N.B. landlords eye renovictions, special leases as potential rent-cap 'loopholes'

·5 min read
A screengrab from Moncton Real Estate Investing Organization's online roundtable discussion, which was posted to YouTube. More than two dozen landlords and property managers participated in discussions that included finding
A screengrab from Moncton Real Estate Investing Organization's online roundtable discussion, which was posted to YouTube. More than two dozen landlords and property managers participated in discussions that included finding

New Brunswick landlords and property managers facing a limit of 3.8 per cent on rent increases for 2022 have been discussing potential ways to escape the restriction.

Ideas include asking tenants personally to agree to higher rents, introducing fixed-term leases that force tenants to move on when they expire and proposing renovations to rent-controlled units significant enough to require tenants to vacate, whether the renovations happen as planned or not.

In an online talk posted to YouTube earlier this month by the Moncton Real Estate Investing Organization, more than two dozen apartment building owners and managers heard a discussion about ways to get around rent caps, an exercise they believe government knows about.

"They do know what landlords are trying to do. They know the loopholes that we're trying to find," Moncton property manager Tony LeBlanc, who led much of the discussion, said during the 77-minute online forum.

"Will they eventually start closing them? I wouldn't be surprised. When it's politicians in play, we just really don't know what the end game is."

Jacques Poitras/CBC News
Jacques Poitras/CBC News

Provincial budget unveiled rent-cap plans

In its March 22 budget, the Blaine Higgs government announced plans to cap rent increases.

That followed a series of highly publicized incidents of rental properties being sold to investors and of tenants being asked to pay 20, 40 and even 90 per cent more for their apartments.

"We have heard the tenants' concerns and are putting in place more measures to help ease the pressures they are facing," said Service New Brunswick Minister Mary Wilson, who is responsible for landlord and tenant issues.

Legislation has since been introduced to implement a one-year limit of 3.8 per cent on rent increases, retroactive to January 1, along with other measures to prevent some kinds of evictions.

"The changes we are introducing to temporarily cap rent increases and strengthen regulations for ending tenancies will further help tenants facing rising rents, increased costs and low vacancy rates," said Wilson.

The proposed changes have upended many apartment owners' plans to raise rents, especially those who recently bought buildings in New Brunswick at premium prices or renovated buildings on the expectation of being able to attract higher-paying tenants.

WATCH | Landlord asks about evicting tenants for 'major' renovations

Plans to explain situation to tenants directly

LeBlanc told the Moncton meeting he has a client who recently bought a six-unit building and then spent $150,000 on upgrades.

He said he plans to ask tenants directly, on the owner's behalf, to agree to increases above 3.8 per cent because of that.

"She's like, oh my God, like, what am I going to do?" LeBlanc said of the building owner.

"We're literally going and sitting at the kitchen table with every one of these tenants and explaining the situation and say, listen, you know we've done all these renovations. And I suspect that it'll go over well. I think we'll be OK."

That strategy has already been tried in the province.

Last month, tenants in Hampton were given eviction notices by a new landlord after refusing to voluntarily agree to rent increases of 29 and 43 per cent. The owner said the rentals will be converted into vacation rentals instead.

Pierre Fournier/Radio-Canada
Pierre Fournier/Radio-Canada

Peter Jongeneelen of the New Brunswick chapter of the Association of Community Organizations for Reform Now (ACORN) advises tenants against paying more in rent than the law requires.

He says if a landlord made a poor investment decision on a rental property, tenants should not be the ones to pay for it.

"That's not the tenant's fault," he said.

"That's the fault of the person who bought the building."

Ways to move existing tenants out discussed

The proposed rent cap applies to existing tenants rather than new renters, and much of the discussion among Moncton investors involved avenues available to move those currently under the protection of rent control out.

Signing tenants to fixed-term leases that expire on a set date and require the tenant to move was one suggestion.

Devising plans for extensive renovations to apartments, even if the work ultimately is not as major as claimed, was another.

Currently, proposed changes to legislation will allow tenants to be evicted under limited circumstances, including if significant renovations "to an extent that vacant possession is necessary to perform the renovations" are undertaken.

The province has not defined exactly what that means, but LeBlanc said he has been told a renovation of a week or two would not qualify for an eviction, while something longer than two months would.

He suggested developing a renovation plan that shows the scope of work to be done, with a timeline, and getting the Residential Tenancies Tribunal to agree that an eviction is required.

"And what if it finishes earlier than we expected?" asked one participant.

"If they say yes you can evict him or get him out in the allotted time, you could be done the project a week later, as far as I'm concerned," said LeBlanc. "The tenant is out and the rentalsman is out of the picture."

Landlords warned to avoid 'shenanigans'

But Leblanc also warned landlords to be careful not to get "caught in any shenanigans" in any interactions with tenants, because fines have been established for breaking rules.

"We're all good with being creative, but being creative in the right way and not trying to circumvent the rules that have been established," he said.

None of the three central organizers of the roundtable discussion, including LeBlanc, returned CBC messages requesting an interview about the meeting.

However, Jongeneelen said a tenant should never move out for renovations without first speaking to the Residential Tenancies Tribunal.

He noted that because landlords are openly looking for ways around the rent cap, the province needs to write rules tight enough to prevent that.

"Also, we'd like to see the government provide some sort of tenant education to understand the new rules, to stop any unscrupulous landlords from tricking tenants to vacate units," he said.

The rent-cap legislation is scheduled to be reviewed and debated by MLAs after the Legislature resumes sitting May 10.

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