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The Ontario standard residential lease: Don’t rent a home without it!

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Background …

It is now the the law in Ontario that residential rentals (with limited exceptions) are subject to the provisions of a standard lease. The standard lease simply ensures that the lease reflects the provisions of Ontario’s “Residential Tenancies Act”. A more detailed description is available here.

This was part of a package of “reforms” enacted in the last days of the Wynne Government – enacting legislation designed to provide further (as if they didn’t already have enough) protections for Toronto tenants in an increasingly tight rental market. These “reforms” included a provision that requires an Ontario landlord who is terminating a lease in order to move into his own property to compensate the tenant by paying the tenant one months rent.

On the one hand …

On the other hand …

Conclusion …

The “standard lease” is now the law in Ontario. Don’t rent a home without it!

The newest problem for #TorontoRentals: You enter into a lease only to find your property rented on AirBNB or converted to a rooming house

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The full text of this post is here.

Landlords requiring property for their personal use will be required to pay tenants to vacate

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Investing in Toronto real estate – tenants make it possible

The Toronto real estate market has been an “investors paradise” since 1996. What a run it has been! There are many people who have made a fortune. Even those who bought a home for sole purpose of living there have done well.

The importance of finding quality tenants

Successful real estate investors have had the problem of property management and the selection of quality residential tenants. If you are new to this, here are 10 principles for how to select residential tenants.

Buying and selling property with tenants

Many investors have bought property, found a tenant and then decided to sell. One of the most frequent questions is how to sell a property with tenants in it. Both the buyer and the seller are bound by the terms of an existing lease. There are many things to consider when buying or selling a property that has tenants living in it.

Getting vacant possession (AKA “evicting”) of property

There are many reasons why property owners wish to get “vacant possession” of their property. In some cases it is to sell. In some cases it is to move into the property themselves.

In general it is difficult to evict a tenant in Ontario. The Ontario “Residential Tenancies Act” gives them significant and substantial rights. The “Residential Tenancies Act” does contain a provision that allows a property owner to evict a tenant if the property is required for the owner’s personal use. Sounds good. But, as described in a recent article in the Toronto Star, there is a new provision of the Residential Tenancies Act that requires the landlord to pay the tenant one months rent of the landlord claims the property for his personal use. In other words, the landlord must pay the tenant in order to move into his own property.

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The story of landlord licensing in Toronto – Real licensing or licensing lite?

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Landlord costs are reflected in tenant rents …

If the City of Toronto really wanted to do something for tenants, it would lower the crippling property taxes imposed on apartment buildings that exceed six units. (I cannot understand why this is not a giant political issue.) After all, property taxes are a huge cost to landlords. These costs are passed on to tenants. Once passed on to tenants, tenants will pay higher rents.

Speaking of increasing costs to landlords …

Landlord licensing in primarily a political issue. In fact, landlord licensing has been an issue in Municipal Elections. Notice that this does not (at least yet) apply to small Toronto landlords.

The licensing of Student rentals has been a topic of controversy in both Guelph, Kingston and Waterloo. In general, (if not outright licensing) student rentals have been the subject of heightened bylaw scrutiny.

The following “story” from “Storify” describes how certain Toronto City Councillors brought “landlord licensing” into effect (well sort of).

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Why the demand for good #TorontoRentals is likely to grow @TessKalinowski

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I have previously written on the question of whether retirees should rent or own. Obviously this is a very fact specific and contextual issue. In some cases an important element of Retirement Prep is to own your home and in some cases not so much.

The above tweet references an interesting article by Tess Kalinowski of the Toronto Star.

The long term prognosis for rental real estate continues to be very very good. The article includes:

William Jack woke up in the middle of the night last month as he often does. This time, though, he rolled over and went back to sleep.

That’s when he knew that after more than two years of turmoil, he was finally home. The fact that the roof over his head belongs to someone else only added to his peace of mind.

William and his wife, Mary Taylor, are among a growing number of Toronto area downsizers, who are choosing to rent rather than buy a retirement nest. It is a choice, they say, that can be physically, mentally and financially liberating.

