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The Residential Tenancy Act Isn’t Helping Landlords or Tenants

In fact, advocates in both camps agree: loopholes and underfunding hurt everyone.

By Katie Hyslop 26 Apr 2017 | TheTyee.ca

Katie Hyslop reports on affordable housing for the Housing Fix. Follow her on Twitter @kehyslop.

2016-17 funders of the Housing Fix are Vancity Credit Union, Catherine Donnelly Foundation and the Real Estate Foundation of B.C., in collaboration with Columbia Institute. Funders of special solutions reporting projects neither influence nor endorse the particular content of our reporting. Other publications wishing to publish this article or other Housing Fix articles, please contact solutions editor Chris Wood here.

Slightly more than half the people living in the City of Vancouver rent their homes. That means that almost everything about their living situation is governed by a law they may never have heard of: the Residential Tenancy Act (RTA).

It does things like set the maximum amount that their rent can legally rise (most of the time), and provides a place for landlords and tenants to settle their differences.

But it doesn’t always work. The Tyee spoke to two Vancouver renters with what’s known as fixed-term leases, who asked to remain anonymous in case their landlords retaliated by evicting them.

Neither knew what a fixed-term lease was when they signed it. When their leases expired, their landlords presented them with new leases that increased their rent by as much as 10 per cent.

One renter, half of an East Vancouver couple who are renting a two-bedroom apartment, expected to go month to month after their first fixed-term lease expired in August 2016.

Instead the landlord presented them with a new, two-year fixed-term lease that increased their rent immediately by $200 to $2,200. That’s a 10 per cent increase in a year when the maximum allowable rental increase in B.C. — of two per cent plus prime — was 2.9 per cent.

On top of that, the new lease stipulates another $100 rent increase this coming August 2017, which is also above the maximum allowable rental increase. But if the couple didn’t sign, they’d have to move out.

When they hesitated, “[The landlord] was like, ‘Well, you know, these rents are so good. My son would really like to move in,’” the renter said. In such a tight market, with little in the way of family-sized rentals, the couple felt they had no choice but to sign.

Now barely able to afford the two-bedroom they live in, “It makes us feel like we can’t have another kid,” they said.

Fixed-term leases lock-in renters’ tenancy and rents for a set period of time. Normally, when they expire, a renter’s tenancy automatically becomes month to month.

But some fixed-term leases feature “vacate” clauses, requiring tenants to move out when the lease expires, unless they sign a brand new fixed-term agreement, which gives landlords the opportunity to jack up rent beyond the RTA limit.

If tenants refuse, the landlord simply finds new tenants, at the new rent. And unlike evictions, which require two months’ notice, the lease expiry date is legally considered sufficient notice for tenants to move on. And with a vacancy rate of 0.7 per cent in Vancouver, it’s a landlords’ market.

The renters could take their complaint to the Residential Tenancy Branch (RTB), the provincial body the Residential Tenancy Act created to settle disputes between landlords and renters. But the cost, in time and money, is a deterrent.

Multiple gambits

The Vancouver residents’ woes are emblematic of what many on both sides of the rental housing transaction say is a broken system.

The fixed-term lease isn’t the only gambit landlords are using to justify rent increases above the act’s cap. So-called “renovictions” — throwing out one tenant, making minor changes to an apartment, and then re-renting it at a new and much higher rate — are a long-standing complaint.

The act also allows landlords to justify extra-large rent hikes by claiming their rent level is significantly lower than similar nearby buildings. One Vancouver landlord made headlines by attempting to use that “geography clause” exemption to raise rents by as much as 43 per cent.

Funding cut for dispute-solving

The Residential Tenancy Act provides a path to resolve renters and landlords’ differences with one another: the Residential Tenancy Branch. It has to approve the use of the “geography clause” to raise rents.

Yet the provincial tribunal is notoriously slow, and, for low-income renters, expensive. Just getting in contact is a hassle.

In January 2016, the province increased the fee for a tenant or a landlord simply to apply for dispute resolution to $100 from $50. They also increased the cost for a landlord to apply to increase rent above the allowable annual increase cap to $300, plus $10 per unit — to a $600 maximum — from $200 plus $5 per unit. The extra fee for a review hearing to challenge an RTB decision went to $50 from $25.

According to the government, dispute resolution fees varied across Canada, from $50 in Saskatchewan to $170 in Ontario. It justified the increases in B.C. by saying it would help the branch hire more arbitrators and reduce wait times.

Instead, the opposite appears to have happened.

