New Residential Tenancy Rules on Fixed-Term Leases and Rent Increases

by Sean Hawkins

The B.C. government recently closed a loophole that allowed landlords to insert vacate clauses in fixed-term leases, forcing tenants out of their homes and allowing landlords to impose a large rent increase between leases. Unless the landlord specified that they intend for themselves or a close family member to occupy the unit, fixed-term tenancies will now revert to month-to-month tenancies at the end of the term.

New rules in the Residential Tenancy Regulation also eliminate the geographic rental increase clause, which allowed landlord to apply for additional rent based on other units in the surrounding area charging higher rent. These new rules took effect on December 11, 2017 and apply to both new and existing tenancy agreements.

Geographic increase clause removed

Under the previous rules in the Residential Tenancy Regulation, landlords could apply for an additional rent increase if the rent they were charging was significantly lower than what was being charged for similar suites nearby.

While the new rules eliminate the geographic rental increase clause, it does not affect the standard rental increase, nor does it affect the other reasons a landlord can apply for an additional rent increase.

The new rules still allow a landlord to apply for an additional rent increase through the RTB where the landlord has completed significant repairs or renovations, where the landlord has incurred a loss from an extraordinary increase in operating expenses, or where the landlord has incurred a loss from unforeseen costs in purchasing residential property.

In addition, once every 12 months landlords can increase rent up to a maximum percentage calculated as follows: Consumer Price Index for BC + 2%. Landlords must provide tenants with three full rental months’ notice of a rent increase and use the approved form. In September of each year, the maximum allowable rental increase amount for the upcoming calendar year is published on the Residential Tenancies website at: www.gov.bc.ca/landlordtenant/increase.

Vacate clauses are now limited for fixed-term leases

Previously, tenancy agreements with a fixed-term lease could include a vacate clause that required the tenant to move out on the date the agreement ends. At the end of each term, tenants would either have to move out, or sign a new lease at a reassessed market rental rate.

Landlords will no longer be able to include these vacate clause in a fixed-term tenancy agreement, except in certain circumstances. These circumstances include where a landlord or a “close family member” (which is defined as a parent, child, or spouse of the landlord) plan in good faith to use the residential unit, or where the tenant is subletting their rental unit.

Going forward, the Residential Tenancy Agreement will include a section that sets out why the vacate clause is to be enforced. This section will require that the landlord to fill in a box as to why they are choosing a fixed term with vacate clause, and both parties must have their initials next to this term in order for it to be enforceable.

What about tenancies that currently have a vacate clause?

For those tenancy agreement that have a vacate clause in place, the tenancy agreement itself is still valid, but will revert to month-to-month tenancy at the end of the fixed term. It is advisable that the landlord and tenant have a discussion regarding the intended use of the rental unit at the end of the fixed-year term. In situations where the landlord and tenant agree to end the tenancy on the original date agreed, the landlord and tenant can sign a Mutual Agreement to End Tenancy to confirm this intention.

Where the parties are not able to come to a mutual agreement and the landlord intends to enforce the vacate clause, the tenant should be advised of the landlord’s intentions to either move into the rental unit or have a close family member move into the rental unit at the end of the fixed term. If the tenant either does not vacate or informs the landlord that they intend to not vacate, the landlord can apply for an order of possession through the RTB’s Dispute Resolution process. For the Dispute Resolution process, the landlord has the onus to prove that they have good faith intentions to use the rental unit for their own purposes or that of a close family member. A failure to meet this onus could result in significant compensation being awarded to the tenant, as well as administrative penalties for the landlord.