What is a rental contract?
A rental contract is a written agreement between a landlord and a tenant regarding the rental of a residential unit in Ontario. In Ontario, when a request is made to rule on a specific case, such as whether a tenant will be allowed to stay in their unit, the case is referred to the Landlord-Tenant Board. The Board will need to consider information about the rental contract in order to rule on the case.
The written document is also known as the lease or tenancy agreement , and lays out agreed terms for the use of the space from the landlord to the tenant. The rental contract is important because it creates an agreement between the parties in regards to the unit and the rent charged. Without the document, it simply becomes a verbal agreement, which is not enforceable by the Landlord-Tenant Board.
The rental contract would include a definition of all involved parties, including the landlord, if there is more than one, and the tenant, and where the rental unit is, for example, the address on street name, and any other clarifying information.
Basic elements of a rental contract in Ontario
When entering into a rental contract in Ontario, there are several details that the renter and landlord should be sure to note in the written agreement. For any residential lease in Ontario that is longer than one month, there are a number of terms that are legally required. While the following list is not representative of all terms that could be outlined in the contract, it does include many essential details.
Rent Payment
Various details of the rent payment should be included in the contract including the amount to be paid, the date it is due, how it will be paid (i.e. by cash, cheque, debit, or money transfer), and whether or not the amounts can be adjusted. Rent may be adjusted to market rates when a new tenant is moving in. When an ongoing lease is being renewed with the same tenant, however, the rent for the new term may not be more than 2.5% higher than the rate for the previous term. In order to increase the rent above this amount, the landlord must apply to the Landlord and Tenant Board.
Duration of the Lease
Determining how long the agreement will last is another important aspect of the rental contract. The terms of the agreement can specify the actual dates, or indicate that it will be a month-to-month agreement until otherwise stated.
Property Details
The rental contract should include a description of the rental unit itself, whether it is a house, apartment, or other type of property, as well as its number of bedrooms, bathrooms and main rooms. If the unit is furnished or has appliances provided, this should also be included.
Ontario rental contract law: what landlords and tenants should know
Ontario’s rental laws are set out in the Residential Tenancies Act (RTA). It aims to keep rental housing affordable, allow Landlords a fair return on their investment, and protect against frivolous eviction. Most rentals in Ontario are covered by the RTA, which applies to Owner/Landlords and Tenants of rental units in apartment buildings, single family homes, condos and mixed-use buildings. The main exceptions to this are "Above Guideline Rent Increases" (AGIs) and apartment locks – these will be discussed further.
Owner/Landlord rights & obligations
Landlords have the right to receive the agreed rent on time from Tenants. If a Tenant is late on rent, or has failed to pay, the Landlord has the right to ask the Tenant to move out. The RTA sets out the grounds for eviction, the two-day notice period required for an eviction and the format for eviction documents. Tenant’s cannot move out with out giving the Landlord 60-days written notice. In practice, if a Tenant refuses to move and the Landlord needs to bring an application to the Landlord and Tenant Board, the Tenant will usually leave within a few months.
Tenant rights & obligations
Tenants must pay the rent on time and inform the Landlord when important information changes. Tenants have the right to clean, safe and well-maintained housing, and to have their privacy respected. The Landlord may enter a Tenant’s unit if there is an emergency, the rent was not paid, if there was an agreed-to repair, or if they gave the Tenant twenty-four hours notice and entered Monday to Saturday between 8am to 8pm. Tenants can get money back on their rent if the place is not clean or safe.
Above Guideline Rent Increases (AGIs)
Landlords can apply for permission to raise the rent above the pre-approved guidelines and get back rent they have lost due to work they have done to improve the building. These increases are called "Above Guideline Rent Increases," or AGIs. The Tenant must be given 20-days notice. These can take time (a year or two) and often go to the Landlord and Tenant Board (LTB) for a decision.
General rental contract terms
In a rental agreement, a clause is the part of the contract that addresses specific aspects of the arrangement. Common clauses in Ontario rental agreements include rent payments, security deposits, maintenance requirements and termination conditions. The rental agreement may be verbal or written but in either case, the terms should be clearly understood by both parties to prevent misunderstandings at a later date.