Follow the investment opportunities created by foreign investors – What do Buffalo and Seattle have in common?

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The article referenced in the above tweet includes:

“We are seeing a rush into Seattle as the next market that matters,” Jones said. “I think for Chinese buyers it becomes like a self-fulfilling prophecy. As a group, they know they can move a market higher. It is definitely the most dominant new presence in the market.”

Will Buffalo be the next Seattle?

Licensing the property and licensing the landlord have both been political issues

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Rental housing has always (well at least since rent controls were enacted in the 1970s) a political issue in Ontario generally and Toronto particularly.

Then: Cira 2010:

Now: 2016

But, condominiums and co-ops are to be excluded.

Is it better to rent or to own if you are living on a fixed income?

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For many Canadians the family home is their biggest asset. Therefore, they must consider how to best make use of that home as part of their retirement plan.

The question is:

Is it better to sell the home and use the capital (but if  you are a U.S. citizen see the warning below) from the home to provide income to rent? Or is it better to retain the home and continue to live in it so that one doesn’t have to rent. Renters can be subject to unpredictable rent increases. Furthermore, at the present level of low interest rates, it is difficult to achieve predictably high returns on investment capital.

So, what’s a poor potential retiree to do?

Excerpts from the article referenced in the above tweet include:

A big financial disadvantage for older renters, however, is that as rising rents take a bigger portion of a fixed income, there is no offsetting increase in equity like there often is when you own a home. And rental prices can double over a 25-year period.

Charles Farrell, a financial planner with Northstar Investment Advisors LLC in Denver, says if a rental starts out at 30% to 40% below the prior mortgage payment, it may be worth considering. But he advocates that seniors not spend more than 15% of their annual retirement income on housing—rented or owned—because as the years progress, medical expenses typically rise. (Other financial planners says seniors should spend no more than 25% on housing, and less if they own a home outright.)

Do property taxes turn owners into renters?

The following two comments appeared in conjunction with this article:

One of the largest expenses for owning a home at any age are the property taxes. As seniors on fixed incomes, the battle against voracious local government spending can easily turn owners into renters. Seniors should not have to pay property taxes for services they no longer use,e.g., schools which are typically the largest component of property taxes. Take school district taxes out of the equation and the housing expense largely goes away.

Some states and counties, in recent years, have become more tax-friendly for seniors.

Georgia allows all retirees 65 and older to pension and investment income from state taxes: up to $65,000 for an individual and $130,000 for a married couple filing jointly.

Cobb County (northwest Atlanta suburb) exempts all homeowners 62 and older from all school and school bond taxes.

The aim of the exemptions is to attract law-abiding financially secure seniors. They, in turn, will create demand for new housing, and more health care and service industry jobs.

Smart policy.

 

Finally, this question may be answered by whether you are a U.S. citizen!!!

Remember that those Canadian residents who are U.S. citizens will be subject to capital gains tax on the sale of their principal residence. Therefore, for U.S. citizens, the sale of the principal residence will be less advantageous than for those who are NOT subject to the burdens of U.S. citizenship!

 

 

 

Am important element of @RetirementPREP may be to own your home

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The above tweet references an article that appeared on April 1, 2016 in the Wall Street Journal. The article includes:

With fewer seniors owning homes and having fixed mortgage payments, they have become susceptible to rent increases, particularly in high-demand areas. In San Mateo County, just south of San Francisco, where Ms. Plymale lives, more than 54,000 new jobs have been created since 2010, but only about 2,100 new housing units have been built in that time, according to the county. In the past four years, monthly rent for two-bedroom apartments in highly marketable multifamily buildings surged nearly 52%, to an average topping $2,800.

Of all renters, those age 75 and older have the greatest incidence of “severe” cost burdens, meaning more than half of their incomes go to rent, according to Harvard research. The typical renter ages 65 to 69 has household income of $24,700 annually, about 40% less than the median renter household income for those ages 45 to 49, according to an analysis of census data for 2014 by Enterprise Community Partners, an affordable-housing nonprofit. “You can’t really go and renegotiate with Social Security about how much you’re getting paid,” said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies.

