Thursday, March 29, 2018

Tenant/Landlord Perspective on Rental Property Lease Agreement

Choose Great Tenants!
Starting April 30, 2018, all landlords in Ontario, Canada are required to use the standard lease agreement template for residential rentals.

Many investors and landlords are not happy about this new requirement.

They don't like the fact that the new lease agreement spells out all the rules that tenants may want to know.

These rules are designed to:
"provide protection for residential tenants from unlawful rent increases and unlawful evictions" and "for the regulation of residential rents" 
per Residential Tenancies Act, 2006
However, some of these rules are not at all landlord- or business- friendly. 

In this post, I’d like to recap what I learned from a lawyer and a paralegal presentation, who have been in the residential rentals business for many years and have seen a lot of landlord/tenant situations. I'll also share some of my own thoughts and findings on the rules landlords are supposed to follow in Ontario.

My goal is to share the key concepts that will benefit beginner landlords without sacrificing the happiness of their tenants. 

First things first:

If you are reading this post, finding it helpful and are not my Mom, please leave a comment at the bottom or share it. Your comment will make my day AWESOME and I am very grateful for it 😁🙏

The Term of Tenancy Agreement is Always Indefinite

Landlord specifies the term of the agreement in section 4 of the lease agreement template. The choices here are fixed length (ex., a year), monthly tenancy, or other (ex., daily or weekly).

Most new investors believe that it is beneficial to sign a lease for a year. Many landlords also learn at various real estate courses that it is a good practice to renew the lease for another year at the end of each term. 

"The tenant does not have to move out at the end of the term." 
- section 4 of Lease Template

The truth is that no matter what type or length of term you put in your lease agreement - a year, monthly, or daily - the tenant has the right to stay in your rental unit FOREVER. 

The tenant will leave if and only if he/she leaves voluntarily OR landlord goes through the process of ending tenancy using one of the very few permitted reasons.

Please note that in case of a problem one year lease really restricts the landlord from evicting the tenant early. For example, N8 form states that the termination date cannot be earlier than the last date of the fixed term - i.e. end of the year for an annual lease. While monthly lease can be terminate with a 60-day notice. Because of this landlord should try to stick with month-to-month leases and stay away from annual ones. 

Can a Tenant Break a Lease? Anytime

On the flip side, suppose you sign a one year lease, but your tenant wants to move out early. Per current rules, tenant is supposed to give landlord a 60-day notice, which has to be effective at the end of a month. 

But if your tenant is going through hard times, chances are they'll move out much faster and with a much shorter notice. In this case, they'll stop paying you rent as soon as they are out. If you try to insist on 60-day notice and they can't afford to pay you, they will not pay you.

In this case, your best course of action is to be thankful that the tenant has moved out on their own accord (rather than staying at your place for free until the Sheriff changes locks) and get a new paying tenant as fast as possible.

Having said that, more often than not, I see tenants giving sufficient notice and coming to a mutual agreement with the landlord to break lease early. This approach is most effective both for the landlord and the tenant. This is why it always helps to have a good business relationship with all your tenants, so they let you know as soon as they decide that they'd like to leave.

Can a Landlord Use a Non-Standard Lease? 

Yes, in theory a landlord can still use their own lease. It's against the rules, but possible if a tenant agrees to sign the non-standard lease and doesn't ask for a proper one. 

In case when the tenant asks for the standard lease and landlord doesn't provide it within 21 days, tenant has the right to leave and landlord would lose the tenant.

My analogy is: Can we drive above speed limit? Absolutely. But there may be consequences if we get caught. So everyone chooses their own boundaries and balances higher speed vs. # of tickets vs. safety.

In tenant/landlord situation, consequences usually come up when there is a disagreement between the tenant and landlord. In that case, Landlord and Tenant Board (LTB) will make decisions based on the Act and other applicable legislation. All terms of any lease agreement that are in conflict with the legislation would be deemed void and non-enforceable. 

LTB officers are very strict in following the legislation. My prediction is that they will not be lenient towards a landlord who decides to break the rules of the legislation on purpose.

This is why I recommend that you find ways to incorporate your additional terms into the new standard lease template and do your best to comply with the rules. 

Rent / Deposit / Increases?

Most landlords are already aware of the boundaries on the money side:
  • We can can charge last month's rent, NSF fees up to $20 and key deposit
  • We can increase rent per approved guidelines every 12 months
  • We have to pay interest on last month's deposit.
Now, these same boundaries are listed in black and white on the standard lease template, so that all tenants are aware of them at the start of their tenancy. 

This certainly clarifies the rules of the game for both parties involved. Very transparent.


Tenant Perspective: Follow three rules and you'll always have a home in Ontario with reasonable annual rent increases:

  1. Pay your rent on time and in full
  2. Treat your home nicely
  3. Respect the neighbours.

Landlord Perspective: There are way more than three rules. Learn them!


PS Let me know if you have any questions about tenants, landlords, or lease agreements? Use "Comment" box to ask.


  1. Very good summary of the presentation. I appreciate the hyperlinks to all relevant websites and forms. Thanks, Anna!

    1. Thanks for your comment Oleg! It made my day - I'm very glad you found this post helpful.