When it comes to rent, the agreement will typically stipulate how much will be paid, when payment is due and what form it must take. To prevent either party from trying to modify the agreement at a later date, it’s critical that the rent payment clause contains all relevant information in a clear and unambiguous manner. Even if the parties attempt to keep the arrangement informal, a written rental agreement can protect their interests.
The security deposit or security bond is typically the equivalent of one month’s rent and serves as a type of insurance for the landlord. The landlord can use money from the security bond to cover damages or repairs when the tenant vacates the property. The landlord must provide an itemized list of deductions taken from the security deposit. The remainder of the money is returned to the tenant.
The maintenance clause may provide clear guidelines about which responsibilities fall on the tenant and which responsibilities fall on the landlord. Typical maintenance issues include yard work, clearing snow, repairing appliances and more. The clause may also clearly define the steps that must be followed to report repair issues.
The termination or eviction clause is especially important for the tenant. It defines the length of the lease or contract term and the types of reasons that can be used for terminating the agreement. A tenant may be able to break the contract early in some circumstances, so guidelines must always be included.
As with any binding contract, the lessor and lessee in a rental agreement should know their rights and obligations. A review of the terms of the agreement will help both parties to avoid disputes. The agreement can also make it easier to present a case to the Board if there is a breach of contract.
How to draft an Ontario rental contract in 5 simple steps
When entering into a rental contract with a tenant in Ontario, the following steps should be followed:
Step 1: Preparation
The agreement must be in writing. Once you have advertised your rental unit, a prospective tenant may ask you to send them documentation outlining how much rent is and other terms and conditions of the rental contract. Under Ontario s. 12 of the Residential Tenancies Act, 2006, landlords are required to provide rent information to the tenant. As such, the landlord should advise the prospective tenant of the following:
Step 2: Document the Agreement
In addition to outlining the rent parameters, you may want to include additional terms to protect you for specific circumstances . With the absence of written rental contracts, there have been many legal disputes that have occurred regarding the terms of a rental contract. To protect yourself in the future, you should cover the following aspects: Although one may be tempted to verbally agree to the terms and conditions of the rental contract, it is always best to document the agreement in writing.
Step 3: Sign the Agreement
After the landlord and tenant have both signed it, their signatures will create a legally binding contract. The landlord will then store the signed agreement as a part of their record keeping of rental income.
Resolving disputes over Ontario rental contracts
Disputes can occur in any legal transaction. Some of the more common disputes in rental contracts revolve around property damage, late rent payments, and the eviction of tenants. In Ontario, there is a clear hierarchy for resolving rental contract disputes. The first is usually mediation. This is an informal process that tries to settle a dispute before it escalates to other processes. In mediation, a third party helps the involved parties discuss the terms of the contract, possible remedies, and a solution to the problem. Mediation is a cost-effective method and generally comes highly recommended. Even if mediation is unsuccessful, the process offers opportunities to discuss the weaknesses of your case and the issues at the core of the dispute. If mediation proves unsuccessful, parties must attend a hearing before the Landlord and Tenant Board. The Board tries to resolve disputes and enforce rules about landlords and tenants. After an extensive review of your issues, the Board issues a ruling. The rulings issued by the Board are legally binding, so parties must abide by them. Similar to mediation, parties may find that the hearing process allows them to resolve issues.
Tips for signing a rental contract
Before you sign your rental contract, double check that each copy is identical. It’s best practice to sign both copies at that time and affix the signatures to prevent either party from denying the validity of the contract because of a missing signature. Make sure contract contains the same names, dates and addresses that are on the Ontario Residential Rental Agreement Form. Read the contract carefully and ensure you understand all its provisions. If there are any inconsistencies between the written contract and the residential rental agreement, follow your residential rental agreement, since it is a government-approved form.
Review the term of occupancy. Most leases are for 12 months , but some are longer. Other leases are month-to-month, meaning you can terminate them by giving one month’s notice. Also check who is responsible for paying utilities, making repairs, and providing any furnishings. Ask the landlord about any restrictions they place on usage of the property or its various components, such as barbeque and heating, laundry facilities, parking, pools, gyms and so on.
If anything seems strange, objections arise, or something seems too good to be true, consider asking a lawyer for advice before you sign. You might want to speak to a lawyer now, rather than later, even if it means incurring some expense in legal fees.