Since its introduction in 2018, Ontario has had a standard lease agreement for all residential units. A pre-written document can be a massive timesaver for many landlords, especially those new to real estate investing.
However, Ontario’s laws tend to favour the tenant in many aspects. The right fit with the right set of terms can absolutely make owning a rental more than worthwhile. Still, it helps to know what specific clauses actually mean in an Ontario tenancy agreement. In addition, you should know about some of the extra terms that can help you protect your investment.
Section 15 in the standard lease allows you to outline and clarify your expectations so both you and your tenant fully understand your responsibilities with regard to the property. In this post, we’ll talk about some of the best clauses that you might want to consider adding to your lease agreement in Ontario.
Is buying a student rental the answer to your university residence challenges? Explore the possibilities in A Parent’s Guide to Real Estate Investing in Guelph.
All Tenants on One Lease
Guelph is a great city for investment if for no other reason than it is home to one of Canada’s top universities. It may sound hard to believe, but students typically make fantastic tenants. For the most part, they pay their rent on time, and they take care of the property. Often, their parents will cosign the lease to ensure that they do.
You can take it a step further when renting to multiple students by making sure they are all on one lease whenever possible. When each tenant has a lease of their own, the space will sit vacant until you can find a suitable replacement.
With one lease (for up to four people), the other tenants are responsible. They can either make up any shortfalls on the rent or find another roommate to share the expense. This tip alone can help protect the income your property generates.
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Rent Guarantor
All tenants on one lease are the way to go whenever possible, but it doesn’t always work that way in the real world. It’s highly feasible when you’re renting to a group of students who all know and trust each other as friends. If they’re strangers or casual roommates, they might not agree to be on the hook for anyone else’s share of the rent.
If one lease isn’t an option, there is still a way to protect your income and investment. Try to get the parents to guarantee the rent amount. If the tenant has a shortfall one month, it’s reassuring to know that someone with the financial means is there to cover it.
No Smoking or Drugs
Smoking isn’t any healthier for your house than it is for your health! The scent can stay in the home for months, and it can make it less appealing when you’re searching for a new tenant.
Fortunately, landlords do have the right to a no-smoking rule. You can stipulate that this applies to cigarettes, pipes, cigars, marijuana, and vaping. Since marijuana is legal now, you also want to consider a lease clause that prohibits tenants from growing it in the house.
Illegal drugs are another matter. You might think that a prohibition goes without saying – since they are, in fact, illegal. Still, it doesn’t hurt to explicitly state it in writing, especially since landlords can be held liable if they knowingly permit trafficking or production. These are just a few things to consider in a changing rental market.
Changes to Decor
A tenant will often want to customize the home to their preferences. As a landlord, you may have conflicting feelings about this. On the one hand, it’s a great sign that the tenant intends to stay for the long term. Still, you want to be careful about what you allow and what you don’t.
A clause that states that the tenant must run any changes by you can be the solution. Your tenant is happy because they can paint the walls, while you have peace of mind that they can’t tear down those walls.
Tenant Insurance
By law, a tenant doesn’t necessarily need insurance. But they should have it, full stop. Adequate insurance protects them from loss, and the clause on the lease protects you from liability. For this reason, most landlords add mandatory tenant insurance to the lease.
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Utilities
As real estate agents, we can tell who is paying the utility bills the moment we walk inside. Hint: if no one is home yet every single light is on and the TV is blaring, it’s the landlord.
Other times, all of the lights are turned off (with post-it notes all over saying “please turn off the lights”), the TV is silent, and all unused appliances are unplugged. Those are a few signs that the students are covering the expenses.
If it were the tenants, they would be mindful, especially when they are students with limited funds. Carefully stating in the lease that tenants will cover their own utilities will help to protect you from a steep bill you didn’t expect.
Looking for more guidance to make the best real estate investment decisions? The posts below will help you get and stay on track:
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What to Avoid in an Ontario Rental Agreement
It is normal to focus on additional terms to the residential tenancy agreement to protect your interests as a landlord. However, it’s also important to know which clauses to avoid.
The Residential Tenancies Act doesn’t allow certain things that you might consider standard practice. For instance, many landlords insist on a damage deposit, which is actually not permitted. (You can, however, request first and last months’ rent.)
You also can’t tell your tenant that they cannot entertain guests (or charge an extra fee for the privilege) as they have the right to reasonable enjoyment of their home. Contrary to common belief, lease agreements cannot forbid tenants from having a pet unless it is an actual rule by the condo board.
Illegal or Unenforceable Clauses
If you choose to customize the standard lease, it’s essential that you do so carefully and in full compliance with the Residential Tenancies Act. Including a clause that contradicts these guidelines is automatically unenforceable. If you say “no pets” and the tenant gets a cat a week after moving in, there’s nothing you can do. They get to stay and keep their new furry companion, but still have to pay their rent each month on time.
Some less-than-ethical or uninformed landlords might try to sneak in an unenforceable clause, but this is never recommended. You might get away with it for the short term if a tenant doesn’t know their rights, but you’ll likely face unforeseen consequences in the future.
For example, the Landlord and Tenant Board might begin to view you as a bad faith landlord if you get a reputation for using illegal clauses. As if Ontario law didn’t already favour the tenant, the board might be even less sympathetic to you even when you have a legitimate complaint.
When searching for a good tenant, keep in mind that most students are law-abiding citizens who simply want an education. Using an experienced real estate agent to carefully vet each tenant will help ensure you find the right fit.
Are you looking for customized advice for your personal situation? Our top Guelph real estate agents are here to answer all of your questions. Reach out today at info@gowylde.ca or call 519-826-7109 for more information.
