Understanding Rent Control Ontario is essential for tenants seeking stability and for property owners managing their investments. While the annual Rent Increase Guideline (like the 2.1% set for 2026) provides a cap for many units, the system is not uniform. The rules vary dramatically based on the property’s history, and certain legal provisions allow rent to be increased far above the annual limit.
This guide explores the key areas of the Residential Tenancies Act (RTA) that govern exceptions and flexibility within Ontario’s rent control framework.
1. The Biggest Exemption: When Rent Control Doesn’t Apply
The foundation of rent control is the “on or before November 15, 2018” rule. Units first occupied after this date are exempt from the maximum annual guideline. However, the RTA contains other specific exemptions that are often overlooked:
- New Construction/Addition: Any building, mobile home park, or land lease community that had no residential occupancy before November 15, 2018. The owner can increase the rent by any amount, though Form N2 is required.
- Shared Living (Owner-Occupied): A unit where the occupant shares a kitchen or bathroom with the property owner, the owner’s spouse, or an immediate family member. The RTA’s entire rent control section does not apply.
- Non-Profit/Subsidized Housing: Units in housing co-operatives or units governed by a social or geared-to-income housing agreement. These tenancies are usually exempt from the standard annual guideline, as their rent is determined by a separate housing formula.
If a unit is fully exempt, the rent increase can be substantial, though the owner must still give 90 days’ notice using the Form N2.
2. Vacancy Decontrol: Resetting the Rent
A key feature of Ontario’s current rental market is Vacancy Decontrol. This rule is a major factor driving rent increases across the province:
- The Rule: When an existing tenant voluntarily moves out (vacates the unit), the landlord is legally permitted to set the rent for the next new tenant at any price they choose. The previous rent paid is irrelevant.
- The Effect: Once the new, market-rate rent is established with the new occupant, the unit’s rent control status (Guideline-capped or Exempt) then applies to that specific tenancy going forward.
- The Impact: This creates a significant gap between the rent paid by long-term occupants (protected by the guideline) and the market rate for new units, fueling the high cost of housing in major urban centres.
3. Beyond the Cap: Above Guideline Increases (AGIs)
Even for rent-controlled units (those occupied on or before November 15, 2018), the guideline is not an absolute ceiling. Property owners can apply to the Landlord and Tenant Board (LTB) for an Above Guideline Increase (AGI) using the Form L5.
An AGI is granted only in specific, legally defined circumstances, primarily for:
- Major Capital Expenditures: Significant, extraordinary expenses (e.g., roof replacement, new boiler, major structural repairs) that benefit the rental complex for at least five years.
- Extraordinary Tax/Charge Increases: Increases in municipal taxes or charges that exceed the guideline by a certain threshold.
- Security Service Costs: New or increasing costs for security services (e.g., concierge, security guard).
For capital expenditures and security costs, the LTB can typically approve an increase of up to 3% above the guideline in any one year. If the approved AGI amount exceeds this cap, it may be spread out over a maximum of three years.
4. Challenging an Above Guideline Increase (AGI)
For occupants facing an AGI, the process involves a hearing at the Landlord and Tenant Board (LTB). The burden of proof rests entirely on the property owner to justify the increase.
Here is the general process for challenging an AGI:
Step 1: Review the Notice and Documentation
The occupant must receive the Form N1 (notifying them of the AGI application) and a copy of the owner’s Form L5 and supporting evidence.
- Action: Immediately review the documents and contact the owner in writing to request any missing invoices, contracts, or details necessary to understand the claim.
Step 2: Prepare a Response and Evidence
The LTB will schedule a hearing (which may be written, phone, or video) and issue a Notice of Hearing.
- Written Submissions: If it is a written hearing, the occupant must submit their arguments against the AGI in writing to the LTB by the deadline (often 50 days from the Notice of Written Hearing issue date).
- Evidence: Gather evidence to counter the owner’s claim. This could include:
- Maintenance Issues: Photos, emails, or T6 Applications showing that the building has serious outstanding repair problems. The LTB may deny or delay an AGI if the owner is in “serious breach” of their maintenance duties.
- Cost Duplication: Evidence that the claimed costs were already included in previous AGIs or were routine maintenance (not “extraordinary”).
Step 3: The Hearing
The LTB may first hold a Case Management Hearing (CMH) to discuss settlement. If no settlement is reached, the case proceeds to a merit hearing.
- No Obligation to Pay: Until the LTB issues a final Order approving the AGI, the occupant is not required to pay the portion of the rent that is above the annual guideline.
- Final Decision: The LTB adjudicator will weigh the evidence. They can approve the AGI as requested, approve a reduced amount, or deny the application entirely if the owner fails to prove the costs were necessary, eligible, and reasonable.
5. A Brief History: From 1991 to 2018
The current system reflects decades of policy shifts aimed at balancing housing affordability with development incentives:
- Pre-2017: Rent control only applied to units first occupied before November 1, 1991.
- April 2017: The Liberal government expanded rent control to all private rental units in Ontario, regardless of the building’s age.
- November 2018: The subsequent government re-introduced an exemption, limiting the annual Rent Increase Guideline protection only to units first occupied on or before November 15, 2018. This is the current law.
This history underscores that while the Rent Increase Guideline provides stability, the policy is subject to change and contains necessary exceptions that all parties in the Ontario rental market must be aware of.
