| Section 13 | Rent Regulation |
| Sub-Section 13.1 | Application for Rent Increase Above the Guideline |
| Legislation | s. 25,69(1),123–126, 140(4),The Residential Tenancies Act
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Definitions |
Anniversary date: the date on which a landlord is entitled to increase the rent on a rental unit. In some residential complexes, all units have the same anniversary or rent increase date. In other complexes, the anniversary dates may be spaced throughout the year. A landlord can usually increase rent for a rental unit only once every 12 months. A landlord can change the anniversary date on a rental unit by waiting more than 12 months between rent increases. For example: The anniversary date on a particular unit was September 1, 2003. The landlord wanted to change the anniversary date to January 1 to coincide with the anniversary dates on the other units in the complex. To change the date, the landlord did not increase the rent on September 1, 2003, but waited for the increase until January 1, 2004. Annual rent increase guideline: the percentage that a landlord can increase rent without applying to the Branch for approval. The Government sets the amount each year. The guideline takes effect on January 1. For an explanation of how the annual rent increase guideline is calculated, click here. A landlord can apply for a larger increase if they can show that the guideline will not cover their increases in expenses. The guideline applies to most rental units, including apartments, single rooms, houses, duplexes, mobile homes and mobile home lots. The Residential Tenancies Act does not apply to rent increases on land leases. Application for Rent Increase Above the Guideline: a form a landlord completes when they apply to the Branch to increase their rent by more than the annual rent increase guideline. Arm’s length: a relationship between parties who have no specific duty, obligation or relationship to one another. Capital expense: a major purchase, repair or replacement that has a lasting and long term benefit to the residential complex. For example: air conditioning, carpets, roof, refrigerators and stoves. The regulations allow only a portion of a capital expense to be used when calculating a rent increase. Economic adjustment factor: a percentage the Government sets each year as part of the rent increase guideline. The Economic Adjustment Factor recognizes the non-operating part of the rent revenue. The Government considers inflation when setting the Economic Adjustment Factor. Notice of Rent Increase: a form a landlord must give a tenant to tell them about a planned rent increase. Operating expense: an expense related to the normal or usual operation of a residential complex. For example: utilities, insurance premiums, property taxes, repair and maintenance. It does not include budgeted, projected or anticipated costs. Rent: the amount of money paid by a tenant to a landlord for the right to occupy a rental unit and the use of common areas, services and facilities; rent includes any service/facility for which the tenant pays a separate charge (For example: parking, storage locker.) Rent discount: a contractual agreement between a landlord and tenant allowing a tenant to pay less than the full rent on their rental unit. A rent discount must be set out in a written agreement and can:
Rent roll: a list of the tenants’ names and unit numbers for a residential complex and information on their rents, including the amount of the rent and the amount payable for any other service, for example: parking. Reporting methods: only revenue earned and expenses incurred in the appropriate reporting periods will be considered; for example: In the category of realty taxes, only one annual realty tax bill will be considered in each reporting period. Any arrears showing on the bill will be moved to the appropriate period. Penalties, late fees and advance payments are not allowed. Reporting period: a period of 12 consecutive or back to back months. When a landlord applies for a rent increase above the guideline, they must choose a "current" reporting period and give the Branch information on their expenses during that period and the "previous" period. A "current" period is a period of 12 consecutive months which ends at least 3 months, but not more than 14 months before the date of the first rent increase in the complex, as shown on the application. A "previous" period is the 12 months immediately before the "current" period. For example: A landlord plans to increase rent on October 1, 2004. The landlord chooses a "current" period ending June 30, 2004. The landlord submits information on their expenses for the "current" period, July 1, 2003 – June 30, 2004. The landlord also submits information on their expenses for the "previous" period, July 1, 2002 – June 30, 2003. When a landlord does not apply for an above guideline increase for three years, they can change the reporting periods they use on their next application. Residential Tenancies Commission: a board that hears appeals from landlords and tenants on decisions or Orders the Branch issues. Tenant objection: an objection by a tenant to a planned rent increase. A tenant can object, in writing, to a rent increase above the guideline. A tenant must send their objection to the Branch at least 60 days before the date of the increase. |
