In Ontario, rent control rules can be confusing, especially with different laws applying depending on when a property was built or first occupied. While many tenants and landlords are familiar with the standard rules for rent control in Ontario, a different set of rules applies to newer builds.
If you own or manage a rental unit that is exempt from provincial rent control caps, you must use a specific document: Form N2: Notice of Rent Increase (Unit Partially Exempt).
Here is a breakdown of what the N2 form is, when it applies, and the rules you must follow to ensure a legal rent increase.
What is an N2 Form and When Does it Apply?
The N2 form is issued by the Landlord and Tenant Board (LTB) specifically for rental units that are exempt from Ontario’s standard annual rent increase guidelines.
A rental unit is generally exempt from the provincial rent cap if it meets the following criteria:
- The unit was first occupied for residential purposes after November 15, 2018.
This rule applies to brand-new condo buildings, newly built rental apartments, and even basement apartments or laneway homes that were constructed and lived in for the first time after that specific 2018 cutoff date.
No Percentage Cap, But Strict Rules Apply
For these newer units, landlords are not bound by the standard annual guideline percentage (which is set by the province each year). While landlords have the flexibility to set an increase that reflects current market conditions, the process is far from a free-for-all. Strict procedural rules must still be followed to make the increase legally valid:
- Verify the November 15, 2018 cutoff:
Confirm that the property or unit was never occupied by anyone for residential purposes prior to November 15, 2018. If it was rented out or lived in by an owner before this date, you must use Form N1 to raise the rent instead and stick to the provincial cap. - Observe the 12-month rule:
Ensure it has been at least 12 months since the tenant moved in, or at least 12 months since their last rent increase. You cannot increase rent more than once a year. - Provide a full 90 days’ notice:
Fill out the N2 form completely and serve it to the tenant at least 90 days before the date the increase takes effect. If you mail the form, you must add an extra 5 days to ensure proper delivery time.
Critical Note on Void Notices: If a landlord fails to provide the full 90 days’ notice, or uses an incorrect form, the rent increase is automatically considered void under the Residential Tenancies Act (RTA). Tenants do not legally have to pay an increase if the proper paperwork and notice period weren’t provided.
Best Practices for Landlords and Tenants
- For Landlords: Document everything. Keep a record of when the unit was first built and occupied to prove its exempt status. When serving the N2, note the exact method and date of delivery. While you can technically raise the rent to any amount, keeping increases fair and aligned with market rates ensures you retain good tenants and avoid costly turnover.
- For Tenants: Check your unit’s history if you receive an N2. If the building is older than November 2018, the landlord cannot use this form. Always double-check the math on the 90-day timeline to make sure you’ve been given proper legal notice.
Navigating these requirements can be tricky, so it helps to review a complete directory of LTB forms to ensure you are always using the right documentation. Ensuring that the correct forms are filled out accurately protects both parties and keeps the tenancy running smoothly.
