent out the other remaining units. A duplex property may also be easier to manage for a first-time landlord as opposed to other multifamily properties.

Triplex

A triplex consists of three self-contained units built either side by side or above each other. All units have separate entrances or are accessible through a common vestibule. The available three units can be used to generate rental income or, alternatively, a client may choose to live in one unit and rent the remaining units. A client may also choose to live in one unit and rent out the other remaining units.

Fourplex

A fourplex consists of four self-contained units at ground level or built on two levels. All units have separate entrances or access through a common vestibule. The available two units can be used to generate rental income or, alternatively, a client may choose to live in one unit and rent the remaining units.

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Rowhouse or townhouse

Rowhouses or townhouses are self-contained units joined together at the sides. Each unit has a separate entrance at the ground level.

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Lesson 3 | Page 12 of 12

There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Low-rise building

A low-rise building is a multi-unit residential building having only a few storeys. The building is wood frame or masonry construction and the lobby and hallways are common to all units.

Accessory unit

An additional living area independent of the primary residential dwelling unit that includes a fully functioning kitchen and bathroom. An accessory unit may or may not be attached to the primary residential dwelling unit. A living area over a garage or in a basement are two examples of this type of unit.

High-rise apartment

A multi-unit residential building with many storeys and has concrete or steel construction.

Condominiums and co-operatives are a form of ownership that may be an easier Condominiums and co-operatives investment to manage for a landlord, as there is less maintenance required by the investor. The property may include amenities for the tenant, such as a pool or a workout facility, and these amenities may increase the appeal of the property to potential renters.

© 2021 Real Estate Council of Ontario

Lesson 4 | Page 1 of 7

Lesson 4: Ownership Options This lesson reviews ownership options, such as sole proprietorship and partnership, which are commonly encountered when working with clients interested in residential investment properties of four units or less.

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Lesson 4 | Page 2 of 7

As you have learned earlier, two of the most common forms of ownership are sole proprietorship and corporate ownership. This lesson expands on sole proprietorship while also introducing you to partnership options. While you may be able to explain these options to your clients, it is also important that you advise them to seek advice from third-party service providers, likely from lawyers and accountants when necessary. Upon completion of this lesson, you will be able to: • Identify the various ownership options commonly encountered when trading in residential investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 7

In order to represent sellers or buyers appropriately, you need to understand the different types of ownership options you may encounter. This enables you to perform due diligence for your clients and allows you to refer them to the appropriate third-party service providers, as required.

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Lesson 4 | Page 4 of 7

Sole Proprietorship You may notice that investors commonly choose personal ownership or sole proprietorship when investing in residential real estate of four units or less. Sole proprietorship is a business that is owned by one person. That person may operate the business as a one-person operation or may retain others. The proprietor owns all the assets, reaps the benefits of any profits, but is personally and legally responsible for the company’s debts and other liabilities. If your client chooses to purchase a property using their personal name, one drawback is that they may not be eligible to receive the same tax benefits as an incorporated business. As a sole proprietor, the investor may be personally liable if any legal issues arise with their investment property (e.g., if a tenant sues an investor or landlord, the court may seize the investor or landlord’s personal assets).

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Lesson 4 | Page 5 of 7

Partnership Options You should be able to explain the benefits and drawbacks of partnerships to your investor client. If your client is interested in working with another investor, then they may consider a business partnership. As you learned in PreRegistration, a partnership is a legal relationship formed by an agreement between two or more individuals to maintain their business as co-owners. There are both benefits and drawbacks to this arrangement. One of the benefits of purchasing a residential investment property as a partnership is that it may allow for pooling of resources, such as financial. A drawback is that the partners need to reach agreement on all decisions related to the

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property. In addition, without a well-documented partnership agreement, one partner may bind the others with or without their knowledge. Another option for investors may be a limited partnership. A limited partnership allows for the pooling of financial resources, but depending on the agreement between investors, not all of the decisions must be agreed upon by all partners. A limited partnership must have one managing, general partner that has unlimited liability and is responsible for the day-to-day management of the investment. The remaining partners are deemed to be passive investors with limited decision making and liability. Their liability is limited to their investment.

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Lesson 4 | Page 6 of 7

A salesperson is working with a new investor client and they ask for advice on which type of ownership might be right for their residential real estate investment. The client is considering two options and the salesperson wants to help them by providing information to help the client decide. The client gives the salesperson a list of benefits that they think they are looking for, hoping to reach the right decision. Which of the following features is distinct for a partnership-ownership option? There are three options. There is only one correct answer.

1

Easy to set up

2

All decisions are at the investor’s discretion

3

Sharing costs and risk

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Lesson 4 | Page 7 of 7

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the various ownership options commonly encountered when trading in residential investment properties of four units or less There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Sole proprietorship

Sole proprietorship is a business that is owned by one person. That person may operate the business as a one-person operation or may retain others. If your client chooses to purchase a property using their personal name, one drawback is that they may not be eligible to receive the same tax benefits as an incorporated business. As a sole proprietor, the investor may be personally liable if any legal issues arise with their investment property.

Partnership and limited partnership

One of the benefits of purchasing a residential investment property as a partnership is that it may allow for pooling of resources, typically financial resources. A drawback is that the partners need to reach agreement on all decisions related to the property. Another option for investors may be a limited partnership. A limited partnership allows for the pooling of financial resources, but depending on the agreement between investors, not all of the decisions must be agreed upon by all partners.

© 2021 Real Estate Council of Ontario

Lesson 5 | Page 1 of 11

Lesson 5: Obtaining Financing This lesson focuses on the considerations for obtaining financing in order to provide information when working with clients interested in residential investment properties of four units or less. Topics such as down payments and mortgage options are discussed.

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Lesson 5 | Page 2 of 11

There are several considerations that investors should be aware of to obtain financing for their investments. This lesson reviews the considerations for obtaining financing for investment properties, in order to provide information to clients interested in residential investment properties of four units or less. You will also learn about the considerations for down payments and review a variety of mortgage options. Upon completion of this lesson, you will be able to: • Identify considerations for obtaining financing when investing in residential investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

© 2021 Real Estate Council of Ontario

Lesson 5 | Page 3 of 11

When working with both sellers and buyers, you need to understand the basics of securing financing for an investment. You must also understand when to recommend that your client seek third-party professional advice for additional information regarding financing.

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Lesson 5 | Page 4 of 11

Financing Requirements for a Salesperson Financing is an important part of your client’s investment strategy and it is considered a best practice to present mortgage options to your client. It is important, however, to recommend that your client seeks the advice of a thirdparty service provider before making any financial decisions. There are numerous mortgage options that your investor client can consider before deciding which one best suits their needs. As an investor is likely to focus on profits, they generally look for options to keep their costs low to bring in a positive cash flow. To apply for a mortgage, clients need to provide their lender or mortgage broker with appropriate personal identification, proof of employment, proof that they can cover the down payment and closing costs, information about their assets, and information about their debts or current financial obligations.

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Lesson 5 | Page 5 of 11

Financing Requirements for a Lender When looking to finance an investment property, the lender reviews the income potential of a property and looks at other properties already owned by the investor. A lender may require a larger down payment if your investor client already has a mortgage on other properties. If your client already has a mortgage on other properties, they may need to provide the lender with mortgage and property tax statements, as well as lease agreements, if they are

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already tenanted. The client needs to demonstrate that their current investment properties are exhibiting a positive cash flow and will not impact the investor’s abilities to comply with their mortgage obligations for the new property. Your investor client needs to provide a down payment of at least 20 per cent of the purchase price and they may be asked to provide proof that the down payment has not been borrowed. If the down payment funds are coming from the sale of another investment property, then your client may be required to show documentation of a sale, such as an agreement of purchase and sale. If your client is planning to live in one of the units, they may be able have a down payment of between 5 and 10 per cent, depending on the number of units in the property.

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Lesson 5 | Page 6 of 11

Mortgage Options As you learned in Pre-Registration, once your investor client has been approved by a lender, they have to discuss the terms and conditions of the mortgage, such as the amount, the amortization period, the mortgage term, how often they make payments, and the interest rate. The following four sections contain information on different mortgage options.

Interest only For an interest only mortgage, your client does not repay any principal, but remits interest payments at regular, specified intervals. The principal amount is due at the end of the mortgage term. Interest only mortgages are sometimes used in short-term seller take backs or interim financing to avoid complex interest calculations. A promissory note is typically based on an interest only arrangement.

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Interest accruing With an interest accruing mortgage, the lender receives no payment of interest or principal during the mortgage term. Interest due and payable is accrued. Consequently, the lender’s risk actually grows during the term. Interest accruing mortgages are rarely found in today’s marketplace and, if used at all, would undoubtedly be for a very short time period. Interest accruing arrangements are often found in student loan programs, where interest owed is added to the amount outstanding (referred to as interest capitalization). The individual does not have to make payments while enrolled in full-time studies, but the loan amount increases by the amount of unpaid interest. Such plans may also include subsidized rates and interest-free periods.

Interest plus specified principal This plan, sometimes referred to as a straight principal reduction plan, requires the borrower to repay a fixed principal amount at specified times during the term. At regular intervals, the borrower is also asked to pay interest on the outstanding balance. For example, a loan of $60,000 might require quarterly principal payments of $2,000 together with interest on the unpaid balance for each quarter.

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Blended (amortized) This plan provides for equal payments made at regular specified intervals during the mortgage term. Each payment is a blend of principal and interest based on the amortized schedule for the mortgage. Blended mortgages can be either fixed or variable. The fixed mortgage has a set interest rate for the blended mortgage during the mortgage term. The variable rate mortgage has an interest rate that varies based on the lender’s prime rate or some other identified index. As rates rise or fall, payments or the amortization period are adjusted accordingly. The blended plan dominates the residential market.

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Lesson 5 | Page 7 of 11

Additional Mortgage Options As you learned in Pre-Registration, once your investor client has been approved by a lender, they have to discuss the terms and conditions of the mortgage. This may also include if the mortgage is fixed or variable, and whether it is an open or closed mortgage. The following four sections contain information on different mortgage options.

Fixed rate mortgages The standard blended mortgage is generally referred to as a fixed mortgage; for example, a blended principal and interest payment is fixed throughout the term. However, increasing lender competition has produced a myriad of prepayment or open privileges. Longer-term fixed mortgages are popular when rates are expected to trend upwards, whereas short-term fixed may offer attractive rates, but renewal timing can be problematic in volatile mortgage markets; for example, a six-month mortgage that renews just as interest rates spike.

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Variable rate mortgages Variable rate mortgages fluctuate with the applicable bank prime rate. Corresponding adjustments are made to payments or amortization. Typically, payment adjustments are made quarterly, half-yearly, or yearly, but many variations exist. Capped variable rate mortgages set limits on rate increases or decreases and a lock-in (sometimes referred to as convertible option) provides for conversion to fixed. It is important to advise your client to read the fine print on the lock-in, particularly to see which administrative costs and interest rate apply.

Open mortgage Generally, an open mortgage refers to a mortgage in which repayment of the principal amount can occur at any time without penalty. As terminology within the lending market may vary, the concept of closed versus open mortgages can often be blurred. An open mortgage may not actually be fully open. The lender may require a penalty or, at minimum, notice. Creative mortgage products now contain both open and closed provisions. In other words, only part of the principal may be open without notice or penalty. For example, a one-time 10 per cent principal reduction (remember, 90 per cent remains closed) or the mortgage may be periodically open subject to notice but no penalty or an option for 10 per cent principal reduction on each anniversary date.

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Closed mortgage Generally, a fully closed mortgage does not permit principal repayment before maturity (other than regularly scheduled payments). However, market circumstances can alter the lender’s perspective. For example, a mortgage written at four per cent is a poor investment if current rates are hovering at eight per cent. The lender, in allowing prepayment, could free up funds for potentially higher returns. Further, legislation also has a bearing. The Interest Act provides that a mortgagor (other than a corporation) may, after five years, pay off the mortgage subject to a three months’ interest penalty.

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Lesson 5 | Page 8 of 11

Benefits and Costs to the Investor When a client is considering different mortgage options for their investment property, you can provide them with information on the different benefits and costs that may be a factor in their decision to choose one type of mortgage over another. A lender may provide more flexibility to attract consumers by including doubling up features (the doubling of any scheduled principal interest payment), offering various payment options (monthly, semi-monthly, bi-weekly, or weekly), or the ability to skip payments. For example, a borrower may skip a payment for every doubling payment that is made. In that way, borrowers have more flexibility to handle variations in cash flow or more effectively deal with unexpected expenses. All of these options may benefit an investor client, allowing them to pay down the mortgage at a quicker pace. © 2021 Real Estate Council of Ontario

Cash backs are another popular incentive, as buyers receive dollars to assist with closing costs. For example, a lender may offer three per cent cash back for a long-term fixed mortgage. However, such benefits are built in the rate structure. Borrowers typically pay back that amount and more in higher fixed rates. As a general guideline, arranging the best package is a matter of risk and cost. As you have learned earlier, investors may experience unanticipated costs through lender holdbacks. A lender holdback refers to funds not advanced by the lender until specific requirements and conditions are met by the investor. A lender typically requires a holdback of funds involving resale properties until certain work is completed or repairs are made to a property being considered for mortgage financing. Normally when a holdback is required, a specified time limit is set for completion of work along with a re-inspection of the property. Holdbacks often pertain to minor structural or cosmetic household improvements. If substantial alterations are undertaken, such as an addition, mortgage funds are normally advanced in progressive stages as construction proceeds and may affect a client’s financing.

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Lesson 5 | Page 9 of 11

Improving the Borrower’s Qualifying Profile You should understand that not all clients initially qualify for their ideal mortgage or come up with the minimum down payment, but you may be able to help by offering some of the following options. Many borrowers overlook funds that can increase down payment, while improving their overall covenant. You should tell clients to review often overlooked sources, such as cash value life insurance, negotiable stocks or bonds, gifts, future bonuses, income tax refunds, and pledging of future dividends. The following four sections contain information on different ways that an investor client might be able to improve their borrowing profile.

Use the right lender If the investor has limited resources, a few financial problems in the past, and does not fit the ideal borrower profile, then the salesperson should suggest that the investor look for third-party service providers, such as a mortgage broker who can source lenders specializing in non-conforming (sub-prime) loans. Underwriting fees and mortgage rates are probably higher, but the borrower can secure credit and start building equity, and a better future credit rating.

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Shop for the total package, not just rates You should recommend that investor clients do not immediately leap at the lowest rate. Other costs, such as underwriting fees, appraisal costs, application and processing charges, and discharge penalties, add up quickly. Further, attractive introductory rates for variable mortgages may be a prelude to higher lock-in rates. You should encourage your client to carefully compare and seek out the best, tailor-made package.

Private investors Private investors may offer greater scope, given more relaxed lending criteria, safety margins, or other approval considerations. In addition, application forms, underwriting requirements, and the mortgage approval process may be simplified. On the converse, your investor buyers need to be aware of limited legislation imposed on such investors. You should ensure that the buyer’s lawyer is involved in all aspects of the mortgage transaction. You should also be very specific in detailing mortgage particulars within an agreement of purchase and sale. Reliable sources of private money often include seller take back mortgages, local developers or investors, and lawyers acting for clients, for example, private investors, trusts, and estates. Specialized investors frequently advertise availability of funds in appropriate © 2021 Real Estate Council of Ontario

trade magazines or local, regional, or national newspapers.

Increased amortization You may suggest to clients that they consider asking their lender for an increased amortization. Lenders may consider a longer amortization given strong borrower covenant, thereby reducing mortgage payments.

© 2021 Real Estate Council of Ontario

Lesson 5 | Page 10 of 11

A salesperson is working with an investor client who is interested in purchasing a duplex. The client has identified a list of features that they are looking for in a property, including their neighbourhood of choice, but they have not yet spoken to a lender about qualifying for a mortgage. The client owns two other duplexes in the city that are currently rented out. What advise should the salesperson offer to their client regarding selecting a lender? There are four options. There is only one correct answer.

1

Choose the lender that offers the longest amortization.

2

Choose a lender that may support the option of an interest only mortgage.

3

Choose a lender based on factors other than just the lowest rates.

4

Choose a lender who does not enforce a holdback option when repairs are identified in mortgage appraisal.

© 2021 Real Estate Council of Ontario

Lesson 5 | Page 11 of 11

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify considerations for obtaining financing when investing in residential investment properties of four units or less There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Financial requirements

Financing is an important part of your client’s investment strategy. You should present mortgage options to your client, but it is important to recommend that they seek the advice from a third-party service provider before making any financial decisions.

Down payment

Your investor client needs to provide a down payment of at least 20 per cent of the purchase price and they may be asked to provide proof that the down payment has not been borrowed. If your client is planning to live in one of the units, they may be able have a down payment of between 5 and 10 per cent. If the down payment funds are coming from the sale of another investment property, then your client may be required to show documentation of a sale, such as an agreement of purchase and sale.

Longer-term fixed mortgages are popular when rates are expected to trend upwards, Fixed versus variable mortgage whereas short-term fixed may offer attractive rates, but renewal timing can be problematic in volatile mortgage markets.

Variable rate mortgages fluctuate with the applicable bank prime rate. Corresponding adjustments are made to payments or amortization. Typically, payment adjustments are made quarterly, half-yearly, or yearly, but many variations exist.

Open versus closed mortgage

A fully closed mortgage does not permit principal repayment before maturity (other than regularly scheduled payments). However, market circumstances can alter the lender’s perspective. Conversely, an open mortgage may not actually be fully open. The lender may

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require a penalty or, at minimum, notice. In other words, only part of the principal may be open without notice or penalty.

Private investors

Private investors may offer greater scope given more relaxed lending criteria, safety margins, or other approval considerations.

Increased amortization

Lenders may consider a longer amortization given strong borrower covenant, thereby reducing mortgage payments and, in turn, permitting lower income qualification levels for Gross Debt Service (GDS) and Total Debt Service (TDS) purposes.

© 2021 Real Estate Council of Ontario

Lesson 6 | Page 1 of 9

Lesson 6: Third-Party Service Providers This lesson explains the common types of third-party service providers that you may encounter when working with clients interested in residential investment properties of four units or less. Topics include the review of the considerations for referring clients to third-party service providers.

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Lesson 6 | Page 2 of 9

Residential investments may require paperwork and advice that are both very specific and complicated at times. This lesson describes the common types of third-party service providers that you may encounter when working with clients interested in residential investment properties of four units or less. This lesson also discusses the considerations for referring clients to third-party service providers. Upon completion of this lesson, you will be able to: • Identify other professionals and third-party service providers commonly engaged when trading in residential investment properties of four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 6 | Page 3 of 9

When working with both sellers and buyers, you need to understand situations when it is appropriate to refer your client to a specific third-party service provider.

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Lesson 6 | Page 4 of 9

Professionals and Third-Party Service Providers I It is important that you inform your clients of the various professionals and third-party service providers that they may be in contact with while purchasing or owning an investment property. It is important for you to understand the responsibilities of different third-party service providers and how each may be beneficial to your investor clients. The following four sections contain information on professionals and third-party service providers.

Property manager Your client, the landlord, may decide to hire a property manager or a property management company to be responsible for their rental unit or units. The property manager is responsible to the landlord, either as an employee or as a professional manager under contract. They implement the landlord’s policy, which is often based on their recommendations. It is important that the landlord be kept informed on everything that may affect their investment. The degree of contact or liaison that a property manager must maintain depends upon the stated requirements of each landlord. It is important to remember that the landlord and property manager relationship is paramount. The property manager must determine the form and frequency of contact that best suits each landlord.

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Paralegal An individual who is employed or retained to perform legal tasks for which a lawyer is responsible. Paralegals often represent the landlord at the Landlord and Tenant Board and Small Claims Court. Occasionally, a paralegal may complete the closing documents for a property under the supervisor of a lawyer; however, typically, this would solely be the responsibility of a lawyer.

Zoning official An individual required to review the zoning for the property, should the investor require a change in the zoning specifications for the property.

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Contractor An individual, such as a plumber, electrician, roofer, or HVAC professional, who may be required to perform repairs and routine maintenance on the property.

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Lesson 6 | Page 5 of 9

Professionals and Third-Party Service Providers II It is important that you inform your clients of the various professionals and third-party service providers that they may be in contact with while purchasing or owning an investment property. It is important for you to understand the responsibilities of different third-party service providers and how each may be beneficial to your investor clients. The following four sections contain information on some more professionals and third-party service providers.

Accountant or bookkeeper An individual who may advise on financial matters, such as tax implications or mortgage options.

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Home inspector An individual who inspects the structural and mechanical elements of a property or unit, prior to an offer being finalized.

Appraisers An individual employed by the lender to ensure that the mortgage being considered can be effectively secured by the value of the property.

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Fire Code expert An individual who can advise on issues or potential issues relating to the Fire Code.

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Lesson 6 | Page 6 of 9

Referring Clients to Third-Party Service Providers When referring investor clients to a third-party service provider, it is important that you offer a list of three or more providers, allowing the client to choose the provider that best suits their needs. If you have a personal connection to one of the referrals, that connection must be disclosed. You must adhere to Section 22 of the Code, which indicates that you shall not enter into an agreement with a third party for the provision of goods or services to your client, unless you have disclosed the agreement to your client, and your client has agreed. An incentive for referral, such as a referral fee, must be disclosed to the clients.

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Lesson 6 | Page 7 of 9

A salesperson is working with an investor client who is purchasing a fourplex. The investor intends to maximize their rental income by renovating a bedroom within the fourplex as a livable space, which was previously only used for storage. To do this, they need to have the air conditioning ductwork inspected and to install a new smoke alarm within the unit. Furthermore, the investor would require assistance overseeing rental incomes while ensuring that their tenant’s needs are met on a consistent basis. The investor client, who lives offsite, is unable to handle these tasks on their own. Which of the following statements are correct regarding the third-party service providers to ensure investor’s needs are fulfilled? There are four options. There are multiple correct answers.

1

A property manager will look after the inspection of venting for the new bedroom.

2

An accountant or bookkeeper will track and coordinate rental income and expenses for this property.

3

A Fire Code expert will conduct an inspection of smoke alarms and other fire safety considerations for the property.

4

A contractor will oversee day-to-day needs and issues regarding for tenants.

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Lesson 6 | Page 8 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify other professionals and third-party service providers commonly engaged when trading in residential investment properties of four units or less There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Property manager The property manager is responsible to the landlord either as an employee or as a

professional manager under contract. They will implement the landlord’s policy, which is often based on their recommendations. For this reason, it is important that the landlord be kept informed on everything that may affect the investment.

Paralegal

Paralegals often represent the landlord at the Landlord and Tenant Board and Small Claims Court.

Zoning official

An individual required to review the zoning for the property, should the investor require a change in the zoning specifications for the property.

Contractor

An individual, such as plumber, electrician, roofer, or HVAC professional, who may be required to perform repairs and routine maintenance on the property.

Accountant or bookkeeper

An individual who may advise on financial matters, such as tax implications or mortgage options.

Home inspector

An individual who inspects the structural and mechanical elements of a property or unit, prior to an offer being finalized.

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Lesson 6 | Page 9 of 9

There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Appraiser

An individual employed by the lender to ensure that the mortgage being considered can be effectively secured by the value of the property.

Fire Code expert

An individual who can advise on issues or potential issues relating to the Fire Code.

Referrals to thirdparty service providers

When referring investor clients to a third-party service provider, it is important that you offer a list of three or more providers, allowing the client to choose the provider that best suits their needs. Should you have a personal connection to one of the referrals, that connection must be disclosed.

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Lesson 7 | Page 1 of 11

Lesson 7: Due Diligence, Disclosure, and Responsibilities This lesson focuses on the obligations that you have when representing a seller, a landlord, a buyer, or a tenant. Due diligence, the Code of Ethics, and liabilities are discussed.

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Lesson 7 | Page 2 of 11

As you know, you are required to apply due diligence when working with clients. This lesson focuses on the obligations that you have when representing a seller or a landlord and a buyer or a tenant. It also discusses due diligence, the Code of Ethics, and liabilities, when working with either a landlord or a tenant. Upon completion of this lesson, you will be able to: • Apply due diligence, disclosure, and responsibilities of a salesperson representing a seller or a landlord • Apply due diligence, disclosure, and responsibilities of a salesperson representing a buyer or a tenant Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 7 | Page 3 of 11

During every transaction, you must understand and comply with the various due diligence obligations of the real estate profession. This includes the different services required for a seller or a landlord, and a buyer or a tenant, compliance with the Code, and when to recommend that a client speaks to an appropriate third-party service provider.

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Lesson 7 | Page 4 of 11

Due Diligence when Representing a Seller or a Landlord When representing a seller or a landlord, there are several considerations related to the Code that you must adhere to in order to provide due diligence. The following five sections contain information on representing a seller or a landlord.

Legal As indicated in Section 21 of the Code, when working with a seller client or customer, you must take reasonable steps to determine the material facts relating to the sale and, at the earliest practicable opportunity, shall disclose the material facts to the client. You must also explain to the seller that they are required to disclose the legal circumstances surrounding the property and individuals, e.g., major easements that materially affect property use and anyone with an interest in the property.

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Financial You must disclose the financial considerations surrounding the property. These may include various financial statements or records of financial activity, and any existing leases or service contracts.

Environmental You must perform due diligence regarding environmental matters. This may include brownfield qualifications, and Phase I, II, and III Environmental Site Assessments (ESAs), as required. An ESA is required if there is reason to suspect the property may have contamination issues (e.g., soil or groundwater contamination).

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Property condition You should consider property condition regarding the HVAC systems, parking, and garbage collection, among others. These include previous agreements, which a prospective buyer would need to review and consider prior to purchasing a property. You must ensure your seller provides required documentation and necessary access to the property to the buyer to perform due diligence.

Additional obligations After acceptance of the offer, you are responsible for guiding your seller through the transaction and ensure that they comply with legal obligations. You must also ensure the seller takes advantage of the various rights and entitlements contained in the Agreement of Purchase and Sale.

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Lesson 7 | Page 5 of 11

Requirements for Representing a Seller or a Landlord You should explain to a seller or a landlord client that you can provide advice on landlord and tenant disputes, but also recommend that these disputes, to be resolved, must be taken to the Landlord and Tenant Board (LTB). The following three sections contain information on representing a seller or a landlord.

Code of Ethics It is important that you refer to the Code to help govern your professional interactions. When representing a seller or a landlord client, you must exhibit fairness and honesty, and must always act in the best interest of your client. You must ensure that you are always providing conscientious and competent service for all professional interactions, as indicated in Section 5 of the Code. As discussed in Sections 6 and 8 of the Code, when providing your opinion, you must demonstrate reasonable knowledge, skill, judgement, and competence. When you cannot provide reasonable knowledge, skill, judgement, and competence, or are not authorized by law to provide the services, you should recommend that clients seek advice from a third-party service provider.

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Disputes You should explain to seller or landlord clients that you can provide advice on landlord and tenant disputes. However, you should recommend that landlord and tenant disputes be taken to the Landlord and Tenant Board (LTB) for resolution or for your client to consult a lawyer or paralegal.

Lease agreements You must thoroughly review the lease agreement with your tenant client prior to signing. If there are any additional questions or concerns that you are unable to address, you should recommend that the client seek advice from third-party service providers.

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Lesson 7 | Page 6 of 11

A salesperson has listed a triplex property. Although the seller had previously leased the property to three tenants, all tenants moved out prior to the seller listing the property for sale. An interested buyer intends to generate rental income after purchasing the property by leasing two available units and living in the third unit. Which of the following are obligations the salesperson must follow when assisting their seller client? There are four options. There are multiple correct answers.

1

Disclose any financial statements related to the property.

2

Disclose any easements that materially affect property use to the buyer.

3

Provide a Phase I ESA report that indicates there is no contamination on the site of the property.

4

Disclose any residential service contracts related to the property to the buyer.

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Lesson 7 | Page 7 of 11

When representing a buyer or a tenant, you must be familiar with the different services you need to provide and understand what advice to provide to your client, including appropriate advice to provide regarding landlord and tenant disputes. You must also recognize how to review a lease agreement with a tenant client prior to signing.

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Lesson 7 | Page 8 of 11

Due Diligence when Representing a Buyer or a Tenant When representing a buyer or a tenant, there are several considerations related to the Code that you must adhere to in order to provide due diligence. The following five sections contain information on those considerations when representing a buyer or a tenant.

Legal As indicated in Section 21 of the Code, when working with a buyer client or customer, you must take reasonable steps to determine the material facts relating to the purchase and, at the earliest practicable opportunity, shall disclose the material facts to the client. You must also disclose any legal circumstances surrounding the property and individuals (e.g., easements, registrations on title, deed restrictions, or authority to sell).

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Financial You must review financial considerations surrounding the property and individuals involved. These may include various financial statements or records of financial activity, leases, availability of financing, and the borrowing qualifications of the buyer.

Environmental You must ensure that due diligence is performed for any potential environmental matters. This may include brownfield qualifications, and Phase I, II, and III Environmental Site Assessments (ESAs), as required.

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Property condition You should consider property condition with regard to HVAC systems, parking, and garbage collection, among others. These include previous agreements, which a prospective buyer would need to review and consider prior to purchasing a property.

Additional obligations You must include various conditions in an agreement of purchase and sale permitting the buyer to carry out a full and thorough investigation of all aspects of the transaction. It is your responsibility to guide the buyer through the transaction. You must then help the buyer obtain the required due diligence documents necessary to complete an investigation and recommend any required third-party professionals to assist with the investigation. Prior to closing, you must complete the necessary documents to waive, fulfill, or amend the conditions. After the agreement of purchase and sale is accepted, you must monitor the various conditions and ensure

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that they were carried out in a timely manner. You must ensure that they comply with their legal obligations and take advantage of the various rights and entitlements contained in the agreement of purchase and sale. You must ensure that the seller provided everything to the buyer, as required by the agreement of purchase and sale, and permitted access to the property by the various third-party service providers.

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Lesson 7 | Page 9 of 11

Requirements for Representing a Buyer or a Tenant You should explain to a buyer or a tenant client that you can provide advice on landlord and tenant disputes but should recommend that these disputes be taken to the Landlord and Tenant Board (LTB). The following three sections contain information on the requirements for representing a buyer or a tenant.

Code of Ethics You must refer to the Code to help you govern your professional interactions. When representing a buyer or a tenant client, it is important for you to be transparent and offer honest and fair opinions. You must exhibit fairness and honesty and must always act in the best interest of your client. You must always offer conscientious and competent service for all professional interactions, as indicated in Section 5 of the Code. As discussed in Sections 6 and 8 of the Code, when providing your opinion, you must demonstrate reasonable knowledge, skill, judgement, and competence. You should recommend that clients seek advice from a third-party service provider when you cannot provide reasonable knowledge, skill, judgement, and competence or are not authorized by law to provide the services.

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Disputes You should explain to buyer and tenant clients that you can provide advice on landlord and tenant disputes. You should also recommend that landlord and tenant disputes be taken to the Landlord and Tenant Board (LTB).

Service contracts You must understand that there are service contracts that may be included in the purchase of the property that your investor client would have to assume after closing. It is your responsibility to inform the purchaser of these. You would work with the investor client to gather the contracts and suggest that they are reviewed by the investor’s lawyer and accountant. Examples of this may include a snow removal contract, garbage removal contract, cleaning contract, or furnace maintenance contract. In addition to service contracts, it is also important to ensure that you work with your buyer client to review all existing leases, rent rolls, and property income statements for the last three years. You must also review various supporting documents relating to the

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statements, such as invoices, bank statements, and tax notices.

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Lesson 7 | Page 10 of 11

A salesperson is representing an investor client that is looking to purchase a triplex. The client has located a property that they believe suits their needs, but wants to make sure that it turns out to be a good investment. The property is located two blocks from a beverage manufacturing plant. The property is being sold by the daughter of the owner, as the owner has recently passed away. How can the salesperson help this investor client to determine if the property would be a good investment? There are five options. There are multiple correct answers.

1

Ask the salesperson representing the seller for documentation that proves that the daughter of the owner has the right to sell the property.

2

Gather all the service contracts and ask the investor client to review the documents themselves.

3

Include a clause in the agreement of purchase and sale that allows for a thorough mechanical and electrical inspection upon acceptance of the offer.

4

Help the investor client arrange for a Phase I ESA.

5

Help the investor client arrange for a Phase III ESA.

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Lesson 7 | Page 11 of 11

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Apply due diligence, disclosure, and responsibilities of a salesperson representing a seller or landlord • Apply due diligence, disclosure, and responsibilities of a salesperson representing a buyer or tenant There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Due diligence for the seller or the landlord

It is essential for you to recognize the various obligations that are required when representing a seller or a landlord. These may include (but are not limited to) all of the following: • Be transparent and offer honest and fair opinions. You must always act in the best interest of your seller or landlord client. • As discussed in Sections 6 and 8 of the Code, when providing your opinion, you must demonstrate reasonable knowledge, skill, judgement, and competence. You must recommend that your seller or landlord clients seek advice from a third-party service provider when you cannot provide reasonable knowledge, skill, judgement, and competence, or are not authorized by law to provide the services. • Explain to your landlord clients that you can provide advice about landlord and tenant disputes but should recommend that landlord and tenant disputes be taken to the Landlord and Tenant Board. • Understand that there are service contracts that may be part of the sale of a residential investment property that your seller client would have to provide to the new investor. It is your responsibility to inform your seller client of this requirement.

Due diligence for the tenant or the buyer

It is essential for you to recognize the various obligations that are required when representing a buyer or a tenant. These may include (but are not limited to) all of the following:

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• Be transparent and offer honest and fair opinions. You must always act in the best interest of your tenant or buyer client. • As discussed in Sections 6 and 8 of the Code, when providing your opinion, you must demonstrate reasonable knowledge, skill, judgement, and competence. You must recommend that tenant or buyer clients seek advice from a third-party service provider when you cannot provide reasonable knowledge, skill, judgement, and competence, or are not authorized by law to provide the services. • Explain to your tenant clients that you can provide advice about landlord and tenant disputes but should recommend that landlord and tenant disputes be taken to the Landlord and Tenant Board. • Thoroughly review the lease agreement with your tenant client prior to signing. If there are any additional questions or concerns, you should recommend that the client seek advice from a third-party service provider. • Understand that there are service contracts that may be part of the purchase of the property that your buyer client would have to assume after closing. It is your responsibility to inform the buyer client of these contracts.

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Lesson 8 | Page 1 of 7

Lesson 8: Summary Practice Activities This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 8 | Page 2 of 7

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 8 | Page 3 of 7

A salesperson is working with an investor client who is the owner and chief executive officer of a shipping and receiving company. The investor is looking to purchase a triplex property and is considering the benefits of making this purchase as part of their corporation, rather than as an individual. The salesperson explains that although they can provide information about the general benefits and considerations that the client may experience through purchasing the triplex through their corporation, it would be best for a third-party service provider, such as a lawyer, to provide specific information. What information can the salesperson provide to this client about corporate ownership for this investment? There are four options. There are multiple correct answers.

1

Corporate ownership of this property could result in lower tax rates for acquisition and disposition.

2

Shareholders of this corporation would have limited liability for any debts accrued through this purchase.

3

Limited liability always protects shareholders from creditors, including this property purchase.

4

If a mortgage is required for this purchase, debts accrued through the corporation may not be distinct from its shareholders.

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Lesson 8 | Page 4 of 7

A salesperson is working with an investor client living in Japan who mentions that they will have their own lawyer complete the FINTRAC identification requirements. The salesperson explains to the client that due to the FINTRAC regulations, this alone would not be sufficient to meet their due diligence requirements. The salesperson recommends an alternative way to complete the identification requirements for this client. What explanation could the salesperson provide the client on FINTRAC identification requirements? There are four options. There is only one correct answer.

1

Tell the client that their lawyer can complete the identification requirements, as the lawyer is easily traceable.

2

Tell the client’s lawyer to complete the identification requirements only after a mandatary agreement is signed by the salesperson and their brokerage.

3

Tell the client that a mandatary will be arranged to complete the FINTRAC identification requirements.

4

Tell the client that the only suitable agent to complete FINTRAC identification requirements is at the Canadian Embassy or Consulate.

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Lesson 8 | Page 5 of 7

A salesperson is working with an investor client who is looking to purchase a triplex as an investment. This client already owns one property, which is their primary residence, and a second investment property through which they generate rental income. The client has applied to their primary lender for additional capital towards this investment, but they are having trouble qualifying for a mortgage in the amount that they require for the purchase. The salesperson explains to the client that a third-party service provider is required to provide a recommendation but would be happy to provide some suggestions to present to them. What options could the salesperson present to the client? There are four options. There are multiple correct answers.

1

Take out a low interest loan to increase their down payment

2

Apply for a mortgage with a different lender

3

Consider a seller take-back mortgage

4

Increase amortization

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Lesson 8 | Page 6 of 7

A salesperson is working with an investor client who just purchased a duplex. The sale transaction closes in the next 60 days. The client wants to live in one unit and rent out the other, but both units require electrical upgrades to comply with the electrical code. The client asks the salesperson for recommendations for an electrician to complete the work. There are four electricians that the salesperson works with regularly. Which electricians may the salesperson refer to their investor client? There are four options. There are multiple correct answers.

1

The electrician that the salesperson uses for their own home, that also happens to be their cousin.

2

The electrician that offers a 10 per cent discount for the salesperson’s clients.

3

The electrician that gives the salesperson 15 per cent cash back for referring clients.

4

The electrician that produces high quality work at the higher than usual cost.

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Lesson 8 | Page 7 of 7

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 3

Module Summary This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are seven sections on this page with a summary of the key topics that were discussed in this module.

Requirements and You must understand how to meet the needs of clients interested in residential investment properties of four units or less, including specific ownership options and tax considerations. Key Completion of this lesson has enabled you to: Considerations • Identify the requirements for a client trading in residential investment properties of four units or less • Identify key considerations when representing a client trading in residential investment properties of four units or less

Representing Non-Resident Clients

You must understand the key considerations and requirements for representing nonresident clients interested in residential investment properties of four units or less. You have also learned about challenges, such as verification of personal information and FINTRAC requirements. Completion of this lesson has enabled you to: • Identify key considerations when representing non-resident clients trading in residential investment properties of four units or less

Types of Residential Properties

You must understand the types of residential properties commonly encountered when representing clients interested in residential investment properties of four units or less, including tenant-occupied income producing properties, condominiums, and co-operatives. Completion of this lesson has enabled you to: • Differentiate between the types of residential properties commonly encountered when trading in residential investment properties of four units or less

Ownership Options

You must understand ownership options, including sole proprietorships and partnerships. Completion of this lesson has enabled you to: • Identify the various ownership options commonly encountered when trading in residential investment properties of four units or less

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Obtaining Financing

You must understand the considerations for obtaining financing in order to provide information to clients interested in residential investment properties of four units or less. You have also learned about financing requirements such as down payments and mortgage options. Completion of this lesson has enabled you to: • Identify considerations for obtaining financing when investing in residential investment properties of four units or less

Third-Party Service Providers

You must be familiar with the common types of third-party service providers and how to refer them to clients. Completion of this lesson has enabled you to: • Identify other professionals and third-party service providers commonly engaged when trading in residential investment properties of four units or less

Due Diligence, Disclosure, and Responsibilities

You must understand the obligations that you have when representing a seller or a landlord and a buyer or a tenant. Completion of this lesson has enabled you to: • Apply due diligence, disclosure, and responsibilities of a salesperson representing a seller or a landlord • Apply due diligence, disclosure, and responsibilities of a salesperson representing a buyer or a tenant

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V7

Module 2: Requirements for Residential Properties Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 2: Requirements for Residential Properties This module provides information pertaining to legal considerations that may impact your residential investor clients. Topics covered include legislation regarding zoning and standards for properties, occupancy, and health and safety. Accessory unit requirements are also discussed with a focus on fire separation. Finally, this module outlines the potential consequences of non-compliance for investors as it relates to property taxation and appraisals. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails this Accessible PDF.

and References from the module are added to support your learning throughout

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Menu: Requirements for Residential Properties

Number of Lessons

Lesson Number

5 Lessons

Lesson Name

Lesson 1

Legal Requirements for Residential Properties Containing Four Units or Less

Lesson 2

Fire Separation Requirements for Accessory Units

Lesson 3

Consequences of Non-Compliance with Standards and Requirements for Residential Investment Properties

Lesson 4

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 17

Lesson 1: Legal Requirements for Residential Properties Containing Four Units or Less This lesson covers zoning bylaws, property and occupancy standards, health and safety standards, and other legal requirements for accessory units.

