Toronto Income Property Newsletter – March 2013

Sales of duplexes and triplexes in the Toronto centre core continue to be brisk, as Sellers enjoy record-high prices and are still often seeing multiple offers. There has been a lot of movement in the east side, particularly Leslieville, Danforth and Riverdale. While other areas of the province seem to have stabilized, there is still a very high demand for quality investment properties downtown. With interest rates still at low levels and the population growth over the past few years, it still seems to me that this situation will carry on for awhile.

Happy Easter to everyone and to all of you travelling for March break, please be safe.

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In my day-to-day business of going through residential income properties, I often come across properties that rent out individual rooms. The economics are such that often renting out by the room can be more profitable than renting out a fully self-contained apartment. The problem is that you cannot just simply put a lock on a door and start charging rent for that room. These unlicensed “rooming houses” often breach fire code and are not insured to be used in that capacity.

Chapter 285 Rooming Houses, Toronto Municipal Code, provides a definition for the term and compliance standards for property owners to meet. The chapter defines a rooming house as:

A building that contains dwelling rooms and may also contain one (1) or more dwelling units, where:
a. The dwelling rooms, in total, are used or designated or intended for use as living accommodation by more than three (3) persons; and
b. The living accommodation is provided in exchange for remuneration.
The Rooming House Chapter states that no person shall use, permit to be used, rent or offer to rent any rooming house unless a rooming house license is in force. The Chapter also states that no person shall use a licensed rooming house except for any purpose for which the license was issued.

The administration and enforcement of Chapter 285, in the former City of Toronto, falls under the jurisdiction of the Municipal Licensing & Standards Division. The Investigation Services team enforces the provisions of Chapter 285 with respect to the issuance, suspension, renewal or revocation of a rooming house license. This includes the imposition of conditions on the license as the circumstances require.

Rooming houses are only legal in the former City of Toronto. In the former City of Etobicoke, there are licensed lodging houses which are licensed by Toronto Public Health. In the former Cities of North York and Scarborough, rooming houses are illegal. There are lots of rooming houses in places like the Junction and Kensington Market, but in my experience, many of them are not licensed. I often tell my clients that rooming houses are quite a different business then owning a triplex, so please be very careful when looking at renting out by the room.

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One question that my landlord clients often ask is whether they can prohibit their tenants from having pets. Let’s say that you’ve rented your apartment out, and there’s a “no pets” clause in the lease. Tenants sign, and move in and before you know it they have a menagerie of cats, dogs and gerbils living in the premises.

The reality is that in Ontario, unless this is a condominium whose declaration prohibits pets, there is little the landlord can do to remove the animals. The Ontario Residential Tenancies Act says that any provision in a lease preventing pets is void. In order to remove the pet, the landlord will have to prove that this pet is actually causing damage to the premises, interfering with the enjoyment of the landlord or the other tenants, or is dangerous or perhaps causing an allergic reaction to the other tenants or the landlord.

Even if the landlord and tenant agreed in the lease not to have pets, it makes no difference. The reason is that section 4 of the act says that you cannot contract out of the provisions of the act. This applies to any lease in Ontario, whether you are in a high-rise apartment building, a basement apartment or any other residential rental unit. The only exception is if you are renting in a condominium building where the condo’s declaration prohibits pets. Only then will tenants have to follow this restriction.

Regardless of whether a landlord allows or prohibits pets, the tenant who resides in it is legally obligated to maintain it in good and clean condition. Upon termination of the lease, the tenant must leave the property in the condition in which it was received, with the exception of changes resulting from normal aging or wear. If the tenant fails to do so, the landlord may institute proceedings against the tenant and obtain compensation for the damaged property. This protects the landlord in the event that a tenant with an animal has left the suite in a mess.

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