Adding more housing is a daunting task, particularly in suburbs where locals are wary of more residents and traffic. Community Legal Services in East Palo Alto, a nonprofit, is pressing several Bay Area jurisdictions to institute new tenant rules, including capping rent hikes to a percentage of the consumer-price index. Deliberations are roiling communities, and pitting those who believe governments should impose new regulations on landlords against those who say such measures violate private-property rights.

Landlords in San Mateo County and other high-cost areas often say many rent hikes are necessary to pay for overhauls of aging buildings as well as other escalating expenses like increased property taxes. New owners in particular can face big tax increases because California law generally allows for a jump in assessed values after a property changes hands from a longtime owner.

“If you’re paying rent of $1,000 for a two-bedroom unit but the market is now $1,800, you really can’t expect the property owner to not ask for $1,800, because what you’re really asking the landlord to do is to subsidize somebody,” said Tom Bannon, the chief executive of the California Apartment Association, the country’s largest statewide association for rental-property owners and managers.

It strikes me that owing one’s own home will provide less volatility in housing costs. That said, ONLY renters can can live free of the costs of owning a building! But, renters do pay the cost of property taxes. Interestingly, in Toronto many tenants subsidize the property taxes of home owners.

 

 

 

 

How Toronto tenants subsidize the property taxes of single family home owners

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A recent post at Landlord Rescue reminded me of the problem of Toronto’s unfair property tax system that leads to Toronto tenants actually subsidizing the property taxes of Single Family home owners.

 

The post from “Landlord Rescue” referenced in the above tweet includes:

Tenants Actually Subsidize Home Owners.

Property tax rates in the city of Toronto on Multiresidential buildings are 1.7265482% and the tax on homeowner properties are 0.7056037%. The taxes on your average $1,000,000 house in Toronto would be $17,264 instead of the $7056 they currently are if homeowners paid the same rate as older multiresidential buildings.

Property developers have refused in the past (like any sane person would) to build rental buildings because of this inequitable tax system. Recently we have heard that condo sites like Kingsclub are converting to residential rental. Guess what? Toronto has changed their policy for new buildings and the tax rate for new rental buildings is 0.7056037% (exactly like homeowners and condos)

To make this super clear, tenants living in homes, homeowners, condo owners and new rental building tenants will all pay the lower rate but the people living in run down bedbug infested, cockroach havens older buildings that require capital improvement (subject to legal rent increases) that represent most of the affordable housing in the city are paying the much higher tax in their rent.

It couldn’t be better explained than this.

 

Toronto taxes – Robbing from the (in most cases) poor(er) to give to the rich(er)

What? Yes, it’s true. One of the highest costs of Toronto landlords is the high rate of property taxes applied to Toronto apartment buildings. Understand that this is a cost to Toronto landords that operates to keep residential rents higher than they should be.

 

Tenants have the numbers to make this inequity a political issue, but so far they have failed to do so. At least one candidate has attempted to educate Toronto tenants. But so far, there has been no interest.

 

The post referenced in the above tweet includes:

Toronto Tenants Pay High Rents Because of Discriminatory Tax on Tenants

“It is assumed that because rental housing is a business, that higher rates of taxation can be charged, even though those levies are passed on dollar-for-dollar to the tenants under landlord and tenant laws, and even though the majority of tenants are renters because they have lower incomes and can not afford to be homeowners. Of course, since the tax levies are ultimately paid by tenants as part of our rents, most tenants unaware of the real source of any increased taxes, nor that over 20% of our rents are in fact due to municipal property taxes.”

– http://www.ontariotenants.ca/taxes/toronto-property-taxes.phtml

You can see the difference in the tax rates here.

I am amazed that that few people seem interested in this issue. If you are a Toronto tenant or landlord you need to make your voice heard. Along with this video, you should read an earlier post I wrote about how tenants and landlords pay higher costs because of the discriminatory property taxes on apartment buildings.