How to increase a tenant’s rent?
To increase your tenant’s rent, all you have to do is calculate a fair increase and write it in a legally compliant renewal notice. To do this calculation, you must take some factors into account or use a calculation tool if necessary.
The rent increase can’t be done at any time or in any way. You must follow very specific rules. They are set out in the Civil Code of Québec.
The Tribunal administratif du logement even recommends a rent increase rate on an annual basis. For example, for the year 2021, the basic percentage increase for unheated rent was 0.8% while for rent heated by electricity, a percentage of 0.5% was recommended.
Here are the many other elements to consider in order to proceed properly with a rent increase.
How to proceed a rent increase?
First of all, it is important to remember that a fixed term lease is automatically renewed. This means that when your tenant’s lease ends, it is renewed under the same conditions.
This rule is detailed in article 1941 of the Civil Code of Quebec:
“A lessee entitled to maintain occupancy and having a lease with a fixed term is entitled by operation of law to its renewal at term. The lease is renewed at term on the same conditions and for the same term or, if the term of the initial lease exceeds 12 months, for a term of 12 months. The parties may, however, agree on a different renewal term.”
It is for this reason that the landlord, if he wishes to modify a condition in the lease, must send a written notice of modification to his tenant as mentioned in article 1942 C.c.Q.:
"At the renewal of the lease, the lessor may modify its conditions, particularly the term or the rent, but only if he gives notice of the modification to the lessee not less than three months nor more than six months before term. If the term of the lease is less than 12 months, the notice shall be given not less than one month nor more than two months before term. […] "
The content of this notice concerning a rent increase must include the information set out in article 1943 C.c.Q.:
“In every notice of modification increasing the rent, an indication shall be made of the proposed new rent in dollars or of the increase expressed in dollars or as a percentage of the current rent. The increase may be expressed as a percentage of the rent that will be determined by the court, where an application for the fixing or review of the rent has been filed. The notice shall, in addition, indicate the proposed term of the lease, if the lessor proposes to modify the term, and the time granted to the lessee to refuse the proposed modification.”
It is suggested that you choose one of the following 3 ways to deliver the notice:
- Registered mail.
- Personal delivery with a written acknowledgement of receipt.
- Any other means that provides valid proof of receipt.
Depending on the type of lease, the deadline for sending the notice may vary.
Lease of 12 months or more
In the case of a lease of 12 months or more, the renewal notice must be sent 3 to 6 months before the end of the lease. For example, if a tenant’s lease ends on June 30, 2022, the landlord must send a renewal notice between January 1 and March 31, 2022.
Lease of less than 12 months
Does your tenant have a lease of less than 12 months? If so, simply send the renewal notice 1 to 2 months before the end of the lease. Does the lease end on November 30, 2022? You will need to send the notice to your tenant between September 30 and October 31, 2022.
Lease with an indeterminate term
The rule regarding the deadline for sending the renewal notice for an indeterminate lease is similar to that for a lease of less than 12 months. You simply need to send the notice 1 to 2 months before the desired change is to take effect. If the rent increase is scheduled for May 30, 2022, then you must send the notice between March 30 and April 30, 2022.
Lease for a room
In the case of a lease for a room, the required notice period is 10 to 20 days prior to the end of the fixed term lease or prior to the proposed change if the lease is open-ended. If you wish to increase the rent as of August 31, 2022, you will need to give notice between August 11 and 21, 2022.
What is a reasonable rent increase?
When you rented the unit to your tenant, he mentioned that it was his dream apartment! He doesn’t cause any problems, always pays his rent on time and keeps the apartment in excellent condition. This is not the time to scare him away with an unreasonable rent increase.
Setting a reasonable rent increase is as much to your advantage as it is to your tenant’s. The objective is to satisfy both parties in a fair manner.
The best way to determine a reasonable rent increase is to use a calculation tool available on the Tribunal’s website.
However, there are a few things to keep in mind that may affect the rent increase requested and included in the renewal notice.
