Within the last six months the BC Government has made some significant changes to the Residential Tenancy Act (“RTA”) which will impact future and existing tenancy agreements –effectively making the legislation retroactive.
Retroactive legislation is NEVER advisable. People make business and financial decisions every day on the basis of the existing legal and regulatory framework. Changes to the law are inevitable, but normally they are prospective, meaning that they take effect on a go forward basis and leave existing contracts and other legal relationships alone.
The BC Government is ostensibly attempting to increase protection for tenants at the expense of limiting the freedom to contract by landlords. Is that a good thing?
Here are the most significant changes –you be the judge!
Vacate Clauses in Fixed Term Tenancy Agreements
For many years the prescribed RTA form of residential rental agreement contained a section allowing for the use of fixed term leases which either 1) terminated at the end date or 2) turned into month to month tenancies at the end date. The landlord and the tenant would agree to either option at the outset of the lease by checking the appropriate box on the lease.
There were pros and cons to this section.
On the con side, some landlords used the termination clause to avoid the annual rental increase limit prescribed by the Residential Tenancy Branch (“RTB”) by terminating the fixed term lease and then entering into a new lease with the former tenant or a new tenant at the market rent (which often had risen faster than the prescribed allowable rental increase).
On the pro side, landlords also used the vacate clauses in fixed term agreements to get rid of unsatisfactory tenants who were frequently late with rent payments, who did not keep the rental property in good condition or who were not abiding by the strata by-laws.
As usual, the NDP government decided that the tenants’ rights trumped the landlords’ and effective December 11, 2017, limits were imposed on landlords’ ability to terminate a fixed term rental agreement when the term expired.
The new provisions in the RTA now prohibit landlords from terminating fixed term tenancy agreements when they expire except when: 1) a tenancy agreement is a sublease agreement or 2) the landlord or a close family member of the landlord intends, in good faith at the time of entering into the tenancy agreement, to occupy the rental unit at the end of the term or 3) the tenant has abandoned the premises or 4) the tenancy is frustrated or 5) the Director of the RTB decides or 6) the landlord and tenant agree to terminate the lease.
Except in these limited circumstances (or the parties agree to another fixed term lease), the tenancy will automatically continue as a month-to-month tenancy under the same terms as the original agreement or until either party serves notice on the other or both parties agree to end the tenancy.
These new rules are RETROACTIVE! They will apply to both new and existing tenancy agreements!
For existing fixed term tenancy agreements, tenants will not be required to vacate at the end of the term unless the landlord meets the specific circumstances described above. If both parties agree to end the tenancy its necessary that they a mutual agreement to end the tenancy.
If you are a landlord who wants to rely on a vacate clause, you will need to first advise your tenant and try to obtain their consent to end the tenancy at the end of the term. If your tenant does not agree to end the tenancy, you must apply for an order of possession through the Residential Tenancy Branch where you must meet the specific circumstances described above to enforce the vacate clause.
The BC Government has also made changes with regards to rental increases between fixed term tenancy agreements with the same tenant. Effective December 11, 2017, a landlord must now give a tenant 3 full months’ notice of a rental increase. Landlords are not to impose a rental increase for at least 12 months from when the rent was first payable or from when the rent was last increased.
A landlord may impose a rental increase that is no greater than the Percentage Amount calculated at the inflation rate + 2%.
Furthermore, landlords are now prohibited from applying for an additional rent increase on the basis that the rent is significantly lower than other similar rental units in the same geographic area.
Investigations and Administrative Penalties
The BC Government has also changed the RTA in attempts to strengthen the ability of the Residential Tenancy Branch to investigate and levy administrative penalties. The Residential Tenancy Branch (“the Branch”) may conduct investigations to ensure compliance with the RTA and its regulations regardless of whether there is an application for dispute resolution in relation to the matter.
A monetary penalty, not exceeding $5,000, may be imposed if the Branch is satisfied that on a balance of probabilities the person has contravened a provision of the RTA or its regulations or failed to comply with a decision or order.
The Branch will give the person an opportunity to be heard and consider: the gravity and magnitude of the contravention; previous enforcement actions for contraventions of a similar nature; the extent of harm to others resulting from the contravention; whether the contravention was deliberate, repeated or continuous; economic benefits derived by the person from the contravention; and the person’s effort to correct the contravention.
If the contravention or failure occurs over more than one day or continues for more than one day, separate penalties not exceeding $5,000 may be imposed for each day the contravention or failure continues. An administrative penalty imposed is a debt due to the government. Failure to pay may result in a filing of a certificate in court. The certificate has the same force and effect as if it were a judgment of the court.
Demolition, Renovation or Repair
Effective May 17, 2018, the BC Government is now requiring all landlords to give 4 months’ notice to end a tenancy for demolition, renovation or repair, or conversion. Tenants have 30 days to dispute such notice.
A landlord (or purchaser) must compensate a tenant 12 months’ rent if a landlord ends a tenancy under s. 49 of the RTA (Landlord’s use of the Property) and the landlord (or purchaser) does not take steps to accomplish the stated purpose for ending the tenancy within a reasonable time period after the effective date of the notice or use the unit for that stated purpose for at least 6 months beginning a reasonable period after the effective date of the notice.
A tenant has a right of first refusal to enter into a new tenancy agreement if the rental complex has 5 or more rental units. Although not yet evident in the RTA or on the RTB’s website, we are advised by the RTB staff that the rent on the suite will be set by the landlord, presumably based on the market rent, not the prescribed rental increase. This gives tenants a greater ability to re-rent after renovation or repair, but depending on the increase they may no longer have the financial ability to do so.
If a tenant exercises a right of first refusal and the landlord does not give the tenant both 45 days’ notice of availability or a tenancy agreement to sign, the landlord must compensate the tenant an amount equal to 12 months rent.
If you are a landlord, these rights may seem like an unwarranted intrusion on your freedom to contract. Contrary to the government’s belief, all landlords are not wealthy individuals or large corporations with deep pockets. As the purchase price of strata properties has risen almost 40% in the past 2 years in the Lower Mainland, a landlord has to charge a high rent to cover his or her expenses including the mortgage, strata fees, insurance, property taxes, repairs and special strata levies where applicable. Regulating a landlord’s ability to charge the market rental is a serious restriction on the landlord’s property rights.
On the other hand, if you are a tenant struggling to keep up with the sky high rents you may welcome these changes as being long overdue, as BC residents’ salaries are not keeping up with either rental rates or property values.
©Pazder Law Corporation (2018)
Questions? Call Kenneth Pazder or Melissa Valana (604-682-1509) at Pazder Law Corporation anytime for a free consultation.
Disclaimer: The foregoing is not intended as legal advice. It is presented for information purposes only. When entering into residential contracts it is advisable to contact legal counsel (or the RTB has a telephone help line with staff who are prepared to answer questions regarding the RTA).