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Lesson 1 | Page 2 of 17

The legal requirements for residential properties with four units or less, or accessory units, will be covered in this lesson. You should familiarize yourself with these requirements, which include standards pertaining to zoning bylaws, property and occupancy standards, health and safety standards, and other legal requirements for accessory units. Upon completion of this lesson, you will be able to: • Identify key legal requirements for residential properties with four units or less • Identify key considerations to ensure compliance with the legal requirements for a dwelling unit Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 17

Certain legal requirements must be met when dealing with residential properties containing four units or less or accessory units. Your understanding of these requirements can better ensure that your clients comply with the law. This topic addresses property and occupancy standards, health and safety requirements, municipal zoning bylaws, and other regulations that must be adhered to.

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Lesson 1 | Page 4 of 17

Dwelling Units and Importance of Municipal Zoning Bylaws A dwelling unit can be broadly described as a housing unit that has one or more habitable rooms as self-contained living quarters with independent cooking, eating, sleeping, and sanitary facilities. Regardless of who occupies the unit—whether it be a family member or a tenant that does or does not pay rent—a housing unit with these characteristics is considered to be a dwelling unit. Examples include single-family homes and apartment units within an apartment building. Other types of dwelling units, such as lodging houses, may provide sleeping accommodations, but washroom and cooking facilities are shared by occupants of more than one room or a portion of the dwelling. As you also learned in Pre-Registration, zoning bylaws control the use of land in a community. They state how land may be used, where buildings and other structures can be located, the types of buildings that are permitted and

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how they may be used, lot sizes and dimensions, parking requirements, and building heights and setbacks from the street. Zoning regulations, bylaws, and maps are available through the local municipality and are often included in their website. You should consult these sources to determine if a particular building’s zoning designation will permit the construction of additional dwelling units and associated restrictions. You also need to know about zoning bylaws so you are able to answer questions that investors may ask, although you may need to refer them to local municipality officials. Questions investors may need answered, whether through your expertise or information provided by the municipality, include: • What is the zoning in this locality? • What is planned for the vacant land in the area? • Will the zoning designation permit the construction of an accessory unit in the basement? • Are there any other restrictions, such as parking requirements? For example, an investor is interested in buying a home that includes a basement apartment and assumes that this accessory unit is legal. Upon consulting you for advice, you perform due diligence and ask the seller’s representative for a copy of the occupancy permit issued by the municipality at the conclusion of the project. This permit is an evidence that the project complies with the requirements of the building permit, which would include Building Code and Fire Code compliance, as well as zoning and other bylaw compliance.

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Lesson 1 | Page 5 of 17

Cross-Verifying that Property Use Meets Municipal Bylaws As you know, the Municipal Property Assessment Corporation (MPAC) is an independent, not-for-profit corporation funded by all Ontario municipalities that is responsible for assessing and classifying all properties in Ontario. MPAC classifies properties into seven categories, with “residential” as one of those categories. The MPAC assessment records also include the presence of “secondary structures,” which may include “accessory units.” However, the inclusion of an accessory unit in MPAC records alone does not necessarily mean that the unit is in compliance with the municipal requirements. You should not rely on these records to verify a property’s use, as MPAC’s classification system is not in line with zoning classifications. Regardless of how MPAC classifies the property in their system, you should verify legal use against municipal bylaws, as that is the only authority that matters.

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Lesson 1 | Page 6 of 17

A salesperson represents an investor who is interested in purchasing a duplex located on an oversized urban lot. The salesperson meets with their client to discuss the possibility of adding two more units following the property’s purchase. What due diligence should the salesperson perform to ensure that their client can legally build two additional units on their newly acquired property? There are three options. There is only one correct answer.

1

Ask the current homeowner if they are aware of any zoning issues that would prevent the buyer from building the additional units.

2

Check the Residential Tenancies Act (RTA) to determine if the additional units can legally be built.

3

Consult copies of the municipality’s zoning maps, zoning regulations, and municipal officials to determine if the two additional units can be built on the property.

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Lesson 1 | Page 7 of 17

The Impact of the Strong Communities Through Affordable Housing Act on Accessory Units The Strong Communities Through Affordable Housing Act is an important piece of legislation that includes a wide range of actions to improve Ontario’s affordable housing supply, including amendments to the Planning Act. The Strong Communities Through Affordable Housing Act allows homeowners to develop accessory units in their existing structure to generate additional income through rent, provided that the accessory unit is compliant with the Ontario Building Code, the Fire Code, and the Electrical Code for accessory units. You should understand how the Strong Communities Through Affordable Housing Act impacts the addition of accessory units to better advise investors who are interested

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Module Summary | Page 3 of 3

There are three sections on this page with a summary of the key topics that were discussed in this module.

Legal Requirements for Residential Properties Containing Four Units or Less

You should be aware of the legal requirements for residential properties containing four units or less. Completion of this lesson has enabled you to: • Identify key legal requirements for residential properties with four units or less • Identify key considerations to ensure compliance with the legal requirements for a dwelling unit

You should know the standards for fire separation under the retrofit Fire Separation Requirements for Accessory requirements of the Ontario Fire Code. Completion of this lesson has enabled you to: Units • Identify the standards for fire separation under retrofit requirements of the Ontario Fire Code for dwelling units

Consequences of NonCompliance with Standards and Requirements for Residential Investment Properties

You should be familiar with the potential consequences for non-compliance to standards and requirements for residential investment properties. Completion of this lesson has enabled you to: • Describe the consequences of non-compliance to legal standards in residential investment properties

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Lesson 1 | Page 8 of 17

Legal Requirements for Property and Occupancy Standards Bylaws related to municipal property and occupancy standards set minimum requirements to ensure that property owners tend to the aesthetics of their property and maintain a safe living environment. These standards are put in place to protect the health and safety of occupants or tenants and to ensure minimum maintenance standards for properties. Your knowledge of a municipality’s property and occupancy bylaws will help you provide accurate information to investor buyers on standards they may need to consider. The following four sections contain information on legal requirements for accessory units specified by municipal bylaws.

Unit interior Floors and walls must be well maintained. Stairs must be safe and built to Ontario Building Code requirements. Doors and windows must be in good working order and provide egress (exits), if necessary. Heating systems must be functional and comply with various safety standards. Air conditioning is not a requirement, but if it is a component of the tenancy agreement, then it must also be properly maintained.

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Property exterior Exterior walls, roof, eavestroughs, and downspouts must be maintained and functional. Balconies, porches, and exterior stairs must be safe and built to Ontario Building Code requirements. Fences, barriers, retaining walls, garages, and sheds must be built to various standards and maintained appropriately to prevent unsafe conditions.

Plumbing systems Plumbing systems must be in good working order with running hot and cold water supply, sinks, and toilets. Any septic systems must comply with the Ontario Building Code and be maintained to ensure safe operating standards. Any accessory, such as water softeners, included in the tenancy agreement must be properly maintained and functional.

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Electrical systems Electrical systems must comply with the Ontario Electrical Code, which would include ground fault circuit interrupters, service requirements (depending on the use of the property), and the prohibited use of extension cords as a permanent source of electrical service, etc.

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Lesson 1 | Page 9 of 17

Legal Requirements for Health and Safety Investors, who are often small residential property landlords, must comply with the maintenance standards set forth in the Residential Tenancies Act (RTA). All maintenance of a rental unit or residential complex must be completed in an acceptable manner and with acceptable materials. Your understanding of minimum health and safety requirements for properties will allow you to better advise your clients who are investing in residential properties. The following information illustrates some of the key considerations for maintaining a safe environment. The following four sections contain information on health and safety requirements for accessory units.

Interior Residential units must have adequate lighting available in all the rooms, stairways, garages, corridors, halls, and basements. All habitable spaces must be provided with natural or mechanical means of ventilation that is adequate for the use of the space.

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Exterior You should advise your client that all exterior property must remain free of noxious weeds and dead, decayed, or damaged trees, rubbish, debris, and abandoned motor vehicles.

Detached structures You should advise your client that all components of the property must be maintained in a good state of repair and be safe for occupation. If something no longer works due to normal wear and tear, or because it breaks or wears out, the landlord must repair or replace it.

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Common areas You should advise your client that all common areas are required to be maintained in a condition that is suitable for their intended use and shall be free of hazards.

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Lesson 1 | Page 10 of 17

Legal Requirements Related to Fire and Electrical Codes for Retrofits If the health and safety requirements, or standards established by the Fire Code, are amended or upgraded, they are retroactive; meaning that building owners must implement the new standards into their existing building. This is termed retrofitting. You would be required to confirm if existing retrofit requirements have been implemented by a building owner before listing the property for sale or when representing a buyer who is considering the building. The retrofit status of a building is considered a material fact that requires disclosure. The following four sections contain information on fire and electrical codes for retrofits.

Containment When assisting an investor, you should ensure that they are familiar with fire containment requirements set forth in the Ontario Fire Code. Containment refers to having an adequate level of fire separation between accessory units. A continuous separation with a 30minute Fire Resistance Rating is required between dwelling units and other areas of the building. This rating refers to the building material’s ability to withstand fire for a minimum period of 30 minutes. This is usually accomplished using a variety of building materials, such as drywall or gypsum board, solid wood doors, etc.

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Means of egress A means of egress refers to the means of escape from a dwelling unit. The means of egress must not involve entering another dwelling unit or other occupied area and must lead directly to the outside at ground level. Homeowners and landlords must instruct their occupants on the emergency procedures to be followed when the fire alarm sounds. Occupants should also develop a home escape plan and know what to do when the smoke or CO alarm sounds.

Fire alarm and detection A landlord is responsible for maintaining working smoke alarms on every floor and outside all sleeping areas. Units containing a fuel burning appliance, fireplace, or an attached garage require a carbon monoxide (CO) alarm installed adjacent to a sleeping area in the house. Fuel burning appliances include furnaces, hot water heaters, gas fireplaces, portable fuel burning heaters and generators, barbeques, stoves, and vehicles.

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Module Summary | Page 3 of 3

There are three sections on this page with a summary of the key topics that were discussed in this module.

Legal Requirements for Residential Properties Containing Four Units or Less

You should be aware of the legal requirements for residential properties containing four units or less. Completion of this lesson has enabled you to: • Identify key legal requirements for residential properties with four units or less • Identify key considerations to ensure compliance with the legal requirements for a dwelling unit

You should know the standards for fire separation under the retrofit Fire Separation Requirements for Accessory requirements of the Ontario Fire Code. Completion of this lesson has enabled you to: Units • Identify the standards for fire separation under retrofit requirements of the Ontario Fire Code for dwelling units

Consequences of NonCompliance with Standards and Requirements for Residential Investment Properties

You should be familiar with the potential consequences for non-compliance to standards and requirements for residential investment properties. Completion of this lesson has enabled you to: • Describe the consequences of non-compliance to legal standards in residential investment properties

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Lesson 1 | Page 11 of 17

An investor client wants to add an accessory unit to an existing property to increase their income and is interested in learning more about the property standards pertaining to such units. Which resource should the salesperson consult to determine this information for the investor? There are three options. There is only one correct answer. 1

Ontario Building Code

2

Municipal bylaw

3

Third-party service provider

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Lesson 1 | Page 12 of 17

Key considerations for investors include egress and ingress (entrances), compliance with various codes, and other requirements. You must have a general understanding of compliance issues so that you can provide guidance to clients and recommend appropriate third-party service providers when necessary.

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Lesson 1 | Page 13 of 17

Ensuring Compliance with Egress and Ingress Standards

As you learned earlier, the Ontario Building Code outlines standards for unit egress and ingress. Ingress and egress requirements are important to homeowners since they allow safe access to their property. The standards for egress and ingress apply regardless of the type of property, whether it is owner-occupied or a rental. You may have specific knowledge regarding egress and ingress and can identify compliance-related matters. However, it is quite common to recommend an inspection be done by a third-party service provider, like a home, building, or fire inspector to

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confirm code-compliance. In some cases, ensuring compliance through these means are an insurance and mortgage condition. General standards to look for when checking compliance include: • Ideally, every level containing a bedroom includes a door providing direct access to the exterior. If this is not the case, every level containing a bedroom in a unit must be provided with at least one window that can be opened from the inside without the use of tools and meet specific dimension requirements. • A unit containing a door leading directly outside on each level with a bedroom is considered at-grade or main floor. If the unit is located on a second or third floor, there must be an interior or exterior stairway leading to the ground floor. Exterior stairways are sometimes referred to as fire escapes. •

A basement accessory unit must contain two means of egress—typically two doors or one door and an egress window for the safety of tenants.

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Lesson 1 | Page 14 of 17

Ensuring Compliance with the Ontario Building Code

Ontario’s Building Code sets out minimum construction standards for an accessory unit. These minimum standards deal with factors such as the age of the house featuring the accessory unit (whether the house is more than five years old), location of the accessory unit, room sizes and floor area, ceiling heights, requirement of windows in the accessory unit, and plumbing requirements, such as hot and cold water supply, toilets, washbasins, kitchen sink, etc. If the property is located outside of a municipality and is not serviced by a sanitary sewer system, adding an accessory unit to a house served by a septic system is permitted if the septic system has the capacity to handle the increase in sewage. The Building Code allows a house with an accessory unit to have a single furnace and a common system of air ducts that are equipped with dampers that close in the event of a fire, thereby preventing the fire and smoke from spreading throughout the entire building.

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According to the Ontario Building Code, an accessory unit must include a bathroom and a kitchen. The bathroom must have a hot and cold water supply, a sink, a bathtub or shower, and a toilet. The kitchen must include a kitchen sink.

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Lesson 1 | Page 15 of 17

Additional Mandatory Requirements for Accessory Units

Investors should consider a few details before they decide to build an accessory unit. You can consult with the local municipal zoning and building departments, or refer a client to these department officials, to determine if an accessory unit may be possible, and if so, the associated requirements. There are several important factors an investor needs to consider before adding an accessory unit, including: • Applicable municipal zoning requirements • Necessary building permits • Designing their unit to comply with the Ontario Building and Fire Codes, and the Electrical Safety Code

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• Required building inspections during construction For example, the Building Code requires that the accessory unit must have a light switch in every room and space of the accessory unit, as well as a switch at both the top and bottom of the stairs to ensure adequate lighting. Your knowledge of an accessory unit’s adherence to all Building Code requirements will help your investor client ensure that the accessory unit is legal, safe, and a healthy place for tenants to live.

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Lesson 1 | Page 16 of 17

When an investor client visited the local municipality to inquire about accessory units, they were given a summary of the Ontario Building Code requirements. Which of the following information is specified in the Ontario Building Code? There are four options. There are multiple correct answers.

1

Minimum requirements for room sizes, floor area, ceiling heights, and the requirement for a kitchen and bathroom to be included

2

Plumbing requirements, such as hot and cold water supply, toilet, and kitchen sink

3

Zoning bylaws that stipulate the location of the accessory unit

4

Requirements for smoke alarms and carbon monoxide detectors

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Lesson 1 | Page 17 of 17

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify key legal requirements for residential properties with four units or less • Identify key considerations to ensure compliance with the legal requirements for a dwelling unit There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Zoning bylaws

A zoning bylaw controls the use of land in a community. It states exactly how land may be used, where buildings and other structures can be located, the types of buildings that are permitted and how they may be used, and the lot sizes and dimensions, parking requirements, building heights and setbacks from the street.

Legislation

The Strong Communities Through Affordable Housing Act allows investors to add accessory units to their existing structure to generate additional income through rent if the accessory unit is compliant with the Ontario Building Code and the Fire and Electrical Code for accessory dwellings. According to the Residential Tenancies Act (RTA), the investor must comply with the maintenance standards mentioned in the RTA. All maintenance of a rental unit or residential complex must be done in an acceptable manner and with acceptable materials.

Cross-verification of information

Leading practice may suggest that you consult an MPAC property assessment report and cross-verify with local municipal records to confirm the existence of an accessory unit.

Minimum requirements for accessory units

If an investor decides to build an accessory unit, at minimum the unit needs a hot and cold water supply, a bathroom sink, a bathtub or shower, a toilet, and a kitchen sink. Minimum egress and ingress requirements must be met. In the case

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of basement accessory units, there must be two or more means of egress. Additional legal considerations include: • Applicable municipal zoning requirements • Necessary building permits • Designing units to comply with the Ontario Building and Fire Codes • Required building inspections during construction

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Lesson 2 | Page 1 of 6

Lesson 2: Fire Separation Requirements for Accessory Units

This lesson covers the standards for fire separation under the Ontario Fire Code that must be adhered to when retrofitting an existing structure.

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Lesson 2 | Page 2 of 6

The Ontario Fire Code contains a requirement that any changes to the standards in the code must be implemented by existing building owners. The standards would be stipulated in the amendments to the code. In this lesson, you will learn about retrofit requirements for fire separation as set forth by the Ontario Fire Code, and their impact on residential investment properties. Upon completion of this lesson, you will be able to: • Identify the standards for fire separation under retrofit requirements of the Ontario Fire Code for dwelling units Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 6

For fire safety, the accessory unit requires a fire separation between itself and the rest of the house. A fire separation acts as a physical barrier to slow the spread of fire from one part of the house to another. Third-party service providers, such as contractors, engineers, and architects, typically deal with structural details like fire separation. Your basic understanding of fire and safety standards for accessory units will help you determine when it is appropriate to refer an investor client to a third-party service provider.

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Lesson 2 | Page 4 of 6

The Ontario Fire Code’s Applications to Accessory Units The following information addresses the Ontario Fire Code’s (the Fire Code) application to accessory units that were not part of the original structure and renovated units. You should be aware of the regulations set by the Fire Code to determine if a unit complies with the code, or if a client needs to be referred to a third-party service provider to address non-compliance. The following four sections contain information on the standards for fire separation in accessory units under retrofit requirements of the Ontario Fire Code.

Permits for new accessory units When building new accessory units, a building permit must be obtained. Fire safety matters for items such as fire separations, egress, and ingress are addressed in the Ontario Building Code and will be part of the building permit requirements. The requirements for smoke and carbon monoxide detectors in the Ontario Fire Code will also be addressed and included in the building permit requirements. A Notification of Work must also be filed with the Electrical Safety Authority (not by the municipality), who will conduct inspections and issue a Certificate of Acceptance upon satisfactory completion of the work.

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Fire separation requirements for new and existing accessory units When adding a new accessory unit, the Ontario Building Code requires a 30-minute fire separation between individual units and between units and common areas. A fire separation can be reduced to 15 minutes if the entire house has interconnected smoke alarms. HVAC ducts must contain fire dampers. These products act as a fire separation between the unit and the open duct. When renovating an existing accessory unit, the owner must apply for another building permit. Any alterations to, and expansion of, fire separation walls would be addressed by the municipal building department and the requirements would be included in the new building permit.

Specifications of fire separation for new and existing accessory units A fire separation can be a floor, a wall, a door with a self-closing device, or a combination of those items. It can be built using typical building materials, such as lumber and drywall. For example, a 30-minute fire separation wall can be built using 51 mm x 102 mm (2 in x 4 in) wood studs, 13 mm (1/2 in) thick drywall on both sides, and fiber-type insulation between the studs. Lath and plaster construction, typically found in older houses, is an example of a 15-minute fire separation.

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Safe exits for new and existing accessory units All accessory units must have safe exits. Providing a separate exit for the accessory unit is preferable; however, if that is not possible, a common exit for both units in the house is allowed if the exit area has a 30minute fire separation and contains smoke alarms that are interconnected to both units. In cases where the exit from one unit leads through another unit, a second means of escape must be provided, usually in the form of a window. Windows that are provided as a possible second means of escape, known as an egress window, must be large enough for a person to get through and be easy to open manually without the use of tools. There can be no obstructions on either side of the window that would impair escape such as a tree, snowbank, furniture, etc. For example, a garage in a single-family home was renovated to serve as an accessory unit. Although the previous homeowners mentioned in the advertisement that the unit is retrofitted, the salesperson notices that the unit does not completely comply with the Fire Code, as it does not have a second means of exit, such as egress windows that are large enough to let people climb through in case of a fire. The salesperson informs the investor client about the unit’s non-compliance with the Fire Code and advises that they will need to make necessary changes, should they opt to rent it out.

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Lesson 2 | Page 5 of 6

An investor client is thinking about buying a single-family home with an attic that was renovated to serve as an accessory unit. Before making a final decision, they would like to know which features of the accessory unit will need to be assessed for compliance with the Ontario Fire Code. They approach a salesperson for advice. Identify which of the following characteristics of the unit would be assessed in order to ensure compliance with the Ontario Fire Code. There are four options. There is only one correct answer.

1

In the event of a fire, the closest means of escape is through a door on the second floor of the main residence. Therefore, they need to check if there is a window in the unit that safely leads to the ground floor.

2

A smoke and carbon monoxide detector is located near the entrance to the attic unit on the second floor but none are present in the attic unit.

3

The accessory unit contains two heating ducts. They need to check one of the ducts to see if it contains a fire damper.

4

An alteration to the floor resulted in the removal of layer of floor finishing material in the attic. The salesperson suspects there is no longer a 30-minute fire separation. So, they need to check if the house has an interconnected fire alarm system.

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Lesson 2 | Page 6 of 6

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the standards for fire separation under retrofit requirements of the Ontario Fire Code for dwelling units There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Fire separation requirement under the Ontario Fire Code

When adding an accessory unit, the Building Code requires a 30-minute fire separation between individual units and between units and common areas. A fire separation can be reduced to 15 minutes if the entire house has interconnected smoke alarms.

Fire separation specifications

A fire separation can be a floor, a wall, a door with a self-closing device, or a combination of those items. It can be built using typical building materials, such as lumber and drywall.

Safe exits requirement

The accessory unit must have safe and accessible exits that comply with the Building Code’s provisions concerning fire separation and means of egress.

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Lesson 3 | Page 1 of 9

Lesson 3: Consequences of Non-Compliance with Standards and Requirements for Residential Investment Properties This lesson explores implications related to taxation and appraisal and identifies potential consequences for noncompliance with standards and requirements for residential investment properties.

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Lesson 3 | Page 2 of 9

You must be familiar with the requirements of various regulations pertaining to investment properties to assist investor clients with their assessment of a property and to refer a client to appropriate third-party service providers. In this lesson, you will learn about the consequences of non-compliance with the legal standards in residential investment properties. It is important that you understand the standards and requirements for residential investment properties and the consequences of non-compliance with those rules and regulations to better advise clients. Upon completion of this lesson, you will be able to: • Describe the consequences of non-compliance with legal standards in residential investment properties Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 9

Investor clients should be made aware of this information, as there can be significant financial implications for noncompliant residential property owners. Consequences may include the denial of insurance coverage, mortgage financing, and negative impacts to property taxes and assessed property value.

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Lesson 3 | Page 4 of 9

Denial of Insurance Coverage

Insurance is an essential component of risk management for any investment property. To better advise your investor client about the insurance required for a property, you need to understand home insurance requirements, insured perils, and denial of coverage. Home insurance covers the cost of repairs or losses to the dwelling or other buildings, be it a house, an apartment, or a townhome, if the damage or loss is covered by the insurance policy. Events and occurrences that may put the property or owner at risk—also known as insured perils—are a significant consideration for investor buyers. Standard home insurance policies typically cover properties against fire, lightning strikes, smoke (if caused by malfunctioning cooking devices or heaters, but typically not fireplaces), theft, water damage (in most situations), wind, aircraft or vehicle impact, explosion, and electrical surges. Home insurance also

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provides liability coverage for guests and visitors to the property that may suffer injury and initiate a lawsuit against the property owner. Most standard policies list conditions that must be fulfilled to maintain coverage; if the conditions are not met, the insurer can refuse the insurance claim, and the home insurance policy can become void. Property negligence or failure to report renovations substantially altering the property’s value or risk can result in denial of coverage or nullification of the policy. Not taking care of the insured property or disregarding measures to protect the home because the homeowner relies on insurance to replace or repair damaged property may lead to a denial of coverage. For example, the commercial storage of flammable materials in a residential garage may nullify the fire insurance component of the insurance policy.

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Lesson 3 | Page 5 of 9

Impact to Mortgage Application Processes Non-compliance with legal standards can adversely affect the mortgage application process and approval. To better advise your clients, it is important to understand the impact of non-compliance. The following three sections contain information on consequences of non-compliance with legal standards on mortgage application processes.

Proof of compliance for mortgage application When building or renovating housing units, homeowners need to show proof of compliance with building codes to secure mortgage approval. Mortgage approval may be denied by a lender if proof of compliance is not obtained. In order to obtain a mortgage, the owner must complete a declaration form stating that all units meet the Ontario Building Code requirements, as well as local zoning and building bylaws and regulations. When a residential unit is fully compliant with municipal zoning and other requirements, such as the Building and Fire Codes (i.e., the unit is considered legal and its use can be lawfully permitted), the lender will often consider the rent from the unit when approving the mortgage application.

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Proof of compliance for Canada Mortgage and Housing Corporation (CMHC) Homeowners also need to send to the CMHC a certificate of Building Code Compliance at three different stages in the construction process: • Pre-backfill inspection (foundation stage) • Pre-drywall inspection (framing, rough-in and insulation/vapour barriers stage) • Final inspection These certificates are important to ensure that the units have met the Ontario Building Code on every step. If these certificates are not obtained, the homeowners may not be eligible to secure mortgage default insurance through the CMHC and other insurance providers.

Proof of compliance with the Ontario Building Code and Fire and Electrical Code Under the Residential Tenancies Act (RTA) the landlord has a legal responsibility to protect their tenants. A residential unit complex that does not comply with the Ontario Building, Fire and Electrical Safety Codes pose a higher risk to the tenants. Compliance with these requirements helps the landlord satisfy their obligations under the RTA. A residential unit that is not compliant poses a higher risk and may not qualify for insurance, depending on the insurer. Consequently, if insurance coverage is denied, a mortgage will also be denied.

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Lesson 3 | Page 6 of 9

Disclosing the Existence of Units that Do Not Comply with Legal Standards

There are thousands of accessory or rental units in Ontario that do not comply with legal standards. This occurs when the unit either does not comply with local zoning bylaw restrictions, a building permit was not obtained, the property does not comply with the Building, Fire and Electrical Codes, or the owner may be charging rents that do not comply with the Residential Tenancies Act (RTA), etc. These properties may be bought and sold legitimately; however, the “legality” of the accessory or rental unit becomes a material fact that you must thoroughly investigate and fully disclose to your client and if known, to their customer before proceeding with a transaction.

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For example, you list what is thought to be a legal triplex, but later determine that it is a legal duplex. This is because the third unit was created in the basement by a previous owner without the required municipal approvals, as the zoning bylaw will not permit triplexes. As you are now involved in the transaction, you have a responsibility under the Code of Ethics to determine the facts surrounding the non-compliant property and disclose them to your client before entering into a binding agreement of purchase and sale. However, the salesperson has a responsibility to prevent error misrepresentation and fraud and as a result must not misrepresent the legality of the unit. Disclosing the existence and details of a non-compliant unit to all parties is crucial, as there may be significant consequences if the property does not comply with legal standards. These consequences include: 1. The income being generated by the unit(s) will not be recognized by lenders when considering a financing application 2. The value may be less than a building that is considered “compliant,” thereby reducing the amount of available financing 3. Insurers may be reluctant to place policies, as their risks could be elevated due to Code non-compliance 4. A non-compliance order can be issued by the municipality leading to substantial costs to rectify the deficiencies 5. The brokerage and salesperson may be found liable for misrepresenting the status of the property in civil litigation 6. The brokerage and salesperson may face disciplinary action or prosecution 7. The reputations of any brokerage and salesperson who may be involved can be negatively impacted 8. Termination of the transaction

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Lesson 3 | Page 7 of 9

Impact on Taxation and Valuation of a Property

If a property’s condition and construction quality are considered inferior to other comparable sales, its market value will decrease. If these factors are as a result of non-compliance with various code requirements, the market value will be further reduced as the owner will have to spend money to rectify the issues. As you learned earlier in this module, MPAC is responsible for assessing and classifying all properties in Ontario. If the assessed value of a property decreases, the property taxes will accordingly be reduced. On the contrary, if a property is inspected by MPAC and it is found that the building has been improved, MPAC will reassess the property, which could result in a

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higher assessed value, hence an increase in property taxes. You are aware that appraisals are conducted to assess the current market value of a property. Mortgage lenders sometimes require a formal appraisal to determine a home’s mortgage, regardless of the price that has been paid for the property. This is a way of ensuring sufficient value or equity in the property to secure the mortgage debt should default occur by the mortgagor or the owner. Appraisals are usually done by an appraiser with a recognized designation who determines the value of the home after studying the interior and exterior of the property, as well as the surrounding land. They will also consider the value of accessory structures. If a property is not compliant with legal standards, a residential unit will be appraised based on its current condition and the appraisal amount may not be sufficient to satisfy the requirements of the lender.

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Lesson 3 | Page 8 of 9

An investor recently purchased a small housing development comprised of four townhouses. To enhance tenant services, and possibly increase rents, they want to install a swimming pool and children’s playground area. They inform a salesperson that they already have a premium policy covering the entire property in place. How should the salesperson respond to the client’s remarks concerning the addition of the playground and the pool? There are four options. There is only one correct answer.

1

Advise them that additions to the property, such as playgrounds and swimming pools, are typically covered by existing insurance policies if the addition adheres to all codes and regulations

2

Advise them that any such addition, such as the playground and swimming pool, may not be covered by their existing property insurance policy and that they should inform their insurance company of the addition to ensure adequate coverage

3

Advise them that since the playground and swimming pool were not the original features of the property, it must be insured by a company that specializes in insuring these types of recreational additions

4

Advise them that purely recreational features, such as playgrounds and swimming pools, added to existing properties do not have to be insured

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Lesson 3 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Describe the consequences of non-compliance to legal standards in residential investment properties There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Denial of insurance coverage

Most standard policies list conditions that must be fulfilled to maintain coverage; if the conditions are not met, the insurer can refuse the insurance claim, and the home insurance policy can become void. An insurer may also deny coverage if the homeowner does not take proper care of the insured property or disregards measures to protect the home because they rely on insurance to replace or repair any damaged property. Adding square footage, additions, upgrades, or swimming pools can substantially change the value and risk of a unit. Property owners should inform their insurance company of any renovations to ensure that they have adequate coverage.

Impact on mortgage application processes

When building or renovating housing units, homeowners need to show a proof of compliance with various codes and municipal requirements to apply for a mortgage. The owner must complete a declaration form stating that all units meet the Ontario Building Code requirements, as well as local zoning and building bylaws and regulations in order to obtain a mortgage. Homeowners must also send the Canada Mortgage and Housing Corporation (CMHC) a certificate of Building Code Compliance at three different stages in the construction process. These certificates are important to assure that the units have met provisions of the Ontario Building Code during every step. If these certificates are not obtained, the homeowners may not be eligible to secure

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mortgage default insurance through the CMHC or through other insurance providers.

Impact on taxation and valuation of a property

Appraisals are usually done by a licensed appraiser who determines the value of the home. An appraiser studies the interior and exterior of the property, as well as the surrounding land. They will also consider the value of accessory structures. If a property is not compliant with legal standards, a residential unit’s assessed value may be impacted. Any future improvements to the property could result in a reassessment and a higher taxation value, which would increase the amount of property taxes.

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Lesson 4 | Page 1 of 6

Lesson 4: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 4 | Page 2 of 6

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 6

A salesperson meets with an investor client who is thinking about purchasing a small duplex on a large parcel of land. They express their desire to build additional units on the property and would like to know if they would legally be allowed to do so. What source should the salesperson consult in order to determine if additional units could legally be added to the property? There are three options. There is only one correct answer.

1

Consult the Strong Communities Through Affordable Housing Act to determine if additional units can be built on the property.

2

Consult an appropriate section of the Residential Tenancies Act (RTA) to determine how many units are allowable on a given parcel of land.

3

Consult the municipality’s zoning bylaws to determine the standards or zoning provisions for adding accessory units to the property. This information can typically be found at the municipal zoning department, or on the municipality’s website.

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Lesson 4 | Page 4 of 6

A client is interested in building an accessory unit in the basement of an investment property that they are considering. They are interested in learning more about the minimum legal requirements for the unit. Which of the following features are required for the accessory unit by the Ontario Building Code? There are four options. There are multiple correct answers. 1

A hot and cold water supply

2

A separate furnace and system of air ducts for the accessory unit

3

Both a window and a fan in the bathroom

4

A kitchen sink

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Lesson 4 | Page 5 of 6

A client wants to add an accessory unit to one of their existing investment properties to boost their return. As such, they would like to become more familiar with the rules regarding accessory units set forth in the Ontario Fire Code. Which of the following statements are accurate and should be used to advise the client? There are four options. There are multiple correct answers.

1

The Ontario Fire Code requires that all fire separations be constructed from materials manufactured specifically for the purpose of fire containment.

2

If an accessory unit shares a common exit with the primary structure, then smoke detectors and a 30minute fire separation are required.

3

The Ontario Fire Code requires working smoke and carbon monoxide detectors on every floor and in each bedroom of an accessory unit.

4

The Ontario Building Code requires a 15-minute fire separation between individual units and between units and common areas.

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Lesson 4 | Page 6 of 6

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 3

Module Summary

This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are three sections on this page with a summary of the key topics that were discussed in this module.

Legal Requirements for Residential Properties Containing Four Units or Less

You should be aware of the legal requirements for residential properties containing four units or less. Completion of this lesson has enabled you to: • Identify key legal requirements for residential properties with four units or less • Identify key considerations to ensure compliance with the legal requirements for a dwelling unit

You should know the standards for fire separation under the retrofit Fire Separation Requirements for Accessory requirements of the Ontario Fire Code. Completion of this lesson has enabled you to: Units • Identify the standards for fire separation under retrofit requirements of the Ontario Fire Code for dwelling units

Consequences of NonCompliance with Standards and Requirements for Residential Investment Properties

You should be familiar with the potential consequences for non-compliance to standards and requirements for residential investment properties. Completion of this lesson has enabled you to: • Describe the consequences of non-compliance to legal standards in residential investment properties

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Module 3: Valuing a Residential Investment Property Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 3: Valuing a Residential Investment Property You need to be well-versed in the essentials of the profession to meet your obligations in valuing and advising on residential investment properties. Expanding your knowledge base supports your future ability to provide appropriate services during the residential listing and selling process. Valuation methods usually include using the direct comparison approach and identifying various due diligence documents necessary to satisfy the material facts of buyers. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails Accessible PDF.

and References from the module are added to support your learning throughout this

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Menu: Valuing a Residential Investment Property

Number of Lessons

Lesson Number

5 Lessons

Lesson Name

Lesson 1

Supply, Demand, and Residential Tenancy Legislation

Lesson 2

Valuing Properties with the Direct Comparison Approach

Lesson 3

Due Diligence and Other Obligations

Lesson 4

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 17

Lesson 1: Supply, Demand, and Residential Tenancy Legislation This lesson reinforces your knowledge of supply and demand factors and outlines their impact on the value of residential investment properties of four units or less. It also explores how legislation in the Residential Tenancies Act may influence an investor’s purchasing decisions.

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Lesson 1 | Page 2 of 17

As you may recall, multi-residential housing technically refers to any residential structure that has more than one dwelling unit. The multi-residential market in Ontario is driven by supply and demand factors but is also strongly influenced by regulatory provisions contained in the Residential Tenancies Act (RTA). A firm understanding of the

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impact these factors have on the residential market will enhance your ability to appropriately value and advise on investment properties of interest. Upon completion of this lesson, you will be able to: • Identify the factors that affect the valuing of multi-unit residential properties of four units or less • Describe the impact of residential tenancy legislation on owners of residential properties with four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 17

Market research is an essential part of your role when valuing a residential property on an investor buyer’s behalf. As you know, some key factors that can affect a property’s value include market trends in supply, demand, and vacancy rates, among others.

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Lesson 1 | Page 4 of 17

Market Trends to Consider Estimating supply involves analyzing the existing competition for a property type, as well as multi-residential buildings that are either approved or under construction. Demand for the supply of multi-residential housing is a complex relationship of factors such as economics, demographics, and target market preferences. The trends in supply and demand have an immediate impact on vacancy rates.

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Lesson 1 | Page 5 of 17

Trends Affecting Property Value You should be aware of how market trends affect your selling area. This knowledge will allow you to determine the value of certain property types and to help investors make informed decisions. The following five sections contain information on the trends affecting property value.

Supply During your research, all properties should be inventoried, including details such as number of units, types of suites (i.e., studio, one-bedroom, twobedroom, and three-bedroom), rent levels (including what is and is not included in that rent), and the condition of property locational features (e.g., nearby parks, shopping, and/or transportation). Based on this information and demand-related data, the individual contemplating a new multi-residential building can then formulate a strategy for a structure that will address the greatest demand within the general market or a specific sub-market, provide the best mix of features or amenities to attract that audience, and establish competitive prices for various units.

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Demand Buyers considering multi-residential investments must carefully assess overall economic trends. From a regional or local perspective, expanding employment opportunities normally translate into increased housing demand, as individuals looking for work opportunities search out housing within particular locales. Similarly, rising income levels typically dictate potential prices for various types of multi-residential accommodation (i.e., studio, one-bedroom, twobedroom, and three-bedroom apartments).

Demographics Overall population shifts from one area to another, known as in-migration and out-migration, and population growth (increased birth rates) provide useful indicators for the multi-residential market. Investors also analyze changes in the formation rate and size of households, as this helps determine the mix of unit sizes within a particular development. Demographic changes can be further broken down into sub-categories. For instance, one region may experience a large influx of citizens seeking retirement accommodation, while another region is attracting young families due to high-tech office growth in a suburban area. Differing age groups and types of households within an area result in distinct preferences regarding residential locations, proximity to schools, access to transportation and nearby retail services, as well as amenities provided in the property.

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Market research You should conduct market research to determine what type of property is needed, where it should be located, and what features it should contain. The scope of research depends on the project. Generally, a smaller multi-residential venture (such as a property with four units or less) may require investigation of a small area, rather than market-wide research. In some cases, an investor may need to know the demand for a single neighbourhood or a target market in a densely populated area consisting of a few blocks. Often, you can discover information regarding market trends through municipal sources, such as the economic development offices.

Vacancy rates Changes in vacancy rates may be seasonal or economic, or even political. Political decisions and policies affecting development or rental operations can often affect supply and demand. For instance, legislation in the Residential Tenancies Act (RTA) has implications for the supply of rental units; similarly, the planning concept of intensification has increased the supply of rental units in many municipalities. There is a strong relationship between demand, rent costs, and vacancies. You should consider the following questions when assessing trends in an investor’s area of interest: • Is the demand for residential housing strong, average, or weak?

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• Are the rental rates increasing, remaining static, or decreasing? • Are vacancy rates rising, remaining static, or falling? If the demand for residential properties is strong, vacancy rates will be low, and the rents will tend to increase (subject to rent control legislation). This trend increases property value. Conversely, if the demand is weak, vacancy rates will be high, and the rents must decrease to attract and retain tenants. This trend lowers property value. You can advise investors on how to attract tenants in high-vacancy areas with incentives for tenants. Incentives may include making repairs and upgrades to units, making the first month rent-free, or providing free parking and electronics (such as TVs and appliances, among others). It will be important to investors that you know the reason for vacancy rates, especially when there are indications that this trend may change (for example, due to ongoing construction in an area that will eventually be completed). Investors tend to follow upcoming area changes in plans so that they can project future areas for investment and/or assess the risk level in investing within that area. For example, an urban neighbourhood has a low demand for residential properties and high vacancy rates, largely due to a lack of accessible transit for commuters. However, municipal plans indicate that improved transit systems will be operational within the next three years, thus increasing the area’s potential investment value. A salesperson should be aware of

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municipal infrastructure improvements that will impact the demand for rental housing. This information will assist the buyer in assessing risk and estimating the current and future values of a property.

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Lesson 1 | Page 6 of 17

An investor is interested in purchasing a multi-unit residential property and asks the salesperson to tell them more about the area. The salesperson performs a preliminary investigation of market trends and discovers that there is a high number of students in the area who commute to a nearby university campus. Information gathered from the university’s housing office indicates that there is a large percentage of eight-month leases in the surrounding area. During the late spring and summer months, vacancy rates tend to be higher; during fall and winter months, vacancy rates tend to be lower. What might the salesperson tell the investor? There are three options. There are multiple correct answers.

1

Tell the investor that they may be more likely to generate greater cash flow during the fall and winter months.

2

Tell the investor that further market research for the area will be required to determine what type of property is best suited to the investors needs and what features it should contain.

3

Tell the investor that the demographics for the area are indicative of a high demand for affordable rental units in triplex properties.

