Rent Controls, who benefits?
During covid we heard a tremendous number of people supporting tenants that there should be more controls on landlords ability to increase rent. In particular they were advocating for rent stabalization between tenants, meaning a landlord should not be able to increase the rent when one tenant vacates to the current market rent. It should be required to rent the unit at the old price. Oddly tenants never advocate for this during the times when rents are decreasing, which is what is happening at this time.
Landlords on the other side were advocating for the right to raise rents to current market rates due to increased costs of operating their property. This could be the cost of the mortgage, heating or other costs associated with the property. At this time landlords are also not advocating for the ability to increase the rent to an amount of their choosing. For the opposite reason as the tenants, they don’t want their property vacant, requiring them to search for another tenant.
When covid started the housing market first dipped including rents from March 2020 through to November of that year rents declined. Then the sales market took off on an upward trajectory. In BC and Canada, many cities use individually owned condos as a large portion of the rental stock for their market. When these products are sold in the free market they are removed from the rental stock. A decrease in supply increases demand and therefore the price of rentals. All levels of governments made amendments to laws trying to combat increased cost of housing.
These changes take time to effect the markets and as they do the markets change.
We now see a large inventory of rental products giving tenant options to choose.
The larger factor is tenants are not being forced out of their properties due to a property being sold, which provides them time to look for the best option. These factors are creating a higher vacancy rate and units are staying vacant for multiple months at a time.
What landlords are not hearing at this time and advocates are not demanding is that the rental rates be left at the previous rental price. The reason for this is, if you rented your property after Nov 2020 you are not likely to achieve the same rent at this time for that property.
We are also hearing less of the landlords advocating for the right to raise the rent to any level they choose. Why? Due to the supply and demand they have no choice other than to offer their product at what the market will pay. A landlord may have rented their property at a higher price two years ago and wants that price now, except the market refuses to pay their requested rate requiring the landlord to accept what tenants will pay today for the rental in property.
Are rent controls good for the tenant or landlords?
A restriction of the amount of rent a landlord can increase the rent does benefit the tenant. How does it benefit the landlord?. If you were restricted to increase the rent to the government approved rate in the past two years your tenants current rent may be comparable to the market and they may not choose to seek a new place to live, giving the landlord stability with their rental property. If a landlord raises the rent higher than the market amounts, tenants have tremendous options at this time to find a better price, location and product to meet their needs.
Rent controls can be beneficial to both parties.
We believe that BC has rent “restrictions” not rent controls. Landlords have the right to charge any amount of rent for their property. During economic good times the landlord is restricted to increase the rent to a level deemed suitable for a tenant to manage in their budget. During slow times the landlords have the right to adjust those agreements aswell to keep tenants and or attract new ones. Often landlords will refuse a tenants request to reduce the rent allowing a tenant to continue residing at the property which causes tenants to vacate the property. Turnover costs can be expensive for landlords and tenants. Increasing rents may provide landlords with increased income today. It may also cause high turnover causing landlords to experience multiple months of vacancy affecting their total income in the long run if the unit is not continuously rented.
The laws are always going to change, and being able to adjust is part of being a landlord.
We recommend as a landlord even in good times be prepared for your property to be vacant or not receiving rent for a minimum of three months each year. If you are not able to carry at least that amount of the expenses you may be in some financial difficulties with your investment property.
Rental restrictions protect both parties of a tenancy agreement.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Standard Terms of a Tenancy Agreement.
All tenancy agreements in BC must have some specific terms. They include items like landlords and tenants names, address of the property, date the tenancy starts, what services and facilities are included in the tenancy. Services include utilities which would include heat and hydro.
During a tenancy it is prohibited for a landlord to terminate or restrict “services” if the service is essential to the tenants use of the rental property. One of the most common mistakes landlords renting out their basement suite missunderstand about this is “restricting” a service is often done without understanding it is being done.
In BC it is a requirement that tenants have control of the heating system in their rental unit. What this means is the tenant needs to have the ability to control the heat without asking someone else living at the property to adjust the temperature. In many basement suites landlords have the heating controls in the upper level of the property which “restricts” the lower level’s ability to control the temperature in their unit. This is inadvertently “restricting” a tenant’s rights required if the tenancy agreement indicated heating is included. A simple adjustment of adding a different type of heating source to the lower level can provide the tenant the option to control their heating.
We hear this often when renting to people who are trying to move into a condo from a basement suite. They indicate it is often cold and they don’t understand why they are not receiving the heat that the agreement indicated was included in the tenancy agreement. Another aspect of this which is misunderstood is if the upper and lower levels are rented to two different parties it is illegal to make the upper tenants pay the entire bill of the utilities and ask them to collect a portion from the lower tenants. The two parties don’t have a contract between them and therefore the upper level tenants have no ability to collect from the other party. When the upper and lower levels are rented to different parties a landlord should keep the utilities in their name and charge each tenant a percentage of the utilities. This percentage needs to be outlined in the tenancy agreement to ensure both parties understand their responsibilities.
