BC landlords get 23.5% rent increase over two years
Two Victoria, B.C., landlords have been granted a rent increase greater than the legally allowed amount after it was discovered they were making a financial loss on a rental property.
The owners purchased the property – their first rental property – on October 28, 2021.
At the time, they had a variable rate mortgage of 1.9%. However, by June 2023, interest rates had risen to 6.4% and by July 2023, they were at 6.65%.
“During the last financial year, the impact on financing costs incurred by landlords due to rising interest rates was $80,058.99. Landlords compared this figure to the interest payable in the previous financial year, which was $45,722.44,” the Residential Tenancy Branch (RTB) decision states.
In April 2023, the landlords contacted the tenants and asked if they would accept a $500 per month rent increase, but the tenants said no.
“Some tenants argued that this was the owners’ investment, so how can it be called a loss when the owners ‘are going to walk away with a million dollar home,'” the decision reads.
Homeowners said they were unable to take out a fixed-rate mortgage because of high penalties.
The landlords requested an additional 23.5 per cent rent increase on top of the permitted annual increase of 3.5 per cent for a total rent increase of 27 per cent, saying their current financial situation was not sustainable.
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They told RTB that they had no financial room for manoeuvre and that even with the increase they would not reach the break-even point.
The landlords’ rental units are two-bedroom, one-bathroom suites. Utilities are included in the tenants’ rents, which are $1,282, $1,450 and $1,550. The landlord’s additional rent increase request would bring the residential property rents to $1,628.14, $1,841.50 and $1,968.50 per month.
“I find credible the owner’s evidence that he suffered a financial loss in connection with the financing costs of purchasing the residential property, which could not have been foreseen in reasonable circumstances,” the judgment states.
“I find that the global and economic events in response to the pandemic were not reasonably foreseeable and impacted the homeowners, despite the fact that they took reasonable precautions by accessing a mortgage from a recognized and well-known lender. I find that the homeowners exercised prudence, foresight, judgment, financial prudence and due diligence in purchasing and financing the residential property, but significant increases in the mortgage interest rate occurred due to unforeseen events.”
According to the judgment, the landlords stated that they never requested an additional rent increase and determined the total amount of this increase by considering the loss of rental income that they can manage.
“They determined that a $10,000 loss of net income was an amount they could accept and still allow them to keep the property.”
The judgment determined that the landlords had proven all the elements required to impose an additional rent increase for financial loss.
“I find this rent increase significant in one go, and I order that it can be applied over two years,” the judgment states.
In a statement, Housing Minister Ravi Kahlon said the government was taking steps to combat the housing crisis and had kept rent increases at or below inflation since 2018.
“The policy that allows these kinds of exceptional rent increases because of funding is an old policy from the previous government and this is the first time a request like this has been granted since we started collecting data in 2021,” he said.
“I know people have a lot of questions and I have asked staff to review this policy and how it impacts tenants in the current environment.”
© 2024 Global News, a division of Corus Entertainment Inc.
