Rent Increase Rules

The Annual Rent Increase Guideline

Each year, the Ontario government publishes a rent increase guideline that sets the maximum percentage by which landlords can raise rent for most rent-controlled units. The guideline is based on the Ontario Consumer Price Index (CPI) and is capped at 2.5 percent. For 2024, the guideline is 2.5 percent.

This guideline applies to most residential rental units that are subject to rent control. Units first occupied for residential purposes on or after November 15, 2018 are generally exempt from rent control and are not bound by the guideline. For exempt units, landlords can increase rent by any amount, subject to the notice and timing requirements described below.

Notice Requirements

Regardless of whether the unit is rent-controlled or exempt, you must provide your tenant with written notice of a rent increase at least 90 days before it takes effect. The notice must be given using the form N1 (Notice of Rent Increase) for rent-controlled units, or the form N2 for units exempt from rent control.

The rent increase can only take effect at least 12 months after the last rent increase or the start of the tenancy, whichever is later. You cannot increase rent more than once every 12 months. If you miss the timing or fail to provide proper notice, the increase is not valid and you cannot retroactively apply it.

Above-Guideline Increases

In some situations, landlords can apply to the Landlord and Tenant Board (LTB) for an above-guideline increase (AGI). An AGI allows you to raise rent beyond the annual guideline to recover specific costs. The LTB will only approve an AGI for eligible reasons.

• Extraordinary increases in municipal taxes or charges
• Capital expenditures that are necessary to maintain the building, such as a new roof, boiler, or elevator
• Increases in operating costs related to security services

The AGI application process involves filing with the LTB, notifying all affected tenants, and attending a hearing. The LTB will review the evidence and determine whether the increase is justified and what amount is appropriate. AGIs can be spread over multiple years to reduce the impact on tenants.

Rent Increases for New Tenants

For rent-controlled units, the lawful rent travels with the unit, not the tenant. When a tenant moves out, you can only charge the new tenant the lawful rent, which is the previous rent plus any lawful increases. You cannot reset the rent to market rate between tenants for rent-controlled units.

There is an important exception. If the unit underwent significant renovations or was converted to a different use, the rent may be adjusted. However, this is subject to specific rules and LTB oversight. If you are unsure whether your unit qualifies, consult the LTB guidelines or a legal professional.

What Happens If a Tenant Disputes the Increase

A tenant who believes the rent increase is unlawful can file an application with the LTB to challenge it. Common reasons for dispute include the increase exceeding the guideline, insufficient notice, or an increase occurring less than 12 months since the last one.

If the LTB finds the increase was not lawful, it can order you to reduce the rent back to the previous amount and refund any overpayment. Ensuring you follow proper procedures protects you from these outcomes.

Common Mistakes

• Raising rent without providing 90 days' written notice
• Increasing rent more than once in a 12-month period
• Using the wrong notice form (N1 vs N2)
• Exceeding the guideline amount for rent-controlled units without an AGI
• Resetting rent to market rate between tenants for rent-controlled units
• Failing to account for the timing rule (12 months from start of tenancy or last increase)

For rental market data and landlord resources, visit The Rental Market.