| Policy |
Application Process A landlord must apply to the Branch when they want to increase rent above the annual guideline. The Branch supplies an application form for the landlord to complete. A landlord may use their own form as long as it has the same information as the Branch’s form. When applying for an above-guideline rent increase, a landlord must pay the Branch a non-refundable application fee. A landlord must give a tenant at least three months’ written notice of any rent increase. A landlord must apply for a rent increase above the guideline at least two and one-half months before the date of the first increase. For example: A landlord gives a tenant notice on June 15 that they plan to increase the rent by more than the guideline on October 1. The Branch must receive the application on or before July 14. If the deadline for filing an application falls on a weekend or statutory holiday, the deadline is extended to the first business day following the weekend or holiday. <><><><> When a landlord applies for a rent increase above the guideline, they must apply for all the non-exempt units in the residential complex, even though the units may have different anniversary dates. <><><><> There are special rules for rental units in condominium complexes since there may be several different unit owners or landlords. If a condominium owner/landlord owns more than one unit in a residential complex, they or their property manager must apply, at the same time, for all the units the owner has in the complex. <><><><> A landlord can choose to apply a rent increase to tenants’ rent by an equal percentage, like 5% to each rental unit, or in equal dollar amounts, i.e. $12.00 increase per rental unit. <><><><> A landlord must apply a rent increase equally in each period. For example: If a landlord is allowed to increase rent by $120.00 a year, they can increase the rent by $10.00 per monthly rental payment period. <><><><> A landlord may " round" to the nearest dollar when increasing the rent. However, if a landlord chooses to "round" to the nearest dollar on one unit in a complex, they must "round " all rents in the complex to the nearest dollar. For example: The allowable rent for Suite 403 is $502.57. The landlord may round to $503.00. On Suite 605, the allowable rent is $478.35. The landlord must round the rent on Suite 605 to $478.00. A rent increase is calculated on the full monthly amount a tenant is supposed to pay the landlord. For example: The tenant’s rent is $500.00, which includes one parking stall. The landlord applies the rent increase to $500.00. If the tenant’s rent is $500.00 plus $25.00 for one parking stall, the landlord applies the rent increase to $525.00. If the tenant’s rent is $500.00 plus $50.00 for two parking stalls, the landlord applies the increase to $550.00. If a landlord of a mobile home park collects licence fees on behalf of a municipality, the landlord must not include those fees as part of their reported revenue. <><><><> If a landlord provides coin operated laundry, they can’t include the laundry revenues and expenses in an application for a rent increase above the guideline. <><><><> A landlord can’t include a laundry rate increase in an application for a rent increase above the guideline. If a landlord wants to increase the laundry rates, they must apply separately. (See Laundry Charges) <><><><> When a landlord makes an application to the Branch for a rent increase above the guideline on a complex which includes exempt rental units, the landlord must exclude those expenses that relate only to the exempt units (for example: new carpet in an exempt rental unit). When an expense (for example a new roof) relates to both exempt and non-exempt units, that expense must be apportioned fairly. When reviewing a landlord’s expenses, the Branch can only consider those expenses related to non-exempt units. If a residential complex includes exempt units, the Branch:
♦ the operating expenses incurred for the sole benefit of exempt rental units; ♦ the capital expenses and mortgage interest incurred for the sole benefit of exempt rental units; ♦ the dollar value of any change in services that relates to or affects only exempt rental units.
