There is a new Act dealing with Residential Tenancies in the province. Over the next six weeks, Key Murray Law will be providing facts and commentary about the new law.
In our first post, we are discussing what we feel are some of the more ‘headline-grabbing’ changes to the law in the province. Our comments are a result of a preliminary review of the Act, and do not get into the language of the Act with any degree of depth. For further information about the new law, please contact us. We are always happy to chat with tenants and landlords about the rights and responsibilities of renting in PEI.
When we talk about Residential Rentals, the first and most important issue on peoples’ minds is typically rent. This is true for tenants and landlords alike.
The residential rental regime in PEI has among the most comprehensive rent-controls in the country (Actually, it might be the most comprehensive). The new Act maintains the regime entirely – and in a few key ways, the rent control provisions have actually been strengthened under the new Act.
Here is what remains the same:
Rents in PEI can only be increased by an annual, allowable amount set by the Director of Residential Tenancies (Previously, the Director of Residential Rental Property).
Rent can only be increased once per-year, at a maximum. Rent increases must be accompanied by at least three-months’ notice. Rent increases above the ‘allowable amount’ are deemed ‘illegal’ if not granted on special application by the Director, and are subject to orders reimbursing tenants for all amounts charged over the ‘legal’ amount.
So what has changed under the new Act?
- Rents run with the unit – Codified
It has been long-held precedent at the Rental Office at IRAC that rents do not run with an individual tenancy, but rather they run with the rental unit. This principle was not explicitly stated, but was based on an interpretation of the language of section 21 of the old Act.
The new Act codifies, for certainty, that the obligations of a landlord in respect of rent increase laws “runs with the rental unit and not with the tenant”. This is not so much a ‘change’, as it is an explicit confirmation of the old regime.
Rents will not be able to be increased after a turnover or a vacancy. A landlord’s obligations to follow the rent increase process attaches to the unit, and not to the tenant.
- Rent increase can end a tenancy
Under the new Act, a tenant may treat any notice of rent increase as a notice of termination of the rental agreement, subject to providing written notice at least a month before the increase comes into effect.
Basically, tenants have an opportunity to exit the tenancy before the rent increase comes into effect, if they choose.
- Increases Capped at 3% (permitted and additional increases)
The new act caps annual allowable rent increases at 3%. This is the highest annual increase that the Director of Residential Tenancies may allow. The new act also caps ‘greater than allowable rent increases’ at an additional 3% per a given year. This is a significant change of the law. Landlords with rental rates insufficient to cover their annual expenses may find themselves unable to catch up. The trade-off being that tenants can rely on the certainty that their rents will not be increased by an amount greater than a maximum of 6% for any given year. (Note: the full 6% is only available in years where the annual allowable amount is 3%… In 2023, the allowable annual amount is, perplexingly, 0%… As such, a greater than allowable increase will max out at 3% this year).
These are some of the headlines on what has changed with rent. This is not the full picture of the new Act. See Part 3 of the new Act to see the full legal landscape of rent increase under the new regime. See also our second Post on the Act (to come next month), which will speak to some of the things that should have changed re: rent increases, but unfortunately did not.
Family Violence in Evictions
Another headline-grabbing item under the new act relates to family violence.
This language did not exist in the old act, and as such this is all new.
The Act provides an avenue for tenants who suffer from family violence to: i) end a tenancy on the basis that they have experienced family violence; and ii) block certain types of evictions on the basis that the conduct is related to family violence.
In reality, it is not necessary for a tenant to ‘block’ an eviction related to certain for-cause evictions. Instead, the deemed existence of family violence is sufficient to invalidate an eviction. However, tenants wishing to rely on this exception must challenge the eviction with the Rental Office in order to ensure that they are protected against the eviction.
Evictions for Renovations, Right of First Refusal, and Tenant Compensation
Many will know that for the past two years, there has been a moratorium on ‘renovictions’ in the province. These are evictions for improvements in a rental unit that are too substantial to permit the tenant to continue renting while the renovations are carried out.
The new act continues the renoviction moratorium until November 1, 2023. After that time, the new regime will kick into place. We will only cover the highlights in this post.
In order to evict a tenant for extensive renovations, land lords will now need to obtain approval from the Director of Residential Tenancies in advance. By our read of the Act, we believe that this application will be ‘ex-parte’, as in the landlord will not be required to give notice to the Tenant. (This is somewhat ambiguous, so pay attention to the Director to see what process is set out in the coming months).
Upon receiving approval, the landlord may give notice to the tenant. The notice period will be six (6) months before any renovations can be completed. The tenant may dispute the notice, which would require a further hearing with the Director of Residential Tenancies.
Assuming the renovations get completed, the tenant may exercise a right of first refusal to reoccupy the unit when the renovations are completed (the tenant must give notice of their intention before vacating). Alternatively, the tenant may elect to end the tenancy.
Finally, the landlord must pay the tenant compensation equal to one-months’ rent plus moving expenses. This compensation is framed as a right of the tenants, and it must be paid even if the tenant chooses to terminate the tenancy.
These were some of the highlights, or ‘headline-grabbing’ items from the new act. Stay tuned for Post 2, coming next months. We will highlight some of the new or most pressing changes, form the perspective of Landlords and the Act.