Lease renewal in 10 questions

With lease renewals on the rise at this time of year, our consulting services team have compiled the 10 most frequently asked questions on the subject.

1. What is the purpose of the renewal notice?

Landlords often think that the renewal notice, commonly referred to as the "rent increase" notice, serves only one purpose: to increase the rent. Indeed, we can use this notice to increase our tenants' rent annually. However, the notice can also be used to modify, add and/or delete any other conditions in the lease.

We would like to point out that, just like the rent, the tenant can refuse other modifications to the lease conditions in the notice of renewal. Therefore, when you file a "Request for Lease Amendment" with the Tribunal administratif du logement (TAL), it is up to the judge's discretion to decide whether to grant you the requested amendments considering the evidence you provide.

If no renewal notice is sent to our tenants during the renewal period, and they do not express during the same period their wish to leave the premises at the end of the term, the lease will be automatically renewed at the same rent and under the same conditions.

Please note: A landlord cannot (with certain exceptions, such as when the tenant has been subletting the dwelling for more than 12 months or in the case of the death of a tenant) send a notice of non-renewal of the lease to his tenants. Tenants have the right to remain in the premises, and it is they who decide whether to renew their lease or not.

 

 

2. When should I send my lease renewal notice to my tenants?

We strongly recommend that you refer to the back of your lease as a guide as to when you should send your renewal notices, depending on the term of your lease. From this guide (see below), we understand that for a classic lease that begins on July 1st and ends on June 30th, the notice should be sent between January 1st and March 31st. If we have a short-term lease (less than 12 months) that also ends on June 30th, the notice should be sent in May. Otherwise, for indeterminate term leases, if we wanted to increase the rent like our other tenants on July 1st, we'd also have to send the notice in May.

Finally, it's important to keep in mind that, regardless of the term of the lease, in accordance with article 1906 of the Civil Code of Quebec, there can only be one rent readjustment per reference period (12 months). To find out your reference period, you can refer to the calculation forms on the Tribunal administratif du logement website by clicking here.

 

 

 

 

3. What are the best ways to deliver the renewal notice to my tenants?

One of the most important steps during the renewal period is to obtain a proof of reception of the renewal notice from your tenants. Tenants will have one month starting from the reception of the notice to respond, failing which they will be deemed to have accepted the increase and changes, if applicable.

Here are the best ways to obtain an acknowledgement of receipt:

• Personal delivery with acknowledgement of receipt;

• Registered mail with signature - be careful! If the tenant doesn't pick up the mail, it's worthless and you'll have to obtain an acknowledgement of receipt otherwise;

• Bailiff;

• Pronotif certified e-mail - make sure you have the tenant's authorization before using it to send your notice of renewal.

Avoid verbal renewal at all costs. As the saying goes, "what's written stays, what's said flies"! It's possible to send the notice by e-mail or by other means, but make sure that each of your tenants confirms receipt of the document.

 

 

4. Is there a fixed percentage rent increase that applies to all landlords in Quebec?

No. There is no fixed percentage rent increase applicable to all Quebec landlords. The Tribunal administratif du logement issues an annual average, which often creates confusion for all parties involved; tenants believe that the landlord can only increase them by this amount, and landlords believe that this is the increase to which they are entitled.

Each building has its own unique operating expenses. If we take two neighboring buildings, one of which spent $100,000 on major renovations the previous year, while the other underwent no renovations at all: it would be illogical for these two landlords to increase their tenants' rent by the same amount.

Legally, a landlord has the right to send an increase at the amount he considers reasonable. If the tenant accepts, everything is perfectly legal. However, if the tenant contests the increase, the landlord, if unable to come to an agreement with his tenant, will have to open an application to modify the lease at the Tribunal administratif du logement in order to have the rent fixed. The Tribunal will use the calculation tool, which considers the building's operating expenses (tax and insurance variations, maintenance, services, energy, management, net income and major work) in proportion to each rent in relation to total income.

We therefore advise you to start by using the calculation tool, to find out where you stand in relation to the amount you would be entitled to before the Tribunal administratif du logement. It might surprise you, and more importantly, give you greater negotiating power with your tenants.

 

 

Click here to use the CORPIQ calculation tool (exclusive to members).