Considerations for calculating the rent increase
Even though the Tribunal administratif du logement proposes a rate of rent increase each year, landlords are not required to follow this recommendation to the letter. There are several factors that can cause a rent increase to vary, such as:
- Energy costs.
- Municipal and school tax increases.
- Variation in insurance premiums.
- Major work done.
- Maintenance costs.
For your information, you should know that the work considered as major corresponds to :
- The repair of the building structure (e.g. roof, heating system, insulation, foundations, windows, etc.).
- Sanding and varnishing of floors.
- Renovation of the bathroom or kitchen.
In general, major work done to the unit adds value to the apartment and improves the quality of life of the tenants.
As for maintenance costs, the amounts incurred can be for:
- Clearing snow from the exterior courtyard and the parking lot.
- Purchasing the necessary paint to paint the apartment.
- Taking care of the maintenance of the plumbing.
You can therefore take these costs into consideration when you calculate your tenant’s rent increase.
Tool available for rent increase calculation
To make it easier for you to negotiate with your tenant, the Tribunal administratif du logement has posted a calculation tool to help you determine a fair and reasonable rent increase.
However, you should know that this tool does not take into account two specific situations:
- The implementation of a service that results in new operating expenses.
- The presence of an expense that does not apply to all tenants in the building.
Nevertheless, in general, the tool can be easily used in most situations. The Tribunal administratif du logement even provides an example of a fictitious calculation to better understand the application of the Regulation respecting the criteria for the fixing of rent.
Note that this example does not take into account the specificities of each unit and each building. However, the calculation tool is an interesting asset to help you establish a fair rent increase.
What must be included in the rent increase notice?
As mentioned above, the modification notice relating to a rent increase must contain the information indicated in article 1943 C.c.Q.:
- The amount of the new rent or the amount of the increase in dollars or the percentage increase in rent in relation to the current rent.
- The term of the lease, if the landlord proposes to change it.
- The amount of time the tenant has to refuse the proposed rent increase.
- Any other changes requested, if applicable.
To make sure you write a renewal notice that complies with the law, use the template available on the Tribunal administratif du logement.
Write the rent increase on the written notice
By law, there are three ways to write the rent increase on the renewal notice. You can choose whether you prefer to:
- Write the proposed new rent in dollars.
- Write the amount of the increase in dollars.
- Write the increase as a percentage of the current rent.
Specifically, here is what you should write on the renewal notice if, for example, your rent is currently $800 and you want to increase it by $25:
- “Your new rent will be $825 per month.”
- “Your rent will be increased by $25 per month.”
- “Your rent will be increased by 5%.”
Employing any of these three methods is fully compliant with current legislation.
The consequences of a non-compliant notice or increase
Have you written a notice of rent increase without relying on the Tribunal administratif du logement’s model or without validating it with the law? There is a good chance that your notice is not compliant. It is therefore preferable to pay particular attention to the wording of such a notice since legal consequences could result from it.
If the tenant challenges the validity of your notice, the Court could declare your notice null and void and state that you are not entitled to the desired rent increase. This does not apply to all situations, but it is a possible impact of a non-compliant notice.
With respect to a non-compliant or abusive rent increase, be aware that your tenant can file a claim to the Tribunal to challenge it.
Lawyer’s Tip: Be aware that an excessive rent increase in an attempt to evict a tenant will be considered bad faith on the part of the landlord and could lead to serious sanctions including damages in favor of the challenging tenant.
Can the tenant refuse the rent increase?
Upon receiving a renewal notice for a rent increase, your tenant may refuse. He or she must then notify you of his or her refusal by a means of communication where he or she can have valid proof of receipt. Your tenant has a certain amount of time to do this, depending on the type of lease. Article 1945 C.C.Q. states it all in detail:
quote"A lessee who objects to the modification proposed by the lessor is bound to notify the lessor, within one month after receiving the notice of modification of the lease, that he objects or that he is vacating the dwelling; otherwise, he is deemed to have agreed to the renewal of the lease on the conditions proposed by the lessor.