For example: if there are 100 units in the complex and 12 of the units are exempt, A/B =
♦ the operating expenses incurred for the common benefit of all rental units in the complex, other than management or other expenses incurred in lieu of management fees by a landlord who manages their own property; ♦ the capital expenses and mortgage interest expenses for the common benefit of all rental units in the complex; ♦ the dollar value of any change in services that relates to or affects all rental units in the complex. When a landlord applies for a rent increase above the guideline, the Branch invites the tenants to come to the Branch, during normal office hours, to inspect the landlord’s application and supporting material. In exceptional circumstances, the Branch may arrange for tenants to inspect a file outside normal office hours. If the residential complex is outside Winnipeg, Brandon or Thompson, the Branch arranges for the tenants to inspect a copy of the file in or near their community. To inspect a file, tenants must show identification to prove that they live at the residential complex. The Residential Rent Regulation gives tenants the right to inspect the application and the supporting material. The regulation does not give the Branch the authority to provide photocopies of this information. People can make their own written notes about the material. Tenants can comment, in writing, about the application. The landlord has the right to see and respond, in writing, to any comments the tenants give to the Branch. While tenants and landlords may discuss the file with Branch staff, the Branch will usually consider only written comments when making a decision on a rent increase. When the Branch issues a decision on an application, it closes its file. Once the file is closed:
Branch Orders The Branch makes a decision on a rent increase application based on the financial information and written submissions of the landlord and the tenants. The Branch may also hold a hearing to allow the landlord and tenants to present information, but this is unusual. <><><><> When reviewing an application, the Branch follows Section 125 of the Act and the Residential Rent Regulation. <><><><> Some types of expenses can be operating or capital, depending on the circumstances. If the regulation on expenses is not specific, the Branch considers whether the landlord routinely incurs the expense by comparing the information between reporting periods. If the Branch decides that an amount shown as an operating expense is extraordinary, it will:
If the Branch moves this type of expense from operating to capital, it may:
For example: A landlord includes a $40,000 expense for painting a number of rental units in their entirety as an operating expense. The Branch needs to determine if the expense is extraordinary. The Branch compares the cost for painting in the current period to the cost in the previous period. The Branch considers part of the cost to be a capital expense. There are 150 units in the building. The landlord painted 100 of the units during the current period. The Branch leaves the cost of painting 20% of the units in operating and moves the balance to capital (150 units x 20% = 30 units). The cost of painting 100 units was $40,000 or $400 per unit ($40,000 ÷ 100). Therefore the cost of painting 20% of the units or 30 units is $12,000 (30 x $400). The Branch moves the balance of $28,000 ($40,000 - 12,000) to capital. Some landlords do their own repairs and maintenance. These landlords are entitled to show a reasonable amount for their labour as an operating expense. However, the Branch may not allow part of the expenses if they appear unreasonable when compared to similar transactions in the marketplace. If a landlord does their own repairs, they must make sure that the work meets health, building and maintenance and occupancy standards. <><><><> When reviewing operating expenses, the Branch considers whether the landlord and the supplier of the goods or services are at arm’s length. If the parties are not at arm’s length, the Branch may not allow part of the expenses if they appear unreasonable when compared to similar transactions in the marketplace. <><><><> In certain instances, some landlords purchase “capital items” such as appliances or plumbing fixtures in bulk and do not necessarily install all of them in rental units during the same year. When this happens the Branch only considers the cost of those items that are actually installed in rental units during the “current period” of the application. For example: A landlord applies for an above guideline rent increase and uses financial statements for the period January 1, 2006 to December 31, 2006 as the “current period” on the application. The landlord purchased 50 refrigerators in 2005 at a cost of $35,000 and installed 25 of them during 2006. The Branch will only allow the allowable portion of the cost of the 25 refrigerators installed during the “current period” on this application. ($17,500 X ¼ = $4,375). <><><><> Not all capital items are specifically listed in the Regulations. Regulation 9(1.2)(d) states: “ (d) 1/3, 1/4, 1/6, or 1/8, as determined by the director, of the cost of such other items as the director determines to be capital expenses.” Some examples of “such other items” would be:
A landlord may include reasonable professional fees related to applications and appeals under the Act as an operating expense. The Branch will allow these professional fees as long as:
