Here's why Toronto's new renoviction bylaw is bad news for small landlords

Renters may have the idea that all Toronto landlords are wealthy jerks without day jobs (who likely happened to get lucky betting on real estate, no less), but it isn't always easy out there for mom-and-pop property owners, especially in the current market.

And, a new bylaw coming down from the City that is designed to give renters peace of mind could make things even harder.

The new regulations, which came into effect on Thursday, aim to prevent "renovictions," or bad-faith evictions in which a landlord uses the excuse of renovations to try and break a tenancy agreement, often in order to re-list the apartment in question at a higher price.

But, just as there are horror stories of renters who have faced such renovictions in the city, there are also local landlords who are out tens of thousands in unpaid rent and damages, unable to remove problem tenants or move into their own homes while the Landlord and Tenant Board (LTB) takes months to deliberate on cases.

It's understandably tricky to balance the needs of, and mitigate the risks for, both sides, with an obvious preference to protect the more vulnerable group, the tenants — which is why Mayor Olivia Chow introduced the new Rental Renovation Licence Bylaw.

The statute adds more steps to the process of an N13, a notice to end tenancy to demolish, repair or convert a unit, which applies in any case that a tenant must vacate a unit (temporarily or permanently) to complete upgrades. It requires landlords to, before starting renovations and within seven days of issuing an N13 to those occupying their unit, apply for a special new licence through the City.

Obtaining the licence means adhering to a list of new criteria, including securing all building permits, as well as an assessment from an engineer or architect to confirm that vacant possession is actually required for the work to take place. There is also a $700 fee.

Additionally, a landlord must offer their tenant back the unit at the same rent price post-construction — yes, even despite making significant improvements that would make it worth more — and also pay for their accommodation while the work takes place, along with moving expenses for that period.

If the tenant, after being given the first right of refusal, opts not to return after the revamp, the landlord is obligated to pay them a lump-sum severance of sorts worth three full months of rent, along with an additional $1,500-$2,500 to help them relocate..

Laying out these new hoops, it's quite easy to see why some experts feel the bylaw will place an undue burden on small time owners, and could potentially lead to a higher proportion of corporate landlords in the city, as they are the only ones likely able to financially handle these requirements.

Stonegate Legal Services Principal Paralegal Bita Di Lisi says that she completely understands why the city is trying to prevent landlords from misusing the N13. But, based on her work representing these parties in the city, she takes issue with certain parts of the new regulations.

"It's fair to offer them the right to return; however, in my opinion, it should be at whatever the market rate for rent is, because that unit is now a superior unit. Maybe it has better amenities, new appliances, or nicer aesthetic flooring," she told us during a phone conversation this week about the new legislation.

"When landlords have to offer a superior unit at the same price that the tenant was paying prior to the renovation, many take the position of, 'Why am I going to invest in the property?' You have to allow a tenant who is not paying market rent back after you invest your after-tax dollars into the property. There are pros, but there are more cons to this."

She says that she expects it will be enough to push more mom-and-pop landlords out of the industry, while corporate owners with access to far more funds will stick around.

Given that the average rent price in the city — as well as in municipalities across Ontario — has been steadily dropping for months now, and that mortgage renewals at higher rates either looming or already here, the prospect of "breaking even" is also becoming even less likely for some landlords.

"What's the point of investing in renovation? It's supposed to give you a return, but if you're putting money into it and it's not giving you a return, or not at least breaking even... the small landlords are going to feel the impact," Di Lisi says.

Jimmy Gangadin, owner of Gangadin & Co. Legal Services, which represents both landlords and tenants in property disagreements, has a similar take on how small time owners will be negatively affected by the new rules.

However, Gangadin does highlight some situations in which the bylaw is especially necessary, such as when a multiplex owner wants to divide up existing apartments to bring in more income from a greater number of units on one lot.

"This bylaw will help tenants in these smaller-scale buildings, where it's five to maybe 10 units, or where it's fewer units that a landlord is trying to convert to more," he says.

"But like you said, where it's a small mom and pop who bought a little bungalow hoping to make it their income or retirement property, this severely impacts those landlords. They're not going to have the funds to follow through with the requirements in Toronto, and, in whole, that affects everybody."

He believes that, though the City "came from a good place" with the new restrictions, a better route would have been to enact a separate, less severe set of rules for landlords of smaller properties versus those of larger buildings.

"It's going to delay any repairs or renovations to units and might affect potential future landlords or investors in the city, too," he says.

"In my opinion, it falls short in terms of helping both sides, and that's what the law is supposed to do, right?"