In the case of a lease of a dwelling described in article 1955 (cooperative housing), however, the lessee shall vacate the dwelling upon termination of the lease if he objects to the proposed modification."
According to the law, your tenant is still within his or her rights to refuse a rent increase that he or she considers too high.
Tenant’s right of refusal
When you receive a notice from your tenant indicating that he or she refuses to accept the rent increase, you have three options:
- You can decide to do nothing and renew the lease on the same terms as before.
- You can negotiate with your tenant to reach an agreement.
- If you feel that your increase is fair, you can file an application with the Tribunal administratif du logement to have the rent set by that legal body.
Negotiation is definitely recommended to maintain a good relationship with your tenants. Try to find a solution that will please both parties, and be reasonable.
How do you convince a tenant to accept the rent increase?
Before your negotiation meeting, prepare yourself by keeping in mind the elements that can influence the amount of rent. For example, think about what you have in place for your tenant, such as:
- A new Internet service.
- Access to a locker-style storage facility.
- New windows.
- A second parking space.
Instead of increasing the rent, you could offer your tenant an additional monthly fee for the parking offered. Be inventive!
Be aware that it is advisable to favour a constant and reasonable increase every year.
Be clear about the reasons for the rent increase
If your rent increase is more than reasonable and your tenant still refuses it, try to play it straight. Try to have a face-to-face conversation to explain all the elements that impact the rent increase.
Try to be as transparent as possible and remain courteous to your tenant. If your explanations are clear and your tenant does not want to move, he or she will be more understanding.
Reaching a financial agreement
Your tenant has refused the rent increase, but you don’t want to go to the Tribunal administratif du logement? In this situation, there is nothing to stop you from making a financial proposal.
Offer him a sum of money in exchange for an early termination of the lease. If he accepts, he will have to leave the apartment before the end of the lease so that you can carry out renovations and thus increase the rental value of the apartment. In this way, you can make a reasonable rent increase for your future tenant.
Please note that the renovations must be completed by July 1 in order for your next tenant to sign a 12 month fixed term lease.
What if the tenant still refuses the rent increase?
Have you made major renovations to the unit or introduced new services for your tenant?
After a detailed calculation, you have included a very reasonable rent increase in the renewal notice that was properly prepared. However, your tenant still refuses the rent increase.
Ultimately, you can file an application with the Tribunal administratif du logement to have the rent set. This is not the preferred route, but it is an option to consider if your negotiations or proposals do not work.
Procedure for Filing an Application to Fix Rent
First, you must complete an application for rent determination using the template available on the Tribunal’s website. Then, simply:
- Send the application to your tenant by registered mail or by bailiff (you can also hand-deliver it).
- Then file proof of receipt within 45 days with the Tribunal.
- Complete the calculation form that the Tribunal will send you.
- Send this form to your tenant by registered mail or by bailiff (you can also give it to him/her by hand).
- File the form with the Tribunal along with the proof of receipt from the tenant within 90 days of receiving the form.
If the Tribunal approves the rent increase, the tenant must accept it and can’t cancel the lease renewal unless an agreement is reached with the landlord.
Hearing for a decision of the Tribunal administratif du logement
If all of the court’s requirements are met for your application to fix the rent, you will be scheduled for a hearing.
You must be able to provide the necessary evidence of the rent increase you are requesting.
Be aware that the court may find a rent increase or decrease depending on the evidence presented. If you are not satisfied with the decision, you have two options:
- Request a rectification, retraction or review.
- Request a review before the Cour supérieure du Quebec.
Contact the Tribunal administratif du logement to find out which application to file according to your situation.
You are now well equipped to increase your tenant’s rent in a fair manner. Always discuss the reasons for the rent increase and be prepared to negotiate if your tenant refuses the increase. Remain open and don’t forget to send a renewal notice that complies with the law!