The Branch does not consider bad debts, allowance for errors, allowance for vacancy loss or any other budgeted, projected or anticipated costs to be operating or capital expenses. <><><><> Sometimes the Branch may consider information from previous years when reviewing an application for a rent increase above the guideline. When the Branch reviews an application, the Branch checks to see when the landlord last applied for a rent increase above the guideline. If the landlord applied two years before the current application and didn’t apply a year ago, the Branch does some calculations to see if there are any unusual fluctuations in the expenses between the reporting periods on the two applications. If there are significant differences, the Branch may do a review of the expenses for up to three years before the date of the current application. When reviewing the expenses for previous years, the Branch considers the effect of increases or decreases over the three-year period. The Branch also considers whether the landlord took a guideline rent increase in the year they didn’t apply to the Branch. After considering the information on file, the Branch may adjust the landlord’s expenses to reflect the increases and decreases in expenses in the last three years. For example: A landlord applies for a rent increase above the guideline in 2004. The landlord uses 2003 as their current reporting period and 2002 as the previous period. The landlord shows expenses of $90,000 for 2003 compared to $60,000 for 2002. The landlord increased the rent by the guideline in 2003. The landlord applied for an increase above the guideline in 2002. On that application, the landlord showed expenses of $70,000 for 2001. Since there is an unusually large difference in the expenses, the Branch decides to review the expenses more closely. In this example, there is an increase of $20,000 in the operating expenses over the three years. [$70,000 in 2001 to $60,000 in 2002 = ($10,000) decrease; $60,000 in 2002 to $90,000 in 2003 = $30,000 increase; increase $20,000]. The Branch reduces the landlord’s expenses by $10,000. The Branch also deducts $2,000 for the guideline increase the landlord took in 2003. ( Total rent roll $200,000 x 1% guideline = $2,000). <><><><> When a landlord applies for a rent increase above the guideline, they can ask the Branch to consider expenses from the three years before the date of the application. The Branch may consider the expenses only if the landlord:
For example: A landlord puts a new roof on a building and buys new appliances for several rental units. Although the landlord could justify a rent increase above the guideline, they don’t apply to the Branch. They take only the guideline increase. Later, when the landlord applies for a rent increase above the guideline, they ask the Branch to consider the expenses for the current and previous periods and the expenses for the roof and the appliances. The landlord supplies the Branch with information on the operating and capital expenses for the three periods. The information shows that the landlord could have justified an increase above the guideline. The Branch adjusts the landlord’s application to show the new allowable rent increase. The Branch’s goal is to issue an Order setting the rents before the date the landlord plans to increase the rent or within 90 days from the date it receives the application. If the Branch doesn’t issue the Order before the date of the proposed increase, the tenants must pay the landlord the rent increase the landlord requested. If the Branch later sets the rent increase at a lower amount and the landlord doesn’t appeal the Order, they must return the overpayment to the tenant. The landlord may give the tenants a refund or allow them to reduce their next rent payment. If the landlord appeals the Order, the tenants must continue to pay the requested amount until the Residential Tenancies Commission issues an Order setting the rent. For example: The landlord gives the tenants a notice of increase in rent for October 1 and applies to the Branch for an increase of 5%. The Branch doesn’t issue an Order before October 1. The tenants must pay the 5% increase. On November 8, the Branch sets the rent increase at 4%. Neither the landlord nor tenants appeal the Order. The landlord must refund the 1% overpayment for October and November. If necessary, the Branch can authorize tenants to set off an overpayment against future rent. The Branch also has the authority to re-direct rent to satisfy an Order to return a rent overpayment. <><><><> Some landlords charge separately for a service, for example: parking. When the Branch issues an Order, it shows the date the rent can go up and the maximum amounts the landlord can charge for the rent for the unit and the separate service. For example: Effective October 1, the landlord may increase the rent for the unit to a maximum of $505.00 and the rent for the parking to a maximum of $47.00 for a total of $552.00. After the Branch issues the Order, the landlord can’t change how they allocate the rent increase until the next increase or new tenancy agreement. For example: The landlord can’t say that rent for the unit is $510.00 and the rent for the parking $42.00. If the landlord only increases the rent by the amount of the guideline the next year, they can apply