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Lesson 1 | Page 7 of 17

Mortgage Interest Rate Changes Supply and demand forces also affect mortgage interest rates, which may, in turn, affect property value. If mortgage interest rates for an area are high, then local property values may decrease to address affordability concerns. Investors often benefit from purchasing residential property during rising or high-interest periods. Conversely, when interest rates fall, demand for properties often increases as buyers’ borrowing qualifications usually improve. In the longer-term, property values typically rise during periods of low interest rates. When a significant percentage of

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individuals are unable to qualify for mortgages, the demand for residential rentals increases; the resulting low vacancy rates open markets for lower-risk investments in duplexes, triplexes, and fourplexes. It is also important to note that if an investor purchases a property and finances it, any future increases to the interest rate will negatively impact the amount of positive cash flow that can be expected from the property. In such cases, it may be in the investor’s best interest to go to a different bank or mortgage broker to seek out a lower rate, if available. You can advise investors in such fluctuating markets to search for lower rates as needed and, in some cases, you may refer the investor to third-party service providers (such as a mortgage brokers) and private lending sources. In general, you may find that fewer home purchases take place during rising or high-interest periods, as the resulting higher mortgage payments may be unaffordable to buyers. Dependent on market conditions, it may lead to increased demand for rental properties and you may find that a growing number of clients seek your services for investment purchases.

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Lesson 1 | Page 8 of 17

Causes and Effects: Owning versus Renting Your investigation and knowledge of market trends, and the availability of multi-residential units in an area, can help investors identify the benefits of buying one building type over another (duplexes, triplexes, or fourplexes). When housing prices and/or interest rates in an area rise and there is a corresponding rise in mortgage costs, many individuals tend to rent due to unaffordable purchasing options. Sometimes, rent payments may exceed monthly mortgage payments; however, saving the down payment for a home may be so unaffordable that buyers may still choose to rent. Conversely, when monthly mortgage payments are less than or equal to the cost of monthly rent, there is more likely to be an upward trend in home-buying.

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Investors can benefit from markets with a higher ratio of rent-seekers to potential homeowners. Rents tend to increase when the demand for rental units exceeds the supply. This trend is evident in heavily populated Ontario metropolises. Although home ownership in such areas is also in high demand, the cost of renting is often more affordable on a monthly basis. In general, it can be more cost-effective for investors to buy property in smaller towns, or those further from urban centres, due to lower mortgage payments. However, purchasing a property in such areas may result in lower positive cash flow due to lower competitive rental rates. These observations are generalizations of overall trends and may not apply to every situation. Investors can further increase their investment return if they are advised to purchase building types that are scarce but in-demand. However, such properties are only beneficial if they can be purchased at a price that will allow the investor to realize a sufficient return on their investment.

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Lesson 1 | Page 9 of 17

An investor is interested in purchasing a triplex property in a small town outside of a major city and asks the salesperson for additional information. The salesperson conducts a preliminary investigation of market trends in the area and discovers that monthly mortgage payments for homeowners are relatively affordable. There is still a promising demand for rental units, but currently, there are very few triplexes in the rental market. What can the salesperson tell the investor? There are three options. There is only one correct answer.

1

Tell the investor that they should expect to price their rental units low due to the area’s affordable mortgage payments.

2

Tell the investor that the scarcity of triplexes on the rental market can be beneficial to the investor due to the demand for rental units.

3

Tell the investor that they may be able to charge higher rents due to the area’s location than would be possible in a more urbanized area.

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Lesson 1 | Page 10 of 17

In addition to monitoring market trends, investors need to consider how residential tenancy legislation can impact their investment goals. You can draw upon your knowledge of the Residential Tenancies Act (RTA) to provide crucial information regarding investment limitations to clients seeking multi-residential properties of four units or less.

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Lesson 1 | Page 11 of 17

The Impact of the Residential Tenancies Act (RTA) Residential investors are directly impacted by residential tenancy legislation. Restrictions and limitations outlined in the RTA will determine the feasibility of an investor’s investment goals and decisions, so it is important that you are also able to advise investors on landlord and tenant legislation. The following three sections contain information on the impact of the RTA on rental increases, renovations, and limitations on evictions.

Rental increases You should inform investors of current legislation surrounding rental increases if they express plans that would be in violation of that legislation. Key legislation to be aware of includes limits placed on a landlord’s right to increase rents above a certain percentage (on an annual basis). This percentage is also referred to as the rent guideline amount.

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Renovations In cases where tenants are forced to temporarily vacate their units to allow for renovations, first right of refusal must be observed—the landlord must give the former tenants first opportunity to come back at no more than the original rental price (with any lawful rental increases included) before they can list the unit for rent elsewhere. Further, more recent regulations require that if landlords intend extensive renovations to an occupied unit, they need to obtain a building permit to demonstrate that the renovations are necessary, rather than cosmetic. Regardless, the landlord must still extend the former tenant the right of first refusal upon completion of the renovations, provided the tenant gives the landlord notice of their desire for right of first refusal prior to vacating their unit. Under the RTA, terminated tenants residing in residential complexes of four units or less are not entitled to alternate units or monetary compensation.

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Limitations on evictions Investors make their decisions based on the projected income they will be able to generate from a rental property; if you are aware of legislation that can impact the investor’s intended use for the property (such as limitations on evictions), this information is a material fact that should be relayed to the investor when they are making their purchasing decision. You should stay current in your knowledge of the RTA and provide sources, such as relevant websites and phone numbers, that investors can use to discover the rules surrounding their specific plans. For example, a first-time investor client is considering purchasing a fourplex. Once they have possession of the property, they intend to increase the rents for preexisting tenants by a significant percentage. The investor notes that two of the current tenants have been in the building for several years and are paying below-market rent for their units. The salesperson informs the investor that there are legislative limitations on rental increases as per the RTA, as well as other protections in place for current tenants. The investor uses this information to assess whether they wish to purchase that particular property. You will learn more about regulations related to rent increases and renovations later.

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Lesson 1 | Page 12 of 17

Other Residential Tenancies Act (RTA) Guidelines You should advise investors of any plans they have for a property that may conflict with their legal requirements. Other regulations you should reference include a landlord’s responsibilities and restrictions for evictions and/or terminations of leases. Additional legislation includes: • • • • •

Landlords should not interfere with a tenant’s reasonable enjoyment of a property Landlords should not enter a unit without advance notice of at least 24 hours Tenants are entitled to reasonable privacy and repairs made to units Tenants may only be evicted by a termination order given with proper notice The termination of monthly and annual tenancies requires that landlords give 60 days’ notice to tenants

Your knowledge of such legal obligations can help investors make informed investment decisions.

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Lesson 1 | Page 13 of 17

A salesperson learns that a first-time investor, who is purchasing an older triplex, intends to inform the current tenants that extensive property renovations will require them to vacate their units and terminate their leases. The investor’s goal is to increase the value of the property and attract tenants who will be willing to pay higher rent than the current long-term tenants, who are paying below-market rent. Based on knowledge of the Residential Tenancies Act (RTA), what advice should the salesperson give to the investor? There are three options. There is only one correct answer.

1

Advise the investor that they will need to obtain building permits before they can proceed with their plans.

2

Advise the investor that if the renovations are necessary, they have no further obligation to the current tenants, provided sufficient notice is given for them to vacate the units.

3

Advise the investor that if they cannot offer the affected tenants with alternate units, they will need to compensate tenants in an amount equal to two months rent.

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Lesson 1 | Page 14 of 17

As landlords, investors have several expectations that may be affected by legislative limitations and/or restrictions. These include: • To obtain a reasonable return on the capital invested in the property • To ensure that the investment is protected by maintaining the building in a condition that will attract quality tenants on a long-term basis in a competitive market • To enhance the property by making improvements that will increase its market value • To retain pride of ownership To help investors understand how these expectations can be achieved, you should be familiar with the role that relevant legislation has on the investment and market value of properties with four units or less.

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Lesson 1 | Page 15 of 17

Investment and Market Value Investment value is what a property may be worth in the future as a result of equity increase and cash flow increase. Market value is what the property is worth at the time of purchase. Investment and market values will each factor into an investor’s purchasing decisions. You should be aware of how legislation, such as the Residential Tenancies Act (RTA) and municipal bylaws, can impact a property’s market and investment value when researching properties on a buyer’s behalf. The legislation affects an investor in terms of how much rent they can charge. As lawful rent and rental increases are regulated for residential units, the market value for a property will be capped at a corresponding amount. The ability to increase rent, however incrementally, will increase investment value. Renovation limitations should also be noted to investors, as they may affect investment value. If the renovations needed to increase the property’s value are extensive enough to warrant a tenant vacating the unit, you should inform the investor of provisions in the RTA

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to be made for affected tenants, where applicable. As you will learn later in this module, cosmetic fixes, while less comprehensive than extensive renovations, can increase value. Additionally, property improvements will have upfront costs, but absorbing such costs can help an investor realize their goals if they intend either to sell the property later or to attract tenants who are willing to pay higher rental prices. For example, a salesperson discovers a building with two units, also known as a duplex, that may have the potential of being converted to three units due to its structural layout. This information may be an incentive for an investor buyer to purchase, given that the updates needed can be completed in compliance with the RTA. Such renovations to a property can increase both market and investment values, as the property would accommodate more tenants. The salesperson notes the existence of any current tenants and obtains information from the listing salesperson to provide the investor with current rental prices in the building. They also make an inquiry with the municipality to ascertain if the property can be re-zoned for use as a triplex.

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Lesson 1 | Page 16 of 17

A salesperson represents a first-time investor who is interested in purchasing a duplex to rent to tenants. The salesperson learns that the investor intends to increase the current rental rates for pre-existing tenants by a significant percentage to realize their immediate investment goals. The investor plans to sell the property in a few years and wants to increase the property’s investment value by making improvements to the property, which shows signs of disrepair. What might the salesperson tell the investor? There are three options. There is only one correct answer.

1

Tell the investor that making improvements to the property will result in a negative cash flow, since tenants must vacate their units during any renovations, per the RTA.

2

Tell the investor that implementing annual rental increases, in compliance with the RTA, will increase or maintain the property’s market value.

3

Tell the investor that rental increases are regulated by the RTA and that such increases will improve the property’s investment value.

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Lesson 1 | Page 17 of 17

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the factors that affect the valuing of multi-unit residential properties of four units or less • Describe the impact of residential tenancy legislation on owners of residential properties with four units or less There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Market factors affecting value

When searching a given area for residential properties of four units or less, you should use your knowledge of the following factors to assess property values: • Supply • Demand • Vacancy rates Vacancy rates are heavily influenced by supply and demand. Your understanding of current and upcoming trends regarding supply, demand, and vacancy rates will help you to advise clients on assessing risk and investment opportunities.

Key residential legislation affecting value

Although you should be familiar with the entirety of the Residential Tenancies Act (RTA), investors may be particularly impacted by legislation pertaining to renovations and rental increases. Key items that can impact a residential property’s potential market and investment value include: • Limitations on lawful rent and rental increases • Limitations on extensive renovations • The first right of refusal Your understanding of how the RTA affects the actions of the investor as landlord will help you to advise clients on assessing risk and planning, with an awareness of legislative limitations.

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Lesson 2 | Page 1 of 10

Lesson 2: Valuing Properties with the Direct Comparison Approach This lesson reinforces your knowledge of the direct comparison approach and outlines how it can be applied when valuing residential investment properties of four units or less.

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Lesson 2 | Page 2 of 10

You should be able to value properties of interest through your understanding of the direct comparison approach and its use in valuing small investment properties. As you may recall, the effectiveness of this method is dependent on a sufficient number of comparable sales. Most communities have encouraged the development of small investment properties to facilitate affordable housing and, therefore, comparable sales data is often available. Upon completion of this lesson, you will be able to: • Determine how the direct comparison approach can be used when valuing residential investment properties with four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 10

Performing a direct comparison approach should be the first step when researching properties on behalf of an investor. During the valuation process for residential properties of four units or less, you should consider factors that increase residential property appeal, including the impact of renovations and suite-mixes on the value and desirability of a property. Your understanding of key differences between subject and comparable properties will ensure that proper adjustments are accounted for in final value estimates.

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Lesson 2 | Page 4 of 10

The Direct Comparison Approach: A Review The direct comparison approach attempts to mirror the market’s behaviour by comparing the property being appraised (subject property) with similar properties that have recently sold (comparables); the findings should indicate a subject property’s market value. You should select comparable properties based on their similarity to the subject property and adjust sale prices to reflect differences in comparison to the subject property. Finally, you should estimate the current value of the subject property based on the reconciliation of adjusted sale prices of the comparable properties. You can gather information on comparables from listing services, among other sources. Note that the further back you search, the less accurate the information may be, due to fluctuations in the market that would require a significant adjustment for time.

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Lesson 2 | Page 5 of 10

Factors Affecting Property Value: An Overview When representing a buyer investor, you should point out property improvements apparent in comparables that could also increase the subject property’s appeal for prospective tenants. Greater appeal may lead to the investor’s ability to generate greater cash flow through higher rents (higher in relation to comparables) and increase value. A significant factor that can impact value between comparables is varying suite-mixes. Suite-mixes include onebedrooms, two-bedrooms, three-bedrooms, and bachelor apartment mixes in a single building. Your analysis of comparables will allow you to better assess the desirability and demand for certain suite-mixes and value the property accordingly.

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Lesson 2 | Page 6 of 10

Factors Affecting Property Value There are multiple factors affecting the value of subject properties and comparables that you should consider. The following three sections contain information on the factors that affect the direct comparison approach.

Increasing value and desirability Multiple factors can influence value and desirability. The property’s exterior, such as landscaping and the general building appearance, as well as the condition of interior common areas and entrances, can each contribute to aesthetic appeal. Additionally, the existence of current tenants who meet an investor’s criteria may also attract similar tenants for any vacant units. Separate entrances for individual units, ample parking spaces, bike racks, and in-suite laundry, among many other items, can also improve a property’s competitive standing. You should also apply your knowledge of supply and demand factors to assess whether major renovations, such as converting units into smaller or larger suites, would be a good investment. Ultimately, the changes needed to increase appeal can differ across markets, depending on the demand for certain types of rentals and how comparables have demonstrably attracted (or failed to attract) tenants willing to pay an investor client’s desired price. For example, a salesperson uses information learned from a comparable sale, and their knowledge of the demand for two-bedroom apartments, to advise an © 2021 Real Estate Council of Ontario

investor on recommended renovations. Provided that the investor obtains a permit, they advise that a property with a series of bachelor apartments in a fourplex can be expanded into fewer, but larger, units to accommodate couples and small families who are seeking larger living spaces.

Considerations for suite-mixes The availability of property amenities, such as laundry and parking, are often dictated by a property’s suitemix. One parking space compared to two, for instance, can limit the desirability for a building if there is a mix of bachelor and one-bedroom to three-bedroom suites (with more residents than the available number of parking spaces). As a result, the value will vary between such properties. Suite-mixes also factor into the amount of income an investor can generate (e.g., generally, higher rents are associated more with two-bedroom or three-bedroom suites than with one-bedroom or bachelor suites). Demographics can affect this trend, so supply and demand should be researched. For instance, an area with a high number of families renting may not need many one-bedroom or bachelor suites; this can lead to the need for an investor to renovate or offer low rents as an incentive for tenants. Such incentives will be added costs for the investor to consider. You should only use data pertaining to legally permitted units when comparing properties. For instance, a property with an accessory apartment that has not been approved by the municipality will compromise the

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accuracy of that property’s value. For example, an investor is interested in a triplex within a residential neighbourhood. The triplex is composed of a large bachelor suite and two one-bedroom suites. Comparables discovered by the salesperson in the area indicate that bachelor and one-bedroom suite-mixes are in high demand within the area, as they have been sold at or above market value. Using the provided information, the investor is able to make an informed decision.

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Making adjustments It is important to select highly comparable properties to ensure that your estimate of value is reasonably accurate. The best comparable property is the most recent sale with the fewest adjustments. Adjustments imply differences, therefore, the more differences, the less applicable the comparable may be; as a result, the appraisal outcomes may not be reliable. Large adjustments also indicate poor comparability. Onestorey houses cannot be compared with one and onehalf storey or two-storey houses, new houses cannot be compared with old houses, and large lots cannot be compared with small lots. Time adjustments are especially difficult to account for, due to insufficient market data to accurately assess changing values over a lengthy period of time. For this reason, time is one of the most significant factors to consider when selecting comparables. There are no set timelines that can determine if a comparable sale is no longer relevant; relevancy depends on local market conditions and the frequency by which a certain property type sells. For example, if a property was sold 12 months ago and there have been no sales in the category for the last 12 months, then this could be a comparable sale. Conversely, in a market where sales are frequent, a comparable property that sold five months ago may be considered “dated” compared to a sale made within the last month. You should have a general understanding of average selling prices in your trading area and whether they are trending up or down to determine what is a reasonable time adjustment

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amount. Although you should avoid making significant adjustments when calculating value, it is important to understand that few comparable properties will be the same as the subject property. As discussed regarding suite-mixes and improvements, some variations are likely to exist; for these differences, adjustments need to be made during the valuation of the subject property.

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Lesson 2 | Page 7 of 10

A salesperson assists an investor in the valuation of a five-year-old duplex with a onebedroom and a two-bedroom suite. Several sales of similar property types have taken place in the area within the last year. Both the location and condition of the property are judged to be above average for the category. The salesperson searches various databases to find comparable properties. Four properties are selected for review. Which of the following would be considered the best comparable when evaluating the subject property? There are four options. There is only one correct answer.

1

A duplex with the same suite-mix as the subject property. It sold 18 months ago at a price close to the investor’s expectations.

2

A duplex where both units are two-bedroom units. It sold four months ago.

3

A single-family home with a one-bedroom accessory apartment in the basement. It sold three months ago.

4

A duplex with one two-bedroom unit, one three-bedroom unit, and a bachelor unit in the basement that has not been approved by the municipality. It sold 12 months ago.

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Lesson 2 | Page 8 of 10

Application of the Direct Comparison Approach The value estimates made through the application of the direct comparison approach should indicate to investors whether a subject property has the potential to meet their investment goals. The following three sections contain information on how you can apply the direct comparison approach when valuing residential investment properties.

Sourcing comparables A variety of sources exist for sales data to use in the direct comparison approach. Your best resources are the brokerage’s files and the real estate board’s listing service. Selected data is also available through registry or land titles offices, MPAC, GeoWarehouse®, and other online data sources. The goal is to collect enough pertinent information on each comparable to make meaningful adjustments and gain a true understanding of the comparable properties. In this regard, an inspection of comparables by viewing prospective properties in person is an advantage.

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Primary qualities of a good comparable When you are in the process of researching comparable sales and listings, you should look for four primary qualities. A good comparable should be: • Located within the local market area • Sold at or near the date of the appraisal • Truly comparable, in that it will appeal to the same type of buyer who would consider buying the subject property being appraised (for example, if the appraisal is for a duplex, then a single-family home would not normally be a good comparable) • An “arm’s length transaction,” meaning that there are no personal influences between the seller and the buyer that would affect the outcome or the selling price of the property (for example, a property sold to a family member would not be a good comparable)

Analysis and estimate Once you have collected sufficient data, differences that exist between the comparable and the subject property should be analyzed and adjusted for, such as the time of sale and features. Adjustments can be either dollar amounts or percentages. Salespersons typically use dollar adjustments. Finally, you should reconcile the data and arrive at a reasonable value estimate to present to your investor client.

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Lesson 2 | Page 9 of 10

A salesperson applies the direct comparison approach to help an investor estimate the value for a duplex property in a busy suburban neighbourhood. The investor’s long-term goal is to renovate extensively and rezone the property to convert it into a triplex. The property is comparable to another duplex in the area that was sold by an individual to a family member in the last few months. Which of the following actions are advisable during the salesperson’s research and selection of comparables? There are four options. There are multiple correct answers. 1

Use the other duplex as a comparable.

2

Use the brokerage’s files as primary source of information to search for comparable properties.

3

Look for a comparable that would appeal to a similar type of buyer.

4

Look for properties comparable to those that are within the same area.

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Lesson 2 | Page 10 of 10

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Determine how the direct comparison approach can be used when valuing residential investment properties with four units or less There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Definition of the direct comparison approach

The direct comparison approach is the first step you should perform when valuing a residential property on behalf of an investor. This approach attempts to mirror the market’s behaviour by comparing the property being appraised (subject property) with similar properties that have sold recently (comparables); the findings should be an estimate of a subject property’s market value.

Factors that impact value

Factors that impact a subject property and value of comparables include: • • • •

Applying the direct comparison approach

Improvements and/or renovations Varying suite-mixes Availability of amenities and parking A market area’s supply and demand

When applying the direct comparison approach, you should check that comparables are located within the same area, were sold at or near the time of appraisal, and that they are similar enough to the subject property. Differences between comparables and the subject property must be adjusted for to arrive at an accurate value estimate.

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Lesson 3 | Page 1 of 9

Lesson 3: Due Diligence and Other Obligations This lesson reinforces your knowledge of due diligence and other obligations in the context of valuing residential investment properties of four units or less.

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Lesson 3 | Page 2 of 9

It is crucial that you practice due diligence and apply your knowledge of other obligations when working with investors. Due diligence means that your actions are consistent with industry standards like Real Estate and Business Brokers Act (REBBA) and the Code of Ethics, as well as applying comparable actions of other prudent and conscientious salespersons. Additionally, your knowledge of these types of properties and the analysis required to provide an adequate level of advice will enable you to effectively deal with investors in this segment of the marketplace. Upon completion of this lesson, you will be able to: • Identify obligations for due diligence, disclosure, and responsibilities of the salesperson when valuing residential investment properties with four units or less Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 9

Your primary objective when working with clients seeking multi-unit residential properties should be to satisfy their investment goals and seek out properties that are consistent with those goals. The Code of Ethics establishes the salesperson’s responsibilities when representing the investor client. Often, third-party professionals may be required to assist.

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Lesson 3 | Page 4 of 9

Adherence to the Code of Ethics: A Review You should provide conscientious and competent service (per Code, Sec. 5) and act in the client’s best interests (per Code, Sec. 4). Additionally, if you offer an opinion about the value of a property, you must have the appropriate education or experience to provide such an opinion (per Code, Sec. 6). In the case of residential investment properties of four units or less, your value assessment of such properties should only be given if you are aware of the area’s current market conditions and any other factors affecting the value of the subject property. When using the direct comparison approach, detailed adjustments and a reconciliation must be carried out before providing the investor with an estimate of value. In cases where you are unable to offer a property value with reasonable skill, judgement, and competence, you must advise the investor to obtain services from a third-party professional, such as an appraiser (per Code, Sec. 8).

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Lesson 3 | Page 5 of 9

Discovering Material Facts There are multiple resources that you can access to gather and verify information regarding a property’s value and other material facts. Although a seller or a seller representative is often a good initial source, you can confirm the provided information’s accuracy and discover additional details through the following sources: • • • • • • •

GeoWarehouse® Land titles office Municipal office (such as fire and/or building departments) The Municipal Property Assessment Corporation (MPAC) Online data sources and subscription services Local listing service database Brokerage files © 2021 Real Estate Council of Ontario

As you know, MPAC is a municipally funded not-for-profit corporation whose role is to classify property use and assess the value of all Ontario properties, per the Assessment Act. Referencing the MPAC database demonstrates competence and reasonable skill in using the best sources of property information to determine property value. However, your performance of due diligence should include verifying all information through multiple sources (such as those listed earlier). In cases where a comparable property is on a listing service, you should also verify the data’s accuracy through more than a single source before using it to estimate the subject property’s value. Performing due diligence by cross-checking research findings will lessen the risk of valuing a property based on inaccurate, outdated, or incorrectly logged data.

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Lesson 3 | Page 6 of 9

Discovering Legal Requirements While conducting research for a subject property, you should also confirm its compliance with legal requirements, such as those related to zoning designations, fire and building codes, and municipal licensing. Zoning bylaws impact permitted uses, which can place restrictions on properties that investors wish to convert. Although requesting a rezoning through the municipality is a possibility, an investor may be deterred by the time and the significant costs associated with this process. Evidence of electrical and fire code compliance can be obtained by contacting the © 2021 Real Estate Council of Ontario

Electrical Safety Authority or the local municipality. Non-compliance may impact a property’s insurability and it’s financing qualification. Compliance certificates are rarely requested by or granted to a salesperson by a municipality. Rather, you should advise concerned investors to request that a lawyer obtain this information when preparing for the closing of a transaction. You can also include conditions which allow the buyer to confirm that the building complies with various code requirements. It is important to know that municipal licensing is not a province-wide requirement. However, in municipalities where it is required, all owners must register their rental property with the municipality and pay an annual fee. This licensing is in place to protect tenants’ rights and safety through ensuring that residences are code compliant. You should inform investors, especially those who have never encountered municipal licensing requirements, of the financial costs for annual registration. Additionally, non-compliant properties may require costly updates before they are deemed suitable for tenants. The discovery of all such material facts and communicating these to the investor can help your client to assess an investment’s cash flow potential and to make informed decisions. For example, records from a key source indicate that a property of interest is a fourplex. However, your performance of a cross-check across multiple sources indicates that zoning in the area has changed; the zoning bylaw permits two commercial units on the main floor and two residential units mentioned earlier (mixed-use). You check with the municipality on the investor’s behalf to determine if the investor’s proposed use, a fourplex, can be considered legal non-conforming (multi-residential use).

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Lesson 3 | Page 7 of 9

Assuming Mortgages Investigating a property’s current mortgage availability is also part of your due diligence obligations. If an investor expresses an interest in assuming a mortgage, you should ask the seller or the seller’s representative if this is possible and further verify with the lender after receiving permission from the seller. The incentive for the investor to assume a mortgage is to avoid the cost of setting up a new mortgage and possibly take advantage of terms and conditions that are more favourable than those being offered currently. Transferring a mortgage to a new owner

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may mean that the seller is no longer responsible for the mortgage. For this to occur, the lender must approve the buyer to assume the existing mortgage and consent to the seller being relieved of further obligations under the mortgage. This is a form of contractual assignment. Although there can be incentives for both sellers and buyers, assumed mortgages are less common for residential units of four units or less. This tends to be due to favourable interest rates available to investors at the time of purchase, depending on the financial institutions they use. In cases where interest rates are less favourable, assumed mortgages are more common. When applicable, it is important that you inform investor clients of the possible benefits of an assumable mortgage prior to the investor setting up mortgage financing independently.

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Lesson 3 | Page 8 of 9

A salesperson researches a triplex on behalf of a first-time investor. According to the listing, the triplex is legally zoned and composed of two one-bedroom units and a single bachelor unit. Once the salesperson has verified the subject property’s listing information, they intend to estimate its value using the direct comparison approach. The salesperson will be accessing the local listing service as part of their research. How else should the salesperson perform due diligence? There are three options. There are multiple correct answers.

1

Estimate the subject property’s value using information about a comparable that is discovered through the local listing service and brokerage files.

2

Request information regarding the subject property through the seller or the seller representative.

3

Inquire through MPAC to discover the subject property’s compliance with fire and building codes.

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Lesson 3 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify obligations for due diligence, disclosure, and responsibilities of the salesperson when valuing residential investment properties with four units or less There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Adhering to the Code of Ethics

You must adhere to the Code of Ethics. When representing investors and valuing residential properties you must: • Provide conscientious and competent service (per Code, Sec. 5) • Act in the client’s best interests (per Code, Sec. 4) • Offer an opinion about the value of a property, only if you have the appropriate education or experience to provide such an opinion (per Code, Sec. 6) • Advise the investor to obtain services from a third-party professional if you are unable to offer a property value with reasonable skill, judgement, and competence (per Code, Sec. 8)

Researching and verifying information

You can use the following sources to confirm a seller’s statements and/or gather and verify key information regarding a property: • GeoWarehouse® • Land titles office • Municipal office (such as fire and/or building departments) • The Municipal Property Assessment Corporation (MPAC) • Local listing service database

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• Other online data sources and subscriptions • Brokerage files You should also confirm a property’s compliance with legal requirements, such as: • Zoning designations • Fire codes • Building codes • Municipal licensing (where applicable) Certificates of compliance, if requested, can be obtained by the investor’s lawyer when preparing for the closing.

Assuming mortgages

Although assumable mortgages are less common for small multi-residential properties, you should ask the seller if this is possible. If the seller is willing to transfer the mortgage, you should verify this possibility through the lender with the seller’s permission. It is advisable to relay the benefits of assumed mortgages to investors in cases where interest rates are high.

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Lesson 4 | Page 1 of 6

Lesson 4: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 4 | Page 2 of 6

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics and lessons presented.

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Lesson 4 | Page 3 of 6

A salesperson meets with a potential first-time investor, who is interested in purchasing and financing a triplex in an urban area during a high-interest rate period. Trends indicate that mortgage rates are likely to keep rising in the future and that the vacancy rates in the community are considered stable. What might the salesperson tell the investor about the investment market? There are three options. There is only one correct answer.

1

Advise the investor that they are more likely to encounter low vacancy rates if they make their purchase during a low-interest rate period.

2

Advise the investor that the demand for rental units is more likely to be low during high-interest periods, making such investments a greater financial risk.

3

Advise the investor that if they purchase a property and finance it, any increasing interest rates will negatively impact the property’s cash flow.

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Lesson 4 | Page 4 of 6

A salesperson represents an investor who has identified a duplex property of interest that shows some minor signs of disrepair on its exterior. The duplex consists of two onebedroom units. They search the local listing service and find comparable sales that would be useful to the investor. During the search, the salesperson discovers that another duplex with two one-bedroom suites was sold recently in the area. The property appears to be well-kept, as indicated by photos of the exterior. The investor’s salesperson contacts the listing salesperson to inquire further and learn that the comparable was purchased by the previous owner’s son. Which of the following conclusions would the salesperson draw about the comparable property? There are four options. There are multiple correct answers. 1

The property’s listing and selling transaction is comparable.

2

The property’s exterior appearance was adjusted for in the valuing process.

3

The property location is comparable.

4

The property type is comparable.

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Lesson 4 | Page 5 of 6

A salesperson represents an investor who is interested in purchasing a fourplex property during a period of high-interest rates for investors. How should the salesperson perform due diligence when advising the investor on their mortgage options? There are three options. There is only one correct answer. 1

Advise the investor to obtain a mortgage rate independently through a financial institution.

2

Advise the investor that they may be able to avoid the cost of setting up a mortgage if they assume the seller’s mortgage.

3

Advise the investor to ask the property’s seller if the property’s mortgage is assumable.

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Lesson 4 | Page 6 of 6

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 3

Module Summary This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are three sections on this page with a summary of the key topics that were discussed in this module.

Supply, Demand, and Residential Tenancy Legislation

You should be aware of how market factors and tenancy legislation can impact value and investors’ purchasing decisions. Completion of this lesson has enabled you to: • Identify the factors that affect the valuing of multi-unit residential properties of four units or less • Describe the impact of residential tenancy legislation on owners of residential properties with four units or less

Valuing Properties Using the Direct Comparison Approach

You should be familiar with the purpose and use of the direct comparison approach. Completion of this lesson has enabled you to: • Determine how the direct comparison approach can be used when valuing residential investment properties with four units or less

Due Diligence and Other Obligations

You should practice due diligence and perform all obligations as per the Code of Ethics. Completion of this lesson has enabled you to: • Identify obligations for due diligence, disclosure, and responsibilities of the salesperson when valuing residential investment properties with four units or less

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Module 4: Requirements Under the Residential Tenancies Act Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 4: Requirements Under the Residential Tenancies Act Understanding the Residential Tenancies Act (RTA) is essential when you are assisting buyers investing in residential properties. This enables you to advise your client regarding lawful rent, an increase or a decrease in rent, the requirement of a rent deposit, and the rights and obligations of a landlord and a tenant. This module familiarizes you with the rights and obligations of a landlord and a tenant as prescribed by the RTA, as well as due diligence a salesperson is required to perform when dealing with clients who are interested in renting residential properties. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails Accessible PDF.

and References from the module are added to support your learning throughout this

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Menu: Requirements Under the Residential Tenancies Act

Number of Lessons

Lesson Number

7 Lessons

Lesson Name

Lesson 1

Determining the Legal Rent of a Unit

Lesson 2

Legal Requirements for a Rent Deposit

Lesson 3

Legal Requirements for Increasing Rent

Lesson 4

Circumstances for Reducing Rent

Lesson 5

Ensuring Compliance to the Residential Tenancies Act

Lesson 6

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 16

Lesson 1: Determining the Legal Rent of a Unit This lesson familiarizes you with the Residential Tenancies Act (RTA) and the parameters for establishing the legal rent for vacant and occupied residential units.

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Lesson 1 | Page 2 of 16

When a landlord decides to rent their property, they need to set the right price for their residential unit, as this helps attract prospective tenants and generate income for the landlords. Learning about the factors that influence the rent of a residential unit will enable you to provide the right advice to your investor clients in determining the legal rent of a residential unit. Upon completion of this lesson, you will be able to: • Identify the parameters for establishing the legal rent for a vacant unit • Identify the parameters for establishing the legal rent for an occupied unit Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 16

The lawful rent of a residential unit varies depending on whether the unit is vacant or occupied. When working with investor buyers who want to rent their properties, it is beneficial for you to be aware of the factors that influence the rent of a vacant and an occupied unit.

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Lesson 1 | Page 4 of 16

Definition of a Vacant Unit A property, from a rental perspective, is deemed vacant when no one is living in the unit and the unit is not generating any rental income or revenue. In other words, a vacant unit is not under any contract and is available to be used, rented, or renovated. For example, a rental unit in which the tenants have vacated the unit and the landlord is waiting for new tenants to occupy.

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Lesson 1 | Page 5 of 16

Legal Rent for a Vacant Unit The Residential Tenancies Act (RTA) allows for a limited type of rent control known as “vacancy decontrol”. Vacancy decontrol allows a landlord to increase the rent of a vacant unit for new tenants regardless of the rent guideline amount. Thus, when a unit becomes vacant a landlord is free to collect from a new tenant fair market rent. However, you should advise your clients that if they increase the rent beyond what is considered a fair market rent, they may have trouble finding tenants for their property.

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When representing an investor client, you should inform your client that if the residential unit is vacant, they can negotiate the rent for the unit with the prospective tenant and decide what services, such as hydro or parking, will be included in the rent. Once the tenancy begins, the rules about future rent increases are subject to the guidelines of the RTA. It is beneficial to inform your client that the fair market rent of a unit can be determined based on a number of factors, such as: • Market standards for rent for similar properties in that location • Accessibility to public transport, such as subway or bus stations, public libraries, schools, colleges, or shops • Amenities and facilities provided by the landlord, such as parking space, storage room, laundry facility, or internet connection

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Lesson 1 | Page 6 of 16

A Salesperson’s Role in Setting the Appropriate Rate When representing an investor landlord, it is important that you are familiar with the Residential Tenancies Act (RTA) so that you can provide proper advice to your client regarding the appropriate rate for the unit. The following two sections contain information on a salesperson’s role in setting the appropriate rate.

Advice regarding appropriate rate You should advise an investor client regarding the fair market rent for the unit based on rents collected for similar units, services provided, and access to similar amenities.

Guidance regarding fair market rent You can also provide guidance to your client regarding fair market rent they could charge for residential units. To determine appropriate fair market rent, you can look for properties that have been rented out recently in the area and compare rent charged by other landlords, amenities provided by them, as well as characteristics of the residential unit being rented. For example, the rent charged by landlords for a threebedroom unit as opposed to a one-bedroom unit.

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Lesson 1 | Page 7 of 16

An investor bought a small apartment building with vacant units. However, they are facing difficulty in finding tenants who would agree to pay the rent they set for the unit and consult their salesperson for advice. Upon arriving at the apartment building, the salesperson finds out that the rent that the investor client is expecting is much higher than the fair market price for similar properties in that area. Moreover, the unit lacks additional parking, a storage locker, and a laundry facility. The location of the unit is quite far from access to public transport, schools, and shopping malls. How should a salesperson advise their client in this situation? There are three options. There is only one correct answer.

1

The salesperson should advise the client to place an advertisement about the unit through the local media channels targeting tenants who could afford to pay the rent.

2

The salesperson should advise their client that when a vacant unit is being offered for rent, the landlord can ask any amount they wish.

3

The salesperson should advise their client to reduce the rent of the unit because the unit does not offer similar amenities to other comparable properties.

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Lesson 1 | Page 8 of 16

The Residential Tenancies Act (RTA) outlines the rights and obligations of landlords and tenants who rent residential properties. These rules apply to most rental arrangements, such as apartments, basement suites, houses, and some public housing. When dealing with an investor landlord or a tenant, it is crucial that you are aware of the rules under RTA regarding rent for an occupied unit, additional costs associated with renting, and terms under which a landlord can increase or decrease the rent.

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Lesson 1 | Page 9 of 16

Definition of an Occupied Unit An occupied unit, from a renting perspective, is the unit that a tenant occupies under a genuine lease agreement and is not considered the owner of the housing unit. When representing an investor landlord, you must know whether a residential unit is vacant or occupied to ensure that you abide by the Residential Tenancies Act (RTA) if the unit is occupied. For example, if a unit is occupied, you should ensure that a written notice has been provided to the existing tenants at least 24 hours before scheduling a showing of the unit to prospective tenants or buyers. According to the RTA, when a new tenancy is entered into, the landlord and the tenant, through negotiation, determine the rent for the rental unit and services that will be included in the rent, such as parking, hydro, heat, or cable.

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Lesson 1 | Page 10 of 16

Regulations for Rent in an Occupied Unit It is important for you to be aware of the regulations in the Residential Tenancies Act (RTA) regarding rent that must be adhered to by both landlords and the tenants when renting an occupied residential unit. This will enable you to perform your due diligence, especially when advising an investor landlord client who wishes to change the rent for their unit. The following four sections contain information on rules regarding occupied units both a landlord and a tenant must adhere to.

Regulations for rent payment A tenant is not required to provide a landlord with postdated cheques or to agree to automatic debit payments from an account, a credit card, or similar automatic withdrawal for rent payment. Any landlord stipulation to that effect in a tenancy agreement is in violation of the RTA. However, if the relationship between a landlord and a tenant is good and it is convenient for a tenant to provide post-dated cheques, the tenant may do so.

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Regulations for rent increase According to the guidelines in the RTA regarding rent increase, a landlord:  Cannot increase the rent until at least 12 months after the tenant has moved in  Can only increase the rent according to the rent increase guideline without obtaining permission from the Landlord and Tenant Board (LTB)  Cannot increase the rent retroactively if they missed increasing the rent the previous year The LTB resolves disputes between residential landlords and tenants, addresses eviction applications filed by non-profit housing co-operatives, and provides information about rights and responsibilities of landlords and tenants under the RTA. For more information on LTB, please refer to the module “Introducing the Landlord and Tenant Board”.

Regulations for notice of rent increase A landlord must give the tenant a written notice of rent increase at least 90 days before the rent increase takes effect. The notice must be served to the tenant on an approved form.

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Regulations for increasing rent above the guideline amount According to the RTA, a landlord can apply to increase the rent above the guideline if: • There is an increase in municipal taxes or charges • The landlord has incurred eligible capital expenses • The landlord has incurred operating costs related to security services Any increase in rent above the guideline amount must be approved by the LTB.

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Lesson 1 | Page 11 of 16

Increasing Rent As a general statement, a landlord can only increase the rent of the existing tenant in accordance with the Residential Tenancies Act (RTA) if 12 months have passed since: • The last rent increase • The day the rental unit was first rented by the tenant A landlord can increase the rent of a unit according to the rent increase guidelines for that year. A tenant must be served a notice of rent increase with a Landlord and Tenant Board (LTB) approved form at least 90 days before the rent increase takes effect. The following two sections contain information on where rent increase guideline is applicable.

Applies to The rent increase guideline applies to most rental arrangements covered by the RTA. The annual rent increase proposed by a landlord may not exceed the guideline amount, which is expressed as a percentage of the previous year’s rent. The landlord may increase the rent less than the guideline amount or not at all.

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Does not apply to The rent increase guideline does not apply to: • Vacant residential units • Social housing units • Nursing homes • Commercial properties • New rental units occupied for the first time for residential purposes after November 15, 2018 There is no limit to how much a landlord can increase the rent each year for these units.

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Lesson 1 | Page 12 of 16

An investor landlord purchased four residential units over a year ago and has subsequently rented them out. Since most of the tenants have been living in those units for over a year, the investor landlord wants to increase their rent. While checking the investor’s requirement for lawful rent and recent increases, the investor’s salesperson notices that their client may be violating some of the regulations under the Residential Tenancies Act (RTA). Which of the following situations is not compliant with the RTA? There are four options. There is only one correct answer.

1

The landlord sent a written notice to one of their tenants that their rent would be increased after 90 days since at that time they would be completing a year in the unit.

2

The landlord wants to increase the rent for one of their tenants to twice the guideline amount since they missed increasing the rent last year.

