Tenancy law revamp to cap rent increases at three per cent
Legislation, which follows two years of delays, first major change in 30 years
After first promising to bring it forward two years ago, the P.E.I. government has tabled the first overhaul of tenancy legislation in P.E.I. in 30 years.
The new Residential Tenancy Act, if passed, would replace P.E.I.’S Rental of Residential Property Act. The new bill, introduced in the legislature Nov. 15, places a limit of three per cent on yearly rent increases for tenants. The current act does not include a hard cap on yearly rent increases.
This does not necessarily mean that rent will be permitted to increase by three per cent every year. The Island Regulatory and Appeals Commission sets the yearly allowable rental increases after consultation with landlords and tenants. In the previous five years, IRAC had limited allowable rent increases to between 1.5 and two per cent.
But this fall’s IRAC order, allowing increases of five per cent for unheated apartments and 10.8 per cent for heated apartments, prompted outcry from tenants and housing activists. A bill passed by the legislature quashed the IRAC order, setting rent increases in 2023 to zero.
A representative from Premier Dennis King’s office said rent increases for 2023 would remain at zero with the new allowable increases taking effect starting in 2024, if the act is passed.
Under the new legislation, some landlords may be able to increase rent to tenants beyond the yearly limit, but they will be required to apply to IRAC first. Increases beyond the yearly limit of three per cent are capped at an additional three per cent.
Speaking before the legislature on Nov. 15, Social Development and Housing Minister Matt Mackay said the government had consulted with the Opposition, as well as landlord and tenancy groups.
“We are proud to introduce this piece of legislation that will protect and further expand on the rights of tenants while striking a fair balance on the rights and responsibilities of landlords,” Mackay said.
LIMITS ON RENOVICTIONS
In the midst of housing shortages, several tenants have suggested in recent years that landlords have increasingly renovicted tenants in a bad faith manner in order to either sell a unit or increase rent.
The new bill provides new restrictions on evictions of tenants for renovation of units but does not ban them outright.
The new act states that renovations must be “so extensive that they require vacant possession of the rental unit.” Landlords would be required to obtain all the necessary permits and approvals and apply to IRAC before issuing eviction orders to tenants.
Tenants would also be granted a “first right of refusal” to occupy the same rental unit once renovations are completed.
The act also limits tenants from charging those who are subletting a unit more rent than they are paying. It also requires landlords to provide a copy of inspection reports to tenants before a unit is rented and sets a maximum penalty of $10,000 for landlords found to have acted in bad faith in cases of evictions.
The act also states that housing is a human right.
2022 ‘AN EXCEPTIONAL YEAR’
In an interview, Mackay said the three per cent cap in the current legislation was based on an average of historical rental data.
“Obviously this year, with the inflation as high as it is, this is an exceptional year, and it’s not a good path to follow,” Mackay said.
Mackay said the bill would likely not satisfy all tenants or landlords but “it’s as close as we’re going to get.”
Mackay also said the new legislation would likely mean IRAC would need to have more resources to deal with added applications required from landlords.
Green MLA Karla Bernard said she was happy to see the legislation had incorporated recommendations from the Opposition calling for yearly rent caps, as well as caps on increases above yearly amounts.
Bernard also said she was happy that housing was recognized as a human right in the legislation.
“In any place where there’s a bit of a confusion, the default is going back to human rights,” Bernard said. “It’s a little sentence that packs a lot of punch.”
Despite this provision, IRAC is not required to explicitly consider the hardship of tenants in cases involving rent increases above yearly limits. Landlord increases in capital costs are listed as a factor to be considered.
Bernard said she was disappointed the new legislation did not protect the rights of tenants to have pets in their units. She also said the act will not require the establishment of a public rental registry, allowing tenants to see what rent was in a unit prior to moving in.