the increase to either component or split it between them. For example: The monthly rent for the unit is $505.00 and the rent for the parking is $47.00 for a total rent of $552.00. The annual rent increase guideline is 1.5%. The landlord may increase the total rent by $8.00 to $560.00. The landlord may say the rent for the unit is $513.00 and the rent for the parking is till $47.00 for a total rent of $560.00. Or, the landlord may say the rent for the unit is still $505.00 and the rent for the parking is now $55.00 for a total of $560.00. Or, the landlord may say the rent for the unit is $509.00 and the rent for the parking is $51.00, again for a total rent of $560.00. When a new tenant moves in, a landlord may also choose to "move" some of the money allocated for rent to parking or some of the money set for parking to rent. For example: The monthly rent for the unit is $505.00 and the rent for the parking is $47.00 for a total rent of $552.00. The landlord prepares a new tenancy agreement for a new tenant and says the rent for the unit is $525.00 and the rent for the parking is $27.00 for a total rent of $552.00. Or, the landlord may say the rent for the unit is $497.00 and the rent for the parking is $55.00 for a total rent of $552.00. A landlord must always give the new tenant a Notice to New Tenant form and send a copy to the Branch. <><><><> When the Branch issues an Order setting the rents, it also sets the effective date of the increase. If a landlord chooses not to collect the total amount of a rent increase in the year the Branch approves it, the landlord can’t carry the balance or unused portion forward and add it to future rent increases. If a landlord prefers not to charge the full amount of the approved rent, they may consider offering their tenants a rent discount. (see Rent Discounts) <><><><> When a landlord applies for a rent increase, the Branch checks for open repair files on the complex. The Branch may also receive an objection from a tenant which mentions repair problems. Depending on the type of repair or repairs, the Branch may:
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Overview |
An officer reviews a landlord’s application for a rent increase above the guideline, taking into account the financial information provided, tenants’ comments and the landlord’s response to them. The officer calculates the amount of the rent increase and issues an Order, which includes reasons. Both the landlord and tenants get copies of the Order. |
Steps ▼ |
1. The officer reviews the landlord’s application to make sure that:
The officer also confirms the reporting methods the landlord is using. The methods must be used consistently to allow the Branch to properly compare reporting periods. 2. If necessary, the officer sends a letter to the landlord, asking the landlord to supply missing information or supporting material within two weeks of the date of the letter. The officer may also call the landlord if any information on the application is not clear. If the officer calls, they either send the landlord a letter to confirm the conversation or ask the landlord to send a letter confirming the information. If there are large or unusual increases and/or decreases in expenses, the officer may ask for financial information for the two periods shown on the application and information from previous periods. 3. When the officer has all the information required, they send the tenants a letter inviting them to inspect the application. 4. If the officer receives written comments from tenants, the officer will either discuss the information with the landlord by telephone or invite the landlord to inspect and comment on the tenants’ statements in writing. 5. The officer reviews the written information from tenants to see if there are any comments on:
If a tenant’s written comments mention an urgent repair, for example: a smoke alarm that’s not working, the officer opens a repair file. If there are other repair requests, the officer may send a letter to the tenant to advise them of the Branch’s repair process. 6. The officer completes a worksheet about the application. The worksheet shows any changes made to the landlord’s application, with a short explanation for each change. Here are some examples of common changes:
7. Once changes are made, the officer uses a set formula to calculate the total allowable rent increase. This is based on:
8. The officer allocates the rent increase to each rental unit by either equal percentage or equal dollar, depending on which method the landlord chose. 9. The officer issues an Order setting the amount of the rent for each unit. The Order includes reasons. The landlord and tenants get a copy of the Order.
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Forms & Form Letters |
Application for Rent Increase Above Amount Permitted by Regulation.
To see Form 3 click here. |
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X-Referencing |
For information on applications received after the deadline, see Late Applicationsin this section. For information on discounting rent, see Rent Discounts in this section. |
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Policy Developed |
September, 1992* |
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Last Revision |
September, 2019 |
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Other Resources |
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