Two landlords in Victoria, BC, were granted a rent increase above the amount allowed by law after it was determined that they had incurred a financial loss while renting a property.
The landlords purchased the property – their first rental property – on October 28, 2021.
At the time, you had a variable rate mortgage of 1.9 percent. However, by June 2023, interest rates rose to 6.4 percent, and in July 2023 they were 6.65 percent.
“In the last financial year, the impact of increased interest rates on landlords’ financing costs was $80,058.99. Landlords compared this figure with the interest payable in the previous financial year, which was $45,722.44,” the Residential Tenancy Branch (RTB) decision said.
In April 2023, the landlords approached the tenants and asked if they would agree to a rent increase of $500 per month, but the tenants refused.
“Some tenants argued that this was an investment by the landlords, so how could this be classified as a loss when the landlords walked away with a house worth a million dollars,” the ruling states.
Landlords said they were unable to take out a fixed-rate mortgage due to the high penalties.
The landlords requested an additional rent increase of 23.5 percent in addition to the permitted annual rent increase of 3.5 percent, resulting in a total rent increase of 27 percent, arguing that their current financial situation was unsustainable.
Breaking news from Canada and around the world delivered to your email address instantly.
Get the latest national news
Sign up for breaking news alerts delivered straight to you as news breaks from Canada and around the world.
They told RTB that they had no financial buffer and that even with the increase they would not be able to break even.
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 additional rent increase request filed by the landlord would increase the rents in the residential property to $1,628.14, $1,841.50, and $1,968.50 per month.
“I consider the landlord’s evidence that he could have suffered a financial loss for the financing costs of acquiring the residential property to be credible under reasonable circumstances,” the ruling states.
“I consider that the global and economic events in response to the pandemic were not reasonably foreseeable and impacted the landlords despite them taking reasonable precautions by obtaining a mortgage through a recognised and well-known lender. I consider that the landlords exercised care, foresight, judgement, financial prudence and diligence in purchasing and financing the residential property, but due to unforeseen events, significant increases in the mortgage interest rate occurred.”
According to the ruling, the landlords stated that they had never requested an additional rent increase and had determined the amount of the increase taking into account the loss of rent that they could bear.
“They concluded that a net income loss of $10,000 was an amount they could accept and still allow them to keep the property.”
The judgment found that the landlords had demonstrated all the necessary elements to be able to enforce an additional rent increase due to a financial loss.
“I consider this one-time rent increase to be significant and order that it be implemented over two years,” the ruling states.
Housing Minister Ravi Kahlon said in a statement that the government is taking measures to combat the housing crisis and has kept rent increases at or below the inflation rate since 2018.
“The policy allowing these types of exceptional rent increases due to financing is an old policy from the old administration, and this is the first time such a request has been approved since we started collecting data in 2021,” he said.
“I know people have a lot of questions and I have instructed staff to review this policy and its impact on tenants in the current context.”
© 2024 Global News, a division of Corus Entertainment Inc.
