New year, new me has turned into new year, new rent, as many begrudged renters and tenants go through the emotions of having their rent increased. While the percentage of the rent increase varies from province to province and state to state, the increase still isn’t all that budget-friendly, and while it may seem unfair for some tenants, there are reasons why the government maintains control over the increase of rent per year. In this blog, we will look at just how much a landlord is allowed to raise rent as of 2024 and whether raising rent is a part of the contract that tenants should agree to or not.
Let us start with why landlords raise rent every year to understand the reason behind this.
Why do landlords raise rent every year?
While many might think that raising rent every year might be illegal, it’s not. In fact, the government regulates it in order to ensure that the rent stays manageable for both the tenant and the landlord themselves. This is because while they usually have a source of income from a job, many landlords depend on the rent for their living and count rent as their main disposable income.
Out of this income, the landlords are supposed to take care of a lot of things: maintenance work for the property, paying property taxes, and other associated costs for ownership. This obviously puts a dent in their rental income, which is why, to ensure that their finances don’t get affected too much, they are allowed to raise rent every year, albeit at a rate decided by the state or provincial government.
Property taxes:
One of the significant expenses incurred by landlords. Property taxes usually increase every year, and many landlords pay it from rental payments. To ensure profitability, landlords may increase rent every year to cover property taxes.
Maintenance costs:
Maintaining a property comes with considerable expenses, and since many rental agreements put these expenses towards the landlord, they increase the rent every year to cover the cost of maintenance.
Utilities:
Many rental agreements may also see the landlord pitch in for the utilities or handle them independently. Since utilities will definitely eat into their profits or income from the household or property, therefore, they increase the rent every year to compensate for that.
How frequently can a landlord increase the rent?
It is unfortunate that a general trend of mistrust between the tenant and the landlord has been seen in recent times; yearly rent increases only serve to deepen this divide further. Many people forget the fact that the government tightly regulates these increases in order to make sure that the situation does not get too financially imprudent for the tenants, for whom rental payments could be a burden.
In order to find a balance between looking out for the tenant and looking out for the landlord, governments worldwide limit the frequency with which landlords are allowed to increase the rent. In accordance with property tax payments which increase every year, the landlord is allowed to raise the rent each year, as specified on the lease agreement. If your landlord or any other authority tries to do otherwise, they might be liable for legal action; Canada and all of its provinces, including both BC (British Columbia) and Ontario, restrict the landlord from increasing the rent twice or more each year. The increase in rent is limited to just once a year, and even then, a specific percentage is decided on by the provincial government that governs just how much the increase will be. Let’s look at that now.
How much can a landlord increase rent in 2024?
As of 2024, across Canada, the rent increase is between 2.5 to 3.5 per cent. In BC, the latter limit applies, where landlords are allowed to increase rent by not more than 3.5 per cent per year, to be notified at least three months prior to coming into effect. On the other hand, one of the more tenant-friendly provinces is Ontario, where the rent increase has been capped at 2.5 per cent for 2024. Ontario also requires landlords to give their tenants notice not less than 90 days before this increase comes into effect.
This adds up to around a 3 per cent increase every year in Canada, whereas many countries may allow up to 5 per cent or even a 10 per cent increase every year. Much of these increases are determined by the prevailing property tax rates in the country, whereas other details may vary from state to state.
Conditions governing this rent increase
There are several conditions that landlords need to follow in order to increase rent every year. Let us take a quick look at them.
- Landlords can only increase the rent according to the set percentage once every 12 months.
- Landlords are not allowed to raise the rent before the passage of 12 months from the signing of a lease by a tenant.
- Due notice of atleast 90 days needs to be given in writing to the tenant, informing them clearly of the rent increase. The new amount should be mentioned clearly, as well as the month or date by which the new rent shall be applicable for the tenant.
- Landlords are not allowed to raise rent more than the percentage set by the provincial government. However, to cater to specific situations or certain circumstances, they may be able to lodge a formal request with the concerned authorities explaining their reasons for raising rent beyond the set limit.
The bottom line
Raising rent allows the landlords to supplement their income, especially when taking into consideration the gradually increasing property tax payments they have to make, as well as other liabilities that may come out of the rental income. Since there are many landlords who do not have a secondary source of income and rely solely on rental income, this increase helps them keep up with the liabilities and allows them greater financial freedom when faced with taxes, maintenance costs, and other associated liabilities.
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