It is important for landlords to understand their obligations when renting their property. If their property is not meeting the requirements of the Residential Tenancy Act a tenant has the right to file a claim with the RTB to request the services be corrected or rent be reduced.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Insurance for Your Strata Lot:
When you are renting your condo or townhouse in a strata corporation, do you need insurance? Yes.
When a property is located in a strata corporation and is rented there should be three insurance policies involved. The strata corporation, owners and tenants should all have insurance. The strata corporation will have insurance for the building and for original furnishings of the unit which they are required to insure. A strata must ensure the items inside the strata lot but only above the strata corporations deductible amount. If there is damage to your unit from outside the unit and the costs are below the deductible then the cost of repairs falls on the owner. This includes the walls, ceilings, flooring and appliances in the unit. When damage is below the deductible this is where the owner’s insurance policy would be engaged. If the roof leaks causing damage to your unit that is below the deductible amount, the strata would be responsible for repairing the roof, not the inside of your unit. An owner could repair this on their own or engage their insurance policy to have the issue repaired. We compare this to the rock hitting your windshield on the road. You know it came from the truck driving the other way, but your car insurance pays to repair your windshield.
Tenants insurance would cover items including their belongings inside the unit in the event of damage to the unit.
All three policies strata, owner and tenants insurance can include costs to relocate the resident in the event the unit is uninhabitable after a flood or fire.
Owner and Tenant insurance also can include coverage to pay the strata deductibles in the event damage to other strata lots or common property originates from your unit. We recommend you bring the strata deductibles page to your insurance provider to ensure they can provide the proper coverage needed. If you don’t have a copy of your deductibles contact your strata company and request a copy. It is provided each year in the AGM package and when the insurance is renewed. When your strata policy is renewed you should review it to see if the deductibles have changed from the previous year and if they have, review this with your insurance provider to ensure you’re covered at the new levels.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Taxes, Taxes and More taxes
A recent court case in Ontario shed some light on the need to understand the taxes your rental property is subject to.
A landlord in Ontario who had rented their property as a long term rental elected to change it to short term rental. This type of rental often brings in larger monthly revenues, when the economy is good and people are travelling. The landlord elected to sell the property after it had been operating as a short term rental. What the landlord failed to understand and the courts upheld is that the short term rental changed the use of the property to a commercial enterprise meaning the sale of the property was subject to HST. When selling a residential property that is lived in by a long term renter it is considered a “home” and is not subject to the HST tax. In this case the amount of tax charged to the owner is higher than the amount of revenue the owner earned while renting the property as a short term and long term rental.
When being a landlord, understanding the taxes one must pay is very important to understanding if you are able to make a profit on your rental property. We recommend you speak with a tax professional when owning a rental property.
One of the most common missed taxes is the non resident tax. When an owner lives out of the country they are required to submit to the government no resident taxes. As an agent for the landlord we are required to submit this before we give any funds to the owner. We use the NR4 method which is 25% of the gross rent sent to the government upon collection of the rent.
If you are not sure what taxes you are required to pay for your rental property we recommend that you speak witha tax accountant to ensure you are making the proper contributions.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
BC Election Results
The provincial Election has finally completed and the NDP government has remained in office although with many fewer seats. What does this mean to managing your rental? Absolutely nothing.
The governments are always changing Locally, Provincially and Federally. If you are a landlord and are looking for the government to change the laws in your favour to make your business more profitable it might not be the right business for you. All governments change the laws to fit the current conditions of what the general population is requesting. Good businesses adjust and adapt to the market. They don’t wait for the government to change so the laws are favourable to them. If they do that then when the government changes again and changes the laws back to being unfavourable, which often happens, they will be in the same place they are now.
There are many changes that have affected the rental market, some are implemented by Federal governments and some by Provincial governments.
The NDP changed the strata act to allow all strata corporations to have rentals in them which was intended to increase the supply in the market during a time when the market was tight for rental properties. They also restricted short term rentals for the same intended reason to create more housing supply. These are two issues that have helped add more products to the market.
The bank of Canada increased interest rates, not a provincial government initiative to stem the tide of inflation. This eventually slowed the house selling market which was the largest factor affecting rental prices increases.
We don’t know what the, or any government will do in their term in office as they often are reacting to the current market conditions.
How do you protect yourself as a landlord?. Understanding the laws affecting renting and managing your rental property is important. If you are unsure what laws affect your property and how to manage a rental property you may be better off hiring a licensed property manager.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com