Since early 2022, the Bank of Canada has raised rates ten times. This rapid run-up in its benchmark interest rate has started to cool down the economy and bring inflation down. However, rate hikes have created other challenges for Canadians, including pushing up the price of mortgage payments and making it harder to shop around for rates.
But it doesn’t end there. This rate hike has had far-reaching impacts on the economy, affecting not just homeowners but also renters and everyone in between.
Here’s how high interest rates can affect you – even if you don’t have a mortgage.
Above-guideline rent hikes
If your residence was built post-2018, you might be subject to substantial rent increases. In Ontario, rental units that were first occupied after November 15, 2018, are not governed by provincial rent control. This allows landlords to increase rents as they see fit, often leading to significant hikes for tenants.
However, any apartment, house, condo, basement, or mobile home occupied since November 15, 2018, falls under rent control. While this doesn’t prevent rent from increasing, it does mean that rent can only be raised once per year, with the rate of increase determined by the provincial government.
For instance, in 2023 and 2024, the maximum monthly rent increase was set at 2.5%. So, if you’re renting a rent-controlled apartment for $1,500, the maximum increase would result in an additional $37.50, bringing your new monthly total to $1,537.50.
The threat of eviction
In more dire situations, a landlord might be compelled to sell their unit due to high interest rates — say, if the sudden increase in mortgage rates on rental units makes them unprofitable or unaffordable to maintain. In those situations, renters may be forced to find new accommodation, often at short notice.
In Ontario, landlords can officially issue an N12 form to evict tenants if they sell the property or if they, or a family member want to move in.
In reality, landlords who have no intention of selling the building or renting them to a family member have also issued N12s to tenants, for the purpose of raising the rent for a new tenant. A CBC investigation showed a 77% increase in N12 evictions in 2023 from 2022.
Along with the N12 form, a landlord must pay you one month’s rent. They must pay this by the termination date listed on the N12. However, if the eviction is unsuccessful, you will have to return the payment.
Rent banks to the rescue
Rent banks are government-provided resources that provide financial support to renters who are facing eviction or need help with a rental deposit. Here’s how they work:
Financial support: Depending on the province or municipality, you may be eligible to receive financial support of up to the equivalent of two or three months’ rent. This can also assist with a damage deposits, clearing rent debt or paying overdue essential utilities that threaten your tenancy.
Eligibility: To qualify for the rent bank grant, you must meet certain criteria such as age, citizenship status, residency, income limits, and more.
In Toronto, for instance, residents may be eligible for a rental arrears grant or rental deposit assistance if they are behind on rent, currently live in or are moving to Toronto, pay market rent for a rental unit covered by the Residential Tenancies Act, can provide proof of income and are not currently in receipt of social assistance such as Ontario Works (OW) or Ontario Disability Support Program (ODSP).
The specifics of the rent bank program can vary by province and city. For example, the Toronto Rent Bank have converted to a permanent grant-based program.
Anchor yourself with your tenant rights
So, if you’re facing eviction, what can you do to protect yourself?
In Ontario, tenant rights are protected under the Residential Tenancies Act. Here are some specific rights that you have when your landlord sells the house:
File a complaint with the Landlord and Tenant Board (LTB). If you believe you’ve been evicted unfairly, the LTB can inform you of your rights and responsibilities, investigate problems, and hold hearings to make decisions and issue rulings.
Continuation of tenancy: When your home is sold, the buyer becomes your new landlord, and the tenancy continues under the same terms. Your landlord can’t evict you solely to sell the house. If you have an ongoing lease, it remains valid even after the property changes hands. The new owner must honour your lease – at least until it expires.
The key distinction between this and the use of the N12 is that in this scenario, your lease continues even after the property is sold, while in the other scenario, you may have to vacate the property if the new owner or purchaser intends to use it for their own purposes and serves an N12 form. However, in this case, your is entitled to compensation or an acceptable alternative rental unit
Negotiate a buy-out: In some cases, landlords may offer a “cash for keys” deal, providing you with a lump sum to vacate the property (this is higher than the month’s rent they are mandated to pay the tenant after an N12).
Understanding tenant ‘buy-outs’
While a tenant buy-out can provide immediate financial relief, don’t sign before considering the long-term implications, including the cost and availability of alternative housing. Here’s what you should know:
Negotiation: The buy-out amount is typically negotiated between the landlord and tenant. It’s essential to understand your rights and the rental market conditions to negotiate effectively.
Legal claims: A tenant buyout agreement releases all legal claims that can arise from the tenancy. This means the landlord is not only paying for the keys but also for a complete release of claims. For instance, if you develop a respiratory condition from a mold infestation six months after moving out, you can't make a legal claim if you’ve signed a buyout agreement.
No obligation: You’re under no obligation to accept a buy-out offer. If you’re happy in your home and don’t want to move, you can decline the offer.
Seek legal advice: It’s a good idea to seek legal advice before accepting a buy-out offer. A lawyer can help you understand the terms of the agreement and whether it’s in your best interest.
Documentation: If you agree to a buy-out, make sure to get everything in writing. This includes the agreed-upon amount, the move-out date, and any other terms.
Remember, a tenant buy-out is a significant decision that can have long-term impacts. It’s important to take your time, do your research, and consult with a legal professional if needed.
Unable to pay rent? Here’s how to protect yourself
If you’re unable to pay rent, there are some protections available. In most cases, landlords can be understanding of a one-time offence and present an option for paying later.
In some cases, landlords can apply to the LTB for approval to raise your rent by more than the rent increase guideline.
High interest rates impact everyone – not just homeowners. Knowing your rights as a tenant, including being aware of potential rent hikes, how to respond to an eviction notice, or finding the right financial resources, is key to navigating the rental market in a high-rate environment.