Above Guideline Rent Increases (AGI)

Above Guideline Rent Increases (AGI) in Ontario

An above guideline rent increase, often called an AGI, is an exception to Ontario’s annual rent increase cap. In most cases, a landlord cannot raise rent above the provincial guideline unless the landlord follows the statutory application process and obtains authorization under the Residential Tenancies Act, 2006. The governing law is primarily statutory; the key regulation for the yearly guideline amount is the annual rent-increase regulation made under the Act.

What is an AGI?

Ontario sets a yearly guideline rent increase for most rent-controlled residential units. There are times where a Landlord has spent a significant amount of capital to upgrade the rental properties they own. The guideline increases are published annually, generally in September of the year. An AGI allows a landlord to seek a rent increase above that guideline, but only on limited grounds and only through the Landlord and Tenant Board process established by the statute.

In practical terms, an AGI is not a routine rent increase. It is an exception for situations where the landlord says extra costs justify an increase above the annual cap. The increase applies for a limited number of years then returns to the normal rent.

Guideline Rent Increases

The principal statute is the Residential Tenancies Act, 2006, S.O. 2006, c. 17. The guideline set by the Province of Ontario is the maximum a landlord can increase most tenants’ rent during a year without the approval of the Landlord and Tenant Board. This includes, rented houses, apartments, basement apartments and condos, as well as care homes, mobile homes and land lease communities.

Relevant statutory provisions include:

s. 116 — Notice of rent increase required, for a normat rent increase the N1 form is used.
s. 120.1 — Guideline application to previously exempt units via an N2.
s. 119 — Using the 12-month rule.
s. 120 — The guideline increase should occur on the anniversary of the month you moved into the unit.
ss. 121–125 — Agreements to increase/decrease rent and related rules.
ss. 128–136 — Rent reductions, illegal charges, money collected illegally, and lawful rent provisions.

This guideline increase does not apply to:

Rentinmg as a new tenant when the landlord and tenant agree the new rent for the first year.
Community care housing units.
Long Term Care homes
New buildings or additions to existing buildings and most new basement apartments that are occupied for the first time for residential purposes after November 15, 2018.
Commercial rental properties.

In exceptional circumstances the Landlord can apply for an above guideline increase, or AGI in the rent. This applies a temporary exception to the guideline rent increases.

AGIs require an application to the Board

The Act expressly provides for an application for above guideline increase in s. 126. That means a landlord cannot simply announce an increase above the guideline; the landlord must proceed through the Board’s adjudicative process for the rent increase to become official. Without the Board order the increase can be challenged.

Section 126 covers the Rules governing the application for Above Guideline Increase to rent, where the landlord has an option to apply to the Board for an order permitting the rent charged to be increased by more than the guideline percentage for any or all of the rental units in a residential complex.

The increase must obey statutory rules

The Act’s AGI scheme is tied to circumstances recognized by statute, generally involving:

major capital expenditures (particularly relating to security or safety),
extraordinary municipal tax increases and charges,
or other specific cost categories permitted by the Act and regulations.

The landlord must prove the claimed costs and meet the statutory criteria. The Board does not approve AGIs as a matter of course, there is a mediation and hearing, if resolution cannot be attained.

What are major capital expenditures?

Most people think that applies if the spend is lerge (e.g. millions of dollars). The definition of a “capital expenditure” in Ontario Regulation 516/06. Case Law gives this as “an extraordinary or significant repair or renovation, the expected benefit of which extends to at least 5 years.” One example is roof anchors which are specialized, engineered securement points installed on rooftops to provide a safe attachment point for personal fall protection systems, for secure attachment of harnesses and lanyards to ensure worker safety

So, if a landlord tries to collect an AGI before receiving approval, or through an improper agreement, the charge may be unenforceable and potentially recoverable by the tenant.

The regulation that determines the annual rent increase guideline is the applicable regulation made under the Residential Tenancies Act for that year, which operate independently of the AGI. In Ontario, the guideline is set annually by regulation, and that annual regulation is what establishes the default percentage cap against which AGIs are measured.

How AGIs typically work in practice

Steps.

Landlord identifies a statutory ground for an AGI, which is documented and available to tenants on request.
The Landlord gives proper notice and files the required application to the Board.
All Tenants receive the application and may oppose it. They can ask the landlord or their agent for a copy to review.
The Landlord and Tenant Board reviews the evidence in relation to the application and any submissions by the Tenant.
If approved, the Board specifies the amount and timing of the increase6Landlord may collect only the amount authorized by the order.

Bottom line

AGIs in Ontario are exceptional, statutory, and application-based. The landlord must comply with the Residential Tenancies Act, 2006, the yearly rent guideline regulation, and the Board process. A landlord cannot impose an AGI unilaterally, and illegal or coerced charges may be void or recoverable.

Take a look at the video produced by Peter Giblett and Angels Browne which also discusses this topic.