3

The landlord increased the rent for one of their tenants, as per the rent increase guideline, without obtaining permission from the Landlord and Tenant Board (LTB).

4

A tenant asked the landlord if they can provide post-dated cheques to pay the rent, as it was convenient for them, and the landlord agreed.

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Lesson 1 | Page 13 of 16

Additional Cost Associated with a Rental Unit As you have previously learned, one of the factors that may influence the rent of a residential unit is the additional services or facilities provided by a landlord. If your client is providing “services” and “facilities” to their tenant, they can ask the tenant to pay for them in addition to the rent. These additional costs may be charged one time or every month, depending on the nature of services provided, and must be agreed upon by both your client and their tenant. Under the Residential Tenancies Act (RTA), “facilities” and “services” include: • Furniture, appliances, and furnishings

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• 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 • Heating facilities and services • Air-conditioning facilities • Utilities and related services • Security services and facilities However, you should advise your client to reduce the rent if they decide to stop providing these services or facilities to their tenant. According to the RTA, all other deposits, extra charges, or advance payments are illegal. For example, sometimes a landlord may indicate that if a tenant wants to rent a unit, they must buy curtains or appliances currently in the apartment, or that a tenant must pay a damage deposit, rental fee, or commission. This is illegal. If a tenant has paid an illegal deposit or charge, they can apply to the Landlord and Tenant Board (LTB), within one year, to get the money back. It is best practice to advise your client to never accept illegal deposits or charges from a tenant, as your client may be prosecuted by the LTB for such an action and may also face significant penalties.

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Lesson 1 | Page 14 of 16

Ensuring the Rent Charged is Legal Being aware of the regulations regarding rent that are outlined in the Residential Tenancies Act (RTA) helps you to protect and promote the best interest of investor buyers who wish to rent their properties. The following three sections contain information on how you can help your client ensure the rent charged is legal.

Advise You must advise your landlord client in matters affecting a proposed tenancy in order to protect and promote their best interests. For example, point out terms and conditions in a lease agreement that may be contrary to the RTA. If you are not in a position to answer all the questions that a client may have, you can refer them to appropriate third-party service providers.

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Check You should perform your due diligence to check whether the rent charged by your landlord client is legal. For example, when preparing to list a rental property for sale that is occupied by tenants, discuss the legitimacy of the rents being charged and ask for documentation supporting your client's position that the rents have been increased in accordance with the rent guideline amounts, or orders issued by the Landlord and Tenant Board (LTB).

Disclose You must disclose any facts about the property that may influence the decision of the prospective tenant to rent the unit. For example, if any of the previous tenants filed a complaint against the landlord with the LTB regarding charging illegal deposits or increasing rent above the guideline amount.

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Lesson 1 | Page 15 of 16

An investor landlord has rented one of their residential units to a new tenant. Upon reviewing the lease agreement, the salesperson notices that certain conditions in the lease may be contrary to the regulations prescribed by the Residential Tenancies Act (RTA). Which of the following conditions should the salesperson ask their client to change in the lease agreement? There are five options. There are multiple correct answers.

1

The landlord charged a “cleaning cost” to their new tenant as they had to call a professional cleaner to clean the unit before the new tenant moved in.

2

The landlord agreed to provide a parking space for their tenant. However, they mentioned that the tenant’s rent would be increased by $30.

3

The landlord mentioned in the standard lease agreement that an extra cost will be charged to the tenant if they wish to use their storage facility, and cleaning and maintenance services.

4

The landlord is willing to rent the unit to the tenant under the condition that the tenant buys curtains and carpeting, and certain appliances for the rental unit.

5

The landlord asked the new tenant to pay $300 in addition to the rent, which will be refunded after the tenancy is over, in case there is accidental damage by the tenant or their guests.

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Lesson 1 | Page 16 of 16

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the parameters for establishing the legal rent for a vacant unit • Identify the parameters for establishing the legal rent for an occupied unit There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Vacant unit

A property, from a rental perspective, is deemed vacant when no one is living in the unit and the unit is not generating any rent money or revenue. In other words, a vacant unit is not under any contract and is available to be used, rented, or renovated.

Rent for a vacant unit

When a residential unit is vacant, the landlord and the prospective tenant can negotiate the rent for the unit and decide what services, such as hydro or parking, will be included. The factors that determine the rent of a vacant unit are: • Market standards for rent for similar properties in that location • Accessibility to public transport and amenities • Services and facilities provided by the landlord, such as parking, storage, and internet

Occupied unit

An occupied unit, from a renting perspective, is a unit that a tenant occupies under a genuine lease-option agreement, who is not considered the owner of the property.

Rent for an occupied unit

The Residential Tenancies Act (RTA) establishes guidelines regarding rent for a tenant in an occupied unit, as well as guidelines for increasing rent for existing tenants. These rules must be adhered to by both the landlord and the tenant throughout the duration of the tenancy.

Increase in rent

In most cases, a landlord can increase a tenant’s rent after 12 months of tenancy or 12 months after the previous rent increase. The rent can be increased according to the

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percentage mentioned in the rent increase guideline for that year. A landlord must give a tenant a 90 days’ notice on a Board-approved form before they increase the rent.

Additional cost

A landlord may charge a tenant for services or facilities they provide, which the tenant can agree to pay in addition to the rent. These facilities and services can be parking, laundry, storage, furniture, appliances, etc.

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Lesson 2 | Page 1 of 9

Lesson 2: Legal Requirements for a Rent Deposit

This lesson outlines the purpose of a rent deposit, the rules and regulations regarding rent deposit, and the rules regarding interest on the deposit.

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Lesson 2 | Page 2 of 9

Most landlords require that new tenants pay a deposit before they move into the rental unit. When representing investor landlords, you may come across situations where you have to advise your clients about rent deposits, which is covered under the Residential Tenancies Act (RTA). Upon completion of this lesson, you will be able to: • Identify the legal requirements for a landlord regarding a rent deposit Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 9

Most landlords require that new tenants pay a deposit before they move in. When representing investor clients who wish to rent their residential units, you have to inform them about the regulations in the Residential Tenancies Act (RTA) regarding rent deposits and interest payment on deposits.

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Lesson 2 | Page 4 of 9

Purpose of a Rent Deposit According to the Residential Tenancies Act (RTA), a landlord can collect a rent deposit as long as it is on or before the day a tenant enters into a tenancy agreement with the landlord. The RTA also mandates that a landlord can only use the deposit to cover the rent for the last month of the tenancy. When representing an investor landlord, you should remind your client that they can only use the deposit to cover the last month’s rent. You must also advise your client that they may not use the deposit for anything else, such as payment for damages to the unit.

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Lesson 2 | Page 5 of 9

Requirements of the Residential Tenancies Act Regarding a Rent Deposit A landlord can collect a rent deposit from a new tenant on or before the start of a tenancy. However, the Residential Tenancies Act (RTA) regulates the amount of deposit a landlord can collect from a tenant. Being aware of the requirements under the RTA regarding rent deposits will enable you to advise your client regarding the amount of deposit they can demand, the amount of interest they should pay to the tenant, and situations when they need to provide receipts. The following three sections contain information on these requirements.

Requirement for a deposit When representing an investor landlord, you should inform your client that although they can collect a rent deposit from a new tenant before the start of the tenancy, the rent deposit cannot be more than one month’s rent or the rent for one rental period, whichever is less. For example, if the tenant has agreed to pay the rent weekly, the deposit cannot be more than one week’s rent. If the tenant pays the rent monthly, the deposit cannot be more than one month’s rent. It is also beneficial to advise your client not to demand a security deposit or damage deposit from the tenant, as it is illegal. In case of any damages to the unit, you can ask your client to apply to the Landlord and Tenant Board (LTB). The LTB can determine the extent of the damage and what should be done about it.

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Increase in rent deposit You should also discuss with your investor client the possibility of increasing the deposit when the rent for a unit is increased. According to the RTA, a landlord can ask a tenant to top up the rent deposit when the rent is increased so that the deposit is the same as the new rent. Your landlord client can ask for this money even after the tenant gives a notice to terminate the tenancy.

Requirement for receipts According to the RTA, a landlord must provide receipts relating to rents and rent deposits upon request by the tenant. If requested by the tenant, the landlord should give rent receipts for a period of 12 months. However, the landlord can agree with a tenant to provide the receipt every month or at the end of the year. Therefore, when representing an investor landlord, you should inform them that when a tenant or a former tenant requests a receipt for the payment of rent or rent deposit, they must provide the receipts free of charge.

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Lesson 2 | Page 6 of 9

An investor client, who is renting out a property, received six month's rent in advance from a new tenant. The investor intends to treat the equivalent of one month's rent in this lump sum as the deposit for last month's rent. However, the investor also insisted that the tenant pay another $2,000 as damage deposit, which they promised to return to the tenant when they move out and if the rental unit was left in a good condition. The salesperson representing the investor client is aware that some of their client’s demands are in contravention of the Residential Tenancies Act (RTA). Which of the following is correct information as per the RTA? There are four options. There are multiple correct answers.

1

Since the tenant has agreed to pay six month’s rent in advance, the client can accept it as long as they keep one month’s rent aside as rent deposit.

2

The client can accept a damage deposit only if they refund the money at the end of the tenancy.

3

The client cannot ask the tenant for a damage deposit, as it would be a contravention of the RTA.

4

The client can ask for a security deposit. However, accepting six month’s rent in advance is against the law.

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Lesson 2 | Page 7 of 9

Interest Payment on Rent Deposits As you have learned previously, a landlord can ask a new tenant to pay one month’s rent as a deposit to cover the rent for the last month before the tenancy ends. Since the landlord does not use the rent deposit until the end of the tenancy, the landlord must pay the tenant interest on this deposit. Being aware of the requirements of the Residential Tenancies Act (RTA) regarding interest payment will enable you to inform your investor client of how to calculate the interest on the deposit and when to pay the interest to the tenant. The following three sections contain information on interest payment on deposits.

Interest payment You must inform your investor client that they are required to pay the tenant interest annually on the rent deposit.

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Interest calculation You must also inform your client that the interest on the rent deposit is the same as the annual rent guideline amount established each year by the provincial government and in effect when the interest payment is due.

Interest deduction When representing an investor landlord, you should also discuss the possibility that if they do not pay the interest to the tenant when it is due, the tenant may: • Deduct the interest from a future rent payment. • File a tenant application for a rebate to the Landlord and Tenant Board (LTB). However, instead of paying the tenant the interest, the investor landlord can reduce the amount needed to update the rent deposit (so that it equals the current rent) by the amount of interest owed. For example, if a tenant pays a rent deposit of $2,000 when they sign the lease agreement, the interest payable on the deposit after one year (considering the rent guideline amount is 2 per cent for that year) will be $40. Therefore, the landlord must pay the tenant $40 as interest. However, the landlord also has the right to © 2021 Real Estate Council of Ontario

demand that the tenant increase their deposit annually by the rent guideline amount, which in this case is $40. Hence, the landlord and the tenant can agree that no interest will be paid and no demand for an increase in rent deposit will be made.

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Lesson 2 | Page 8 of 9

After the first year of the tenancy, a tenant pays the rent to the investor landlord for the next month and deducts the interest owing on the deposit by the landlord from the rent amount. Since the landlord was not aware that they had to pay the tenant interest on the rent deposit, the landlord demanded that the tenant pay them the full rent, to which the tenant did not agree. Not sure of how to deal with the situation, the landlord consulted their salesperson for advice. Which of the following is the correct advice to give the client in this situation? There are three options. There is only one correct answer.

1

Tell the client that the tenant always needs to pay them the full rent, even though they owe the tenant interest on the rent deposit.

2

Tell the client that, in this case, the tenant was right to deduct the amount of interest due to them from the rent payment. However, they can ask the tenant to “top-up” the deposit by the same amount.

3

Tell the client that the tenant did not do the right thing by not paying the full rent and advise them to apply to the LTB asking for a rebate.

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Lesson 2 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the legal requirements for a landlord regarding a rent deposit There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Purpose of a rent deposit

According to the Residential Tenancies Act (RTA), a landlord can collect a rent deposit as long as they ask for it on or before the day the landlord and the tenant enter into a rental agreement. The rent deposit must be used for the rent for the last month before the tenancy ends. It cannot be used for anything else, such as to pay for damages.

Increase in rent deposit

If the rent increases after a tenant has paid a rent deposit, the landlord can ask the tenant to top up the rent deposit so that it is the same as the new rent. The landlord can ask for this money, even after a tenant gives notice to terminate the tenancy.

Paying interest on deposit

According to the RTA, a landlord must pay the tenant interest on the rent deposit every 12 months.

Calculation of interest on deposit

The amount of interest a landlord must pay to the tenant is the same as the rent guideline amount that is in effect when the interest payment is due.

Deduction of interest

A landlord can deduct from the interest payment any amount needed to legally raise the rent deposit to the amount permitted by the RTA. However, if the landlord does not pay the interest owed on the last month’s rental deposit to the tenant when it is due, the tenant can deduct the interest from a future rent payment or file an application with the LTB for a rebate.

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Lesson 3 | Page 1 of 15

Lesson 3: Legal Requirements for Increasing Rent This lesson explores the conditions under which the rent of a residential unit can be increased, the guidelines for rent increase, and the circumstances under which the rent can be increased above the guidelines.

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Lesson 3 | Page 2 of 15

Investor buyers who are renting residential properties may consult you for advice on legal requirements regarding a rent increase. Therefore, it is important that you are aware of regulations in the Residential Tenancies Act (RTA) regarding the timing of a rent increase, the rent guideline percentage, and circumstances under which a landlord can increase the rent above the guideline. This will enable you to identify instances when your client might have increased the rent contrary to the RTA. This lesson explores the conditions under which the rent of a residential unit can be increased, the guidelines for rent increase, and the circumstances under which the rent can be increased above the guidelines. Upon completion of this lesson, you will be able to: • Identify the legal requirements for a landlord regarding a rent increase • Describe the conditions under which the landlord can increase rent by more than the increase guideline Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 15

When representing investor landlords, you may have to advise them about the regulations in the Residential Tenancies Act (RTA) regarding increasing the rent of a unit.

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Lesson 3 | Page 4 of 15

The Rent Increase Guideline According to the Residential Tenancies Act (RTA), a landlord can increase the rent of a residential unit only in accordance with the rent increase guideline or as otherwise approved by the Landlord and Tenant Board (LTB). When working with investors, it is important that you are aware of the rent guideline amount and how it is calculated. This will enable you to advise your client on how to lawfully increase the rent and how to calculate the percentage increase. The following three sections contain information on the rent guideline amount.

Rent increase guideline The rent increase guideline applies to most private rental accommodation covered by the RTA. The rent guideline percentage is the maximum a landlord can increase a tenant’s rent during a year without the approval of the LTB. Before your client signs a lease agreement with their tenant, it is advisable to inform them about the rent increase guideline and remind them that they can increase the rent at the end of 12 months only in accordance with the rent increase guideline for that year. This information is also available in the Standard Form of Lease and the “Information for New Tenants” brochure, which can be downloaded from the LTB website. You should advise your client to refer to these documents to learn more about the rent increase guideline.

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Determination of the per cent rent increase The rent guideline amount is based on the Ontario Consumer Price Index (CPI), which is calculated monthly by Statistics Canada. The per cent rent increase is determined by averaging the per cent increase in the CPI during the 12 months from June of the previous year to May of the following year. When representing an investor buyer, you should inform your client that, by law, the rent increase can never be more than 2.5 per cent, even if the CPI increase is determined to be higher. This will help prevent misunderstandings between the landlord and the tenant regarding rent increases in the future.

Sample rent increase calculation When representing an investor buyer, it may be beneficial for your client if you explain to them how to calculate the rent increase based on the rent guideline amount. A sample rent increase calculation is explained as follows. Consider a situation in which the monthly rent of an apartment is $1,000 beginning June 1. With a written 90 days’ notice to the tenant in the prescribed form, the landlord could increase the rent 12 months later, on June 1 of the following year. This is the calculation for the rent increase: • If the guideline for the following year is 2.2 per cent. • A rent increase of 2.2 per cent on $1,000 = $22. © 2021 Real Estate Council of Ontario

• Therefore, the new rent on June 1, the following year could be no more than $1,022.

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Lesson 3 | Page 5 of 15

Notice Requirements for Rent Increase When informing your client about the requirements of the Residential Tenancies Act (RTA) for a rent increase, you should also advise them to give their tenants proper notice before their rent is increased. According to the RTA, a landlord must give at least 90 days’ notice on a prescribed form for any rent increase. This includes an increase involving higher operating costs or capital expenditures. An increase is void if the notice is not provided in accordance with the RTA. It is also important to note that the notice must be provided in writing by the landlord or the landlord’s representative. You are not permitted to act as the landlord’s representative without written consent. This will be discussed in more detail in the Introducing the Landlord and Tenant Board module.

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Lesson 3 | Page 6 of 15

A tenant who started their tenancy on the first of September last year was paying $1,100 per month. The tenant is surprised when they received a notice from their landlord this year in September that the rent for their unit would be increased by $50 the following month. Even though the tenant was aware their rent would be increased after 12 months of tenancy, they were not happy with their landlord’s sudden announcement of this increase and asked the landlord to reconsider the rent increase. Since the landlord is an investor, they consult their salesperson for advice. What advice should the salesperson give to their client? There are four options. There are multiple correct answers.

1

Suggest to the client that they can ask their tenant to pay a lump sum amount of $150 after 90 days if it is inconvenient for them to pay the increased rent immediately.

2

Remind the client that they must give at least 90 days’ notice to the tenants before any rent increase can take effect.

3

Remind the client that the maximum rent they can increase must be in accordance with the rent guideline amount.

4

Recommend that they can verbally discuss the rent increase with their tenant and, as long as the tenant approves, then the rent increase is acceptable.

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Lesson 3 | Page 7 of 15

Being aware of the circumstances that may warrant an increase in rent above the guideline amount will enable you to provide the right advice to your landlord clients when they want to increase the rent of the residential unit.

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Lesson 3 | Page 8 of 15

Increase in Rent Due to Additional Services A landlord and a tenant may agree to increase rent if new or additional services are provided. For example, adding a new parking space, a new kitchen, storage space, or laundry facility, etc., to the rental unit. The regulations in the Residential Tenancies Act (RTA) set out various items that fall under the parameters of a service. When representing an investor, you should advise your client to access the RTA to view prescribed services that would warrant an increase in rent above the guideline. The RTA also provides flexibility on related issues, for example, rent adjustment for an increase or a decrease in unit size and discontinued services.

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Lesson 3 | Page 9 of 15

Increase in Rent Due to Capital Expenditure According to the Residential Tenancies Act (RTA), a landlord can increase the rent of a residential unit above the guideline amount if they have done major repairs or renovations to the unit. These repairs or renovations are called “capital expenditures”. A capital expenditure is an amount that was spent for an extraordinary or significant renovation, repair, replacement, or new addition that has an expected benefit of at least five years. A capital expenditure, however, does not include: • Routine or ordinary work

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• Regular maintenance work that replaces the unit to its original condition • Work that is considered substantially cosmetic in nature • Work that is designed to enhance the level of prestige or luxury offered by the complex However, there are special rules that apply to rent increases due to capital expenditures. For example, before passing the costs on to the tenants, the Landlord and Tenant Board (LTB) determines whether the work was really necessary. The LTB also requires that any cost that was claimed as capital expenditure must have been incurred by the landlord at the time of filing the application to the LTB for approval. The LTB may not approve the landlord’s application to increase the rent above the guideline amount owing to capital expenditure if the board determines that there are serious maintenance problems in the rental unit or building, or the landlord has not complied with an order to fix an existing issue identified by the board, the municipality or the Technical Standards and Safety Authority. In that case, the board may: • Dismiss the landlord’s application • Require the landlord prove that the problems have been fixed before they can charge the approved increase

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Lesson 3 | Page 10 of 15

Increase in Rent Due to Operating Expenses Operating expenses are costs that a landlord has to incur in order to run the rental unit(s). These can be costs paid by the landlord for: • Maintenance and repair • Landscaping • Cleaning and janitorial work • Wages and salaries of the maintenance staff • Management fees or administrative expenses • Taxes • Legal and accounting expenses, usually when refuting or seeking reductions in taxes

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• Security service costs According to the Residential Tenancies Act (RTA), a landlord can apply for an increase above the guideline amount due to the operating costs related to a new security service or increased operating costs of an existing security service. However, a landlord can only make a claim for security services provided by persons who are not the landlord’s employees. For example, an application to the Landlord and Tenant Board (LTB) claiming increased costs for a building superintendent who provides security services in addition to their regular responsibilities will not be allowed. In order to determine if the increase in operating costs related to security services are extraordinary, the landlord can select a 12-month accounting period (called the base year) and compare the cost incurred during the base year with a 12-month accounting period immediately before the base year. If an investor landlord who you represent has increased operating costs for security services performed by people who are not employed by your client, you can advise your client to apply to the LTB for increasing the rent above the guideline amount.

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Lesson 3 | Page 11 of 15

Considerations Not Applicable for Rent Increase Above the Guideline In the previous section, you learned that a landlord can increase the rent above the guideline if they have done major repairs, renovations, replacements, or additions to the rental unit. These repairs, renovations, or additions are known as “capital expenditures”. However, when representing an investor landlord, you must inform them that, according to the Residential Tenancies Act (RTA), rent increases for capital expenditures cannot be more than three per cent above the guideline each year. If your client can justify an increase that is more than three per cent above the guideline, the increase can be implemented over three years at the rate of three per cent above the guideline per year.

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Lesson 3 | Page 12 of 15

Considerations Not Applicable for Rent Increase Above the Guideline: Example The Residential Tenancies Act (RTA) also explains that a capital expenditure to replace a system or an item is not an eligible capital expenditure if the system or item that was replaced did not require major repair or replacement. For example, a landlord may want to replace steel railings in the balcony of a rental unit with aluminum railings stating that aluminum railings are more durable and require less maintenance than steel. In this case, the Landlord and Tenant Board (LTB) may reject the landlord’s application to pass on the cost of replacing the steel railings to their tenants, if they do not find evidence that the steel railings were causing damage to the balcony or that the replacement was necessary to protect or restore the physical integrity of the rental unit.

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If your client is considering replacing a system or an item in a rental unit, it may be beneficial for your client if you inform them that the repair or replacement they are planning will not be considered an eligible capital expenditure unless the replacement of the system or item promotes: • Access for persons with disabilities • Energy or water conservation • Security of the residential complex or a part thereof

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Lesson 3 | Page 13 of 15

Agreements for Rent Increase Above the Guideline As you have learned, a landlord can increase the rent of a residential unit if they have done major renovations or repairs to the unit, promised to buy new equipment for the unit, or added a new service for the tenant. If your client is considering increasing the rent of the rental unit above the guideline amount, you may have to inform them that the decision to increase the rent above the guideline amount must be agreed upon by both your client and their tenant, and this agreement must be in writing. If your client has an agreement with their tenant to increase the rent in writing, they do not have to apply to the Landlord and Tenant Board (LTB) for approval of the increase. However, a tenant has five days after signing the agreement to change their mind and tell your client, in writing, that they no longer agree to the rent increase.

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Lesson 3 | Page 14 of 15

A salesperson represents an investor client who owns four units in a residential building. The client has rented them out to tenants who have been living in those units for a few years. Since the client bought those units a couple of years ago, they want to renovate them and also make some repairs. However, the client is not sure if the repairs and renovations they have planned for those units would be eligible for an increase in rent above the guideline amount. Which of the following can be considered a capital expenditure that could qualify for an increase in rent above the guideline amount? There are four options. There are multiple correct answers.

1

The client wants to build a separate parking lot for the tenants in one of the residential units and increase the rent of the tenant by three per cent above the guideline.

2

The client is planning to repair the wooden staircase in one of the units and increase the tenant’s rent by two per cent above the guideline.

3

The client wants to replace an old microwave that stopped working in one of the units and plans on buying the latest model available in the market. To cover the cost of the appliance, they plan to increase the tenant’s rent by two per cent above the guideline.

4

The client wants to renovate one of the units to add a disability ramp. To cover the cost of construction, they plan to increase the tenant’s rent by three per cent above the guideline.

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Lesson 3 | Page 15 of 15

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the legal requirements for a landlord regarding a rent increase • Describe the conditions under which the landlord can increase rent by more than the increase guideline There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Rent increase guideline According to the Residential Tenancies Act (RTA), the rent guideline per cent is the

maximum a landlord can increase a tenants' rent during a year without the approval of the LTB.

Determination of the per cent rent increase

The guideline is based on the Ontario Consumer Price Index (CPI), which is calculated by Statistics Canada every month. The per cent rent increase is calculated by averaging the CPI for 12 months from June of the previous year to May of the following year. However, the guideline increase is capped at 2.5 per cent every year even if the CPI indicates a higher increase.

Notice requirements for rent increase

A landlord must give a tenant at least 90 days written notice before a rent increase can take effect. The notice must be given to the tenant on a prescribed form under the RTA.

Rent increase above the guideline

According to the RTA, a landlord can increase a tenant's rent above the guideline if the landlord has provided additional services to the tenant, has incurred capital expenditure for the rental unit, or has operating costs for security services performed by people who are not the employees of the landlord.

Considerations not applicable for rent increase above the

Rent increases for capital expenditures cannot be more than three per cent above the guideline each year. If a landlord justifies an increase that is three per cent above the guideline, the increase can be taken over three years at the rate of three per cent above the guideline per year. Also, capital expenditure to replace a system or an item © 2021 Real Estate Council of Ontario

guideline

is not an eligible capital expenditure if the system or item that was replaced did not require major repair or replacement.

Agreements for rent increase above the guideline

A landlord and a tenant can agree, in writing, to a rent increase above the guideline if the landlord promises to do major repairs or renovations, buy new equipment for the rental unit, or add a new service for the tenant. In such cases, the landlord does not have to apply to the Landlord and Tenant Board (LTB) for approval of the increase. However, a tenant has five days after signing the agreement to change their mind and tell their landlord, in writing, that they no longer agree to the rent increase. If the landlord and the tenant cannot come to an agreement over the increase, the matter has to be decided by the LTB.

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Lesson 4 | Page 1 of 9

Lesson 4: Circumstances for Reducing Rent

This lesson outlines the circumstances under which the rent of a residential unit must be decreased.

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Lesson 4 | Page 2 of 9

You may often encounter situations where your clients consult you regarding increasing a tenant’s rent. However, you must also be able to identify situations where a tenant’s rent should be reduced, as per the Residential Tenancies Act (RTA). This will enable you to help your client avoid potential disputes or disagreements with their tenants that may lead to legal consequences. This lesson explores situations where a tenant’s rent should be reduced as per the RTA. Upon completion of this lesson, you will be able to: • Identify circumstances which may enable a reduction in rent Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 9

The Residential Tenancies Act (RTA) lists circumstances that lead to reduction in a tenant’s rent. These circumstances include full payment of capital expenditure, reductions in municipality taxes or charges, removal of a service provided by a landlord for which rent was increased, or unfulfilled promises by a landlord to carry out changes in the rental property for which rent was increased.

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Lesson 4 | Page 4 of 9

Rent Reduction After Full Payment of Capital Expenditure A landlord can increase a tenant’s rent above the guideline amount if they have done major repairs, additions, or renovations to the rental unit that extend the useful life of the property and provide a lasting benefit (for example, adding a new roof, an air conditioning unit, or an elevator). These types of renovations or repairs are called “capital expenditures”. However, according to the Residential Tenancies Act (RTA), a landlord must reduce the rent of the tenant by the percentage increase that is attributed to the capital expenditure when the capital expenditure is fully paid for. If an investor client you are representing has any plans to make renovations to the rental unit in the future and increase the rent of the tenants living in the unit, you should advise them to reduce the rent after the capital expenditure is fully paid for. It is also important to note that this only applies to the tenants who were living in the rental unit when the Landlord and Tenant Board (LTB) approved the rent increase based on the capital expenditure.

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Lesson 4 | Page 5 of 9

Rent Reduction Due to Reductions in Municipal Taxes and Charges When representing an investor client, it may be beneficial to inform them how changes in municipal taxes and charges will affect the rent of a residential unit. The following two sections contain information on rent reduction due to reductions in municipal taxes and charges.

Reductions in municipal property taxes According to the Residential Tenancies Act (RTA), a landlord is required to reduce the rent if the landlord's property taxes are reduced by more than 2.49 per cent. This is called an automatic rent reduction. In such situations, the Landlord and Tenant Board (LTB) has the authority to decide the percentage of rent reduction based on the percentage of property tax reduced. Some municipalities may send out notices of automatic rent reduction to property owners. However, policies may differ from one municipality to another. For example, the City of Toronto does not send out notices of tax reduction to landlords of properties with less than six units and, therefore, it is the landlord’s responsibility to notify their tenants if the tax decrease is more than 2.49 per cent. If not notified, a tenant may apply to the LTB for an order compelling rent reduction. You should advise your client to contact the LTB to determine the percentage of rent reduction applicable to them, in case their property taxes are reduced by

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more than 2.49 per cent and also to seek help from third-party service providers.

Reductions in municipal charges According to the RTA, if a landlord increases a tenant’s rent due to an extraordinary increase in municipal charges, such as an increase in the cost of utilities, they must reduce the tenant’s rent when the municipality charges drop below the percentage prescribed under the RTA. When representing an investor client, you should inform them that any significant decreases in municipal charges must be passed on to the tenants in the form of a rent reduction. You should also advise your clients to seek help from third-party service providers to understand how reductions in municipal charges will affect the rent of their property.

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Lesson 4 | Page 6 of 9

Rent Reduction Due to Removal of a Service by the Landlord In addition to the rent, a tenant can agree to pay for services and facilities provided by the landlord. However, according to the Residential Tenancies Act (RTA), a landlord must reduce the rent charged to the tenant if they cease to provide those services and facilities. For example, if an investor landlord you are representing charges an additional amount in the rent for providing a designated parking space, laundry facility, or storage facility to their tenant, you should advise them to reduce the tenant’s rent accordingly if they cease to provide the same. It is also beneficial to know that a tenant has one year, from the day the landlord stops providing additional services or facilities, to apply to the Landlord and Tenant Board (LTB) to have their rent reduced.

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Lesson 4 | Page 7 of 9

Rent Reduction Due to Unfulfilled Promises by the Landlord A landlord may often mention services like resurfacing the parking lot, renovating the bathroom, remodeling the kitchen, or adding extra utilities in a rental unit to entice a tenant. However, after a tenant signs a lease, some landlords do not fulfill their promises. When representing an investor client, it is best practice to find out if your client has promised to provide specific services or facilities to their tenant and explain to them the importance of fulfilling those promises in time. The following three sections contain information on how unfulfilled promises by a landlord affects the rent.

Circumstances that lead to rent reduction According to the Residential Tenancies Act (RTA), a tenant may apply to the Landlord and Tenant Board (LTB) to have their rent reduced or have the landlord pay their money back if the landlord and the tenant signed an agreement to increase the rent and: • The landlord failed in whole or in part to carry out an undertaking under the agreement • The agreement was based on work that the landlord claimed to have done but did not • The agreement was based on services that the landlord claimed to provide but did not You should inform your client that any promises by your client about a repair or an addition to the unit must be done in writing. You should also advise your client to include, in writing, a deadline for completion of the promised work and inform them that, if unfulfilled, these circumstances would lead to a reduction in rent.

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Time limitation You should inform your landlord client that a tenant can apply to the LTB for a decrease in rent two years after the rent increase becomes effective. You must also advise your client to refer to third-party service providers for further help.

Landlord and Tenant Board’s order When advising a landlord client, you should also inform them that if a tenant applies to the LTB for decrease in rent due to unfulfilled promises by the landlord, the Board can: • Order the landlord to do specified repairs or replacements, or other work within a specified time. • Allow the tenant to deduct an amount from future rent payments if a landlord fails to comply with the order within the specified time. • Order an abatement of rent. The landlord may be asked to pay a lump sum amount to the tenant, which may mean giving back a part of the rent paid. The Board can also allow the tenant to pay

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less rent (by a certain amount or percentage) or even no rent for a specified period of time.

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Lesson 4 | Page 8 of 9

When representing investor clients, a salesperson may come across situations when their clients may be required to reduce the rent charged to their tenants. Some situations are given as options that could possibly lead to a reduction in the tenant’s rent. In which of the following situations should a landlord client reduce their tenant’s rent? There are five options. There are multiple correct answers.

1

The landlord and their tenant agreed to an increase in rent for providing a storage facility and an air conditioning unit for the entire term of the tenancy.

2

A landlord received a notice from the municipality that their property tax was reduced by three per cent.

3

A landlord receives a request from their tenant to reduce their rent as the tenant is travelling most of the time and not using utilities in the rental unit.

4

A landlord starts parking their own car in the parking lot that they had previously allotted to the tenant and included in their rent.

5

A landlord could not renovate the bathroom in the rental home for which they had increased the tenant’s rent.

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Lesson 4 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify circumstances which may enable a reduction in rent There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Full payment of capital A landlord may increase the rent for their tenant if they have done major repairs or renovations to the rental unit or have provided a new service for the tenant, after expenditure

getting approval from the Landlord and Tenant Board (LTB). These expenses are known as capital expenditure. However, the RTA requires the landlord to reduce the rent, by the percentage increased, after the capital expenditure is fully paid for.

Reductions in municipal property taxes

According to the Residential Tenancies Act (RTA), a landlord is required to reduce their tenant's rent if the landlord's property taxes are reduced by more than 2.49 per cent. A landlord should contact the LTB to determine the percentage of rent reduction applicable to them.

Reductions in municipal charges

According to the RTA, if a landlord increases the rent of a tenant due to an extraordinary increase in the cost of municipal charges (for example, the cost of utilities), the landlord must reduce the rent of the unit when the municipality charges drop below the percentage prescribed under the RTA.

Removal of a service by the landlord

If a landlord increases a tenant's rent for providing additional services or facilities, they must reduce the rent if they cease to provide those services or facilities. For example, parking space, laundry facility, storage facility, etc.

Unfulfilled promises by the landlord

According to the RTA, a tenant may apply to the LTB to have their rent reduced or have the landlord pay their money back if the landlord and tenant signed an agreement to increase the rent and:

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• The landlord failed in whole or in part to carry out an undertaking under the agreement • The agreement was based on work that the landlord claimed to have done but did not • The agreement was based on services that the landlord claimed to provide but did not

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Lesson 5 | Page 1 of 26

Lesson 5: Ensuring Compliance to the Residential Tenancies Act

This lesson highlights important issues that are regulated under the RTA, such as key deposits, Non-Sufficient Funds (NSF) cheques, and obligations of landlords and tenants under the RTA.

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Lesson 5 | Page 2 of 26

Having a competent knowledge of the Residential Tenancies Act (RTA) enables you to have a better understanding of important issues that are regulated under this legislation, such as how much of a deposit a landlord could charge for keys, what a landlord can do if a tenant’s cheque is returned due to non-sufficient funds, and what the landlord’s and the tenant’s obligations are towards unit maintenance. Moreover, having a competent knowledge of the RTA enables you to provide necessary resources to your clients that will not only help them start a tenancy but also ensure their compliance with the RTA. Upon completion of this lesson, you will be able to: • Identify other important issues regulated under the RTA • Identify the salesperson’s due diligence to ensure compliance with the RTA Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 5 | Page 3 of 26

An understanding of the issues that are regulated under the Residential Tenancies Act (RTA) is crucial when you are representing investor landlords, as they may consult you for your advice regarding whether to take a key deposit from tenants, how to handle a Non-Sufficient Funds (NSF) cheque, or what services and utilities should be provided by a landlord.

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Lesson 5 | Page 4 of 26

Key Deposits There have been instances when landlords have charged tenants a considerable amount of money as a key deposit and tenants have ended up paying. According to the Residential Tenancies Act (RTA), a landlord can ask for a key or fob deposit, only if: • The deposit is refundable • The amount of deposit is in compliance with the RTA

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If your client includes a key deposit in the lease agreement, you should advise them that they need to give this deposit back when the tenant returns the key(s) at the end of their tenancy. You should also inform your client that they can charge their tenant for additional keys at the tenant’s request (for example, if the tenant wants an extra set of keys or if the tenant loses their keys). However, the charge cannot be more than the actual cost of the keys. It is also important to note that your client cannot charge their tenant for new keys if they decide to replace an existing lock with a new one.

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Lesson 5 | Page 5 of 26

Non-Sufficient Funds According to the Residential Tenancies Act (RTA), if a tenant’s cheque is returned as Non-Sufficient Funds (NSF) from the bank, a landlord can ask the tenant to pay the charges the landlord had to pay the bank, plus an administrative charge of not more than $20. When representing an investor landlord, you should advise your client to discuss the importance of availability of funds with their tenant if the tenant decides to pay their rent by cheque. This will not only help your client avoid the unnecessary hassle of processing an NSF cheque, but also prevent the tenant from paying extra charges and getting a bad credit rating. It is important to know that a landlord can also claim any NSF cheque charges if they apply to the Landlord and Tenant Board (LTB) for arrears of rent.

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Lesson 5 | Page 6 of 26

Utilities and Basic Services Covered by the Landlord If your client wants to rent their unit, you should advise them to keep the rental property habitable and in a good state of repair. This means, should your client decide to provide utilities, appliances, or services to the tenant, they must ensure that the utilities, appliances, and services are kept in working order. The following two sections contain information on the utilities and basic services that should be covered by the landlord.

Utilities provided by the landlord You should inform your client that, according to the Residential Tenancies Act (RTA), any utilities or appliances that a landlord provides to their tenant must be kept in working order. This could include: • Electrical, plumbing, or heating systems • Kitchen appliances • Carpets in the unit or common areas • Walls, roofs, and ceilings • Windows, doors, locks, and lighting • Garages, laundry rooms, patios, walkways, or pools You should also inform your client that if something no longer works due to normal wear and tear or because it has worn out, they should repair or replace it. However, when something is replaced by the landlord, it is not required to provide a new or better model. For example, if a stove supplied by the landlord cannot be repaired, it must be replaced. However, it does not

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have to be replaced with a newer model with more features. Also, the landlord can replace it with a used stove, as long as the used stove works properly.

Vital services provided by the landlord Vital services that a landlord provides to a tenant are: • Heat • Electricity • Hot and cold water • Fuel or gas According to the RTA a landlord cannot withhold a reasonable supply of the vital services provided. The RTA also requires landlords to follow certain standards when it comes to providing vital services. For example, if a landlord provides heat, it must be kept at a minimum of 20 degrees Celsius from September 1 to June 15. However, some municipal standards may be higher. When representing an investor client, you should inform your client that under no circumstance can they withhold a reasonable supply of vital services – even if the tenant’s rent is overdue or the tenant has damaged the property. If your client wants their tenant to arrange for one or more of these services, such as paying the hydro company directly for electricity, you should inform them that they cannot deliberately interfere with the supply of those services.

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Lesson 5 | Page 7 of 26

An investor client wants to rent out one of their residential units and asks their salesperson to review the lease agreement. As the salesperson reviews the lease agreement, they notice that some of the content in the agreement is not in compliance with the Residential Tenancies Act (RTA). Which of the following statements should the investor landlord change in the lease agreement? There are four options. There are multiple correct answers.

1

The investor landlord has asked the tenant to pay half a month’s rent as a deposit for keys and fob for the unit.

2

The landlord mentioned in the lease agreement that the tenant must pay a key deposit, but it will be refunded at the end of the tenancy.

3

The landlord mentioned that if the tenant’s cheque is returned because of Non-Sufficient Funds (NSF), the tenant will have to pay the administrative charge of $40 plus any NSF charges made by the client’s bank.

4

The landlord mentioned that if the carpeting, tiles, or wooden flooring of the house wears out while the tenant is staying at the unit, the tenant must replace them.

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Lesson 5 | Page 8 of 26

In order to ensure that the rental unit is compliant with health, safety, housing, and maintenance standards, the Residential Tenancies Act (RTA) lists rights and obligations of landlords and tenants regarding unit maintenance.

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Lesson 5 | Page 9 of 26

Unit Maintenance Every tenant has a right to a well-maintained home. However, both landlords and tenants are responsible for keeping the rental unit in a good state of maintenance. The Residential Tenancies Act (RTA) outlines the landlord’s and tenant’s responsibilities towards unit maintenance and upkeep. The following two sections contain information on unit maintenance that should be completed by both landlords and tenants.

Unit maintenance by the landlord According to the RTA, it is the landlord’s responsibility to maintain the unit in a good state of repair, even if: • The tenant was aware of the problems in the unit before they moved in • The lease agreement says the tenant is responsible for the maintenance When representing an investor client who is interested in renting their unit, you should advise them that it is their responsibility to maintain the cleanliness and upkeep of the common areas of the unit, such as lobby halls, elevators, laundry room, pool, parking lots, and garage. You should also advise your client to check for infestation of pests, such as cockroaches, bedbugs and mice, in the unit.

