by Karen Ngan and Alex Bogdan
The average rent for an apartment in Greater Vancouver is on the rise, and if you are a developer or landlord, it is important to know what opportunities and limitations are present when increasing your rent.
Developers and landlords of residential properties in B.C. may raise their rent once every 12 months, starting from the start of the term or since the last rent increase. This maximum allowable rent increase is set out in sections 22 and 22.1 of the Residential Tenancy Regulation.1 The B.C. government has set the new annual limit for these rent increases to 2% for 2023.2
The annual rent increase is usually set as the 12-month average percent change in the all-items Consumer Price Index for B.C.3 However, for 2023, the B.C. government decided to limit the maximum allowable rent increases below the 12-month average change due to high inflation.
We outline the key considerations when looking to increase your rental income below.
Who Can Benefit From the Annual Rent Increase?
As long as the Residential Tenancy Act (the “RTA”) applies to your property, then you are able to utilize the maximum annual rent increase.4 The RTA applies to tenancy agreements, rental units, and other residential properties.5 The RTA does not apply to commercial properties, such as office and retail spaces.
An increase in rent would also be subject to any existing agreement between a landlord and tenant with terms for rent increases. However, the rent increases would not apply to situations where the rent is tied to the tenant’s income, such as subsidized housing.
When Can I Increase the Rent for My Properties?
Under the RTA, you must give your tenants 3 months’ notice in writing before the effective date of the increase, and it must be done using the appropriate rent increase form, RTB-7.6
When increasing the rent, make sure that the new rate takes effect at least 12 months after the previous rent increase or, for new tenants, 12 months after the start of the lease.
Please keep in mind that only one rent increase can be issued during a 12-month period. If a landlord fails to follow these rules, the tenant may deduct any overpayments from their future rent.
What if I Want to Increase the Rent Beyond the 2% Limit for 2023?
If you are looking to raise the rent on your properties beyond the 2% limit, you will need to create an agreement between you and your tenants or apply to the Residential Tenancy Branch for eligible expenses.7
Voluntary Agreements
Voluntary agreements must be made in writing, clearly set out the rent increase in dollars and percentage, and contain signatures from the tenants and landlord. Any rent increases made with this method will still require a rent increase form issued to the tenants with 3 months’ notice along with a copy of the signed written agreement.
Through the Residential Tenancy Branch
Without a written agreement from the tenants, you may be eligible to increase your rent beyond the 2% limit due to eligible expenses or capital expenditures. These would include:
| Expenses: | Capital Expenditures – in installing, repairing, or replacing a major system or component in order to: |
| Financial loss from an extraordinary increase in operating expenses of the residential property | Maintain the residential property in a state of repair to comply with health, safety, and housing standards |
| Incurring financial loss for financing costs of purchasing the residential property, if the financing costs were reasonably unexpected | Achieve a reduction in energy use or greenhouse gas emissions, or an improvement in the security of the residential property |
| The landlord has received a rent increase as a tenant under a sublease | Remediate ones that failed, are malfunctioning, inoperative, or at the end of their useful life |
For expenses, you must apply by completing the Application for Additional Rental Increase Form, RTB 52.8 This form must be filed directly with the Residential Tenancy Branch or through Service B.C.
For capital expenditures, you must apply online using the Residential Tenancy Branch’s online portal. In addition, the expenditures must have incurred within the 18-month period prior to applying and must not be expected to recur for at least 5 years.
Any rental increases due to capital expenditures are limited to 3% but may be added to a standard rent increase. However, a landlord must not combine rental increases due to both expenses and capital expenditures, as indicated in section 23.4 of the Regulations.9
For both expenses and capital expenditures, any increase would still require 3 months’ notice and cannot take effect until 12 months from the previous rent increase or the first date on which rent was payable, i.e. the start of the rental term.
Landlords should be aware of the specific application process for each of these scenarios.
Who Can I Contact to Help Me With My Properties?
Contact the writers for legal advice on how to navigate this topic for your developments or income producing properties.
References
[1] BC Reg 477/2003, ss 22-22.1 [the Regulations].
[2] See BC Government, “Rent Increases” (7th September, 2022), online: <https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/during-a-tenancy/rent-increases> [Rent Increases].
[3] The Regulations, supra note 1, s 22.
[4] Residential Tenancy Act, SBC 2002, c 78.
[5] Ibid s 2.
[6] Ibid s 42; see also Rent Increases, supra note 2.
[7] Ibid, ss 23-23.3.
[8] See BC Government, “Additional Rent Increase” (16th February, 2022), online: <https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/during-a-tenancy/rent-increases/additional-rent-increase>.
[9] The Regulations, supra note 1, s 23.4.
