A young couple is renting a one‑bedroom plus den unit in a building. They both work from home, and when looking for a new place they were concerned about the cost of renting a place large enough for them both to have a workspace. They chose this building because of its amenities: a gym, a party room, and a common workspace with couches, large tables and free internet access. One of the tenants was able to use the den in the building as a home office and the other used the common workspace in the building. However, with the onset of the global pandemic, all of the shared spaces in the building have been closed, forcing them both to work in the apartment.

Amenities like gyms, pools, business centres, and party rooms are used to induce tenants to move to certain buildings, and often pay higher rents. Now in the age of COVID‑19, tenants have yet to receive any rent relief and are unable to access common spaces that encouraged them to accept these higher costs.

What options do tenants have for relief? And what will that mean for landlords?

The Potential Risk of Rent Abatements

The Residential Tenancies Act allows a tenant to file an application with the Landlord and Tenant Board (LTB) for a rent reduction when a landlord has reduced or discontinued a service or facility within the last 12 months. This application applies when amenities in a building are unavailable for a significant period of time when they were previously included in the rent the tenant paid, or induced the tenant to choose the unit. These applications are separate from those requesting compensation because a landlord delayed repairing an amenity.

In 2012, the LTB ordered a landlord to pay a tenant $122.14 for removing the hot tub from the yard, thereby discontinuing access. The LTB stated that the tenant had chosen this unit over one in a high rise, possibly because of the hot tub access. In another case, from 2013, a family had rented a bungalow with an unfinished basement because they wanted more space for their children to play. They brought an application for lost facilities against their landlord when the unfinished basement was turned into a locked storage space. The LTB ordered the landlord to pay the tenants a 10% rent abatement for the period during which they did not have access to the basement, which totalled $3,720.00.

The LTB is currently prioritizing emergency applications involving exception and extremely urgent circumstances or serious illegal acts. As a result of this, there have not been any cases assessing the impact of COVID‑19 on building amenities. These could very well be coming, and with high price tags. Tenants could use these applications as a form of individual rent relief in these tight times, and the results have the potential to be costly for landlords.

Rent Discounts: Getting Ahead of the Problem

To compensate for the unavoidable change in their tenants’ living circumstances, or to reflect reduced costs that landlords are experiencing, landlords can offer rent discounts, but it won’t be easy.

The rules for rental discounts are specific and complex to prevent tenants from experiencing sudden jumps in rent. Landlords wanting to provide a rental discount to avoid a possible abatement/rebate application need to be careful to follow the regulations or risk jeopardizing future rent increases. Remember, many rental increases are limited by the provincial guideline set annually. (For 2020 it’s 2.2 %.) The base amount that rental increases are applied to is called the “lawful rent.” If a landlord provides too high of a discount, or applies a discount at the wrong time, the lawful rent amount is lowered and the annual increase will be applied to a lower value. There are rent discount options available that do not affect the lawful rent, meaning that once the discount period is over the landlord is still able to raise the rent within the guideline amounts without breaking the rules about rent increases.

And this is complicated stuff!

The discount a landlord can offer a tenant is determined by where the tenant falls in a 12‑month rental period. The 12‑month period starts either at the beginning of a tenancy, the last time the rent was increased, the anniversary of the last increase or, if none of those apply, the anniversary of the beginning of the tenancy.

A longer discounted period is available to those tenants in the first eight months of their 12‑month period. Tenants can receive a discount for any or all of the months in the first eight month period, so long as the total of the discount does not equal more than one month’s rent.

Example:

Luka’s tenancy started in January of 2019. His rent was increased, in accordance with the guidelines, starting January 1, 2020. He now pays $1200/month. Luka’s building has a pool, but starting in mid‑March tenants were no longer permitted access to it as a social‑distancing measure.

As of May 1, 2020, his landlord would like to enter into an agreement for a rental discount to reflect the loss of pool access. Because Luka is in the first eight month period, the landlord could offer him a discount of up to $300 per month for the next four months, for a total discount equal to one month’s rent.

A larger discount can be offered, but the timeline is divided differently. A landlord can offer a discount equal to up to two months’ rent in a 12 month period, so long as the discount only totals one month’s rent throughout the first seven months of the 12‑month period, and in the last five months the discount is a maximum of one months’ rent and is only applied to one month.

This also means that a tenant in the last five months of their 12‑month period can only have a discount applied to one month, and it must be less than or equal to one month’s rent.

Example:

Paige moved into her building on February 1, 2017. Her rent was last increased on February 1, 2019, and she is now paying $1400. She used her building’s gym every morning until the COVID‑19 restrictions closed it. The landlord no longer has to pay for maintenance for the gym so agrees with Paige to discount her rent starting in May. Because Paige is within the first seven month period the landlord can offer her a discount of $100 for the next two months.

Jess moved in to the same building as her friend Paige in August of 2019 because she heard that the gym in the building was state‑of‑the‑art. Her rent is $1600/month, and she is also hoping to enter a discount agreement with the landlord. Because Jess is in the final months of her tenancy, she can have a discount for only one month. She and the landlord agree to discount her rent by $200 for the month of June.

Confused yet? A simplified method could be to offer a discount to all tenants for their next month’s rent. Remember: any tenant in any point of their 12‑month period is eligible for a discount on one month’s rent, and could likely use the relief sooner rather than later.

Many landlords have dozens or hundreds of units, all with different start dates for the 12 month period. Offering legal and protected discounts to tenants while ensuring that all tenants are being treated fairly is a difficult task. If you are overwhelmed or concerned, we would be happy to help draft agreements to suit your needs, build goodwill with your tenants, and help avoid a costly rent abatement application in the future.

Filed in: Housing

Tags: building amenities, Landlord and Tenant Board, rent abatements, Rent Discounts