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Unit maintenance by the tenant According to the RTA, a tenant is responsible for: • Keeping the unit clean, up to the standard that most people consider ordinary or normal cleanliness • Repairing or paying for any undue damage caused by the wilful or negligent conduct of the tenant, tenant’s guests, or another person permitted in the rental unit by the tenant

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Lesson 5 | Page 10 of 26

Rent Withholding by the Tenant When representing an investor landlord, you should advise your client to keep the rental unit in a good state of repair. However, you should also inform your client that, according to the Residential Tenancies Act (RTA), a tenant cannot withhold paying rent even if the landlord is not properly maintaining the unit. If a tenant withholds rent, your client can give them a notice of termination for non-payment of rent and then file an application with the Landlord and Tenant Board to evict the tenant. However, the RTA does allow a tenant to withhold one month’s rent if the tenant is entitled to a Residential Tenancy Agreement (Standard Form of Lease) but did not get one. Therefore, you should advise your client that if their

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tenant requests a Standard Form of Lease, they must provide it to the tenant within 21 calendar days. If a tenant still does not get the Standard Form of Lease 30 calendar days after they have withheld rent, the RTA allows the tenant to keep the withheld rent. It is important to note that the tenant cannot withhold more than one month’s rent and must continue paying their rent for the term of their lease, even if they never receive the standard lease from their landlord. However, if a standard lease is not provided, special rules allow a tenant to end their fixed term early.

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Lesson 5 | Page 11 of 26

Compliance with Health, Safety, Housing, and Maintenance Standards When representing an investor client, you should advise them that in addition to properly maintaining the rental unit, they must also ensure that the unit meets the municipal or provincial health, safety, housing, and maintenance standards. The following three sections contain information on ensuring compliance with health, safety, housing, and maintenance standards.

Compliance with maintenance standards Most communities have bylaws that set the minimum standards for the upkeep and maintenance of a rental property. The local municipal government is responsible for enforcing these bylaws. When representing an investor client, you should advise your client to always maintain the rental property to the minimum standards specified by the municipality. It is important to note that some communities do not have property standard bylaws. In those areas, the landlord must follow the maintenance standards set out in the Residential Tenancies Act (RTA) regulations.

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Compliance with health and safety standards The RTA outlines requirements for residential rental units to ensure safety of the tenants, such as installing guards on staircases and balconies, safety devices on windows, and keeping exterior common areas free of hazardous substances, noxious weeds, and substances that create an unsafe condition for occupants living in the unit, as well as in adjoining units. You should advise your client to refer to the RTA to ensure the rental unit meets the specified health and safety requirements.

Compliance with fire and electrical standards You must advise your client to ensure the rental unit is compliant with the fire and electrical safety standards. You should inform your client to obtain information regarding fire safety laws for rental properties from the local fire department or from the website of the Office of the Ontario Fire Marshal. You can also suggest that your client contact the Electrical Safety Authority for information on the Electrical Safety Code, or to arrange an inspection of the property if needed.

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Lesson 5 | Page 12 of 26

An investor client contacted their salesperson to help them understand their obligations as a landlord regarding proper unit maintenance. Some examples that highlight the landlord’s responsibilities, as well as those of a tenant’s, are given as options. Which of the following are the responsibilities of the landlord as specified under the Residential Tenancies Act (RTA)? There are four options. There are multiple correct answers. 1

Maintenance and cleanliness of lobby halls, elevators, parking lot, and laundry room

2

Repairing a window that was accidentally broken by one of the tenant’s guests

3

Controlling pests, such as cockroaches and mice

4

Keeping the rental unit reasonably clean

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Lesson 5 | Page 13 of 26

You should have a competent knowledge of the Residential Tenancies Act (RTA) to help your investor clients understand their rights and obligations as landlords.

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Lesson 5 | Page 14 of 26

Having a Competent Knowledge of the Residential Tenancies Act Having an in-depth knowledge of the Residential Tenancies Act (RTA) is crucial for you to provide the right advice to your clients about tenancies. This includes regulations regarding rent, rent deposit, conditions in which rent can be increased or decreased, regulations for showing an occupied unit, and the rights of the tenants throughout the duration of the tenancy. Having a competent knowledge of the RTA not only helps you provide the right advice to your clients but also ensures that you are compliant with the Code of Ethics under REBBA.

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Lesson 5 | Page 15 of 26

Informing the Client where to Find Information Regarding the Residential Tenancies Act When representing an investor client, you should inform your client about the Residential Tenancies Act (RTA) and where to find the required information. This information is available on the website of the Government of Ontario. Alternatively, you can download and provide your clients with a copy of “Brochure: A Guide to the Residential Tenancies Act” from the Landlord and Tenant Board (LTB) website. You can also recommend to your client that they refer to the various landlord and tenant advisory group websites. You should also advise your clients to write to the Government of Ontario or call any of the numbers listed on their website in case they have any questions regarding the RTA. In case of any complaints, they can reach out to the Rental Housing Enforcement Unit (RHEU) for assistance.

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Lesson 5 | Page 16 of 26

Setting Up Showings in Compliance to the Residential Tenancies Act A tenant cannot prevent a prospective buyer or tenant from visiting their home. However, when representing an investor client, you must be aware of the regulations under the Residential Tenancies Act (RTA) regarding showing a residential unit to prospective tenants or buyers. When representing an investor client, you should advise them not only about the regulations under the RTA regarding lawful entry into the rental unit but should also ensure that any showing you schedule is in compliance with the RTA. The following two sections contain information on the regulations under the RTA regarding the showing of a rental unit.

Providing proper notice When preparing to show a residential unit to prospective tenants or buyers, you must inform your client about the regulations in the RTA regarding the entry of the landlord into a rental unit for showings and other purposes. According to the RTA, an existing tenant must be given at least a 24-hour written notice, and a showing can only take place between 8 a.m. and 8 p.m. It is important to note that entry by the landlord with proper written notice is permitted, provided that the notice sets out the reason for the request and the day and time of the requested entry. You can provide a written notice to a tenant regarding a showing, on your client’s behalf, only if you have a written authorization from your client.

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More information regarding regulations for entry into a rental unit will be presented in the Interactions with Tenants module.

Considering the tenant’s preference When setting up showings, you must remember that entry into a rental unit, provided that the appropriate written notice has been given, is the right of a landlord and should not be viewed as a privilege. Therefore, a tenant must not obstruct a showing or refuse entry when prior written notice has been given. However, you should also be mindful of the tenant’s preferences. For example, a tenant may choose whether they would like to be present during the showing. In such cases, always try to accommodate their wishes. You must also be careful not to take pictures, or allow prospective buyers or tenants to take pictures, of the property while it is occupied by a tenant unless the tenant gives their consent.

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Lesson 5 | Page 17 of 26

Ensuring Compliance with the Residential Tenancies Act It is your responsibility to ensure that your client is aware of the Residential Tenancies Act (RTA) and understands their rights and obligations as outlined by the RTA. This involves supplying important documents to your client. The following three sections contain information on the due diligence you must perform to ensure compliance with the RTA.

Advising the tenant According to the RTA, a landlord can collect a rent deposit on or before the start of a new tenancy. When representing a landlord client, you are expected to advise your client about the lawful use of the rent deposit. However, you should do your due diligence to also inform the tenant that they are not required to pay more than one month’s rent as a deposit if the landlord wants them to pay the rent monthly. If the landlord wants the tenant to pay the rent by the week, the deposit cannot be more than one week’s rent. It is best practice to inform the tenant that their landlord can only use this deposit to cover the rent for the last month before the tenancy ends and not to pay for anything else, such as damages to the unit.

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Supplying forms to clients As of April 30, 2018, landlords and tenants signing a new residential lease in Ontario are required to use the Standard Form of Lease. This requirement applies to new leases for most private market rentals, including, but not limited to, apartments, basement apartments, condominium units, and houses. When representing a client, you are required to use the Standard Form of Lease from the Landlord and Tenant Board (LTB) website to be used for starting a new tenancy.

Supplying forms to tenants A landlord must provide the “Information for New Tenants” brochure to new tenants on or before a tenancy begins. Many landlords do not provide this brochure to their tenants and, as a result, tenants are unaware of their rights and obligations as outlined by the RTA. When representing an investor landlord, it is considered best practice to advise your client to provide this brochure to their tenant or suggest that they inform their tenant how to obtain the brochure from the LTB website. You can also attach a copy of the brochure to the Standard Form of Lease before handing it out to your client to ensure the brochure is given to the tenant.

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Lesson 5 | Page 18 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. Having a competent knowledge of which of the following options enables a salesperson to help both the landlord and tenant understand their rights and obligations when renting a residential unit? There are three options. There is only one correct answer. 1

Landlord’s property

2

Landlord and Tenant Board

3

Residential Tenancies Act

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Lesson 5 | Page 19 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. A salesperson must guide their landlord client to access the Residential Tenancies Act (RTA) from which website? There are three options. There is only one correct answer. 1

Government of Ontario

2

Government of Canada

3

RECO

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Lesson 5 | Page 20 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. The salesperson should also inform the client about the RTA. If a client or their tenant has any questions regarding the RTA, they can either write to the Government of Ontario or call any of the phone numbers listed on their website. In case of complaints, whom should a landlord or a tenant reach out for help? There are three options. There is only one correct answer. 1

Rental Housing Enforcement Unit (RHEU)

2

Landlord and Tenant Board

3

OREA

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Lesson 5 | Page 21 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. To whom should the salesperson send an advance written notice to perform their due diligence and ensure compliance with the RTA while setting up showings for prospective tenants or buyers? There are three options. There is only one correct answer. 1

Building Superintendent

2

Existing tenant

3

Landlord

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Lesson 5 | Page 22 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. What is the minimum duration for the advance notice that the salesperson should send to the existing tenants prior to setting up showings for prospective tenants and buyers to ensure compliance with the RTA? There are three options. There is only one correct answer. 1

12 hours

2

24 hours

3

36 hours

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Lesson 5 | Page 23 of 26

When working with an investor landlord, a salesperson is expected to provide appropriate advice to their client who is interested in starting a tenancy. The salesperson should inform the tenant about the usage of which of the following deposit by the landlord? There are three options. There is only one correct answer. 1

Rent deposit

2

Security deposit

3

Damage deposit

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Lesson 5 | Page 24 of 26

When working with an investor landlord, a salesperson is expected to advise their client to provide the “Information for New Tenants” brochure to their new tenants. Usage of which of the following by the landlord client should be ensured by the salesperson to start a new tenancy? There are three options. There is only one correct answer. 1

Standard Form of Lease

2

LTB Rules and Procedures

3

The Tribunals Ontario Dispute Guidelines

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Lesson 5 | Page 25 of 26

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify other important issues regulated under the Residential Tenancies Act • Identify the salesperson’s due diligence to ensure compliance with the Residential Tenancies Act There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Key or fob deposit

According to the Residential Tenancies Act (RTA), a landlord can ask for a key deposit only if the deposit is refundable and the amount of the deposit is not more than the amount that is in compliance with the RTA. The landlord can also charge a tenant for additional keys at the tenant’s request, but the charge cannot be more than the actual cost of the keys.

Non-Sufficient Funds (NSF) cheques

If a tenant's cheque is returned NSF, a landlord can ask the tenant to pay for the charges the landlord had to pay to the bank, plus an administrative fee as specified under the RTA.

Utilities provided by the landlord

According to the RTA, a landlord must keep a rental property in a good state of repair. Any appliance or thing that a landlord provides to the tenant must be kept in working order. This could include electrical, plumbing, heating, appliances, carpeting in the unit or common areas, doors, windows, etc. If anything stops working due to normal wear and tear or because it has worn out, the landlord must repair or replace it. However, a landlord is not required to provide a newer model with better features.

Vital services provided by the landlord

According to the RTA, a landlord cannot withhold a reasonable supply of any vital services provided, such as heat, electricity, hot and cold water, or gas. This rule applies even if the tenant's rent is overdue or the tenant has damaged the property.

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Unit maintenance to be completed by the landlord

According to the RTA, a landlord is responsible to maintain the cleanliness and upkeep of common areas of the unit, such as lobby halls, elevators, laundry room, pool, parking lots, and garage. A landlord should also keep the infestation of pests, such as cockroaches and mice, in check.

Unit maintenance to be completed by the tenant

According to the RTA, a tenant is responsible for keeping the unit reasonably clean. A tenant is also required to repair or pay for any undue damage caused by the wilful or negligent conduct of the tenant, the tenant’s guests, or another person permitted in the rental unit by the tenant.

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Lesson 5 | Page 26 of 26

There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Rent withholding by the tenant

According to the RTA, a tenant cannot withhold rent if a landlord is not properly maintaining the unit. If a tenant withholds rent, a landlord can give them a notice of termination for non-payment of rent and then file an application with the Landlord and Tenant Board (LTB) to evict the tenant. However, the RTA allows a tenant to withhold one month's rent if the tenant requests a residential tenancy agreement and does not receive one within 21 calendar days.

Compliance with health, safety, housing, and maintenance standards

According to the RTA, a landlord must ensure that the rental property meets health, safety, housing, and maintenance standards. These standards are set out in municipal bylaws or provincial maintenance standards. A landlord must also ensure that the rental property is compliant with fire safety laws. Information regarding fire safety laws can be obtained from the local fire department or downloaded from the website of the Office of the Ontario Fire Marshal.

Ensuring compliance with the RTA

A salesperson can ensure compliance by the landlord with the RTA is by: • Having a competent knowledge of the RTA • Informing the clients about the RTA and how to access it online from the official website of the Government of Ontario. Alternatively, a salesperson can provide a copy of “A Guide to the RTA” to their clients • Setting up showings in compliance with the RTA, such as by providing proper written notice to the existing tenant, with written authorization from the landlord, at least 24 hours before the scheduled showing • Considering the existing tenant's preferences during showings, such as their preference to be present during the showings, not taking pictures of the unit without the tenant's consent, etc. • Informing the tenant that they are only required to pay one month's rent as a deposit, which would only be used to cover the rent for the last month before

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the end of the tenancy and not to pay for anything else, such as damage deposits to the unit • Ensuring the Standard Form of Lease is used when starting a new tenancy • Supplying the “Information for New Tenants” brochure to the tenant or by guiding the tenant to access the brochure from the LTB website

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Lesson 6 | Page 1 of 8

Lesson 6: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge of the entire module.

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Lesson 6 | Page 2 of 8

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 6 | Page 3 of 8

An investor client has tenants who have been living at one of their duplexes for over 12 months. When the client first rented the property, they charged a rent of $1,500 per month, but they now feel they charged too little, as other similar properties were being rented at a much higher price. The client sent a notice to their tenants that when their lease is renewed, their rent will increase by $50. The tenants do not think they have to pay the $50 increase because it is almost a 3 per cent increase from their existing rent, which is more than the guideline amount of 2.2 per cent increase for that year. The client then consults the salesperson to suggest ways in which the rent can be increased above the guideline. Which of the following is correct as per the Residential Tenancies Act (RTA)? There are three options. There is only one correct answer. 1

An increase is justified given that other comparable units in the market are rented at the same rate.

2

The rent can be increased above the guideline amount if the investor landlord tells their tenants that they are going to renovate the house later that year.

3

As per the RTA, the landlord can only increase the rent by the current rent guideline amount.

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Lesson 6 | Page 4 of 8

An investor buyer bought a triplex and made some repairs to the units before renting one out. They also collected from the tenant a deposit equal to two month’s rent, claiming that they need one month’s rent to cover the last month’s rent and the other to cover any damages that may be incurred to the unit. While reviewing the lease agreement, the salesperson notices these inclusions. Which of the following situations comply with the Residential Tenancies Act (RTA)? There are four options. There is only one correct answer. 1

According to the RTA, the landlord may collect deposits amounting to two months’ rent.

2

According to the RTA, the landlord must not collect any deposit to cover potential damages to the unit and they should remove this request from the lease agreement.

3

According to the RTA, collecting a damage deposit is illegal, but the landlord can take an extra month’s rent as a security deposit if they promise to return it at the end of tenancy.

4

According to the RTA, the landlord cannot take any form of deposit from their tenants.

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Lesson 6 | Page 5 of 8

An investor client has received $1,000 (one month’s rent) from the tenant before they signed a lease agreement. This amount was taken as a deposit to cover the last month’s rent before the tenancy is over. After 12 months of tenancy, the landlord increased the tenant’s rent, as per the percentage permitted by the rent guideline amount for that year, which is 2.2 per cent. However, the landlord is not sure how much interest they should pay to their tenant on the last month’s rent. What amount should the landlord client pay to their tenant as interest on the rent deposit? There are four options. There is only one correct answer. 1

$18

2

$20

3

$22

4

$15

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Lesson 6 | Page 6 of 8

A landlord client had rented out a unit on October 1 last year at a rent of $2,000 per month. They sent a notice to their tenant on July 1 of the following year that their rent would be going up from October 1, since they would have completed 12 months of tenancy. Moreover, the landlord had remodeled the kitchen in the rental unit last year. Therefore, they notified their tenant that the total rent increase would be $104. Initially, the tenant agreed to pay the amount, as they wanted to continue living in the unit. However, they later refused to pay claiming that the increase was 3 per cent above the rent increase guideline of 2.2 per cent for that year. Not sure of how to deal with the situation, the landlord client consults the salesperson for advice. Which of the following is correct as per the Residential Tenancies Act (RTA)? There are three options. There is only one correct answer.

1

The amount that the landlord has requested is correct owing to the renovations they have done in the unit, if authorized by the Landlord and Tenant Board (LTB).

2

The landlord can only increase the amount as per the rent increase guideline, so the rent can only be increased by 2.2 per cent.

3

The landlord can increase the rent by any amount if they have done renovations to the rental unit as long as the amount increased covers the cost of work done.

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Lesson 6 | Page 7 of 8

A client wants to sell one of the residential units they own and contacts their salesperson to arrange for potential buyers to see their property. However, there are tenants who currently live in this property. When the salesperson contacts their client to schedule the showing, the client says, “You can bring them over anytime you wish. I have spare keys to the unit and the tenants are not at home most of the day.” Which of the following is correct when showing a tenanted property? There are three options. There is only one correct answer.

1

It is acceptable to arrange for showing according to the potential buyer’s availability if the client has spare keys to the unit.

2

It is acceptable that the client verbally informs the tenant that prospective buyers may come to visit the unit any time during the week.

3

It is acceptable that the client notifies the existing tenants in writing 24 hours in advance of the showing.

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Lesson 6 | Page 8 of 8

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 3

Module Summary

This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are five sections on this page with a summary of the key topics that were discussed in this module.

Determining Legal Rent of a Unit

You must know about the factors that determine the rent of a vacant unit as well as the guidelines for increasing rent for existing tenants in a residential unit. Completion of this lesson enabled you to: • Identify the parameters for establishing the legal rent for a vacant unit • Identify the parameters for establishing the legal rent for an occupied unit

Legal Requirements for a You must be aware of the regulations in the Residential Tenancies Act (RTA) regarding the legal requirements of a rent deposit and rules regarding interest Rent Deposit payment on rent deposits.

Completion of this lesson enabled you to: • Identify the legal requirements for a landlord regarding a rent deposit

Legal Requirements for Increasing Rent

You must know the important rules and regulations under the RTA regarding increasing rent and circumstances when rent can be increased above the guideline. Completion of this lesson enabled you to: • Identify the legal requirements for a landlord regarding a rent increase • Describe the conditions under which the landlord can increase rent by more than the increase guideline

Circumstances for Reducing Rent

You must know that circumstances, such as full payment of capital expenditure, reductions in municipal taxes and charges, removal of a service by the landlord, and unfulfilled promises from the rent increase agreement on the landlord’s part can lead to a reduction in the rent. Completion of this lesson enabled you to: • Identify circumstances which may enable a reduction in rent

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Ensuring Compliance to the RTA

You must know about important issues that are regulated under the RTA, such as key deposits, NSF cheques, and setting up showings in compliance to the RTA. You also learned about the due diligence you are expected to perform to ensure your client adheres to the rules outlined in the RTA regarding residential rental properties. Completion of this lesson enabled you to: • Identify other important issues regulated under the RTA • Identify the salesperson’s due diligence to ensure compliance with the RTA

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V7.2

Module 5: Introducing the Landlord and Tenant Board Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

© 2021 Real Estate Council of Ontario

Module 5: Introducing the Landlord and Tenant Board In the previous module you learned about the requirements from landlords and tenants under the Residential Tenancies Act (RTA). When representing investor clients, they might ask you for advice regarding tenancy matters and disputes with respect to this legislation. This module describes how the Landlord and Tenant Board (LTB), set up under the authority of the RTA, manages tenancy matters and disputes between landlords and tenants. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails Accessible PDF.

and References from the module are added to support your learning throughout this

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Menu: Introducing the Landlord and Tenant Board

Number of Lessons

Lesson Number

6 Lessons

Lesson Name

Lesson 1

The Role of the Landlord and Tenant Board

Lesson 2

Residential Tenancies Act

Lesson 3

Finding Information Regarding Tenancy Matters

Lesson 4

Dispute Resolution

Lesson 5

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 13

Lesson 1: The Role of the Landlord and Tenant Board

This lesson explains the role of the Landlord and Tenant Board and how it can benefit landlords and tenants.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 2 of 13

The Landlord and Tenant Board (LTB) provides information about the rights and responsibilities of landlords and tenants under the Residential Tenancies Act (RTA). When representing investor clients, it is beneficial for you to be aware of the role of the LTB in managing tenancy matters and disputes. Upon completion of this lesson, you will be able to: • Describe key information about the LTB • Identify the role of the LTB Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 3 of 13

The Landlord and Tenant Board (LTB) is one of the eight tribunals that make up the Social Justice Tribunals Ontario and was created under the authority of the Residential Tenancies Act (RTA). Learning about the LTB will enable you to advise your clients about rules regarding tenancy matters.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 4 of 13

Landlord and Tenant Board The Social Justice Tribunals Ontario is a cluster of eight adjudicative tribunals, and the Landlord and Tenant Board (LTB) is one of them. These tribunals are less formal than courts and not a part of the court system. Different tribunals and boards handle disputes in various areas of social justice including landlord and tenant matters under the Residential Tenancies Act (RTA). The LTB was created under the authority of the RTA on January 31, 2007. The RTA outlines the rights and responsibilities for residential landlords and tenants and a process for enforcing them. This includes rules for tenancy matters, such as: • Rent

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• Maintenance and repair • Starting a tenancy • Ending a tenancy • Rent deposits and other charges • Entering a tenant’s unit • Pets and smoking As part of its mandate the LTB provides information about services to landlords and tenants, making it a third-party service provider. The biggest advantage of the LTB is that decisions are made by members who have specialized knowledge in landlord and tenant matters and a comprehensive understanding of the RTA. After filing an application with the LTB, a decision is given in three to four weeks depending on the applicant’s geographic location.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 5 of 13

An investor client has some questions regarding the rules of a rental unit and asks their salesperson for advice. A salesperson is expected to be aware of the rules regarding rental units with respect to the Landlord and Tenant Board (LTB) and Residential Tenancies Act (RTA) to give appropriate advice to their clients. Which of the following statements is true about the LTB? There are four options. There is only one correct answer.

1

The LTB outlines the rights and responsibilities for residential landlords and tenants and a process for enforcing them.

2

The LTB provides information and services to landlords and tenants, making it a third-party service provider.

3

The LTB is part of the court system.

4

The LTB was created by the Social Justice Tribunals Ontario.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 6 of 13

The Landlord and Tenant Board (LTB) resolves disputes between landlords and tenants, and addresses eviction applications. You need to understand the role of LTB in resolving disputes between landlords and tenants so that you can provide information to landlord and tenant clients about their rights and responsibilities under the Residential Tenancies Act (RTA).

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Lesson 1 | Page 7 of 13

Dispute Resolution by Landlord and Tenant Board The Landlord and Tenant Board (LTB) has two key roles: it provides information about the Residential Tenancies Act (RTA) and resolves disputes between most residential landlords and tenants. The LTB resolves disputes between landlords and tenants by two methods – mediation and adjudication. The following two sections contain information on the different dispute resolution methods employed by the LTB. Mediation It is generally described as a process of bringing about some form of agreement or reconciliation between opposing parties. This process has proven particularly effective in resolving a wide variety of disputes that might otherwise extend into lengthy hearing or legal action. The LTB often mediates issues that arise from applications made by either landlords or tenants. Mediation is not mandatory (with one exception involving transferal of tenant in a care home to a new facility). The LTB will not become involved in a mediation process concerning tenancy disputes, unless an application is received. Further, even with an application, the decision may be made not to mediate if resolution by this means appears impractical.

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Adjudication It is the process of deciding or settling by law, issues arising between landlords and tenants pursuant to the RTA. With adjudication, a hearing is typically held. Based on evidence presented by the tenant and landlord, a member of the LTB issues an order. An order is the final, written version of the LTB member’s decision.

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Lesson 1 | Page 8 of 13

Resolving Eviction Applications The Landlord and Tenant Board (LTB) outlines steps that a landlord must follow in order to evict a tenant before they submit an application for eviction. The LTB then issues an eviction order. These steps are outlined in the following tabs. The following two sections contain information on the ways in which the LTB resolves eviction applications. Step 1: Giving a notice of termination Before a landlord applies to the LTB to evict the tenant, they must give the tenant a notice of termination that informs the tenant about the reason for eviction. The termination notice may specify the number of days that are given to the tenant to resolve the problem before the landlord can file an eviction application with the LTB.

© 2021 Real Estate Council of Ontario

Step 2: Filing an application with the LTB If the tenant does not resolve the problem or does not vacate the unit, the landlord can file an application with the LTB. Generally, a hearing is scheduled during such situations where a member of the LTB listens to both the landlord’s and the tenant’s arguments before making a decision.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 9 of 13

Landlord and Tenant Board Issues an Eviction Order If the Landlord and Tenant Board (LTB) issues an eviction order, the tenant is given a date by when they must vacate the unit. If they do not adhere to this deadline, the landlord can file this order with the Court Enforcement Office (Sheriff’s Office). Only the Court Enforcement Office (Sheriff’s Office) can evict a tenant. The LTB can issue an order to evict a tenant without a hearing if the following applications are filed: • L3 application: Application to end a tenancy and evict a tenant when the tenant gave the notice or agreed to end the tenancy • L4 application: Landlord’s application to end a tenancy and evict a tenant when the tenant failed to meet the conditions of a settlement or an order

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Lesson 1 | Page 10 of 13

Information on Landlord and Tenant Board Brochures, videos, and Frequently Asked Questions (FAQ) related to residential tenancy topics are documented on the Landlord and Tenant Board (LTB) section of the Social Justice Tribunals Ontario website. These topics include: • Information for new tenants • Guide to the Residential Tenancies Act (RTA) • Guidelines for rent increase by year • Rules for the automatic reduction of a tenant’s rent if there is a decrease in the property taxes for the rental unit • Information about the rules regarding suite meters in residential units • Information about the rights and responsibilities of landlords and tenants relating to maintenance and repairs

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• Rules for disposing the property that a tenant has left behind • Offences under the RTA • Rules for a landlord to end a tenancy • Rules for how a tenant can end their tenancy, including lease renewals, assigning, and subletting • Rules for ending a tenancy by a landlord if a tenant fails to pay rent • Information for tenants if they are locked out of their unit • Information about applications for a rent increase above the guideline • Information about the LTB application review process

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Lesson 1 | Page 11 of 13

When representing investor clients, a salesperson may have to guide them to seek help from the Landlord and Tenant Board (LTB) in case they have disputes or seek to evict their tenants. Which of the following statements are correct regarding dispute resolution methods of the LTB? There are five options. There are multiple correct answers.

1

The LTB helps landlords and tenants resolve disputes by way of reconciliation through a process called mediation.

2

If a dispute cannot be settled by mediation, the LTB holds a hearing to decide the matter based on evidence presented by the tenant and the landlord.

3

In order to resolve eviction related disputes, the LTB requires landlord to apply to the board before they notify the tenant.

4

The LTB can issue an order to evict a tenant without a hearing if the landlord has filed an application to the LTB stating that the tenant failed to meet the conditions of a settlement or an order.

5

A landlord or a tenant can get information on residential tenancy topics only by contacting the LTB.

© 2021 Real Estate Council of Ontario

Lesson 1 | Page 12 of 13

A landlord wants to evict a tenant after giving them the correct termination notice. The tenant agrees to vacate the unit but does not vacate it at the given deadline. The Landlord and Tenant Board (LTB) issues an eviction order after they receive an application from the landlord. The landlord asks their salesperson for advice about who is supposed to evict the client now that the LTB has issued the order for eviction. Which of the following entities can evict a tenant after the order is issued by the LTB? There are five options. There is only one correct answer.

1

Landlord and Tenant Board

2

Sheriff

3

Landlord

4

Residential Tenancies Act

5

Social Justice Tribunals Ontario

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Lesson 1 | Page 13 of 13

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Describe key information about the Landlord and Tenant Board • Identify the role of the Landlord and Tenant Board There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Landlord and Tenant Board

The Landlord and Tenant Board (LTB) is one of the tribunals that make up the Social Justice Tribunals Ontario. As part of its mandate, the LTB provides information about services to landlords and tenants, making it a third-party service provider.

Role of the Landlord and Tenant Board

The LTB has two key roles. It provides information about the Residential Tenancies Act and resolves disputes between residential landlords and tenants. It also mediates and adjudicates eviction applications.

© 2021 Real Estate Council of Ontario

Lesson 2 | Page 1 of 10

Lesson 2: Residential Tenancies Act

This lesson explains the Residential Tenancies Act, and how it affects landlords and tenants.

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Lesson 2 | Page 2 of 10

The Residential Tenancies Act (RTA) sets out rights and responsibilities of landlords and tenants who rent residential properties. Upon completion of this lesson, you will be able to: • Describe the types of tenancies covered under the RTA • Identify the types of tenancies not covered under the RTA Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

© 2021 Real Estate Council of Ontario

Lesson 2 | Page 3 of 10

The Residential Tenancies Act (RTA) not only applies to most residential properties but also to care homes, rented suites, and mobile homes. When representing an investor client, you may have to explain the requirements under the RTA that apply to these properties.

© 2021 Real Estate Council of Ontario

Lesson 2 | Page 4 of 10

Residential Tenancies Act As you have learned in the Requirements Under the Residential Tenancies Act (RTA) module, the RTA applies to landlords and tenants of most rental units. Since the Landlord and Tenant Board (LTB) provides information about the RTA, you should know which properties come under its purview. The RTA applies to landlords and tenants of most rental units. A rental unit for example, can be an apartment, a house, a mobile home, a rooming house, etc. When representing investor clients, you should know which properties are covered under the RTA to advise your clients appropriately. For example, an investor client may want to purchase a multi-residential property and may ask you if it is covered under the RTA. You should advise the investor client that the RTA applies to this property type. You should also refer them to the LTB for more information.

© 2021 Real Estate Council of Ontario

Lesson 2 | Page 5 of 10

Other Properties Where the Residential Tenancies Act Applies Additional residential properties that are covered by the Residential Tenancies Act (RTA) include care homes and rented sites in mobile home parks and land lease communities. In addition to the requirements discussed in the Requirements Under the Residential Tenancies Act module, there are other requirements in the RTA that apply only to care homes. It is beneficial for you to be aware of the types of residential properties covered by the RTA, as you may need to advise an investor client regarding the requirements under the RTA for mobile homes and land lease communities. Your advice should be in line with the regulations that the client is required to follow; otherwise, there could be time-consuming disputes raised with the Landlord and Tenant Board (LTB).

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Lesson 2 | Page 6 of 10

A former client, who had purchased a fourplex a few years ago, approached their salesperson seeking advice on other types of residential investments. They asked about the applicability of the Residential Tenancies Act (RTA) to these investment opportunities. Which of the following property types has some additional legislative requirements under the RTA? There are four options. There is only one correct answer.

1

Mobile home parks

2

Land lease communities

3

Care homes

4

Rooming house

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Lesson 2 | Page 7 of 10

When representing investor clients, it is beneficial for you to have knowledge about non-profit, public housing, and other residential properties that are not covered by the Residential Tenancies Act.

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Lesson 2 | Page 8 of 10

Tenancies not Covered Under the Residential Tenancies Act Several Residential Tenancies Act (RTA) requirements do not apply to non-profit and public housing, nor to university and college residences. It is beneficial for you to know which types of properties are not covered under the RTA, to allow you to advise an investor client appropriately. The following five pages contain information on the types of tenancies that are not covered under the RTA. You must review all the pages before moving forward. Units where the tenant shares the kitchen or bathrooms with the landlord Tenancies with co-occupants sharing a bathroom or kitchen facility with the landlord, the landlord’s spouse or same-sex partner, a child or a parent, and where any of these individuals live in the same building, are not covered under the RTA.

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Seasonal or temporary units Seasonal or temporary accommodation, for example, hotels, motels, lodges, campgrounds, trailer parks, and tourist homes, are not covered under the RTA.

Accommodations that provide care services Accommodations that provide care services to residents, but are not covered under the RTA, include: • Long-term care homes, such as nursing homes, and municipal and charitable homes for the aged • Private or public hospitals • Homes for persons with developmental disabilities • Accommodations for persons in custody or confinement • Accommodations for receiving short-term respite care

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Student housing Off-campus student housing that is owned by third parties is covered under the RTA. However, accommodation provided to students by an educational institution under specific circumstances are not covered under the RTA.

Vacation properties Vacation properties, such as cottages and Airbnb rentals, are not covered under the RTA.

© 2021 Real Estate Council of Ontario

Lesson 2 | Page 9 of 10

An investor client asks their salesperson for advice on how to identify which type of properties are covered and not covered under the Residential Tenancies Act (RTA). Which of the following property types are covered under the RTA? There are five options. There are multiple correct answers.

1

Vacation property

2

Student housing (off-campus)

3

Nursing homes

4

A room in a rental unit occupied by tenants

5

Temporary accommodations

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Lesson 2 | Page 10 of 10

Congratulations, you have completed the lesson! Completing this lesson has enabled you to: • Describe the types of tenancies covered under the Residential Tenancies Act • Identify the types of tenancies not covered under the Residential Tenancies Act There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Types of tenancies covered under the Residential Tenancies Act

Landlords and tenants of most rental units are covered under the Residential Tenancies Act (RTA). Most of the same rules and requirements that apply to other types of residential rental units under the RTA also apply to care homes and rented sites in mobile home parks and land lease communities. However, there are some components of the RTA that apply only to care homes.

Types of tenancies not covered under the Residential Tenancies Act

Some type of tenancies, such as tenancies with co-occupants sharing a bathroom or kitchen facility with the landlord or their family members, seasonal or temporary units, accommodations providing care services, student housing (by an educational institution under specific circumstances), and vacation properties, are not covered under the RTA.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 1 of 34

Lesson 3: Finding Information Regarding Tenancy Matters

This lesson describes how landlords and tenants can access information regarding various topics, such as offences for landlords and tenants and use of different forms, from the Landlord and Tenant Board.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 2 of 34

The Landlord and Tenant Board (LTB) provides information about its practices and procedures and the rights and responsibilities of landlords and tenants under the Residential Tenancies Act (RTA). When representing investor clients, you should know what information your clients can get from the LTB if they need help in managing tenancy matters. Upon completion of this lesson, you will be able to: • Identify the methods of the LTB to provide information • Identify the topics about which the LTB provides information • Describe offences under the RTA for the landlord • Describe offences under the RTA for the tenant • Identify the rules and obligations regarding the use of applications and forms • Identify the most commonly used forms Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented. © 2021 Real Estate Council of Ontario

Lesson 3 | Page 3 of 34

The Landlord and Tenant Board (LTB) provides informational resources about the rights and responsibilities of landlords and tenants and processes at the LTB. These resources will enable you to guide your clients with matters related to tenancy.

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Lesson 3 | Page 4 of 34

Landlord and Tenant Board Information Sources You need to know how to gather information about the Residential Tenancies Act (RTA) and the Landlord and Tenant Board (LTB), should your clients need more information to deal with specific tenancy matters. The following three sections contain information on the LTB information sources. LTB brochures The “Information for New Tenants,” brochure from the Social Justice Tribunal Ontario, Landlord and Tenant Board must be given to new tenants on or before the day the tenancy begins. The brochure can be downloaded and printed from the LTB section of the Social Justice Tribunals Ontario website or can be collected at LTB offices and some Service Ontario centres.

© 2021 Real Estate Council of Ontario

Residential Tenancies Act website or toll-free numbers If a client has questions regarding the RTA, you can offer advice, but should recommend that the client use the website or toll-free numbers to get the most recent and accurate information. You should stay current about amendments to the RTA. Local newspapers can be a good source to get such updates.

Canadian Legal Information Institute (CanLll) website Some LTB decisions are posted on the CanLll website (www.canlii.org). CanLll is a non-profit organization that makes Canadian law accessible for free on the internet.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 5 of 34

A client is the landlord of a new rental unit and has some questions regarding rent increases. A salesperson can advise them about the common requirements of the Residential Tenancies Act (RTA) that should be followed. However, a salesperson should recommend other resources from which the client can get more specific and up-to-date information. Which of the following sources can the landlord use to get the correct information? There are four options. There is only one correct answer.

1

Newspapers

2

Social Justice Tribunals Ontario website

3

Landlord and Tenant Board website

4

Service Ontario centres

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 6 of 34

When representing an investor client, it is beneficial for you to be aware of the various areas of information covered by the Landlord and Tenant Board (LTB). This information will prove helpful if a client reaches out to you for insight during a dispute with their landlord or their tenant.

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Lesson 3 | Page 7 of 34

Rent Increase Guidelines and Requirements for Automatic Rent Reduction A landlord can increase the rent by a certain amount without asking the Landlord and Tenant Board (LTB) for approval based on the rent increase guidelines. This amount is based on the Consumer Price Index (CPI) and set every year by the Ontario government. This is known as the rent guideline amount, which is established by averaging the CPI increases over the preceding 12 months. The LTB provides detailed brochures to deal with cases where the rent guidelines have not been followed or an automatic rent deduction has not been applied. For more information on automatic rent reductions, please refer to module Requirements Under the Residential Tenancies Act.

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Lesson 3 | Page 8 of 34

Rules for Ending Tenancy The Landlord and Tenant Board (LTB) provides resources that outline rules under the Residential Tenancies Act (RTA) for ending a tenancy by a landlord or a tenant. All forms related to tenancy are available in LTB offices or Social Justice Tribunals Ontario website. The following three sections contain information on the rules for ending tenancy under the Residential Tenancies Act (RTA). Mutual agreement between a landlord and tenant A landlord and a tenant can agree to end the tenancy at any time during the term of a lease. Both landlords and tenants can use the Agreement to Terminate Tenancy. If neither the landlord nor the tenant uses the approved forms, the notice or agreement will not be effective.

© 2021 Real Estate Council of Ontario

Landlord ending a tenancy If the landlord and the tenant do not agree to end the tenancy mutually, the landlord must give a notice to end the tenancy to the tenant for vacating the rental unit. There are different notice forms available for different reasons.

Tenant ending a tenancy When a tenant wants to move out, they must give the landlord a written notice. The tenant must use the Tenant’s Notice to Terminate the Tenancy.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 9 of 34

Rules for Maintenance and Repair Landlords and tenants can refer to the Landlord and Tenant Board (LTB) brochure on maintenance and repair to find information on the ownership of various responsibilities. All brochures related to tenancy are available in LTB offices or the Social Justice Tribunals Ontario website. The following four sections contain information on the rules for maintenance and repair under the Residential Tenancies Act (RTA. Requirements for Maintenance and Repair of items provided by the Landlord A landlord must maintain a rental property and ensure that it is in good condition. All things that the landlord provides to the tenant must be kept in working order. This may include: • Appliances • Carpets in the unit or common areas • Walls, roofs, and ceilings • Windows, doors, locks, and lighting • Garages, laundry rooms, patios, walkways, and pools

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Requirements for maintenance by a landlord The landlord must repair or replace anything that no longer works due to normal wear and tear. But the landlord does not need to supply a new or better model if anything is replaced. The landlord must keep the rental property clean, including areas such as the lobby, hallways, the elevator, the laundry room, the pool, and the parking lot or garage. Further, the landlord must ensure that the rental property meets health, safety, housing, and maintenance standards. These standards are set out in municipal bylaws or provincial maintenance standards. Requirements for services provided As per the Residential Tenancies Act (RTA), a landlord and a tenant can agree to have the tenant pay their own electricity costs by using a suite meter provider. Before entering the tenancy, the landlord must provide the prospective tenant with information about the electrical usage for the unit and about the electrical efficiency of the refrigerator. If the tenant agrees, the landlord must get the tenant’s consent in writing and let them know how much rent will be reduced. The landlord should also give them information about the suite meter provider’s fees, policies, and any other required information.

