I have had some people reach out and ask me what an AGI is. It is a commonly used term for Above Guideline Increase and it is an important tool for rental housing providers to understand.
Here is an LTB interpretation bulletin that lays it all out. And again note that for 2021, you can stroke off municipal property taxes from the list.
If you plan on doing capital improvements or adding certain services, this process can be used for increasing rent to help cover those expenditures.
Normally this can also be used for property taxes except for 2021. But also note that if your property taxes fall by more than 2.49%, your tenants will normally receive a letter from the city letting them know that they are entitled to a rent reduction.
Wait what? Yup. The Residential Tenancies Act (RTA) considers property taxes to essentially be a pass through to the tenant and is part of the tenant's rent. So when it goes up, you can pass it on in the form of an appropriate rent increase and why if it goes down it must be passed along.
Here is a good article on the subject:
This is why this particular legislation is so strange as it is essentially contradicting the premise in the RTA. I don't know if this will get challenged but if we see significant property tax increases in 2021 as a fallout of C19 then I wouldn't be surprised to see a court challenge.
It is worse than originally expected. AGI will exclude property tax increases. This is likely because municipalities will likely see larger than normal property tax increases next year due to operational revenue shortfall.
Here are the details from EOLO:
SEPTEMBER 17, 2020
2021 Guideline set at 0% and related rules
As we reported in the e-Newsletter of August 31st, the Ford government is freezing residential rents in 2021. The legislation will make the guideline 0%.
The legislation was introduced into the Ontario Legislature today. While the government could still change its plans, the legislation is almost certain to pass, and will likely pass in the current form.
This e-Newsletter reports the content of the current legislation on the following issues:
The guideline for 2021
For rent increases to take effect between January 1, 2021 and December 31, 2021, the Guideline is to be set at zero per cent, and a rent increase cannot be taken unless there is a specific justification other than the Guideline. Those justifications are:
As the legislation is written, the guideline limit will sunset for 2022. In other words, no action is needed for a regular guideline to come into force for 2022, based on the average rate of inflation from June 2020 to May 2021.
AGI orders or applications
Above-guideline rent increases for capital expenditures for the period of January 1, 2021 and December 31, 2021, can still be taken. This includes applications that have already been approved, applications that are pending, and applications that have not yet been filed. To take an AGI increase one needs to give a proper notice of rent increase (NORI) for the expected or approved amount of the AGI increase (without adding anything for the guideline or for an extraordinary tax increase).
However, if you can delay an increase for an AGI from January without losing it, we recommend that you hold off on sending out NORIs at this time. It would be better for the industry if AGI increases were delivered only after the legislation passes, even if that means delaying an AGI increase to February.
As the legislation is written, one cannot take an AGI increase in 2021 for the extraordinary increase in the cost of municipal taxes and charges unless an order of the Board is issued before the new legislation is enacted. With the backlog of AGI applications at the LTB, we do not believe that any such orders have been issued, or will be issued.
Rental units first occupied on or after November 15, 2018, are generally exempt from the Guideline. However for 2021, the legislation as drafted will prohibit giving rent increases to those rental units.
Interest on LMR
Rental providers are generally obliged to pay interest on the deposit for last month’s rent at the guideline. Since the 2021 guideline will be zero, no interest will be owing for 2021.
Commercial Eviction Moratorium
The same legislation prohibits most commercial evictions from the date the bill is enacted until October 30, 2020.
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