B.C.’s Minister Responsible for Housing intends to close a loophole that allows landlords to skirt rent-control rules by pushing tenants to sign fixed-term leases with vacate clauses.
Rich Coleman said his staff will report back within a month or so on legal ways the province can stop the tactic, which requires tenants to either leave their units at the end of a year or remain after signing a new lease with rent increases that can reach upward of 30 per cent.
“If they’re using something that’s a legal document to game the system – because of a shortage of supply – that’s where I get concerned,” said Mr. Coleman, the provincial cabinet minister in charge of the housing portfolio for the past 15 years.
By negotiating a whole new agreement with the same tenant, these landlords are bypassing the province’s existing rent-control rules, which allow for one rent increase every 12 months. The limit is 2.9 per cent this year, and 3.7 per cent in 2017.
The Globe and Mail spent the summer examining the rising cost of rental units in Canada’s largest cities. In Vancouver – where recent price surges were among the highest – tenants consistently pointed to the abuse of the vacate clause as a tactic that is clearly damaging the affordability of the region.
Prominent companies such as Westbank and the Aquilini Investment Group reportedly use this legal technique, but no data exists and Mr. Coleman is not convinced the phenomenon is as widespread as media reports would suggest.
“The first thing we need to know is how many of these are going on, how many of these complaints do we have – what’s the real numbers?” he told The Globe in a phone interview late last week.
He acknowledges it will be tricky hitting the legislative “sweet spot,” because the province cannot infringe upon existing contract law.
In the meantime, Mr. Coleman warned anyone signing a fixed-term lease that they can look elsewhere if they are concerned about how the tenancy agreement could end.
“I don’t think you have to because [landlords] are not all doing it,” he said.
Cass Sclauzero disagrees.
The 33-year-old Vancouver renter, who has been profiling the region’s dingy rental digs using the @dearYVRlandlord Twitter account, said many people feel happy to get a lease – any lease – and don’t have the luxury of avoiding a vacate clause.
“Because the market is so bad, they’ll just check it and deal with it in a year,” said Ms. Sclauzero, who is also a landlord in Kingston, Ont.
Bakhos Mjalleh, a Lebanese chef who immigrated to Canada three years ago, said he was locked into an unaffordable rent increase at his Mount Pleasant bachelor apartment in Vancouver this summer when his rental management company told him he had to pay an extra $175 a month or vacate the property, as per the box he checked on his one-year lease that was ending within a week.
The company said they left notice on his door three months earlier that they intended to increase his rent from $900 to $1,075, a roughly 20-per-cent increase. But Mr. Mjalleh said he never received any such notice and assumed his lease would transition into month-to-month when it finished at the end of July.
“I didn’t hear from them and I thought it would automatically renew – that’s what I’ve had before,” he said.
He can’t afford this new rent and is seeking to sublet his unit – despite opposition from his landlord – so he can relocate to a cheaper home.
David Hutniak, chief executive officer of Landlord BC, which represents the rental-housing industry, said using a vacate clause to raise rents above the allowable limit is something his association strongly opposes, as the practice hurts both renters and his broader industry.
“No one’s happy reading these reports about the odd few landlords that are taking advantage of this,” he said.
If no inspection of the unit was conducted and the existing tenant’s deposit wasn’t returned between the end of a fixed-term lease and the beginning of a new agreement, then the landlord has no right, under the current laws, to increase rents above the prescribed limit, Mr. Hutniak said. He added that the government could hurt the tight rental market if it “ends up overreacting or implementing very prohibitive legislation or regulations” and that, ultimately, helping to create more rental supply is the best thing B.C. can do for tenants.
Spencer Chandra Herbert, a long-time Vancouver New Democratic MLA, said the government could protect renters immediately by eliminating the vacate clause and ensuring that a tenant can start a month-to-month agreement once any lease ends, as is the case in Ontario.
“It’s a very simple change, it should have been done years ago,” said Mr. Herbert.
Most of his constituents live in apartment towers in the West End, where average rents for a one-bedroom unit rose 6.1 per cent last year, according to the Canada Mortgage and Housing Corp.
“I can think of many constituents who’ve lost their homes or are paying way too much now because this government hasn’t acted.”