© 2021 Real Estate Council of Ontario

Requirements for maintenance by a tenant If the tenant does not maintain cleanliness in the rental unit such that it becomes a safety or health hazard, or they damage the rental property, the landlord should ask the tenant to correct the problem. If the tenant does not correct the problem, the landlord may give the tenant a notice to end the tenancy.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 10 of 34

Tenant Vacated a Rental Unit If the tenant moved out according to a notice or agreement to terminate based on a Landlord and Tenant Board (LTB) order, or the tenant’s job as the superintendent has ended, the landlord and the tenant can agree on terms of what should be done with the property that the tenant left behind. If they did not agree to anything before the tenant left, the landlord can immediately sell, keep, or dispose of any property the tenant has left behind. For example, a landlord and a tenant may agree that the tenant can store their sofa in the basement for two weeks after the tenant leaves the unit.

© 2021 Real Estate Council of Ontario

Lesson 3 | Page 11 of 34

Tenant Abandons a Rental Unit When representing an investor landlord, you can guide them about rules regarding any property left behind when a tenant abandons a rental unit. You should, however, advise your client to seek more information from the Landlord and Tenant Board (LTB) and a third-party service provider such as their lawyer if required. The following four sections contain information on the rules regarding property left behind when a tenant abandons a unit. When is a unit considered abandoned? A rental unit can be considered abandoned if a tenant moves out while owing rent to the landlord without: • Making an agreement with the landlord to end the tenancy • Giving notice to the landlord to end the tenancy • Getting notice from the landlord to end the tenancy • Getting an LTB order for eviction However, a rental unit cannot be considered abandoned if the tenant’s rent payment is up to date.

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Property left behind by the tenant If a tenant leaves any property behind after they have abandoned the rental unit, and the landlord wants to sell, keep, or dispose of this property, the landlord must take one of the following actions: • Apply to the LTB using the appropriate application form to get an order stating that the rental unit was abandoned, and the tenancy has ended • Serve a notice to the tenant copying the LTB and stating that they intend to sell, keep, or dispose of the tenant’s property (no LTB form required)* * If the landlord does not know the tenant’s latest address, the notice can be sent to the tenant’s last known address or business address. No property left behind by the tenant If there is no property left behind by the tenant in the rental unit and the landlord is sure that the tenant has abandoned the unit, they do not have to apply to the LTB for an order to end the tenancy. However, the landlord can still apply if they want to get an LTB order clearly stating that the tenant has abandoned the unit and the landlord now has the right to rent it to someone else.

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How long should a landlord wait? The landlord must wait 30 days after they give the notice to the tenant or receive the order from the LTB stating that the unit has been abandoned, before they can sell, keep, or dispose of the tenant’s property. The landlord can leave the tenant’s property in the rental unit or store it in a safe location close to the unit. The landlord can dispose of any unsafe or unhygienic items (e.g., rotting food) in the rental unit.

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Lesson 3 | Page 12 of 34

Sheriff Evicts the Tenant In the event that a tenant is being evicted by the sheriff, a landlord must follow the rules regarding property that may be left behind by the tenant in the rental home. The following two sections contain information on the rules regarding property left behind when a sheriff evicts a tenant. Allowing tenant to collect their property If a tenant leaves property behind after the Sheriff has enforced the Landlord and Tenant Board’s (LTB) order and evicted them, the landlord must give the tenant 72 hours to get their property before selling, keeping, or disposing of it. The tenant’s property can be collected from either the rental unit or some storage area that is safe and close to the rental unit. If the tenant does not collect their property during the 72-hour period, they no longer have any claim to it, unless the landlord and the tenant have agreed to any other terms. After the 72-hour period has passed, the landlord can sell, keep, or dispose of the tenant’s property.

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Disposing a tenant’s property If the landlord does not let the tenant collect their property, or sells, keeps, or disposes off their property before the 72-hour period has passed, the landlord is in violation of the Residential Tenancies Act (RTA). The tenant can take one or both of the following actions: • The tenant can contact the Ministry of Municipal Affairs and Housing’s Investigation and Enforcement Unit (IEU). After talking to the tenant and obtaining more details, the IEU may advise the landlord about the rules that must be followed. If the landlord still refuses to follow the rules, the IEU can start an investigation, which may result in the landlord being taken to court. If the landlord is found guilty, the court could fine an individual up to $25,000 and a corporation up to $100,000 for this offence. • The tenant can file an application with the LTB.

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Lesson 3 | Page 13 of 34

Tenant Abandons Mobile Home Similar to a rental unit, a mobile home owned by the tenant and on rented land can be considered abandoned if a tenant moves out while owing rent to the landlord. The landlord must notify the tenant that they are going to sell, keep, or dispose of the tenant’s mobile home by sending a notice to the tenant’s last known address or business address. For more information on rules under the Residential Tenancies Act that apply specifically to mobile home parks, review Mobile Home Parks and Land Lease Communities from the Ontario Tribunals.

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Lesson 3 | Page 14 of 34

Tenant Dies Since the tenancy agreement is still in effect for 30 days following a tenant’s death, the landlord must leave the deceased tenant’s property in the rental unit for this 30-day period. However, the landlord can dispose of any unsafe or unhygienic items immediately. The landlord must allow the estate’s representative reasonable access to the unit and the residential complex during the 30 days following the tenant’s death to remove the deceased tenant’s property. If the estate’s representative does not move the property during the 30-day period, the landlord can sell, keep, or dispose of the deceased tenant’s property. However, the estate’s representative may still claim the deceased tenant’s property or the money the landlord received for it for up to six months after the date of the tenant’s death. If the landlord does not follow the rules before they sell, keep, or dispose of the property, the estate’s representative may take legal action against the landlord, and the landlord may be held liable. For more information on property left behind when a tenant moves out, review LTB Brochure: Property Left Behind When a Tenant Moves Out from the Ontario Tribunals.

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Lesson 3 | Page 15 of 34

Rights of Tenants in Case of Illegal Eviction There could be occasions when a tenant has been illegally evicted from their rental unit. When representing an investor landlord, it is important that you understand tenant rights and the procedure that should be followed in case of an illegal eviction. The following two sections contain information on the rights of tenants in case of an illegal eviction. Changing of locks by landlord As per the Residential Tenancies Act (RTA), it is illegal for a landlord to change the locks to a rental unit or the rental building without giving the tenant keys for the new locks. The only exceptions are if the: • Locks are changed because the tenant has been evicted by the Sheriff • Landlord is sure that the tenant has abandoned the unit

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Tenant’s rights if locked out If a tenant is illegally locked out and if the unit is still vacant, they can: • Call the police, who may try to get the landlord to let the tenant back in the unit • Call the Rental Housing Enforcement Unit of the Ministry of Housing, who will call the landlord and explain the law • Apply to the Landlord and Tenant Board (LTB) for an order that requires the landlord to let the tenant back into the unit If the landlord does not cooperate with tenant access, they could be subject to an investigation and be convicted under the Provincial Offences Act and be required to pay a heavy fine. The tenant can also file an application to get an order requiring the landlord to let the tenant into the unit and to continue their tenancy.

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Lesson 3 | Page 16 of 34

Clients, either landlords or tenants, may ask a salesperson for advice regarding tenancy matters. Even though they can refer them to the Landlord and Tenant Board (LTB) for information, it is expected that a salesperson knows who is responsible for various tasks so that they can provide some guidance on their issue. Responsibility for which of the following tasks cannot be shared between the landlord and the tenant? There are five options. There are multiple correct answers.

1

Submit notice to terminate the tenancy

2

Submit the Agreement to Terminate Tenancy form

3

Repair or replace the washer dryer in the rental unit

4

Clean carpets, ceilings, windows, doors, locks, and lighting in the unit

5

Pay electricity costs

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Lesson 3 | Page 17 of 34

An investor client has not been able to contact or meet their tenant for weeks and believes that the tenant has abandoned the unit. They ask their salesperson for help in determining what needs to be done if the unit is in fact abandoned. Which of the following actions can be taken if the unit is abandoned? There are four options. There are multiple correct answers.

1

Immediately dispose of the tenant’s property that may be left behind.

2

Wait for 30 days to file an application with the Landlord and Tenant Board.

3

Apply to the Landlord and Tenant Board using the appropriate application form to get an order stating that the rental unit was abandoned, and the tenancy has ended.

4

Serve a notice to the tenant copying the Landlord and Tenant Board and stating that the landlord intends to sell, keep, or dispose of the tenant’s property.

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Lesson 3 | Page 18 of 34

You need to know what constitutes offences for landlords and tenants under the Residential Tenancies Act (RTA) and be able to provide information to your clients about how they may be affected by these offences.

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Lesson 3 | Page 19 of 34

Setting Up Unfair and Discriminatory Application Process According to the Ontario Human Rights Code, every person has the right to be treated equally in the area of housing without discrimination because of any of the grounds set out in the Code. The purpose of anti-discrimination laws is to prevent the violation of human dignity and freedom through the imposition of disadvantage, stereotyping, or political or social prejudice. The right to equal treatment in rental housing offers protection to tenants in various situations, such as applying for tenancy for a rental unit, entering into an agreement, occupying a residential unit, and all other matters related to the accommodation. For example, an investor landlord may ask you not to present rental applications from tenants of a certain nationality, ethnicity, or religion. When you are representing an investor landlord, you must inform the landlord that this is discriminatory and against the Ontario Human Rights Code.

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Lesson 3 | Page 20 of 34

Harassing a Tenant According to the Human Rights Code, every person who occupies an accommodation has a right to freedom from harassment by the landlord, an agent of the landlord, or an occupant of the same building because of a Codeprotected ground. The following three sections contain information on options a tenant has in case of harassment by a landlord. Harassment by a landlord According to the Residential Tenancies Act (RTA), it is an offence for the landlord to: • Do anything that would interfere with a tenant’s ability to enjoy living in their rental unit • Threaten, interfere with, or harass a tenant to move out of a rental unit • Stop a tenant from forming or taking part in a tenants’ association

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Interference by a landlord It is also an offence to interfere with, or try to stop, a landlord or a tenant from: • Taking part in a hearing • Filing an application under the RTA • Exercising their rights under the RTA

What can a tenant do? A person being harassed is not required to object to the harassment at the time that it is happening for a violation to exist or for a person to claim their rights under the Human Rights Code. A person who is the target of harassment may be in a vulnerable situation and afraid of the consequences of speaking out. If a tenant is being harassed by their landlord, they can contact the Rental Housing Enforcement Unit (REHU) for help.

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Lesson 3 | Page 21 of 34

Entering Without Proper Notice Right of entry by the landlord is broadly divided into two scenarios: entry with written 24 hours’ notice and entry without notice. Entry by the landlord with proper written notice (a minimum of 24 hours in advance) is permitted provided that the notice sets out the reason for the request and the day and time of the requested entry. Entry by the landlord without written notice is permitted in the specific situations, such as an emergency. If a landlord enters a unit illegally, a tenant can file an Application about Tenant Rights with the Landlord and Tenant Board (LTB). If the LTB decides that the landlord entered the unit illegally, the landlord could be ordered to give the tenant a rent reduction or to pay a fine. For more information on entering an occupied rental unit, please refer to the Requirements Under the Residential Tenancies Act module.

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Lesson 3 | Page 22 of 34

Charging Extra Fees The Residential Tenancies Act (RTA) clearly states the rules for a landlord to charge legal rent. Under the RTA, it is an offence to: • Charge more rent than is allowed under the RTA • Charge additional rent after the tenant has notified their intent to vacate the unit • Force a tenant to pay rent above the guideline or increase the rent before it has been approved by the Landlord and Tenant Board (LTB) • Make a tenant or a potential tenant purchase anything from the landlord or an existing tenant to secure or keep a rental unit (e.g., requiring a potential tenant to buy window coverings or furniture if they want to rent the space) • Charge a tenant, a sub-tenant, or a potential tenant an additional fee, such as a damage deposit • Fail to return a rent deposit to a tenant if the landlord cannot give the tenant possession of the rental unit • Use a tenant’s rent deposit for something other than the last month’s rent • Not pay the tenant annual interest on their rent deposit For more information on charging extra fees, please refer to the Requirements Under the Residential Tenancies Act module. © 2021 Real Estate Council of Ontario

Lesson 3 | Page 23 of 34

Restricting Vital Services Like Water and Heat A landlord cannot shut off or interfere with the supply of any of the following vital services to a tenant’s rental unit: • Heat (from September 1 to June 15) • Electricity (when the landlord is paying for the electricity) • Fuel (such a natural gas or oil) • Hot or cold water For example, if the landlord is responsible for providing heat and they do not keep the unit heated to at least 20 degrees Celsius from September 1 to June 15, this would be considered an offence under the Residential Tenancies Act.

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Lesson 3 | Page 24 of 34

Providing False Information on an Application Misrepresenting information is a serious offence, as per the Residential Tenancies Act (RTA). The Landlord and Tenant Board (LTB) may dismiss a proceeding without holding a hearing if they find out that the applicant filed documents that contained false or misleading information. For example, a landlord can evict a tenant for misrepresenting their income. However, under the RTA, an agreement is void if it has been entered into due to coercion or as a result of a false, incomplete, or misleading representation by the landlord or an agent of the landlord. According to the RTA and Sections 37 and 38 of the Code of Ethics under REBBA, a salesperson cannot falsify, or assist anybody else in falsifying, any information or document relating to a trade in real estate.

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Lesson 3 | Page 25 of 34

Disrupting Quiet Enjoyment Quiet enjoyment is a right to the undisturbed use and enjoyment of a rental property by a tenant or a landlord. As per the Residential Tenancies Act (RTA), a landlord can give a tenant notice of termination of the tenancy if the conduct of the tenant or a person permitted in the residential complex by the tenant is such that it substantially interferes with the reasonable enjoyment of others in the residential complex or the neighbourhood. For example, a tenant who knocks on landlord’s door to complain about every minor inconvenience or a tenant who is constantly noisy is disrupting the quiet enjoyment of the landlord or other tenants. For more information on quiet enjoyment, please refer to the Interactions with Tenants module.

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Lesson 3 | Page 26 of 34

Withholding Rent According to the Residential Tenancies Act (RTA), a tenant should not withhold paying rent even if the tenant feels the maintenance of the unit is poor or necessary repairs have not been carried out by the landlord. For example, a tenant cannot stop paying rent because there was a leak in the basement and despite complaining, the landlord did not fix it. The tenant can complain to the Landlord and Tenant Board (LTB) against their landlord for not making repairs or not maintaining the unit. If a tenant does not pay rent, the landlord can give them a notice of termination for non-payment of rent and then file an application with the LTB to evict the tenant. For more information on quiet enjoyment, please refer to the Interactions with Tenants module.

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Lesson 3 | Page 27 of 34

Subletting or Assigning Without Permission Subletting provisions apply to all tenancies, whether periodic (such as month-to-month), fixed (such as lease with exact term), or statutory (provided under the Residential Tenancies Act (RTA).) For example, a fixed tenancy becomes a periodic tenancy if the tenant remains following the term. The RTA sets out various requirements and restrictions concerning subletting. The tenant may apply to the Landlord and Tenant Board (LTB) for an order for compensation from an “overholding subtenant”, if the subtenant is in possession of the rental unit at the time of the application. An overholding subtenant is a subtenant who continues to live in the property even after a valid notice of termination has expired.

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If a tenant transfers the occupancy of the unit to another person without the landlord’s consent, you should advise the landlord to apply to the LTB for the tenant’s eviction. You should advise them that such an application must be filed within 60 days from when the landlord discovered the unauthorized occupant. For more information on subletting, please refer to the Interactions with Tenants module.

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Lesson 3 | Page 28 of 34

A salesperson may come across situations when an investor client or a tenant client may ask for advice regarding offences under the Residential Tenancies Act (RTA). Which of the following are offences under the RTA? There are six options. There are multiple correct answers.

1

Entering a unit without proper notice in an emergency

2

An above guideline rent increase without approval

3

Rejecting a tenancy application based on a person's ethnicity

4

Providing inaccurate information on an application

5

Restricting vital services like water and heat

6

Using rent deposit for damages

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Lesson 3 | Page 29 of 34

You need to understand the Landlord and Tenant Board’s (LTB) requirement to use only approved forms when providing notice or making an application. When representing an investor client, you should know about LTB forms to address any queries your clients may have.

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Lesson 3 | Page 30 of 34

Landlord and Tenant Board Applications and Forms After knowing about the offences for landlord and tenants under the Residential Tenancies Act (RTA), it is important that you are aware of the approved Landlord and Tenant Board (LTB) forms that landlords and tenants must use in case of any tenancy issues. The LTB has different forms that landlords and tenants can use depending on the issue that needs to be resolved. The person filing the form is responsible for using the approved LTB forms and providing correct and accurate information in their application. While processing applications submitted by landlords and tenants, the LTB may require certain documents to be filed along with the application. If a document that is required by the RTA is missing from the application or the information provided is incorrect, the LTB may dismiss or return the application without processing it. You should direct your clients to the LTB section of the Social Justice Tribunals Ontario website to get the appropriate forms to use for different tenancy matters. You should also remind your clients about the importance of filling out the LTB forms honestly and without misrepresentation.

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Lesson 3 | Page 31 of 34

Landlord and Tenant Board Forms for Landlord’s Use Landlords must use the following Landlord and Tenant Board (LTB) approved forms when filing applications for common matters such as rent increase, termination of tenancy, and rent increase above guidelines. All forms that can be used by landlords are available in the LTB section of the Social Justice Tribunals Ontario website. The following four sections contain information on the forms a landlord can use. Rent increase forms A landlord can use the following forms to notify a tenant of rent increase: • N1: Notice of Rent Increase • N2: Notice of Rent Increase (Unit Partially Exempt) • N3: Notice to Increase the Rent and/or Charges for Care Services and Meals

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Termination of tenancy notice forms A landlord can use the following forms to notify a tenant about termination of tenancy: • N4: Notice to End your Tenancy Early for NonPayment of Rent • N5: Notice to End your Tenancy for Interfering with Others, Damage or Overcrowding • N6: Notice to End your Tenancy for Illegal Acts of Misrepresenting Income in a Rent-Geared-toIncome Rental Unit • N7: Notice to End your Tenancy for Causing Serious Problems in the Rent Unit or Residential Complex • N8: Notice to End your Tenancy at the End of the Term • 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 • N13: Notice to End your Tenancy Because the Landlord Wants to Demolish the Rental Unit, Repair it, or Convert it to Another Use

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Termination of tenancy application forms A landlord can use the following applications to terminate a tenancy: • L1: Application to evict a tenant for non-payment of rent and to collect rent the tenant owes • L2: Application to End a Tenancy and Evict a Tenant • L3: Application to End a Tenancy – Tenant Gave Notice or Agreed to Terminate the Tenancy • L4: Application to End a Tenancy and Evict a Tenant – Tenant Failed to Meet Conditions of a Settlement or Order Forms to increase rent above the guideline amount A landlord can use the following forms to increase the rent above the guideline amount: • N10: Agreement to Increase the Rent Above the Guideline • L5: Application for an Above Guideline Increase

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Lesson 3 | Page 32 of 34

Landlord and Tenant Board Forms for Tenant’s Use Tenants must also use the following Landlord and Tenant Board (LTB) approved forms when filing applications for common matters, such as giving a notice of termination to the landlord, rebate or rent reduction, appeals against tenancy terminations, and maintenance applications. All forms that can be used by tenants are available in the LTB section of the Social Justice Tribunals Ontario website. The following three sections contain information on the forms a tenant can use. For more information on LTB Forms, review Landlord and Tenant Board Forms from the Ontario Tribunals. Forms for termination of tenancy If a tenant wants to terminate their tenancy, they should use the “N9: Tenant’s Notice to End the Tenancy” form to notify their landlord. If a landlord gave the tenant a notice of termination in bad faith, the tenant can use the “T5: Tenant Application – Termination in Bad Faith” form to appeal against a tenancy termination.

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Forms for rebate and rent reduction A tenant can use the following forms to ask their landlord for a rebate or reduction in rent: • T1: Tenant Application for a Rebate • T3: Tenant Application for a Rent Reduction • A4: Application to Vary the Amount of a Rent Reduction

Applications for maintenance If a landlord has not repaired or maintained the rental unit, or has not complied with health, safety, housing, or maintenance standards, the tenant can fill the “T6: Tenant Application About Maintenance” form and submit to the LTB.

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Lesson 3 | Page 33 of 34

An investor client may often consult their salesperson for advice regarding tenancy matters, such as the appropriate forms to use and where to download them from. A salesperson is expected to have the knowledge of the correct source from which these forms can be downloaded. Which of the following sources should they use to get the approved Landlord and Tenant Board (LTB) forms? There are four options. There is only one correct answer.

1

Service Ontario website or offices

2

Residential Tenancies Act website

3

LTB section of the Social Justice Tribunals Ontario website

4

Ontario e-Laws website

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Lesson 3 | Page 34 of 34

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the methods of the Landlord and Tenant Board (LTB) to provide information • Identify the topics about which the LTB provides information • Describe offences under the Residential Tenancies Act (RTA) for the landlord • Describe offences under the RTA for the tenant • Identify the rules and obligations regarding the use of applications and forms • Identify the most commonly used forms There are seven sections on this page with a summary of the key topics that were discussed in this lesson.

Sources for LTB information

The different sources of information for the RTA and LTB include LTB brochures, RTA website, toll-free numbers, newspapers, and Canadian Legal Information Institute (CanLll) website.

LTB information

The LTB provides information about multiple topics related to tenancy matters, such as: • Rent increase guidelines and rules for automatic rent reduction • Requirements for ending a tenancy by the landlord or the tenant • Requirements for maintenance and repair

Requirements regarding property left behind when a tenant moves out

The different situations where the landlord may have to manage the property left behind by a tenant include: • Tenant moves out according to a notice or agreement to terminate an LTB order, or a tenant’s job as superintendent has ended • Sheriff evicts the tenant

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• Tenant abandons the rental unit • Tenant abandons a mobile home • Tenant dies

Rights of tenants in case of illegal eviction

It is illegal for a landlord to change the locks to a rental unit or the building, without giving the tenant keys for the new locks. The only exceptions are if the locks are changed because the tenant has been evicted by the Sheriff or the landlord is sure that the tenant has abandoned the unit.

Offences for landlords under the RTA

The RTA clearly states the actions by landlords and tenants that could be considered as offences. The LTB deals with such offences and the penalty depends on the type of offence. The offences involving landlords include: • Setting up unfair and discriminatory application processes • Harassing a tenant • Entering a unit without proper notice • Charging extra fees • Restricting vital services like water and heat

The offences involving tenants include: Offences for tenants under the • Providing false information on an application RTA • Disrupting quiet enjoyment • Withholding rent • Subletting or assigning the rental unit without authorization

LTB applications and forms

The LTB has different application forms that landlords and tenants can use depending on the issue that needs to be resolved. It is important for landlords and tenants to fill out these forms correctly and honestly. The LTB section of the Social Justice Tribunals Ontario website has all the approved forms to use for different tenancy matters. The commonly used forms for landlords and tenants are:

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• Landlords: Rent increase, termination of tenancy, and increase for rent over the guidelines • Tenants: Rebate or rent reduction, appeals against tenancy terminations, and maintenance applications

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Lesson 4 | Page 1 of 12

Lesson 4: Dispute Resolution

This lesson describes how landlords and tenants can use the methods outlined by the Landlord and Tenant Board to resolve disputes.

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Lesson 4 | Page 2 of 12

Insights into the various methods used by the Landlord and Tenant Board (LTB) are crucial to resolving tenancy disputes. Orders could be issued by the LTB and the actions taken when those orders are not followed by the parties. When representing an investor client, it is important for you to note that if a landlord is non-compliant with the Residential Tenancies Act (RTA) because you gave them incorrect advice, this may mean that you are also noncompliant with your duties and obligations, and you may also face consequences. It is your duty to advise your clients about the correct sources for information on any tenancy matters. Upon completion of this lesson, you will be able to: • Describe the actions that the LTB takes to resolve a dispute Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 4 | Page 3 of 12

The Landlord and Tenant Board (LTB) resolves disputes in two ways – mediation and adjudication. When representing an investor client, you should be aware of the use of mediation and adjudication by the LTB to properly advise a client whenever required.

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Lesson 4 | Page 4 of 12

The Process of Mediation During mediation, a neutral person talks with the landlord and the tenant to help them reach an agreement that is acceptable to both sides. The following three sections contain information on dispute resolution through mediation. What is mediation? Mediation discussions at the Landlord and Tenant Board (LTB) are led by a dispute resolution officer. The officer explains to both parties their rights under the Residential Tenancies Act (RTA), but they do not give any advice. Mediation is available on the day of the hearing at most hearing locations. If the parties do not agree, the mediation can be stopped, and the hearing is held on the same day. If both parties come to an agreement during the mediation, the dispute resolution officer prepares a written agreement and the hearing is cancelled.

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Benefits of mediation Mediation can be beneficial because it: • Enables parties to suggest and discuss solutions, rather than receiving solutions ordered through adjudication • Is an opportunity to discuss solutions to other tenancy-related problems that were not part of the application • Includes a confidentiality policy that ensures mediation discussions cannot be used at a hearing

Re-opening application If one party does not follow the agreement, the other party can file a request to re-open an application form. If the application is re-opened, the LTB will deal with the issues raised in the original application at the hearing. If a mediated agreement is related to an eviction application and the tenant does not follow the agreement, the landlord can get an eviction order from the LTB without requiring a hearing.

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Lesson 4 | Page 5 of 12

The Process of Adjudication Sometimes a landlord and a tenant may agree to mediation, but they may fail to reach an agreement. In such situations, the application proceeds to a hearing. Another situation when a hearing is required is if the parties do not agree to the mediation and at least one party has decided to proceed directly to a hearing or adjudication. The Landlord and Tenant Board (LTB) member controls the hearing and is also called an adjudicator. During the hearing both parties may question witnesses, introduce relevant documents as evidence, and make arguments about the facts and the law.

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When the hearing is over the adjudicator might announce or reserve their decision. If they are reserving their decision, they may need more time to consider the evidence and submissions. In either case, the parties will receive the decision in writing with an explanation. This decision is called an order.

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Lesson 4 | Page 6 of 12

Legal Advice and Assistance Services The tenant duty counsel is a lawyer or a legal professional who helps tenants on the day of their hearing. They are usually available in-person at all Landlord and Tenant Board (LTB) offices (except Sudbury) and other hearing sites. This service is offered by Legal Aid Ontario, which is independent of the LTB. Tenants do not need an appointment to speak with a tenant duty counsel; they just need to arrive 30 minutes before the start time of the hearing. The tenants who have eviction or emergency hearings are given priority.

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Lesson 4 | Page 7 of 12

Types of Hearing at Landlord and Tenant Board There are four types of hearing at the Landlord and Tenant Board (LTB). It is beneficial for you to be aware of the hearing formats at LTB to advise investor clients properly. The following four sections contain information on types of hearing at LTB. Oral hearing The landlord and tenant appear in-person before the LTB and each party presents their evidence. Most LTB hearings are oral.

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Telephone hearing The parties file all documents or materials before the hearing. During the hearing, they display evidence and present their arguments by a telephone link. In parts of northwestern Ontario, a duty counsel is available by phone for telephone hearings.

Video hearing This hearing is like a telephone hearing but both parties use a video link for the hearing.

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Written hearing In this type of hearing, parties file a written explanation of their position and supporting documents. The member considers the explanation and reviews the filed documents to make their decision. Written hearings are most commonly used to decide applications for an above-the-guideline rent increase and a variance in the amount of a rent reduction.

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Lesson 4 | Page 8 of 12

An investor client who lives in northern Ontario is involved in a dispute with a tenant who lives in southwestern Ontario regarding a rent increase. The client reaches out to the salesperson for guidance to deal with this matter. The salesperson advises them about the various methods used by the Landlord and Tenant Board (LTB) to resolve such disputes, especially since the tenant is not in the same location for the hearing. In which of the following scenarios, the mediation method to resolve disputes can be used by the LTB? There are six options. There are multiple correct answers.

1

If the landlord and tenant can come to an agreement, the hearing may not be required and could get cancelled.

2

If the tenant does not follow the agreement after the day of the hearing, the landlord can file a request to re-open the application form.

3

If the tenant does not agree to the proposed solution, they may decide to proceed directly to a hearing.

4

If the LTB board member reserves their decision, they may need more time to consider the evidence and submissions.

5

If the landlord or tenant cannot attend the hearing in-person, they can give evidence and present their arguments by a telephone or video link.

6

If the landlord and tenant decide to use this method, it will give them an opportunity to discuss solutions to other tenancy related problems that were not part of the application.

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Lesson 4 | Page 9 of 12

Types of Orders Issued in a Hearing After a hearing, the Landlord and Tenant Board (LTB) can issue one of four main types of orders. You need to know these types of orders to help your client when a need arises. It is your ethical obligation to provide guidance and information to your clients to the extent that you are qualified to do so and advise them to reach out to third-party service providers, such as the LTB, if necessary. For example, if an investor client asks you for advice on a tenancy dispute, you should be able to advise them to go to the LTB and file the appropriate application. The following four sections contain information on the different types of orders issued by the LTB. Interim order An interim order requires a party to complete certain requirements, or a temporary decision is made before the final order is issued. For example, a landlord has applied for an above guideline rent increase amounting to five per cent. The adjudicator permits a three per cent increase and issues an order not to increase the rent beyond three per cent, pending further consideration.

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Ex-parte order An ex-parte order is issued when the LTB reviews the documents filed by the applicant and makes a decision without notifying the respondent. The order is based only on the information provided by the applicant. In these cases, the LTB would not send the tenant a copy of the application or hold a hearing. Only two application types can be decided ex-parte: • L3 application: Landlord files an L3 application to end the tenancy because the tenant agreed to vacate the unit on a specific date • L4 application: Landlord files an L4 application to end the tenancy because the tenant did not meet the terms of a mediated agreement or order Hearing order The LTB issues an order after the hearing is complete.

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Consent order The LTB can issue a consent order when: • A tenant and a landlord have settled their dispute through an agreement and have asked for the terms of the settlement to be put into a consent order. • A landlord files an application to evict a tenant for non-payment of rent or arrears of rent. A consent order is issued only if the landlord and tenant had agreed upon a payment plan and a copy of the written payment plan is filed with the LTB before the hearing. No hearing is held in such cases.

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Lesson 4 | Page 10 of 12

Actions Taken When a Landlord and Tenant Board Order is not Followed If a person fails to comply with an order issued by the Landlord and Tenant Board (LTB), the terms and conditions of the LTB order can be enforced through the courts. For example, an investor client may reach out to you if their tenant does not move out of the rental unit by the date given in the eviction order and does not pay the rent or arrears. As a salesperson, you should advise your client that the order for eviction can be filed with the Court Enforcement Office (Sheriff’s office) to physically remove the tenant, and the order for payment of money can be filed with the Small Claims Court if the amount of the claim is less than $25,000, otherwise the matter must go to the Superior Court. You can also direct them to the LTB section of the Social Justice Tribunals Ontario website for more information.

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Lesson 4 | Page 11 of 12

A tenant who had agreed to vacate their unit a month ago has changed their mind and is now refusing to vacate that unit. Therefore, the investor landlord files an application with the Landlord and Tenant Board (LTB) to end the tenancy. The investor client seeks their salesperson’s advice because they wonder why their tenant has not been notified of a hearing and are wondering if the order could be issued without one. Which of the following orders could be issued without notifying the respondent in this scenario? There are four options. There is only one correct answer.

1

Interim order

2

Ex-parte order

3

Consent order

4

Court order

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Lesson 4 | Page 12 of 12

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Describe the actions that the Landlord and Tenant Board takes to resolve a dispute There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Actions taken by the Landlord and Tenant Board

The Landlord and Tenant Board (LTB) uses two methods to resolve disputes: • Mediation: Mediation enables parties to suggest and discuss solutions, as opposed to receiving solutions after an order is issued by the LTB. It is also an opportunity to discuss solutions to other tenancy related problems that were not part of the application. Mediation includes a confidentiality policy that ensures mediation discussions cannot be used at a hearing. • Adjudication: Adjudication takes place if mediation does not work out, or either party decides to proceed with the hearing. During the hearing, both parties may question witnesses, introduce relevant documents as evidence, and make arguments about the facts and the law. When the hearing is over, the adjudicator might announce or reserve their decision.

Legal advice and assistance services

A tenant duty counsel is a lawyer or legal professional who helps tenants on the day of their hearing. They are usually available in-person at all LTB offices (except Sudbury) and other hearing sites.

Types of hearings

The four types of hearings include: • Oral Hearing: Applicant and respondent appear in person before an LTB member (most common type of hearing) • Telephone Hearing: Hearing takes place between the member and the parties using a telephone link

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• Video Hearing: Hearing takes place between the member and the parties using a video link • Written Hearing: Parties file written documents instead of appearing in-person

Types of orders issued by the LTB

The different types of orders issued by the LTB include: • Interim Order: Requires a party to complete certain requirements or a temporary decision is made before the final order is issued • Ex-parte Order: Issued when the LTB reviews an application filed by the applicant and makes a decision without notifying the respondent • Hearing Order: Issued after the hearing is complete • Consent Order: Issued if a tenant and a landlord have settled their dispute through an agreement or a payment plan

Actions to take when an LTB order is not followed

If a person fails to comply with an order issued by the LTB, the terms and conditions of the LTB order can be enforced through the courts.

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Lesson 5 | Page 1 of 5

Lesson 5: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 5 | Page 2 of 5

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 5 | Page 3 of 5

A tenant has damaged a wall in the rental unit while mounting their television. The landlord has asked the tenant to get it fixed multiple times, but the tenant has not complied. The investor client is considering pursuing the matter with the Landlord and Tenant Board (LTB) to evict the tenant and wants to know how they should proceed. What are the things that the client needs to know about raising a dispute with the LTB in this situation? There are four options. There are multiple correct answers.

1

The landlord can directly file a complaint with the LTB for the eviction of the tenant, as the landlord had asked the tenant to fix the problem multiple times.

2

Before the landlord applies to the LTB to evict the tenant, they must give the tenant a notice of termination that informs the tenant about the reason for eviction.

3

If the tenant does not resolve the problem and continues to occupy the unit after the landlord gives them a notice of termination, the landlord can file an application with the LTB.

4

The LTB can issue an order to evict the tenant without a hearing if the landlord files an application to end the tenancy and evict the tenant when the tenant failed to meet the conditions of a settlement or an order.

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Lesson 5 | Page 4 of 5

A tenant client calls their salesperson for advice, as their landlord has changed the locks of the rental unit without notifying them. Before advising the tenant, the salesperson needs to know the situations where it is legal for the landlord to change the locks to a rental unit without giving the tenant keys for the new locks. Which of the following reasons are legal for a landlord to change the locks without notifying the tenant? There are four options. There are multiple correct answers.

1

Changing the locks because the tenant has been evicted by the Sheriff.

2

Changing the lock as the tenant has not paid rent in past three months.

3

Changing the locks as the tenant has sublet the apartment without notifying the landlord.

4

Changing the locks because the landlord has grounds to believe that the tenant has abandoned the unit.

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Lesson 5 | Page 5 of 5

Congratulations, you have completed this lesson!

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Module Summary | Page 1 of 3

Module Summary

This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are four sections on this page with a summary of the key topics that were discussed in this module.

Role of the Landlord and Tenant Board

The Landlord and Tenant Board (LTB) was created under the authority of the Residential Tenancies Act (RTA) and is one of the eight tribunals of the Social Justice Tribunals Ontario. Completion of this lesson has enabled you to: • Describe key information about the LTB • Identify the role of the LTB

Residential Tenancies Act

The Residential Tenancies Act (RTA) sets out the rights and responsibilities of landlords and tenants who rent residential properties. Completion of this lesson has enabled you to: • Describe the types of tenancies covered under the RTA • Identify the types of tenancies not covered under the RTA

Finding Information Regarding Tenancy Matters

The Landlord and Tenant Board (LTB) provides information on various topics, such as offences under the Residential Tenancies Act (RTA) and use of different forms, that landlords and tenants can access from their website or obtain from their office. Completion of this lesson has enabled you to: • Identify the methods of the LTB to provide information • Identify the topics about which the LTB provides information • Describe offences under the RTA for the landlord • Describe offences under the RTA for the tenant • Identify the rules and obligations regarding the use of applications and forms • Identify the most commonly used forms

Dispute Resolution

The Landlord and Tenant Board (LTB) resolves disputes between landlords and tenants through mediation or adjudication.

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Completion of this lesson has enabled you to: • Describe the actions that the LTB takes to resolve a dispute

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V7.2

Module 6: Interactions with Tenants Disclaimer: This is a reference document which contains pages from the Accessible eLearning module. You should complete the eLearning module to proceed to the next step. Please note that the accessible module on the LMS only contains the interactive pages and you need to go through the content of this document thoroughly to attempt the interactive activities in the module. Please use Adobe Acrobat Reader (Recommended version 9 or above) to navigate through this PDF. Real Estate Salesperson Program © 2021 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

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Module 6: Interactions with Tenants This module provides you with an overview of the procedures and requirements as set out in the Residential Tenancies Act (RTA) and other applicable legislation that focus on the interactions of landlords with tenants. This information will be important for you when advising your clients on tenancy matters. You should know about the landlord’s right to enter the tenant’s unit and the notice requirements that must be provided to the tenant, should the landlord or you, as their representative, choose to enter the tenant’s unit. The module also covers the requirements for assigning and subletting a lease. It also outlines the tenant’s right to have a pet and the provisions for a tenant eviction because of pet-related concerns. The module encompasses scenarios stipulated in the RTA related to termination of tenancy by both the tenant and the landlord. This module explores the requirements to terminate a tenancy, such as notice requirements (by both the tenant and the landlord), compensation requirements and the requirements of the landlord after the termination of an agreement, and the need to demonstrate competence when advising the investor landlords on these matters. To check your understanding of this module, you must complete all the activities in the online module. While navigating through the online module, click the Legislation button to view laws and regulations related to this module. The contents of the thumbnails Accessible PDF.

and References from the module are added to support your learning throughout this

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Menu: Interactions with Tenants

Number of Lessons

Lesson Number

8 Lessons

Lesson Name

Lesson 1

Right to Enter a Unit

Lesson 2

Assignments and Subletting

Lesson 3

A Tenant’s Right to Have a Pet

Lesson 4

Termination of a Tenancy by a Tenant

Lesson 5

Termination of a Tenancy by a Landlord

Lesson 6

Requirements for Termination of a Tenancy

Lesson 7

Summary Practice Activities Module Summary

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Lesson 1 | Page 1 of 12

Lesson 1: Right to Enter a Unit This lesson discusses the legal requirements under the Residential Tenancies Act that the landlord and their representatives must adhere to before entering the tenant’s unit.

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Lesson 1 | Page 2 of 12

A tenant’s quiet enjoyment of their unit is fundamental to any tenancy, which includes the non-interference of the landlord or their representatives such as their salesperson, or any other person they appoint to act on behalf of them. To protect the interest of the tenants, the Residential Tenancies Act (RTA) has stipulated entry requirements that must be adhered to by the landlord and their representatives, including their salesperson. You should understand the legal requirements for a landlord or for you, as their representative, to enter the rental premises and to ensure compliance with the requirements of the RTA. Upon completion of this lesson, you will be able to: • Identify the legal requirements for a landlord to enter a tenant’s unit • Identify the legal requirements for a representative or a salesperson to enter a tenant’s unit Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 1 | Page 3 of 12

The landlord’s right to entry is broadly divided into two categories: entry with a written 24 hours’ notice and entry without notice. The Residential Tenancies Act (RTA) sets out provisions for the landlord to enter a tenant’s unit in both cases. You should be aware of these requirements and advise the landlord on the consequences of non-compliance with the RTA.

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Lesson 1 | Page 4 of 12

Notice Requirements for a Landlord to Enter a Tenant’s Unit According to the Residential Tenancies Act (RTA), a landlord may enter a tenant’s unit with proper written notice, provided that the notice sets out the reason for the request and the day and time of the requested entry. The landlord may enter between 8 a.m. and 8 p.m.: • To carry out repairs or do work in the rental unit • To allow a potential mortgagee or insurer of the residential complex to view that rental unit • To allow a potential purchaser to view the rental unit • To inspect for purposes of ensuring that the property is in a good state of repair and meets health, safety, housing, and maintenance standards, consistent with the landlord’s obligations © 2021 Real Estate Council of Ontario

• For any other reasonable grounds specified in the tenancy agreement The purpose of the written notice is to provide as much information as possible to the tenant regarding the entry into the unit. It is important for you, when providing services to the landlord, to understand the notice and entry requirements to the rental unit to provide competent services. Failure to adhere to these requirements can create significant problems for both the landlord and you, as their salesperson.

