Becoming a landlord is not for the faint of heart

If you’re considering building and renting out a secondary suite, here’s some helpful info

For those who own a home in the Waterloo Region that is valued at $403,635 or less, applications for a forgivable loan totalling $25,000 to create a secondary suite, such as an in-law suite, are due Dec. 1.

There are several stipulations around the funding, including controls over total rent that can be charged for the new rental unit, total gross income of prospective tenants and a 15-year commitment to these controls in order to realize complete forgiveness of the loan.

According to the application available on Waterloo Region’s website, “Ontario Renovates (O.R.) is a component of the Investment in Affordable Housing for Ontario program and is being delivered by the Region of Waterloo on behalf of the federal and provincial governments.”

Homeowners considering venturing into the business of rental housing provision are likely considering the risks and benefits that will confront them along the way. Questions about whether a secondary suite will increase or decrease the value of their home, and the impact it may have on their family life and neighbourhood are sure to be at the top of the list.

If you own a home and are considering building and renting out a secondary suite, here are some other things to consider:

1. You are a landlord and subject to the expectations of the Residential Tenancies Act and subsequently governed by the Landlord Tenant Board, a quasi-judicial arm of the Social Justice Tribunals Ontario. As a result of a shortage of adjudicators, the board has undertaken a hiring initiative. If you find yourself seeking support from the board, be prepared for a hearing date that is assigned months from the application date and an accumulation of legal costs. Tenants in Ontario are provided free legal counsel; landlords are not.

2. As a landlord, you must use the Residential Tenancy Agreement form. If you do not provide the tenant with the standard lease form, the tenant can demand that the landlord do so. The “provincial lease” as it is commonly known is 14 pages long. Legal addendums in the “industry lease” (including items on damage from growing plants as well as the condition and care of the secondary suite) bring the total number of pages to 28.

3. If the address falls within the boundaries of the City of Waterloo, the landlord is required to satisfy the residential rental housing licensing bylaw. The cost varies (up to and beyond $70 per month, per secondary suite) and the licensing fees and mandatory charges levied by the city have been declared “municipal charges and taxes” as determined by the Landlord and Tenant Board, and affirmed by divisional court. Among the documents required for a rental licence in the City of Waterloo, despite the Police Record Checks Reform Act, 2015, is a police criminal record check.

4. The maximum amount of rent a tenant is charged is determined by the region and strictly controlled by the province, with increases in rent permitted once a year and capped at 2.5 per cent. The allowable increase for 2018 and 2019 is 1.8 per cent. Although rents can be changed to reflect market needs when a tenant moves, secondary suites that have received funding through this program must have rents at or below the approved average market rents for 15 years.

5. You cannot force a tenant to leave the secondary suite if you change your mind about being a rental housing provider. Additionally, the tenant can dictate whether they vacate the secondary suite if you decide to sell your home. Issues like this, as well as those surrounding pets, number of occupants (guests versus partners versus weekend parenting obligations), smoking (tobacco and marijuana, for example) and noise are all important and, in some cases, lifestyle-altering considerations.

6. The income you generate is reportable to the Canada Revenue Agency and impacted by your applicable marginal tax rate.

Rental housing provision and becoming a landlord is not for the faint of heart. The Waterloo Regional Apartment Management Association is working hard and strives to actively and positively develop and sustain the integrity of its members’ business — the provision of private residential rental accommodation — in the Golden Triangle. The way in which rental housing providers are viewed is changing, as the need for affordable private rental supply has become a viable part of the solution to Canada’s housing crisis. However, the need to understand the rental housing landscape is imperative for those hoping to enter the market and take advantage of Waterloo Region’s secondary suite initiative.