Last month The Globe and Mail reported that the number of arbitrators the branch employs fell by nearly 15 per cent between July 2016 and January 2017, as five positions were cut to leave only 29. Wait times to have the branch even answer the phone reached 39 minutes in January 2017, five minutes longer than in July 2016.

This year’s budget cut another $200,000 from the branch, reducing its funding to $8.4 million. A spokesperson for the Liberal government told the Globe the cut simply returned the branch to previous funding levels, after a temporary increase to reduce backlogs.

“There’s definitely an access to justice issue at the Residential Tenancy Branch,” said Andrew Sakamoto, executive director of B.C.’s Tenant Resource and Advisory Centre (TRAC). “The branch receives 20,000 applications and have 18,000 hearings per year with the staffing levels that they currently have. It’s not good enough.”

A place for ‘fixed-terms’

Speaking for landlords, David Hutniak defends fixed-term leases — for certain purposes. They’re a valuable form of tenancy, the CEO of Landlord BC says, when “people are renting their house for a year because they’re going away on sabbatical. Or we have tons of people who are snowbirds, and they’re providing six months of [rental] housing.”

But those purposes don’t include circumventing the rent cap. Landlords who do, Hutniak insists, are contravening the act and “doing damage to renters, obviously, but to the industry as well.”

Hutniak says Landlord BC has asked the Residential Tenancy Branch for a better explanation of how fixed-term tenancies are supposed to work, to no avail. TRAC’s Sakamoto wants the vacancy clause removed altogether.

As for the act’s geographic increase clause, Hutniak believes the widely publicized West End example is an exception. “I honestly do not know anyone who has bothered to even consider it,” said Hutniak, adding he doesn’t know the landlord trying to use it. “I was quite shocked that they even did this.”

Hutniak doesn’t think the landlord will be successful, because the process to bring rents up to match neighbouring buildings is complicated and cumbersome. “Both these — they’re just not worth it,” he said of the fixed-lease vacancy and geographic area clauses as loopholes for raising rents. “They don’t work.”

That’s not to say landlords are thrilled with everything in the Residential Tenancy Act either. For one thing, while it does allow exemptions to the provincial rent-increase cap, they must be approved by the overworked and arguably under-staffed Residential Tenancy Branch.

And that’s easier said than done, Hutniak says. “If you own an apartment building, you’re not going to go through it because the process is just too cumbersome. It’s just not worth it.”

With energy and climate issues emerging, landlords would like to see an easy and transparent mechanism to incorporate some of the costs of efficiency retrofits on their buildings into the rent they charge.

“These guys are running businesses at the end of the day, and I don’t think that’s an unfair conversation to have,” said Hutniak, who added that a transparent process would help renters understand how retrofits benefit them, too.

Pin increases to inflation

Tenant Resource and Advisory Centre executive director Sakamoto would also like changes to the maximum allowable annual rent increase. With incomes not keeping pace, his organization wants it pinned to inflation.

Sakamoto would also like to see the rights of a roommate who has a rental agreement with the tenant but not the landlord clarified. Such renters are considered occupants, not tenants, and don’t have the same rights under the act. “They wouldn’t be able to go to the Residential Tenancy Branch to have disputes resolved. They wouldn’t be able to ask TRAC for assistance,” he said, adding TRAC isn’t sure what rights occupants have. “It creates a lot of uncertainty.”

The legal grey area impacts landlords too, he adds. “If they needed to kick those [occupants] out, the eviction process wouldn’t be the same as under the Residential Tenancy Act.”

Last September Rich Coleman, the B.C. minister responsible for housing (as well as natural gas development) in the Liberal government now seeking another term, told Metro that it was “doing some work on [fixed-term leases] because that appears to be a gaming of the system, so we have to stop the gaming of the system.”

In December, the province did lift the penalty for breaking a fixed-term lease for victims of domestic violence who do so to escape abuse. But it left most fixed-term renters at the mercy of the existing act.

Punting the ball

It now seems the government has no plans to address the act’s failures before May’s election.

In an emailed response to a query from The Tyee, a spokesperson for Coleman punted the ball on fixed-term leases to the branch: “The Residential Tenancy Branch will develop a discussion paper to conduct a wider consultation with stakeholders,” the email said.

“Once that work is completed, policy options will be developed,” adding that there was no timeline for the work. There was no mention of increasing the strained branch’s resources to conduct the review.

The geography clause will not even be reviewed. Noting that it was used successfully only three times last year, the ministry spokesperson wrote that, “the current approach balances the needs of landlords and tenants.”

What may really be in balance, however, are the frustrations of both sides.  [Tyee]

Read more: BC Politics, Housing

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