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Lesson 1 | Page 5 of 12

Permitted Entry to a Tenant’s Unit Without Written Notice The Residential Tenancies Act (RTA) specifies exceptions to when the landlord may enter the unit without 24 hours’ written notice. The RTA also allows the landlord to enter the unit without giving notice if the tenant consents at the time of entry. Any deviation from these rules stipulated in the RTA will be considered an illegal entry. Therefore, it is your responsibility to perform your due diligence and advise your clients in related matters. However, if the landlord has provided the required notice to the tenant, and the tenant does not permit entry, the RTA allows the landlord to serve the tenant with a notice to vacate.

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Entry is permitted without written notice in the following specific situations: • In the case of an emergency or the tenant consents at the time of entry • If the tenancy agreement provides for regular cleaning by the landlord and if entry is made at times specified; or between 8 a.m. and 8 p.m. when no times are specified • If the landlord wants to show a prospective tenant and if: o The landlord and the tenant have agreed to a termination or either has given notice of termination o The landlord enters the rental unit between 8 a.m. and 8 p.m. o The landlord, before entering, makes a reasonable effort to inform the tenant of their intention to enter For example, if a landlord wants to enter the unit for repairs and/or maintenance requested by the tenant, they must give written 24 hours’ notice. If the landlord does not give the required notice, they must obtain consent from the tenant at the time of such an entry.

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Lesson 1 | Page 6 of 12

Consequences of Illegal Entry to a Tenant’s Unit If a landlord enters a tenant’s unit without notice at a time or situation other than specified in the Residential Tenancies Act (RTA), it will be deemed as illegal entry to the tenant’s unit. The tenant can, under the RTA, file an order to the Landlord and Tenant Board (LTB), which might fine the landlord, upon verifying that the landlord has illegally entered the unit. The landlord may also be ordered by the LTB to offer the tenant an abatement in rent. As a consequence of illegal entry, a landlord may also be subjected to action by the Investigation and Enforcement Unit of the Ministry of Municipal Affairs and Housing, which is the provincial agency responsible for the RTA. © 2021 Real Estate Council of Ontario

Lesson 1 | Page 7 of 12

An investor landlord has leased out a triplex and a condominium unit to tenants. The landlord was recently assessed a fine by the Landlord and Tenant Board for illegally entering a tenant’s unit, therefore, they want to ensure compliance with the Residential Tenancies Act (RTA) requirements this time. They consult a salesperson for advice. In which of the following cases should the salesperson advise the investor landlord to give a 24 hours’ written notice? There are four options. There are multiple correct answers.

1

The tenant in the basement unit of the triplex called stating that water was leaking into their apartment from the unit above. He knocked on the tenant’s door but there was no one home.

2

Enter the unit for showing to a prospective buyer, while the tenant is out of town.

3

Enter the unit to fix a broken window, as per the tenant’s request.

4

Enter the unit urgently to get the property inspected by a potential insurer or mortgagee.

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Lesson 1 | Page 8 of 12

As you have learned, the Residential Tenancies Act (RTA) allows you to enter a tenant’s unit for the purpose of showing it to a prospective buyer or tenant. However, the RTA specifies certain requirements that must be completed before such an entry is made. When providing the tenant with 24 hours’ written notice, you must also obtain written authorization from the landlord to enter the tenant’s unit.

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Lesson 1 | Page 9 of 12

Permitted Entry to a Tenant’s Unit with Written Notice and Authorization The Residential Tenancies Act (RTA) specifies requirements for both written notice and written authorization for any landlord’s representative, including you, as their salesperson, to enter the tenant’s unit. Written Notice: The RTA requires that the landlord’s representative must provide written notice to enter the tenant’s unit, on behalf of the landlord. This written notice must be provided to the tenant at least 24 hours before you enter.

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You must also specify the following in the written notice: • The day of entry • The reason for entry • A time of entry between the hours of 8 a.m. and 8 p.m. Written Authorization: You, as a listing salesperson, upon receiving written authorization from the landlord, may provide the required notices to the tenant with respect to entry to the rented premises on behalf of the landlord. The landlord’s written authorization should be provided to the tenant or be attached to the written notice of entry. If you are not the listing salesperson, upon receiving authorization from the listing salesperson or another representative of the landlord such as a property manager, you may enter and show the rental unit as directed in the authorization. You should make every attempt to obtain written authorization and provide a copy of the letter to the tenant at the time of showing.

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Lesson 1 | Page 10 of 12

Legal Requirements for a Salesperson to Enter a Tenant’s Unit When representing a landlord, you may enter an occupied unit to show the property to a prospective buyer or tenant, or for any other purpose permitted by the Residential Tenancies Act (RTA). However, you must comply with the requirements stipulated in the RTA before entering a unit. You can enter an occupied unit with the provision of the following: • Written authorization letter signed by the landlord authorizing you, as their representative, to enter the unit or serve a 24 hours’ written notice • Written notice given to the tenant at least 24 hours before the time of entry outlining the date, time, and reason for the entry and signed on behalf of the landlord

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Lesson 1 | Page 11 of 12

A tenant refused to let a salesperson, representing the landlord, to enter their unit, as the time specified in the 24 hours’ written notice was after 8 p.m. and was not agreed to by the tenant. As a result, the salesperson was unable to show the unit to a prospective buyer. To avoid such situations in the future, the salesperson advises the landlord to fill out the notice correctly and ensure compliance with the requirements in the Residential Tenancies Act (RTA). Select the choice that most appropriately meets the legal requirements for the salesperson to enter a tenant’s unit, as per the RTA. There are three options. There is only one correct answer.

1

Provide a physical copy of the written authorization from the landlord, along with the written notice on January 17 specifying the following: Notice to enter the unit to show to a prospective buyer on January 18, between 7 p.m. and 9 p.m.

2

Provide a physical copy of written authorization from the landlord, along with the written notice on January 17 specifying the following: Notice to enter the unit to show to a prospective buyer January 18 between 4 p.m. and 7 p.m.

3

Provide the written notice on January 17 specifying the following: Notice to enter the unit to show to a prospective buyer on January 18 between 4 p.m. and 8 p.m.

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Lesson 1 | Page 12 of 12

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the legal requirements for a landlord to enter a tenant’s unit • Identify the legal requirements for a representative or a salesperson to enter a tenant’s unit There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Legal requirements for a The landlord’s right to enter the unit falls under two categories: landlord to enter the • Written 24 hours’ notice: The notice must include the reason, day, and time of entry between 8 a.m. and 8 p.m. unit • Entry without notice: There are some exceptional scenarios, like when a situation is specified in the tenancy agreement, when the notice of termination of the tenancy has been given by either party, or in cases of an emergency If the landlord does not adhere to the rules stipulated in the Residential Tenancies Act (RTA), the tenant can file an application to the Landlord and Tenant Board (LTB), and the landlord may face legal action.

Legal requirements for a The Residential Tenancies Act (RTA) allows you to enter a tenant’s unit on behalf of the landlord. However, you must provide the following to the tenant: salesperson to enter a • 24 hours’ written notice, which must include the reason for the entry, day, and unit time of entry between 8 a.m. and 8 p.m.

• Written authorization from the landlord permitting the salesperson to give notice on their behalf that must be given to the tenant at the time of entry If you do not meet the requirements before entering an occupied unit, the tenant can file an application with the LTB requesting enforcement action.

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Lesson 2 | Page 1 of 9

Lesson 2: Assignments and Subletting

This lesson highlights the definition and key features that differentiate between assigning and subletting a lease. The lesson also outlines the leasing requirements and exemptions related to an assignment and subletting of a lease.

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Lesson 2 | Page 2 of 9

According to the Residential Tenancies Act (RTA), if a tenant wants to move out before the expiry of their lease agreement, they may choose to sublet or assign their lease to another person. You should know the key features and differences between an assignment and subletting of a lease, as the processes and outcomes can be significantly different and, in the case of a sublet, there can be ongoing liabilities for a sub-landlord. Upon completion of this lesson, you will be able to: • Differentiate between assigning a lease and subletting Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 2 | Page 3 of 9

This topic describes an assignment and sublet of a lease. A tenant can use the feature of an assignment or sublet if they meet the requirements of the Residential Tenancies Act (RTA) and if the landlord allows such a request. The topic also details the requirements of both the landlord and the tenant related to assigning and subletting of a lease. If a tenant assigns or sublets a unit without fulfilling the requirements of the RTA, they can be held liable and the landlord can file an application with the Landlord and Tenant Board (LTB).

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Lesson 2 | Page 4 of 9

Assignment of a Lease A tenant who may want to end a tenancy early and move out permanently can opt to assign their lease to another person(s). Assignment of a unit means that the tenant permanently moves out of the unit and finds another person(s), known as the assignee, to assume the tenancy agreement for the remaining term of the tenancy.

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Features of an assignment: The tenant must obtain the landlord’s approval for an assignment. When an assignment is made, the terms and conditions of the tenancy agreement continue to apply. Both assignee and tenant (now former tenant) are liable to the landlord and have rights under the tenancy agreement as follows: • The former tenant for the period up to the assignment • The assignee for the period following assignment Once the assignment begins, the original tenant is no longer liable to the landlord for the period following the assignment. The assignee becomes responsible for paying the same rent as the original tenant to the landlord and gets the same amenities and facilities as agreed upon in the lease. For example, if a parking spot and access to the gym have been agreed upon in the lease by the tenant, the same must be provided to the assignee (new tenant) as well. You should inform the investor clients of the features of an assignment and ensure that they continue to provide the amenities and services to the new assignee, as per the original lease terms.

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Lesson 2 | Page 5 of 9

Subletting a Lease Subletting a unit is different from an assignment, where the tenant moves out permanently and is no longer liable to the landlord. In a sublet, a tenant cannot end a tenancy early but can find another person to share the lease agreement until the expiration date. However, you should know that it is not common for tenants to sublet their unit. In a sublet, the tenant moves out of the unit and finds a new person, known as the subtenant, to move into the unit. The tenant, now known as the sub-landlord, may move out temporarily or may sublet the premises with no intention to return. © 2021 Real Estate Council of Ontario

Features of a sublet: The tenant must obtain the consent of the landlord prior to subletting the rental unit. Unlike an assignment, where the tenant is no longer liable to the landlord once the assignment has begun, in a sublet the original tenant (sublandlord) continues to remain entitled to benefits and liable for breaches under the tenancy agreement during the subtenancy period. The subtenant also becomes entitled to benefits and is liable to the sub-landlord (and not the landlord) for breaches of the subtenant’s obligations. The sub-landlord is responsible to collect the rent from the subtenant and pay it to the landlord. However, often the parties agree that the subtenant will pay rent directly to the original landlord. The tenant can charge the same amount of rent to the subtenant as they pay to the landlord and cannot charge any additional fee for the new tenant to take over the lease. Various rights given to the landlord concerning termination apply to the tenantsubtenant relationship, as if the tenant were landlord and the subtenant were tenant (e.g., damage, reasonable enjoyment, and too many persons). You should understand the different obligations of (and to) a tenant and a subtenant and inform your investor client of these obligations.

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Lesson 2 | Page 6 of 9

Leasing Requirements and Exemptions Related to a Sublet and to Assignment of a Lease As you learned previously, the features of a sublet are very different to those of an assignment. Similarly, the Residential Tenancies Act (RTA) stipulates different leasing requirements that must be complied with by both the tenant and the landlord. You should know about these varying requirements to help an investor client make an informed decision. As per the RTA, there are exemptions that prohibit the assignment and sublet of a unit by an occupant. However, further discussion of these exemptions is not applicable to this course. The following two sections contain information on leasing requirements related to a sublet and to assignment of a lease. For more information on requirements for subletting and assigning a lease, review How a Tenant Can End Their Tenancy from the Landlord and Tenant Board.

Leasing requirements for an assignment If a tenant requests an assignment, the landlord can either consent or refuse consent. If a tenant requests an assignment to a specific assignee, the landlord can consent or refuse consent based on that assignee. A refusal regarding an assignee cannot be arbitrary or unreasonable. It should be noted that the landlord may consent to an assignment and subsequently refuse an assignment to a specific assignee. However, such a refusal should not be in contravention with the Ontario Human Rights Code and should be based on sound business principles; for example, poor credit history, criminal background, or poor recommendations from previous landlords.

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If an assignment is requested by a tenant and the landlord refuses or does not respond within seven days of the request, the tenant may give notice of termination but must do so within 30 days of the request being made. If the tenancy period is weekly or daily, the tenant must give at least 28 days’ notice. The landlord may charge reasonable out-of-pocket expenses in giving consent. For example, the costs of a credit check or the preparation of an assignment agreement by the landlord’s lawyer.

Leasing requirement for a sublet The landlord cannot arbitrarily or unreasonably withhold consent to a sublet. The landlord must respond (with approval or refusal) within seven days since the request for consent was made by the tenant. The landlord may charge reasonable out-of-pocket expenses relating to the consent. The subtenant has no right to occupy the rental unit after the end of the subtenancy. The tenant may apply to the Landlord and Tenant Board (LTB) for an order for compensation from an over holding subtenant, who has not vacated the unit at the end of the sublet period and is not paying rent owed to the landlord. If a subtenant overholds and the original tenant has vacated the rental unit, the landlord may negotiate a new tenancy agreement with the subtenant. If a tenant transfers the occupancy of the unit to © 2021 Real Estate Council of Ontario

another person without the landlord’s consent, the landlord must apply to the LTB to evict the unauthorized person and the tenant within 60 days of discovering the unauthorized occupant. The unauthorized occupation shall be deemed to be an assignment with the landlord’s consent if a new tenancy agreement is not entered into within 60 days and no application is made to evict the person or the subtenant.

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Lesson 2 | Page 7 of 9

Residential Tenancies Act Forms Related to an Assignment and Sublet In cases where the Residential Tenancies Act (RTA) allows for the tenant to file an application to the Landlord and Tenant Board (LTB), they must use the proper forms. If the landlord does not respond to the tenant’s request to assign or sublet the unit to another person, the tenant can file to end the tenancy early by giving the landlord: • Form N9: Tenant’s Notice to Terminate the Tenancy If the tenant believes that the landlord arbitrarily or unreasonably refused the person, they suggested to assign or sublet the unit, they can apply to the LTB using: • A2 Form: Application about a Sublet or an Assignment The tenant can use this form to authorize the assignment, end the tenancy, or order the landlord to pay a rent rebate. © 2021 Real Estate Council of Ontario

Lesson 2 | Page 8 of 9

An investor landlord has leased out a duplex and one of their tenants wants to assign their lease agreement to another person. The tenant has been transferred to another city by their employer and wants to vacate their unit immediately. The investor landlord seeks advice from their salesperson, on the requirements of an assignment. Which of the following should the salesperson recommend to the landlord? There are four options. There are multiple correct answers.

1

Inform the landlord that they may charge the tenant for the lawyer’s fee to prepare the new tenancy agreement.

2

Advise the landlord to respond to the tenant’s request within seven days of the request being made.

3

Advise the landlord that they can charge the assignee higher rent.

4

Inform the landlord that the tenant would remain liable for fulfilling the terms of the lease even when the assignee moves into the unit.

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Lesson 2 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Differentiate between assigning a lease and subletting There are two sections on this page with a summary of the key topics that were discussed in this lesson.

Assigning a lease

In an assignment, the tenant moves out permanently and assigns the unit to another person, known as the assignee. Once the assignment begins, the original tenant is no longer liable to the landlord. The Residential Tenancies Act (RTA) specifies the following leasing requirements for an assignment: • The landlord can either consent or refuse to an assignment or a specific assignee, but cannot be arbitrary or unreasonable • The landlord must respond within seven days of the assignment request; if not, the tenant may give notice of termination within 30 days • The landlord may charge a reasonable out-of-pocket expense from the tenant

Subletting a lease

In a sublet, the tenant (now known as sub-landlord) moves out of the unit (for a period, or with no intention to return) and another person, known as the subtenant, moves in. The tenant (sub-landlord) remains liable to the original landlord while the subtenant is liable to the tenant (sub-landlord). The subtenant may pay the rent to the tenant (sublandlord) or may agree to pay the rent directly to the original landlord. The Residential Tenancies Act (RTA) specifies the following leasing requirements for a sublet: • The subtenant cannot occupy the unit after the end of subtenancy, or else the tenant (sub-landlord) may apply to the Landlord and Tenant Board (LTB) for an order for compensation • The landlord may negotiate a new tenancy agreement if the subtenant overholds even after the original tenant vacates the unit

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• If a tenant sublets the unit without the landlord’s consent, the landlord may apply to the LTB (within 60 days) to evict the tenant or else the subtenant will be deemed to be a tenant

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Lesson 3 | Page 1 of 9

Lesson 3: A Tenant’s Right to Have a Pet

This lesson describes the tenant’s right to have a pet and the provisions for tenant eviction with regards to petrelated issues. The lesson also outlines the exceptions for service animals pursuant to the Ontario Human Rights Code.

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Lesson 3 | Page 2 of 9

A tenant has the right to keep a pet in the unit and the Residential Tenancies Act (RTA) has provisions in place, protecting this right. As per the RTA, a landlord can refuse to rent a unit to a person with a pet, but once the tenancy begins, a tenant can only be terminated due to issues specified in the RTA. The tenant’s right to keep a pet is also governed by the condominium corporation’s declaration and bylaws.

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You should know there is a distinction between pets and service animals. Tenants with service animals are exceptions to the legal requirements that apply to tenants with pets and are governed by the Ontario Human Rights Code. You should be aware of these distinctions and regulations so that you can guide the investor landlord to ensure compliance with various governing acts and codes. Recent amendment to the Condominium Act addresses the issue of “nuisance” which prohibits condo residents from causing unreasonable amount of noise, which includes disturbance caused by loud and unruly pets. Where previously, matters related to nuisance were taken to court, the new amendment allows condominium corporations to bring the matter to the Condominium Authority Tribunal (CAT). CAT’s new extended authority allows matters to be resolved quickly and in a less costly manner. If the landlord wishes to evict the tenant on account of the noise, the eviction hearings would still have to go through the Landlord and Tenants Board. Upon completion of this lesson, you will be able to: • Explain the legal requirements regarding a tenant’s right to have a pet Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 3 | Page 3 of 9

This topic details the tenant’s right to keep a pet in a rental unit and the various legislations governing that right. The Residential Tenancies Act (RTA) prohibits a landlord to terminate a tenancy simply based on the presence of a pet in the unit. However, it does provide for the situations where the tenant may be evicted due to harm or interference caused by the presence of a pet. The topic also highlights the right of a tenant to keep a service animal and the provisions of the Ontario Humans Right Code governing this right.

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Lesson 3 | Page 4 of 9

Tenant’s Right to a Pet The Residential Tenancies Act (RTA) prohibits the landlord from evicting a tenant simply for having a pet. Tenants are attached to their pets and the RTA has provisions safeguarding their interests for reasonable enjoyment. A landlord can refuse to rent a unit to an applicant who has a pet. However, once a tenant has entered into a lease agreement, they cannot be evicted simply because the landlord was unaware of a pet, or because the tenant adopted the pet after they moved in. The RTA prohibits tenant eviction even in cases where the tenant adopts a pet when the tenant and the landlord agreed otherwise. The RTA also prohibits the landlord from including a clause in the tenancy agreement that prohibits the tenants from having pets in the unit. You should be aware that any such provision that forbids the presence of a pet in or about the unit is void.

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For example, if a landlord consults you on including a “no pet” clause in the lease agreement, you should advise them against such inclusion. It is also advisable to inform them that inclusion of any such clause will be void, as the RTA does not allow such an inclusion in the lease agreement.

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Lesson 3 | Page 5 of 9

Pet-Related Eviction As you learned previously, the landlord cannot evict a tenant simply for having a pet. However, the Residential Tenancies Act (RTA) specifies certain situations when a tenant can be evicted because of pet-related concerns. When representing a landlord, you can advise them to apply to the Landlord and Tenant Board (LTB) to evict the tenant due to pet-related concerns, if any one of the following conditions exist: • • • • • •

The condominium corporation declaration, rules, and bylaws do not allow pets (or a specific pet) The pet is making too much noise The pet is damaging the unit The pet is causing interference with other tenants’ or residents’ reasonable enjoyment of their premises The pet is causing other tenants an allergic reaction The pet is considered to be inherently dangerous (e.g., Pitbull dogs are banned as pets in Ontario for being dangerous)

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You should recall that the first step for a landlord should be to advise the tenant to remove the pet from the premises. If they refuse, the landlord can serve them with notice of termination. However, if a tenant does not comply with the notice requirement, the landlord can apply to the LTB to evict the tenant. However, you should know that the tenant cannot be evicted until the LTB issues a written order stating that the pet is causing a problem or is inherently dangerous. You will learn more about the landlord’s right to terminate a tenancy due to pet-related issues and the notice requirements in further lessons.

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Lesson 3 | Page 6 of 9

Role of Condominium Corporations for Establishing Pet-Related Rules The tenant’s right to have a pet is governed not only by the Residential Tenancies Act (RTA), but in cases where the tenant is renting a unit, a condominium corporation’s declaration and/or bylaws and rules may also play a role in establishing pet-related restrictions. The following two sections contain information on the role of condominium corporations in establishing pet-related rules.

Restrictions on pet ownership The condominium corporation’s declaration, bylaws, or rules may prohibit the presence of any pet altogether or impose limitations on the kind, species, or size of pets that the tenants are permitted to keep. The declaration and rules may also limit the number of pets an owner can have. For example, a condominium’s declaration may allow owners to have only one pet. Some condominium bylaws limit the weight of the pet so that, if required, the owner can carry the pet. For example, in some high-rise apartment style condominiums, pets must be carried by the owner in all common areas within the building. Walking them on a leash inside the building is not permitted. For example, a tenant may be allowed to keep dogs but only if the pet weighs less than 14 kilograms (30 pounds). Pet-related rules are set by a condominium corporation’s declaration or bylaws when it is first established. However, the pet restrictions can be changed by the condominium corporation if agreed to by a required number of unit owners. © 2021 Real Estate Council of Ontario

Provisions In cases where a condominium’s declaration allows for the tenant to keep a pet, they may have certain provisions for the pets and pet owners, such as: • Prohibit noises at certain times • Prohibit certain pet activities at certain times • Prohibit the pet from interfering with a neighbour’s reasonable enjoyment of their property The condominium corporation bylaws may define additional rules for pets causing noise or being a nuisance to the neighbours.

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Lesson 3 | Page 7 of 9

Service Animals As per the Accessibility for Ontarians with Disabilities Act, an animal is considered a service animal if either of these conditions apply: • The animal should be easily identifiable as relating to the owner’s disability • The owner should be able to provide documentation from a regulated health professional stating the need for the animal due to a disability It is important to note that service animals are not considered pets and are protected by Ontario Human Rights Code. The Ontario Human Rights Code gives equal rights and opportunities to all those residing in Ontario without © 2021 Real Estate Council of Ontario

discrimination and protects the rights of people requiring the aid of service animals for their disability. As such, the landlord or a condominium corporation cannot prohibit a tenant from keeping a service animal. When working with an investor client, you should inform them that the provisions of the Ontario Human Rights Code overrule the provisions of the Residential Tenancies Act (RTA) if there is a conflict between the two. Therefore, a tenant using a service animal for their disability is an exception to the provisions and requirements of the RTA and the condominium corporation, respectively. Example: A tenant, who is visually impaired, rents a unit in a condominium building where the condominium declaration prohibits pets. The tenant relies on a service animal for assistance. In this case, you should recommend to the investor client that the tenant cannot be refused accommodation, as the provisions of the Ontario Human Rights Code would overrule the condominium corporation’s declaration. Most service animals can be easily identified from their vests or harnesses. However, as mentioned above, the landlord or a condominium corporation may request documentation from a health professional identifying the tenant’s need for a service animal.

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Lesson 3 | Page 8 of 9

An investor landlord does not want the tenants to keep pets in their units but, before making a decision, seeks advice from their salesperson to ensure compliance with the Residential Tenancies Act (RTA) or any other acts that might impact them. To best guide them, the salesperson presents the investor landlord with various pet-related situations that may or may not permit removal of pets from the premises. In which of the following situations can the landlord ask the tenant to remove the pet from the premises? There are four options. There are multiple correct answers.

1

Over the period of the tenancy, the tenant has acquired a pet even though the landlord and the tenant both agreed to no pets at the beginning of the tenancy.

2

The tenant’s cat has caused an allergic reaction to the other tenants.

3

The tenant owns a pet that is against the condominium corporation’s bylaws.

4

The tenant has a child with autism and uses a service animal, but the condominium’s declaration prohibits any kind of pets.

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Lesson 3 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Explain the legal requirements regarding a tenant’s right to have a pet There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Tenant’s right to a pet

As per the Residential Tenancies Act (RTA), a tenant cannot be evicted from a unit simply for having a pet. The RTA protects the tenant’s right to keep a pet and prohibits the landlord from evicting a tenant for reasons other than those stipulated in the RTA. The RTA also prohibits an inclusion of “no pet” clause in the lease agreement.

Pet-related eviction

The Residential Tenancies Act (RTA) stipulates provisions for tenant eviction due to petrelated concerns. An investor landlord may apply to the Landlord and Tenant Board (LTB) to evict a tenant if their pet is: • Making too much noise • Damaging the unit • Causing other tenants an allergic reaction • Considered to be inherently dangerous However, the tenant cannot be evicted until the LTB issues a written order stating that the pet is causing a problem or is inherently dangerous.

Role of condominium corporations

A condominium corporation’s declaration or bylaws may have various requirements related to pets: • Prohibit the presence of a pet (of any kind) • Impose limitations on the kind, species, size, or number of pets • Impose limitations and provisions on the presence of the pets, such as: prohibit the movement of a pet or pet noises at certain times and certain places in the condominium building premises © 2021 Real Estate Council of Ontario

Service animals

As per the Ontario Human Rights provisions, service animals are exceptions to the provisions of pet-related evictions as per the Residential Tenancies Act (RTA) or the condominium declarations or bylaws. • Service animals are not considered pets • Service animals are easily identifiable from their vests or harnesses, but the landlord may also request documentation from a regulated health professional stating the need for a service animal

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Lesson 4 | Page 1 of 9

Lesson 4: Termination of a Tenancy by a Tenant

This lesson details the tenant’s notice requirements for terminating a tenancy as per the Residential Tenancies Act. The lesson also highlights special cases that are exceptions to notice period requirements.

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Lesson 4 | Page 2 of 9

As you learned in the Introducing the Landlord and Tenant Board module, termination of a tenancy agreement by a tenant is only possible in accordance with the Residential Tenancies Act (RTA). As per the RTA, a tenant may terminate a tenancy agreement at the end of a periodic tenancy (e.g., weekly, monthly, or yearly) or at the end of a fixed-term tenancy. However, the RTA also specifies special cases where a tenant may terminate a tenancy agreement before the end of a periodic or fixed-term tenancy. These special cases will be discussed further in the lesson. The RTA specifies different notice requirements for various types of termination of tenancy by a tenant. You should be aware of notice periods relating to termination of a tenancy by tenants to help investor clients make informed decisions. Upon completion of this lesson, you will be able to: • Identify the requirements for a tenant to terminate a tenancy Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented. © 2021 Real Estate Council of Ontario

Lesson 4 | Page 3 of 9

This topic details the Residential Tenancies Act (RTA) requirements and prescribed forms a tenant must use when giving a notice of termination of tenancy. The RTA specifies various notice periods for each type of tenancy and exception notice period requirements. The exception notice period is granted for cases when the landlord fails to provide the tenant with a Standard Form of Lease or in cases where the tenant or their child has been a victim of domestic violence or sexual abuse.

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Lesson 4 | Page 4 of 9

Tenant’s Notice Requirements for Terminating a Tenancy As per the Residential Tenancies Act (RTA), a tenant may terminate a tenancy agreement at the end of a periodic tenancy or at the end of a fixed-term tenancy. However, they must fulfill the requirements prescribed in the RTA when terminating a tenancy. The following three sections contain information on notice requirements for a tenant wanting to terminate a tenancy.

Forms for notice of termination When advising an investor client, you should know the details of the notice required to be provided by a tenant. A notice of termination must identify the rental unit, the date of the tenancy termination, the reason for the termination, and be signed by the person giving the notice. The tenant must use the RTA prescribed forms to give notice. However, in a case where the tenant and the landlord agree to terminate the tenancy, a tenant is not required to give a notice of termination. Tenants must use form N9: Tenant’s Notice to End the Tenancy, when giving a notice of termination. A different form is prescribed for termination of tenancy to victims of domestic violence and sexual abuse. This will be covered further in the lesson.

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Notice period In a case where the tenancy period is daily or weekly, the tenant must give notice at least 28 days before the effective date of termination; for example, the last day of the rental period. For example, a tenant in a weekly tenancy uses form N9 to give a notice of termination on April 1. As per the RTA, the tenant cannot vacate the unit before April 29. In a case where the tenancy period is monthly or yearly, a tenant must give notice at least 60 days before the effective date of termination. In case of a monthly tenancy, it would be the last day of a rental period, whereas in a yearly tenancy it would be the last day of the term. For example, a tenant in a monthly tenancy wants to move back to their parent’s house effective July 30. As per the RTA, they must give the landlord a notice of termination no later than May 31. In a fixed-term tenancy, the tenant must give notice at least 60 days before the specified expiration date to be effective on the expiration date. For example, a tenant is in a fixed-term lease up to August 31. The tenant must give the landlord notice of termination before June 30 with the effective date of termination being August 31.

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Consequence of an improper notice In cases where the tenant moves out of the unit without giving proper notice, such as not abiding by the required number of days, the landlord may apply to the Landlord and Tenant Board (LTB) to recover their revenue. After a review, the LTB may order the tenant to pay the landlord an amount of rent owed to them. The rent amount is calculated until the earlier of these two dates: • The date the unit is rented to another tenant • The earliest termination date that could have been put in a notice to end a tenancy, if the tenant had given proper notice For example, a tenant in a monthly tenancy provides a 30-day written notice of termination on March 31 and moves out on April 30. However, the landlord is unable to rent out the unit to another tenant until June 12 and applies to the LTB for compensation for improper notice served by the tenant. The LTB orders the tenant to pay rent until May 31, which would the earliest termination date permitted in this case, as per the RTA.

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Lesson 4 | Page 5 of 9

Exceptions to Notice Requirements: Victim of Sexual or Domestic Violence When representing an investor client, you should know that the Residential Tenancies Act (RTA) prescribes some exceptions to notice period requirements, such as if the tenant is a victim of sexual or domestic violence. The following three sections contain information on victim of sexual or domestic violence.

Notice period The RTA allows for tenants to terminate a tenancy if the tenant or their child experiences domestic violence or sexual abuse during the tenancy or is in fear of being a victim. The notice implies that the tenant or their child may become a victim of domestic violence or sexual abuse if they stay in the rental unit. Effective September 8, 2016, the RTA was amended to allow tenants who are concerned for their safety or the safety of a child living in their household to give 28 days’ notice to terminate their tenancy. The tenant can give this notice any time during the tenancy. This is down from the current requirement of 60 days’ notice for most tenancies. These changes apply to monthly, yearly, and fixed-term leases. You should also know that in cases where the tenant is in a joint tenancy and the other tenants do not sign the notice, the tenancy will continue for those tenants. For example, a tenant signed a 12-month lease with their common-law spouse on October 25. Three months later, one of the spouses experiences domestic

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violence from their partner. On the advice of their lawyer, the victim provides notice of termination to the landlord on January 31 that they would be vacating the unit on February 28, along with other required documentation. This notice of termination would not affect the tenancy of the remaining tenant, who will be required to fulfill the remaining term of the lease agreement.

A tenant’s responsibilities You should know that to give this notice, the tenant must give the landlord two documents: • Tenant's Notice to End Tenancy because of Fear of Sexual or Domestic Violence and Abuse using form N15 • Tenant's Statement about Sexual or Domestic Violence and Abuse, or a copy of a court order issued within the last 90 days (such as a restraining order or a peace bond)

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A landlord’s responsibilities When advising an investor client, you should know that in such a case, the RTA specifies certain requirements for the landlord as well. A landlord must do the following: • Pay strict attention to protecting the privacy of a tenant who reports abuse or be subject to fines and a possible damage award. • Must not advertise or show the unit to prospective tenants until after the tenant who gave the notice vacates. • Must not let other people, including other tenants in the unit, know about the documents provided by the victim tenant or about the information in them, except as required by the RTA. For example, the RTA allows the landlord to disclose information to a law enforcement agency, such as the police, or children and family service agencies. You should advise the landlord about these requirements, as failure to comply with them may lead the investor landlord to face legal action.

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Lesson 4 | Page 6 of 9

Exceptions to Notice Requirements: Standard Form of Lease As you learned previously, a tenant may end a tenancy early if the landlord did not use a Standard Form of Lease when preparing the tenancy lease agreement and did not provide a copy when requested. The following three sections contain information on exceptions to notice requirements if the landlord does not provide a Standard Form of Lease.

Provision in the Residential Tenancies Act (RTA) The RTA specifies that any tenancy agreements entered into on or after April 30, 2018 must use the Standard Form of Lease. If the tenancy agreement is not on a Standard Form of Lease, the tenant can demand that the landlord provide their lease agreement on a Standard Form of Lease to be signed by both the parties. It is also ideal for the tenant to make such a request in writing.

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A landlord’s responsibilities The RTA specifies that the landlord must comply with the tenant’s request and provide the tenant with the Standard Form of Lease. If the landlord does not provide the tenant with a copy of the standard lease within 21 days of the tenant’s request, the tenant can give notice to the landlord to end the tenancy, even if it is for a fixed term. The RTA also stipulates that a tenant may choose to give a notice of termination, even if the landlord provides the tenant with the Standard Form of Lease. However, the tenant must decide and give the notice of termination within 30 days of the request for the Standard Form of Lease being made. For example, a tenant rented an apartment unit on April 1 and agreed to sign a lease for 12 months. When the landlord did not provide a copy, the tenant made a written request for their copy of the lease agreement on May 31. In this case, the landlord has until June 21 to provide the Standard Form of Lease to the tenant.

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Notice period You should be aware that in either of the cases mentioned before, the RTA specifies that the tenant must provide the landlord with a minimum of 60 days’ notice to terminate before the last day of a rental period. It is important to note that the termination date does not have to be the last day of the fixed tenancy agreement. As discussed previously, the tenant has only 30 days from the date of the request, to give their 60 days’ notice of termination. Once the 30 days have expired, the tenant cannot give a notice of termination for failing to provide the Standard Form of Lease. For example, a tenant requests the landlord for a Standard Form of Lease on May 31. However, the landlord fails to provide the form until the required date of June 21. The tenant has until June 30 to give a notice of termination to the landlord. This notice of termination must be the required 60-day notice period. The tenant cannot give a notice of termination after June 30, which is the end of the 30-day period provided for in the RTA.

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Lesson 4 | Page 7 of 9

Exceptions to Notice Requirements: Other Factors There are other factors, as stipulated in the Residential Tenancies Act (RTA), under which a tenant can end a tenancy early or move out before the period ends. These may not be special cases but provide the tenant with a way to end the tenancy before the fixed term expires. The following three sections contain information other factors for a tenant to end a tenancy. For more information on notice requirements for tenants to terminate a tenancy, review How a Tenant Can End Their Tenancy from the Landlord and Tenant Board.

Agreement with the landlord The RTA allows for a tenant to end a tenancy early if the tenant and the landlord agree that the tenant will move out at any time. This agreement should include a specific date the tenancy will end. This agreement can either be oral or written. In a case where the tenant and/or the landlord want a written agreement, they may use the Agreement to Terminate a Tenancy Form, which is an approved Landlord and Tenant Board (LTB) form.

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Landlord and Tenant Board (LTB) issues an order The RTA allows for a tenant to apply to the LTB for an order to end the tenancy agreement early if the landlord does not meet their obligations under the RTA. Some of these cases include: • The landlord does not maintain or repair the unit properly. • The landlord or their representative enters the unit illegally. • The landlord changes the locking system or access to the unit, thus locking the tenant out of the unit. • The landlord interferes with the tenant’s reasonable enjoyment of the property. • The landlord harasses the tenant. • The landlord withholds or deliberately interferes with a vital service.

Assignment and sublet As you learned in the “Assignments and Subletting” lesson, a tenant can end a tenancy early by assigning their unit to another person, known as an assignee, or subletting to a subtenant for the remaining period of the lease agreement.

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Lesson 4 | Page 8 of 9

An investor landlord has received notice of termination from some of their tenants, informing the landlord that they will be vacating the units. The investor landlord seeks advice from a salesperson on various termination scenarios and appropriate notice requirements stipulated in the Residential Tenancies Act (RTA). Which of the following scenarios are as per the RTA notice requirements? There are four options. There are multiple correct answers.

1

The investor landlord did not provide the tenant with the Standard Form of Lease within 21 days of the request being made. The tenant has given 30 days’ notice to terminate.

2

A tenant in a monthly tenancy period has given 28 days’ notice to terminate the tenancy.

3

A tenant in a fixed-term lease has suffered domestic violence and has given 28 days’ notice of termination.

4

A tenant wants to assign their unit to another person and vacate the unit before the end of the term of their tenancy.

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Lesson 4 | Page 9 of 9

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the requirements for a tenant to terminate a tenancy There are two sections on this page with a summary of the key topics that were discussed in this lesson. According to the Residential Tenancies Act (RTA), a tenant must provide the landlord Terminate a tenancy at the end of an agreement with a notice to terminate the tenancy using the appropriate forms. The notice

period varies based on the type of tenancy agreement (periodic versus fixed term). The tenant must give at least 28 days’ notice before the effective date of termination in case of a daily and weekly tenancy and at least 60 days’ notice before the effective date of termination in case of monthly, yearly, and a fixed-term tenancy. In a case where the tenant does not give proper notice, the tenant must pay the landlord the rent amount calculated up to the earlier of the two dates: • The date the unit is rented to another tenant • The earliest termination date that could have been put in case of proper notice

Tenancy termination: exception cases

The Residential Tenancies Act (RTA) stipulates special cases where exceptions to notice requirements are granted and a tenant may end a tenancy early. The following are the reasons allowed in the RTA: • Victim of sexual or domestic violence: If the tenant (or their child) has suffered sexual or domestic violence and fear for their safety, they may give 28 days’ notice to terminate the tenancy. In addition to the appropriate notice form the tenant must also provide either a statement about sexual or domestic violence, or a copy of court order. • The landlord did not provide Standard Form of Lease: If the landlord does not provide the tenant with a Standard Form of Lease within 21 days of the request being made by the tenant, the tenant may give the tenant a 60 days’

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notice to end the tenancy. If the landlord complies with the tenant’s request, the tenant may still choose to give 60-day notice to terminate but must do so within 30 days of making the request. • Agreement with landlord: The tenant ends a tenancy early if the tenant and the landlord have a written or oral agreement in place stating that the tenant can end a tenancy earlier than the date of termination in the lease agreement. • Landlord and Tenant Board (LTB) issues an order: The tenant can end a tenancy early if the landlord does not meet their obligations under the RTA. They can apply to the LTB to issue an order to terminate the tenancy.

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Lesson 5 | Page 1 of 13

Lesson 5: Termination of a Tenancy by a Landlord

This lesson provides the provisions of the Residential Tenancies Act for landlords to terminate a tenancy in conditions where the termination is warranted with or without cause, or due to an offence under the Ontario Human Rights Code. The lesson also highlights the legalization of cannabis and how it impacts landlords.

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Lesson 5 | Page 2 of 13

As you learned in the Introducing the Landlord and Tenant Board module, termination of a tenancy agreement is only possible in accordance with the Residential Tenancies Act (RTA). The landlord may proceed with a notice of termination either before the end of the tenancy or at the end of a tenancy agreement, based on specific reasons set out in the RTA. The RTA also prescribes various requirements to be fulfilled by the landlords with respect to these reasons. The reasons to terminate a tenancy are covered further in this lesson. © 2021 Real Estate Council of Ontario

The termination of a tenancy by a landlord is also determined by the provisions outlined in the Ontario Human Rights Code and the federal Cannabis Act. In matters related to termination of a tenancy, you should know the applicable legislation. You should ensure that an investor landlord understands their obligations and advise them to act within the boundaries of the law. Upon completion of this lesson, you will be able to: • Identify the requirements for a landlord to terminate a tenancy Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 5 | Page 3 of 13

You might encounter situations related to termination of a tenancy by a landlord. The Residential Tenancies Act (RTA) prescribes various scenarios which are broadly categorized into: termination of a tenancy with cause and termination of a tenancy without cause. The RTA also prescribes varied notice requirements based on the reason for termination.