 

 

5.  Why does the CORPIQ calculation tool only allow three rents to be increased at a time?

CORPIQ's rent increase calculator lets owners of small buildings (houses, condos, duplexes and triplexes) use the tool once to calculate all their rent increases. Please note that the Tribunal administratif du logement tool only allows you to increase one rent at a time. In our tool, when you have more than three units, simply delete the information at the bottom (Unit rent adjustment section) and enter the rents of the other units to be increased. The rest of the information at the top of the tool (income, operating expenses) remains unchanged, unless a unit undergoes specific major work. Ultimately, what you need to remember is that the calculation tool allows you to find the  rent adjustment percentage that you can easily multiply by each of your rents.

Please note that Corpiq's calculation tool has no legal value and will not be recognized by the Tribunal administratif du logement for rent setting purposes.

 

 

6. What should I do if my tenant refuses to accept the rent increase?

In accordance with article 1945 of the Civil Code of Québec, the tenant has one month from the reception of the lease renewal notice to respond. If the tenant fails to respond within this time limit, he or she is deemed to have accepted all the changes in the notice. However, if the tenant sends you, within the period of one month, a written refusal ot the proposed increase while wishing to remain in the dwelling, you should, within one month of receiving the refusal, file an "application to modify the lease" with the Tribunal administratif du logement.

Note that it is always possible to negotiate with the tenant to reach an agreement and avoid going to the Tribunal. If you reach an agreement with your tenant, it's essential to put it in writing to protect yourself in the event of a dispute. However, never forget the deadline for opening your file. If you exceed it, your lease will be renewed on the same terms as the last term. You might  not be able to recover this increase during the following year's renewal period.

In the case of the sole owner opening the file, proceed with this request.

 

 

7. What is the purpose of the RL-31 Slip, when and to whom do I submit it?

The RL-31 Slip is used to report information on the occupancy of a dwelling as of December 31st of the year in question. The information provided on this statement is used by the tenant or sub-tenant claiming the solidarity tax credit on his or her income tax return.

It must therefore be given to all tenants and/or sub-tenants that were occupying your dwelling on December 31st. If your tenant moved out before December 31st, he or she must obtain the statement from their new landlord with whom he or she was living on that date.

This statement must be produced and given to the tenant by the end of February at the latest. It is good practice to send this statement with the lease renewal notice.

Click here to produce Revenu Québec's RL-31 Slip.

Click here to consult the RL-31 Slip Guide.

 

 

8. Does CORPIQ have letters and forms to help us?

Of course! Go to the CORPIQ website, log in to the member's area and click on "Sample letters and forms" in your tools. There's a complete section on lease renewal notices, in compliance with the standards of the Civil Code of Québec. Please note that you must not remove any basic elements from our templates, otherwise your lease renewal notice will not be valid under article 1943 of the Civil Code of Québec.

In addition, landlords still awaiting a rent-setting judgment from the Tribunal administratif du logement, or those for whom Section F applies (building constructed five years or less ago, or whose use for residential purposes results from a change of use five years or less ago), will also find the right notice for their situation on our website.

 

 

9. Should I visit my rental unit during the renewal period?

We recommend that landlords take advantage of the renewal period to visit the dwelling. This visit will enable them to check the condition of the dwelling, and possibly hand-deliver the notice of renewal to the tenant (with acknowledgement of receipt), as well as the RL-31 Slip. The visit can also be used to see if there is a need for maintenance in the near future. It also makes tenants feel more responsible when they know that the landlord will be coming to see the property.

Please note that you must give notice at least 24 hours prior to the scheduled visit, in accordance with article 1931 of the Civil Code of Quebec. Visits must also take place between 9 a.m. and 9 p.m., and the tenant may refuse the visit if the landlord is not present (1932 of the Civil Code of Quebec).

 

 

10. How do I go about visiting a rental unit for which the lease has not been renewed?

When a tenant notifies you, in a timely and appropriate manner, that they do not intend to renew their lease, they must allow you to visit and advertise the dwelling  as soon as they have given this notice. In fact, article 1930 of the Civil Code of Québec allows landlords to show their units for re-rental without prior notice. Of course, we still recommend that you notify your tenant, as a courtesy, as soon as you become aware of an upcoming visit. This will maximize good relationships, ensure that the property is prepared for the visit, and ensure that the relocation process  takes place on good terms. 

This type of visit must also take place between 9 a.m. and 9 p.m., and the tenant may refuse the visit if the landlord is not present (1932 Civil Code of Quebec).

 

Note

The information presented above is for information purposes only. It does not constitute legal advice and should not be construed as such.