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Lesson 5 | Page 4 of 13

Termination of a Tenancy by a Landlord As you learned previously, the Residential Tenancies Act (RTA) outlines various reasons under which a landlord may terminate a tenancy. The notice period requirements, procedures, and forms for each of these reasons vary. These reasons can be grouped into two categories: • Termination “with cause”: The RTA allows a landlord to give a tenant notice to end the tenancy if the tenant, the tenant’s guest, or someone else who lives in the unit does something they should not do or does not do something they should. This is called termination of a tenancy with cause. In most cases, the RTA allows the landlord to end a tenancy early or before the end of an agreement. However, in the case of the “cause” whereby a tenant is persistently late in the payment of rent, the landlord can only terminate a tenancy at the end of a period or term. © 2021 Real Estate Council of Ontario

• Termination “without cause”: There are also other reasons for ending a tenancy that is not related to what the tenant has done, or not done. These reasons are related to external circumstances or to the landlord’s situation. These reasons are called termination of a tenancy “without cause.” In these cases, a landlord must terminate a tenancy at the end of a period or in case of a fixed-term tenancy, at the end of the fixed term. These reasons are categorized as following: Termination with cause 1. Termination of tenancy in cases of negligence: • Damage caused to the unit • Interference with others’ reasonable enjoyment • Overcrowding in the unit • Misrepresentation of income by tenant • Non-payment of rent by tenant • Persistent late payment of rent 2. Termination of tenancy in cases of harm: • Impairing safety of others • Illegal act conducted in the unit Termination without cause 1. Possession of the unit required by landlord 2. Demolition, conversion, renovation, or major repairs of the unit 3. Sale of property by landlord 4. Additional reasons: • Tenant ceases to meet qualification to live in public or subsidized housing • Tenancy arose due to employment • Tenant was occupying the unit to receive therapeutic services and the period of tenancy has ended

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Lesson 5 | Page 5 of 13

Termination with Cause – Negligence, I As identified in the Residential Tenancies Act (RTA), a landlord is allowed to end a tenancy “with cause.” These reasons are categorised further into termination of tenancy due to negligence and termination due to harm. When advising an investor landlord on their properties, you should inform them of the stipulations in the RTA that protect them from financial losses and damages. The causes identified as termination due to negligence are: • • • • • •

Damage caused to the unit Interference with others’ reasonable enjoyment Overcrowding in the unit Misrepresentation of income by tenant Non-payment of rent by tenant Persistent late payment of rent

The following four sections contain information on termination due to negligence.

Damage caused to the unit As per the RTA, a landlord may give a tenant notice of termination if the tenant, their pet, another occupant of the unit, or a person whom the tenant permits in the residential complex wilfully or negligently causes undue damage to the unit or the residential complex. For example, a tenant causes damage to the flooring, due to an overflowing tub. Upon regular inspection on September 5, the landlord finds the flooring damaged. The landlord gives the tenant a notice to terminate the tenancy and sets the ground for termination. The notice allows the tenant until September 12 to either repair the damage or pay the landlord to get it repaired. If the damage is not repaired, the tenant must © 2021 Real Estate Council of Ontario

vacate the unit no later than September 25. Notice period: You should advise the landlord that a notice of termination under this cause must: • Provide a termination date not earlier than the 20th day after the first notice is given, 14 days for subsequent notices in case the damage is caused again • Set out the grounds for termination. Require the tenant, within seven days to do either of the following: o Repair the damaged property o Pay to the landlord the reasonable costs of repairing the damaged property o Replace the damaged property or pay to the landlord the reasonable costs of replacing the damaged property, if it is not reasonable to repair the damaged property Notice void if tenant complies: The notice of termination under this cause is void if the tenant, within seven days after receiving the notice, complies with the requirement or makes arrangements to comply with that requirement that the landlord accepts.

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Severe damage to unit The RTA provides for an expedited termination of the tenancy in cases where the damage caused to the unit is severe. As per the RTA, a landlord can provide a notice for severe damage if the tenant, another occupant of the rental unit, or a person whom the tenant permits in the residential complex: • Wilfully causes undue damage to the rental unit or the residential complex • Uses the rental unit or the residential complex in a manner that is inconsistent with use as residential premises, and that causes or can reasonably be expected to cause damage that is significantly greater than “undue damage” For example, as a result of a tenant hosting regular parties with many people, there has been significant damage to the walls (holes and dirt), kitchen cabinetry, and the floor coverings. The landlord serves the tenant a notice to vacate for wilful damage on May 12 to take effect on May 23. Notice period: The notice period is reduced from 20 days to 10 days in cases of severe damage. This shorter notice period also applies to tenants who cause a disturbance in a small rental building where the landlord also resides. In this case, no remedial opportunity is given to the tenant.

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Interference with others’ reasonable enjoyment As per the RTA, a landlord may give a notice of termination of the tenancy if the conduct of the tenant, their pet, another occupant of the unit, or a person permitted in the residential complex by the tenant is such that it is one the following: • Substantially interferes with the reasonable enjoyment of the residential complex for all usual purposes by the landlord or another tenant • Substantially interferes with another’s lawful right, privilege, or interest of the landlord or another tenant For example, a tenant plays loud music frequently and causes disturbance to the neighbours. Notice period: You should advise the landlord that a notice of termination must: • Provide a termination date not earlier than the 20th day after the notice is given • Set out the grounds for termination • Require the tenant, within seven days, to stop the conduct or activity or correct the omission set out in the notice Notice void if tenant complies: The notice of termination is void if the tenant, within seven days after receiving the notice, stops the conduct or activity, or corrects the omission.

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Overcrowding in the unit According to the RTA, a landlord may give a tenant notice of termination of the tenancy if the number of persons occupying the unit on a continuing basis results in a contravention of health, safety, or housing standards required by law. Municipal occupancy standards, or overcrowding bylaws, regulate the maximum number of persons who may occupy a rental housing unit. For example, a tenant has rented out a bedroom to two occupants without authorization from the landlord. As a result, they may have exceeded the permitted occupancy of the unit, as per the local municipal bylaws and the lease agreement. The landlord becomes aware of the situation and gives the tenant a notice of termination on February 1 to either vacate the unit no later than February 21 or evict the two occupants before February 8. Notice period: • Provide a termination date not earlier than the 20th day after the notice is given • Set out the details of the grounds for termination • Require the tenant, within seven days, to reduce the number of persons occupying the unit to comply with health, safety, or housing standards required by law Notice void if tenant complies: The notice of termination under this cause is void if the tenant, within seven days after receiving the notice, sufficiently reduces the number of persons occupying the unit. © 2021 Real Estate Council of Ontario

Lesson 5 | Page 6 of 13

Termination with Cause – Negligence, II The following three sections contain additional information on termination due to negligence.

Misrepresentation of income The RTA allows for a landlord to give a notice of termination of tenancy to a tenant living in a rent geared to income housing, if they knowingly and materially misrepresented their income or that of other members of their household. For example, a tenant completes an application to rent an apartment unit in a triplex and states their annual income as $56,000. The landlord asks the tenant for a letter of employment confirming their income. The tenant provides the letter three weeks later, which indicates their annual income to be $29,000 and the tenant’s employment status to be part time. The landlord serves notice on April 1 to evict the tenant for misrepresenting their income to take effect on April 21. Notice period: A notice of termination under this cause must set out the grounds for termination and shall provide a termination date not earlier than the 20th day after the notice is given.

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Non-payment of rent As per the RTA, if a tenant fails to pay rent lawfully owing under a tenancy agreement, the landlord may give the tenant notice of termination of the tenancy effective not earlier than both: • The seventh day after the notice is given, in the case of a daily or weekly tenancy • The 14th day after the notice is given, in all other cases However, the landlord may also choose to give the tenant seven days in a daily or weekly tenancy and 14 days in all other cases, to pay the owed rent. If the tenant still fails to pay the rent, the landlord may proceed with the termination of the tenancy. For example, a tenant in a monthly tenancy fails to pay rent on May 1, as required in their lease agreement. The landlord gives the tenant a notice of termination on May 15, specifying that the tenant either pay the owed rent by May 30 or vacate the unit on May 30. However, it should be noted that the Landlord and Tenant Board (LTB) may require a history of the tenant’s late payments before ordering termination. As such, in instances where it is the first occurrence of the tenant’s late payment of rent, eviction of the tenant may not be the supported by the LTB.

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Persistent late payment of rent As you learned, a landlord may terminate a tenancy early under the termination “with cause” cases. However, there are “with cause” cases where the landlord must terminate a tenancy at the end of a period or, in case of a fixed term tenancy, at the end of the fixed term. A landlord can end a tenancy at the end of a period or term, if the tenant has persistently failed to pay the full amount of rent on the date it becomes due and payable. Notice period: As per the RTA, the landlord must give at least 60 days’ notice to terminate, with the last day in the notice being the day a period of the tenancy ends, or in the case of a fixed term, the end of the term and 28 days’ notice in case of a daily or weekly tenancy.

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Lesson 5 | Page 7 of 13

Termination with Cause – Harm As per the Residential Tenancies Act (RTA), a landlord may terminate a tenancy if the tenant is conducting activities that are causing harm to others or are harmful in nature. You should be aware of the provisions in the RTA that safeguard the landlord against harm caused by the tenant, or another person permitted in the unit by the tenant. The following two sections contain information on the termination of a tenancy in cases of harm or potential harm to others.

Impairing safety of others As per the RTA, a landlord may give a tenant notice of termination of the tenancy if: • The tenant, their pet, another occupant of the unit, or another person permitted in the unit by the tenant, commits an act or omission that results in seriously impairing the safety of another person • The perpetrator commits the act or omission, in the unit or residential complex For example, a tenant’s guest wilfully breaks all the smoke and carbon monoxide detectors in the unit and the tenant does not replace or fix them. The landlord gives the tenant a notice of termination on September 11 to take effect on September 21. Notice period: You should advise the landlord that in such a case, the notice of termination must include a termination date not earlier than the 10th day after the notice is given © 2021 Real Estate Council of Ontario

and must set out the grounds for termination. Appropriate forms, as specified in the Introducing the Landlord and Tenant Board module, should be used for the purpose of the notice.

Illegal act The RTA prescribes that a landlord may give a tenant notice of termination of the tenancy if the tenant or another occupant of the unit commits an illegal act or carries on an illegal trade, business, or occupation or permits a person to do so in the unit or the residential complex. For example, a tenant carries out a business activity not permitted by the local zoning bylaws, resulting in overcrowding of the unit and parking by the visitors. Notice period: When giving a notice of termination for this cause, a landlord must set out the grounds for termination and must provide a termination date not earlier than either: • The 10th day after the notice is given, in the case of a notice grounded on an illegal act, trade, business, or occupation involving the production of an illegal drug, the trafficking of an illegal drug, or the possession of an illegal drug for trafficking • The 20th day after the notice is given, in all other cases For more information, please refer to the RTA.

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Lesson 5 | Page 8 of 13

Termination without Cause As you learned previously, the Residential Tenancies Act (RTA) prescribes the termination of a tenancy for reasons where the tenant is not at fault. These reasons are referred to as termination of a tenancy without cause and, in such cases, a landlord can give the tenant a notice of termination of their tenancy at the end of their tenancy agreement. As you learned in the Introducing the Landlord and Tenant Board module, the RTA prescribes forms for providing a notice of termination. The following four sections contain information on termination without cause. For more information on notice requirements for landlord to terminate a tenancy, review How a Tenant Can End Their Tenancy from the Landlord and Tenant Board.

Possession of the unit required by landlord A landlord may give a notice to terminate a tenancy if the landlord, in good faith, requires possession of the rental unit for the purpose of residential occupation for at least one year by: • The landlord • The landlord’s spouse • A child or parent of the landlord or the landlord’s spouse • A person who provides or will provide care services to the landlord, the landlord’s spouse, or a child or parent of the landlord or the landlord’s spouse, if the person receiving the care services resides or will reside in the unit The rental unit in question must be in a residential

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complex containing no more than three residential units. For example, the owner of a triplex requires that the tenant in the basement unit vacates, as the landlord’s daughter who has recently finished university will be moving into the unit. The tenant, who is on a month-tomonth tenancy, is given notice of termination on March 31, in the prescribed form, to take effect on May 31. The requirements for such a notice will be discussed in more detail in the next lesson.

Demolition, conversion, renovation, or repairs of the unit As per the RTA, a landlord may give the tenant a notice of termination if the landlord requires possession of the unit to: • Demolish it • Convert it to use for a purpose other than residential premises • Do major repairs or renovations to it that are so extensive that they require a building permit and vacant possession of the unit is required to complete the renovations safely For example, a landlord intends to make extensive renovations to a rental property and obtains a building permit from the local municipality. The landlord gives the tenant notice of termination on March 31, in the prescribed form, to take effect on July 31. Notice period: As per the RTA, the landlord must give the tenant at

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least 120 days’ notice and the date for termination specified in the notice shall be the day a period of the tenancy ends or, where the tenancy is for a fixed term, the end of the term. When advising an investor landlord, you must also be aware that the tenant has the right to move back into the unit once the work is complete.

Sale of property by the landlord According to the RTA, an investor landlord of a residential complex containing no more than three residential units, may give notice if: • The landlord has entered into an agreement of purchase and sale to sell the complex • Possession of the complex or a unit within the complex is required by either one of the following: the buyer, the buyer’s spouse, a child or parent of one of them, or a person who provides care services to the buyer, the buyer’s spouse, or a child or parent of the buyer, or the buyer’s spouse requires possession of the complex or a unit within the complex Notice Period: As per the RTA, the landlord must give at least 60 days’ notice to terminate, with the last day in the notice being the day a period of the tenancy ends, or in the case of a fixed term, the end of the term. Upon notice, the tenant may terminate earlier than the landlord’s notice, but not earlier than 10 days following notice. Appropriate notice forms should be used for ending the tenancy.

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Please refer to the Introducing the Landlord and Tenant Board module for more information on this topic.

Other specified reasons The RTA specifies additional grounds based on which a landlord may give a tenant notice of termination to their tenancy, but those reasons do not apply to investment properties that are three or less units and are thus beyond the scope of this course. Some examples are: • The tenant ceases to meet qualifications in selected government owned, operated, or administered rental units, federal or provincial non-profit housing projects, non-profit housing co-operative non-member units, education institution rental units and religious institution charitable non-profit unit • An employee’s employment has been terminated and the rental unit was provided during the employment • The tenancy arose pursuant to an agreement of purchase and sale for a proposed unit and the agreement of purchase and sale has been terminated • The tenant was occupying the unit to receive rehabilitative or therapeutic services and the period of tenancy agreed upon has ended

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Lesson 5 | Page 9 of 13

A client represented by a salesperson owns a four unit-building, which they have rented out. The client wants to evict a tenant for being negligent and another because the client wants to take possession of the unit. The client consults the salesperson to understand the requirements of the Residential Tenancies Act (RTA) in matters related to termination of a tenancy and eviction of the tenant. In which of the following situations can the client evict their tenants? There are five options. There are multiple correct answers.

1

The tenant’s guests have broken a window of the unit and the tenant has refused to repair it or pay the cost of the repairs.

2

The tenant accidentally caused a cooking related fire in the unit.

3

The tenant has a family member living with them temporarily for four weeks.

4

The landlord wants their sibling to move into the unit.

5

The landlord wants to repair the flooring as the wood underneath is rotting.

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Lesson 5 | Page 10 of 13

The Ontario Human Rights Code As you learned in the previous lesson, the Ontario Human Rights Code gives all residents of Ontario equal rights and opportunities without discrimination in cases, such as housing and services. The termination of a tenancy can also be governed by provisions of the Ontario Human Rights Commission. The code specifies that there should be no discrimination or unfair treatment to a person because of their: • • • • •

Race, colour, or ethnic background Religious beliefs or practices Ancestry, including people of Aboriginal descent Place of origin Citizenship, including refugee status © 2021 Real Estate Council of Ontario

• • • • • •

Sex, including pregnancy, and gender identity Family status Marital status, including people with a same-sex partner Disability Sexual orientation Age, including people who are 16 or 17 years old and no longer living with their parents or guardians

You should know that the provisions of the Ontario Human Rights Code overrule the provisions of the Residential Tenancies Act (RTA). If a tenant exhibits behaviour towards other tenants or neighbours that are discriminatory on grounds mentioned above or violate the Ontario Human Rights Code, a landlord can apply to evict the tenant. For example, a tenant with a physical disability has been assigned a special parking space near the entrance to the building. However, another tenant has repeatedly parked in this reserved space and has ignored the landlord’s instructions to not use this space. As a result, the tenant with the disability experiences hardship when accessing and exiting the building. Therefore, the landlord applies to the Landlord and Tenant Board to evict the offending tenant on the grounds of violating the Ontario Human Rights Code.

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Lesson 5 | Page 11 of 13

The Cannabis Act You should be aware of the legalization of cannabis and how it impacts residential tenancies. The Cannabis Act came into effect in June 2018 and there is still some ambiguity surrounding the rules of the use of cannabis. The Cannabis Act creates a legal and regulatory framework for controlling the production, distribution, sale, and possession of cannabis in Canada. When advising an investor landlord, you should know that, as per the Cannabis Act, an individual can possess up to 30g of marijuana and can grow up to four plants per household for personal use. The legislation also prescribes that cannabis must be obtained from regulated vendors. The legalization of cannabis impacts landlords in two ways: growing cannabis and smoking cannabis in the rental property.

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Growing cannabis: Although cannabis has been legalized in Ontario, the growing of cannabis in residential units may be regulated by the landlord. The landlord may decide to include a special clause in their rental lease that prevents tenants from growing cannabis on the premises. In situations where the tenant wants to grow cannabis in the unit due to health reasons, they must obtain a medical prescription from a health care provider and submit to the landlord. You should advise the landlord that in cases where the tenant is growing cannabis for medical reasons, a landlord must not object to it, as it would be considered discrimination. Smoking cannabis: Another impact of the legalization of cannabis on the landlord is the smoking of cannabis. The Residential Tenancies Act (RTA) allows the landlord to specify rules around smoking tobacco in the lease agreement. Therefore, an investor landlord can apply the same rules for the smoking of marijuana in the rental unit. An investor landlord may prohibit smoking cannabis in the unit and may also include a smoking ban clause in the lease agreement. In a case where the rental unit is in a condominium, the tenant must follow the no-smoking rules imposed by the condominium corporations, even if the lease or the landlord do not prohibit such smoking. However, if the smoking of cannabis causes any damage to the unit or interferes with any of the neighbour’s enjoyment of their property, or seriously impairs the safety of others, a landlord may provide the tenant with a notice to terminate the tenancy. If the tenant has been prescribed smoking marijuana for medical purposes, the landlord cannot prohibit the use of cannabis in such cases. In these situations, the landlord should advise the tenant to not interfere with the reasonable enjoyment of other residents.

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Lesson 5 | Page 12 of 13

An investor landlord has rented out a unit in a condominium building to a tenant. Upon regular inspection, the investor landlord finds out that the tenant has been growing and smoking cannabis in the unit. The investor landlord seeks advice from their salesperson to check if they can evict the tenant. The landlord also informs the salesperson that they did not specify in the lease any clauses prohibiting the growing or smoking of marijuana in the unit; however, the condominium bylaws prohibit smoking. Select the reasons for which the landlord would be justified in evicting the tenant. There are three options. There are multiple correct answers. 1

The tenant is cultivating five marijuana plants in a unit.

2

The tenant possessed at least 1kg marijuana.

3

The tenant smokes cannabis for medical purposes.

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Lesson 5 | Page 13 of 13

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the requirements for a landlord to terminate a tenancy There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Termination of tenancy According to the Residential Tenancies Act (RTA), a landlord can end a tenancy early if the tenant, their pet, or another person permitted by the tenant in the unit causes with cause

wilful negligence or harm to the unit and/or others in the unit or residential complex. The reasons and the notice requirements as per the RTA are: • Damage caused to the unit: 20 days’ notice to terminate (10 days in case of severe damage caused) • Interference with others’ reasonable enjoyment: 20 days’ notice to terminate • Overcrowding in the unit: 20 days’ notice to terminate • Misrepresentation of income by tenant: 20 days’ notice to terminate • Non-payment of rent by tenant: seven days’ notice in case of daily or weekly tenancy and 14 days’ notice to terminate in all other cases • Persistent late payment of rent: 60 days’ notice to terminate, with the last day in the notice being the day the tenancy ends

However, the RTA also specifies that the landlord must give the tenant a seven-day remedial opportunity to stop the conduct, correct the omission, or repair the damage.

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Termination of tenancy As per the Residential Tenancies Act (RTA), the landlord could terminate a tenancy in cases where the tenant is at no fault. These reasons are related to the landlord’s without cause

circumstances. In such cases, termination is only allowed at the end of the term or period of the tenancy. The reasons and the notice requirements as per the RTA are: • Possession of the unit required by the landlord or the purchaser • Demolition, conversion, or repairs of the unit: At least 120 days’ notice and the date for termination in the notice shall be the day of the tenancy period or term • Agreement of sale of the property by the landlord: At least 60 days’ notice and the date for termination in the notice shall be the day of the tenancy period or term

Termination under Ontario Human Rights Code

The code protects the equal rights and gives all residents of Ontario equal rights and opportunities without discrimination. The Ontario Human Rights Code provisions overrule the provisions in the Residential Tenancies Act (RTA). If a tenant exhibits behaviour towards other tenants and/or neighbours that are discriminatory on grounds mentioned in the Residential Tenancies Act or violate the Ontario Human Rights Code, an investor landlord can apply to evict the tenant.

Impact of the Cannabis As per the Cannabis Act, an individual can possess only up to 30g of marijuana and grow up to four plants per household for personal use. A landlord may prohibit the Act

growing and smoking of marijuana in their units by adding a clause in the agreement. However, if the tenant wants to use cannabis for a medical purpose, with prescription from a healthcare provider, a landlord cannot prohibit such use. If the smoking of cannabis causes any damage to the unit, interferes with any of the neighbour’s enjoyment of their property, or seriously impairs the safety of others, a landlord may provide the tenant with a notice to terminate the tenancy.

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Lesson 6 | Page 1 of 10

Lesson 6: Requirements for Termination of a Tenancy

This lesson outlines the requirements specified in the Residential Tenancies Act related to termination of a tenancy by the landlord when they or a new buyer wants to occupy the unit. The lesson also details the requirements for compensation to be given to the tenant.

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Lesson 6 | Page 2 of 10

In the previous lesson, you learned about the Residential Tenancies Act (RTA) stipulations related to notice requirements for termination of a tenancy by a landlord. However, in addition to the requirements for the notice period, the RTA also prescribes a landlord’s requirements for compensation when terminating a tenancy. When representing an investor client, you should advise them that the requirements they must implement do not end once the termination of an agreement has taken place. A landlord must still abide by these RTA requirements until the tenant has vacated the unit. Upon completion of this lesson, you will be able to: • Identify the requirements to terminate a tenancy when the landlord or a buyer wants to occupy the unit Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 6 | Page 3 of 10

The Residential Tenancies Act (RTA) provides for a landlord to terminate a tenancy if they want to occupy the unit for their own use. The RTA also specifies the persons who can occupy the unit and the allowable uses for which a landlord may terminate the tenancy. You should advise the landlord that they can only terminate a tenancy for reasons allowed in the RTA. Termination of a tenancy for any other reasons will be viewed as “bad faith” and may result in the landlord facing not only legal action but will also affect the reputation and relationship of the investor landlord with other tenants.

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Lesson 6 | Page 4 of 10

Landlord’s Requirements Related to Personal Use of Unit As per the Residential Tenancies Act (RTA), a landlord can give notice of termination to a tenant, in good faith, if they require the unit for residential occupation for at least one year by the landlord, a specified family member, or a caregiver. The following four sections contain information on requirements related to personal use by the landlord.

Allowable occupants The RTA states that any one of the following persons can occupy the rental unit: • The landlord • The landlord's spouse • A child or a parent of either the landlord or the landlord's spouse • A person who provides or will provide care services to the landlord or the family member of the landlord, where the person receiving the care services resides or will reside in the building The notice of termination cannot include other family members who are not specified in the RTA, such as a landlord's siblings.

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Allowable uses of the unit The RTA prescribes that a landlord must only terminate a tenancy in good faith. This means that the landlord requires the possession of the unit for reasonable reasons and genuine intention. The Landlord and Tenant Board (LTB) identifies uses that qualify as “residential occupation.” Some of the uses that a landlord may terminate the tenancy for include: • Using the basement rental unit for storage of items that the landlord uses for their profession and to construct a recreation room • Using a basement rental unit as a home office or study where the landlord lives on the upper floors, so long as the scholarly, professional, business, or other such activity does not constitute the predominant use Some uses that do not qualify for residential occupation include: • Occasional or infrequent use of the rental unit • Using the rental unit as a business office so that the landlord can meet with tenants of the building • Leaving the rental unit empty after the tenant vacates

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Notice period When representing an investor client, you should advise them that the RTA specifies the termination is 60 days after delivery of the required notice and must be the day a period of the tenancy ends, or in the case of a fixed term, the end of the term. Upon receiving a notice, the tenant can terminate earlier than the date provided in the landlord’s notice of termination, but not earlier than 10 days following receipt of the notice. As you learned in the Introducing the Landlord and Tenant Board module, the landlord should use appropriate forms, as prescribed by the RTA, to give notice for such termination.

Additional requirements The RTA states that the landlord or their family that move into the unit must then live in the unit for at least 12 months after the termination of the agreement. Further, you should advise an investor landlord that failure to do so could lead them to facing legal action, as the landlord may be assessed a fine of up to $25,000 by the LTB. There are additional requirements that a landlord must fulfill, related to compensation they must give to the tenant. You will learn about these requirements further in this lesson.

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Lesson 6 | Page 5 of 10

A salesperson represents an investor client who has rented out the main floor of a duplex. The client wants to terminate the tenancy agreement at the end of the term, as they want the possession of the main floor unit for personal use. They consult the salesperson for advice before giving the notice for termination. Which of the following reasons for eviction would be in violation of the Residential Tenancies Act (RTA)? There are three options. There is only one correct answer. 1

Terminate the tenancy so that the landlord’s caregiver can move into the unit.

2

Terminate the tenancy as the landlord living on the upper floor wants to use their basement as a home office.

3

Terminate the tenancy so that the landlord’s mother can move into the unit for 10 months.

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Lesson 6 | Page 6 of 10

Landlord’s Requirements Related to Sale of Property As a component of an agreement of purchase and sale, the buyer may want all or part of the property for their own use or for the use of an immediate family member or a caregiver. Before an investor landlord (the seller) can provide vacant possession of the unit(s) to the new owner, they must meet the following requirements when applying to the Landlord and Tenant Board (LTB) to terminate the existing tenancy. As per the Residential Tenancies Act (RTA), before a landlord may give notice to terminate, there must be an agreement of purchase and sale for the residential complex or the condominium unit. You should advise an investor client that the LTB may refuse an application if it is not reasonably certain that a completed sale will result from the agreement. If a term or condition of the agreement makes it uncertain that the transaction will be completed, it may be appropriate to delay the application until the agreement becomes firm and binding. © 2021 Real Estate Council of Ontario

The LTB may also dismiss the application if they are satisfied that the purchase is a pretense created for the purpose of evicting the tenant, also called acting in “bad faith.” For example, a transfer to a family member or a sale for much less than market value, may raise questions. Terminating a tenancy in “bad faith” may not only damage the reputation of a landlord but may also result in legal repercussions. Notice period: The termination of tenancy, in a case where the landlord needs possession of the unit, is 60 days following the notice. The last day in the notice should be the day a period of the tenancy ends, or in the case of a fixed term, the end of the term. Upon notice, the tenant may terminate earlier than the landlord’s notice, but not earlier than 10 days following the notice. In addition to the notice requirements, the RTA stipulates that a landlord must pay compensation to the tenant if the landlord requires possession of the unit due to sale of the property. You will learn about these compensation requirements further in the lesson.

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Lesson 6 | Page 7 of 10

Landlord’s Requirements for Compensation As you learned previously, the Residential Tenancies Act (RTA) specifies various notice period requirements for a landlord to terminate a tenancy. However, in some cases the RTA prescribes that, along with the notice period requirements, the landlord must also provide the tenant with compensation. You should know the different compensation requirements a landlord must adhere to in the applicable termination scenarios. The following four sections contain information on the requirements for compensation.

Notice for personal use In a case where the landlord wants to terminate a tenancy, as they require possession of the unit, along with 60 days’ notice, the RTA requires that they compensate the tenant by doing either of the following: • Offer the tenant another unit acceptable to them • Compensate the tenant in an amount equal to one month’s rent

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Notice for demolition or conversion The RTA requires a landlord to compensate a tenant in an amount equal to three months’ rent or offer the tenant another unit acceptable to the tenant if: • The tenant receives notice of termination of the tenancy for the purposes of demolition or conversion to non-residential use • The residential complex in which the unit is located contains at least five residential units • In the case of a demolition, it was not ordered to be carried out under the authority of any other piece of legislation other than the RTA As you learned previously, the landlord must also provide the tenant with at least 120 days’ notice to terminate the agreement. For example, an investor landlord wants to convert their residential complex, which contains three units, into a commercial unit and gives the tenant a notice to terminate. Assuming the rent for one month is $750, a landlord must provide a compensation of $2,250 to the tenant.

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Notice for repair or renovation According to the RTA, a landlord must compensate a tenant who receives notice of termination of a tenancy for the purpose of repairs or renovations. The landlord must compensate the tenant in an amount equal to three months’ rent or offer them another unit acceptable to them if: • The tenant does not give the landlord notice to express their interest in reoccupying the unit post the repairs and renovation • The residential complex in which the unit is located contains at least five residential units • The repairs or renovation was not ordered to be carried out under the authority of RTA or any other piece of legislation As you learned previously, the landlord must also provide the tenant with at least 120 days’ notice to terminate. For example, the landlord wants to convert their triplex into a single-family home and gives the notice to terminate to two tenants who are each renting a unit. Assuming the rent for each unit is $1,200, the landlord must compensate each tenant $3,600.

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Compensation period When advising an investor landlord, you should also be aware that where the landlord is required to compensate a tenant under the situations specified in the previous tab, the landlord shall compensate the tenant no later than on the termination date specified in the notice of termination of the tenancy given by the landlord.

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Lesson 6 | Page 8 of 10

An investor landlord who owns several rental buildings is contemplating evicting three tenants in different buildings. The client consults with their salesperson to ensure compliance with the Residential Tenancies Act (RTA) and provides the following information highlighting their reasons for termination: • Unit One: The landlord wants their caregiver to move into the unit. • Unit Two: The landlord owns a duplex in a residential complex that is being demolished. • Unit Three: The landlord wants to make major renovations to their unit. What would the salesperson advise the landlord to do with regards to the termination of the tenancies? There are six options. There are multiple correct answers. 1

Unit One: Give the tenant 120 days’ notice.

2

Unit One: Offer the tenant another unit acceptable to them or offer compensation equal to one month’s rent.

3

Unit Two: Give the tenant 120 days’ notice.

4

Unit Two: Offer the tenant another unit acceptable to them or offer compensation equal to three month’s rent.

5

Unit Three: Give the tenant 60 days’ notice.

6

Unit Three: Offer the tenant the opportunity to move back into the unit after the renovations are complete, or offer the tenant another unit acceptable to them, or offer a compensation equal to three month’s rent.

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Lesson 6 | Page 9 of 10

Landlord’s Requirements After Termination Once the notice of termination has been given to the tenant, as per the Residential Tenancies Act (RTA), and an order served by the Landlord and Tenant Board (LTB), the landlord can proceed with the termination of the tenancy. However, the landlord must still comply with the requirements specified in the RTA and the lease agreement until the unit is vacated. When advising an investor landlord, you should know the following requirements. A landlord should: • Inform or make a reasonable effort to inform the tenant of the intention to enter the unit for showing it to a prospective tenant • Enter the unit between 8 a.m. and 8 p.m. unless agreed with the tenant otherwise • Use the tenant’s rent deposit only towards the payment of last month’s rent • Give back to the tenant any other deposit collected at the start of the agreement, such as key deposit if the keys were returned as required • Abide by the requirements of the RTA until the tenant is evicted or otherwise vacates the unit, such as reasonable enjoyment and all other rights enjoyed by the tenant before the notice of termination was agreed upon © 2021 Real Estate Council of Ontario

• In cases of termination of the tenancy due to possession required by the landlord, their immediate family, or caregiver, the person moving into the unit must live in the unit for at least 12 months after the termination of the agreement

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Lesson 6 | Page 10 of 10

Congratulations, you have completed the lesson! Completion of this lesson has enabled you to: • Identify the requirements to terminate a tenancy when the landlord or a buyer wants to occupy the unit There are four sections on this page with a summary of the key topics that were discussed in this lesson.

Landlord’s requirements A landlord can apply to the Landlord and Tenant Board (LTB) to terminate a tenancy if they require the unit for personal use or residential occupation. However, the related to personal use Residential Tenancies Act (RTA) stipulates the following requirements: of unit

• The RTA allows for only the landlord, their spouse or children, landlord’s parent, or person providing care services to either of the persons to move into the unit

• The landlord can use the unit only for residential purposes • The landlord must provide 60 days’ notice of termination to the tenant • The RTA also stipulates that the new person who moves into the unit must live in the unit for at least 12 months

Landlord’s requirements To terminate a tenancy in cases where the landlord has entered into an agreement of sale of the property, the Residential Tenancies Act (RTA) stipulates the following related to sale of requirements: property • The landlord must apply to the LTB with a valid agreement of purchase and sale • The landlord must provide 60 days’ notice of termination to the tenant

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Landlord’s requirements As per the Residential Tenancies Act (RTA), if the landlord terminates a tenancy for no fault of the tenant, they must provide the tenant with compensation. The RTA for compensation specifies the following reasons that qualify for compensation:

• Notice for Personal Use: Compensate with an amount equal to one month’s rent or offer another unit acceptable to the tenant • Notice for demolition, conversion, repair, or renovation: Compensate with an amount equal to three month’s rent or offer another unit acceptable to the tenant • Notice in case of severance: Compensate with an amount equal to three month’s rent or offer another unit acceptable to the tenant

Landlord’s requirements Once the notice of termination has been given to the tenant, as per the requirements specified in the Residential Tenancies Act (RTA), a landlord must after termination continue to comply with the applicable RTA requirements, such as:

• Enter unit between 8 a.m. and 8 p.m. unless agreed with the tenant otherwise • Use the rent deposit towards payment of last month’s rent • Ensure continuation of rights enjoyed by the tenant same as before the notice of termination was agreed upon

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Lesson 7 | Page 1 of 7

Lesson 7: Summary Practice Activities

This lesson provides a series of activities that will test your knowledge on the entire module.

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Lesson 7 | Page 2 of 7

This lesson provides summary practice activities. Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

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Lesson 7 | Page 3 of 7

An investor landlord has rented out a condominium unit in a residential complex. The neighbours have complained to the landlord about the tenant’s pet creating a nuisance with incessant barking, especially late at night. The neighbours want the landlord to intervene. The investor landlord consults their salesperson on how to take further action, as per the Residential Tenancies Act (RTA). Which of the following would the salesperson recommend to the landlord? There are three options. There are multiple correct answers. 1

Ask the tenant to remove the pet from the premises

2

Give a notice to terminate the tenancy

3

Include a clause in the future agreement prohibiting noisy pets

© 2021 Real Estate Council of Ontario

Lesson 7 | Page 4 of 7

An investor client has leased out a unit in their triplex for a fixed term of three years. After one year, the tenant gives the landlord 28 days’ notice to terminate the tenancy. The investor landlord informs their salesperson of the matter and seeks advice on what they could do to recover the lost revenue due to the tenant’s improper notice. Which of the following would be an advisable recommendation to the landlord? There are four options. There are multiple correct answers. 1

Allow the tenant to vacate the unit without a penalty.

2

Apply to the Landlord and Tenant Board (LTB) to order the tenant to pay the rent that would have been payable if the tenancy had not been terminated early.

3

Inform the tenant that the notice is void and that they should give a new notice in accordance with the RTA.

4

Retain the tenant’s rent deposit.

© 2021 Real Estate Council of Ontario

Lesson 7 | Page 5 of 7

An investor client wants to terminate a fixed-term tenancy early, as they require the unit for personal use. They consult their salesperson to help them get possession of the unit before the end of the term. The salesperson informs them that ending a tenancy early for personal use is in contravention with the Residential Tenancies Act (RTA), and they can only terminate the tenancy at the end of the fixed term. To help them understand the difference, the salesperson gives them various scenarios of tenancy termination and informs them of their requirements, as per the RTA. In which of the following situations would the landlord be in adherence to the RTA in ending the tenancy before the end of the term? There are three options. There are multiple correct answers. 1

Too many people are occupying the rental unit in violation of local bylaws.

2

The tenant has sublet the unit to another person without the landlord’s consent.

3

The investor client wants to rezone their duplex into a commercial unit.

© 2021 Real Estate Council of Ontario

Lesson 7 | Page 6 of 7

An investor client wants to terminate a fixed-term tenancy early, as they require the unit for personal use. They consult their salesperson to help them get possession of the unit before the end of the term. The salesperson informs them that ending a tenancy early for personal use is in contravention with the Residential Tenancies Act (RTA), and they can only terminate the tenancy at the end of the fixed term. To help them understand the difference, the salesperson gives them various scenarios of tenancy termination and informs them of their requirements, as per the RTA. In In which of the following situations would the landlord be in adherence to the RTA in ending the tenancy at the end of the term? There are two options. There is only one correct answer.

1

The investor client wants vacant possession of their basement unit as their family is growing and needs more living space.

2

The tenant has persistently paid their rent late.

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Lesson 7 | Page 7 of 7

Congratulations, you have completed the lesson!

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Module Summary | Page 1 of 3

Module Summary This lesson contains a summary of the entire module.

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Module Summary | Page 2 of 3

Congratulations, you have completed this module! This lesson will present a summary of Learning Objectives.

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Module Summary | Page 3 of 3

There are six sections on this page with a summary of the key topics that were discussed in this module.

Right to Enter a Unit

You should know that the Residential Tenancies Act (RTA) requires the landlord to provide 24 hours’ written notice to the tenant before entering their unit. The RTA also requires the landlord’s representative or you, as their salesperson, to give 24 hours’ written notice along with the written authorization from the landlord to enter the tenant’s unit. Completion of this lesson has enabled you to: • Identify the legal requirements for a landlord to enter a tenant’s unit • Identify the legal requirements for a representative or a salesperson to enter a tenant’s unit

Assignment and Subletting

You should know the key features and leasing requirements that a tenant and landlord must adhere to when assigning or subletting a unit to another person. Completion of this lesson has enabled you to: • Differentiate between assigning a lease and subletting

A Tenant’s Right to Have a Pet

You should know that the Residential Tenancies Act (RTA) has stipulations related to a tenant’s right to have a pet. The RTA states that a landlord cannot terminate a tenant simply for having a pet. However, the RTA also prescribes circumstances where the landlord may evict a tenant if the pet causes interference with others’ enjoyment or when the condominium corporation declaration prohibits the presence of a pet. Completion of this lesson has enabled you to: • Explain the legal requirements regarding a tenant’s right to have a pet

© 2021 Real Estate Council of Ontario

Termination of a Tenancy You should know the requirements stipulated in the Residential Tenancies Act (RTA) for a tenant to terminate a tenancy either at the end of a term or in special cases by a Tenant before the end of a term or period. The RTA specifies these special cases as, when the tenant has been a victim of sexual or domestic abuse, or if the landlord does not provide a standard lease form. Completion of this lesson has enabled you to: • Identify the requirements for a tenant to terminate a tenancy

Termination of a Tenancy You should know the requirements prescribed in the Residential Tenancies Act (RTA) for a landlord when they want to terminate a tenancy. A landlord may terminate a by a Landlord tenancy early if the tenant causes wilful negligence or harm to the unit or other people in, and around, the unit. The landlord may also terminate a tenancy at the end of the term or period in cases where the landlord requires possession of the unit for reasons as allowed in the RTA. Completion of this lesson has enabled you to: • Identify the requirements for a landlord to terminate a tenancy You should know the Residential Tenancies Act (RTA) stipulations regarding Requirements for Termination of a Tenancy additional compensation requirements, with which a landlord must comply when

terminating a tenancy without cause. A landlord must offer another unit acceptable to the tenant or offer a compensation amount, as per the RTA.

Completion of this lesson has enabled you to: • Identify the requirements to terminate a tenancy when the landlord or a buyer wants to occupy the unit

© 2021 Real Estate Council of Ontario