Adoption of Bill 31: better landlord-tenant relations, but more work still to be done

The Corporation des propriétaires immobiliers du Québec (CORPIQ) is cautiously welcoming the new law, in a context where certain misinformation surrounding the piece of legislation will certainly have hindered the advancement of means to solve the housing crisis.

The perverse effects of misinformation

CORPIQ is surprised by the alarmist statements and positions taken by certain groups who have claimed that lease assignment is "a tool that protects" tenants, while asserting that it is a marginal phenomenon. However, these misleading statements have had perverse effects. Have we really asked ourselves whether it is necessary to limit lease transfers?

Unwittingly, and above all unintentionally, using lease assignments as a means of rallying around pleas denouncing a housing crisis has had the opposite effect: the tenant using the assignment as a "tool" has ended up making the crisis even greater on a national scale. Whereas for years the landlord had been benevolent and helpful in keeping the rent low, the logic of lease assignment penalized the landlord rather than welcoming his openness and/or the long-established relationship with a tenant. By hindering the possibility of adjusting rents between two tenants and restricting the carrying out of renovations, the most damaging result manifests itself when a lease is assigned, often prompting the landlord to disinvest by selling his property. In the absence of profitability, the next buyer is forced to undertake major renovations, leading to evictions and the loss of affordable housing.

Allowing the landlord to accept or reject the assignment simply restores the original intention of the law, i.e. the approach whereby the tenant presents his situation honestly and the landlord chooses the best solution in the circumstances, including that of releasing the tenant from his obligations, which is entirely to the tenant's advantage. The benefit of the new legislation on lease assignments will be to help the landlord retain his building, rather than fostering a transactional market of entrepreneurs seeking short-term value maximization.

By promoting lease surrenders to excess, even encouraging the sale of leases, activist groups have themselves broken the raison d'être of surrenders, forcing the government to act. Let's hope that these groups will be responsible when it comes to other potentially harmful provisions, such as Section G of the lease, since abusing it could lead to limitations, or even the complete withdrawal of this clause. CORPIQ expresses its disappointment that the government has not abandoned the punitive approach to Section G, aimed at encouraging landlords to mention the old rent in leases without fear of disastrous consequences similar to those of an assignment.

 

A crackdown on illegal evictions

The amendments to the Civil Code of Quebec are a step in the right direction. The provision reversing the presumption that the tenant's response is deemed to be negative in the event of a non-response has simplified and harmonized the law. This will make it easier for everyone to understand, since the Civil Code had two different regimes for evictions and repossessions, which could lead to confusion. As landlords are often required to present their project before the Tribunal administratif du logement, they will now be subject to a more rigorous process before carrying out evictions for renovation. However, to avoid the pressure leading to evictions, we need to ensure that rental yields are sufficient and that the housing stock can begin to be rehabilitated by traditional owners aiming for long-term ownership. 

 

The urgent need to build and encourage long-term ownership of rental properties

While certain groups were busy defending the assignment of leases, and dragging out the process of adopting the law, little attention was paid to what is a real issue: the lack of housing throughout Quebec. Despite relentless criticism, Minister Duranceau succeeded in inserting into the law measures to accelerate - for a limited period - the granting of building permits at the municipal level, which was indeed a problem since thousands of housing units are effectively stuck in excessively lengthy processes. It's a step forward, but financially, the difficulty of getting projects off the ground remains.

The solution is to set up a regulatory and tax framework that encourages the renovation of existing housing stock, rather than the massive addition of new units. For the second year running, housing starts are particularly weak. Governments will have to support an accelerated revival of housing construction, with financing and profitability conditions in line with the reality on the ground.

As for the regulatory framework, the Quebec government will need to do more to restore balance and confidence, with a view to encouraging long-term ownership. It is essential to make the provisions surrounding Section G of the lease more flexible, and to improve investment conditions for the maintenance and renovation of the rental stock. Éric Sansoucy, Chairman of the Board of Directors of CORPIQ, points out that "as long as the rental model is not profitable, it will be difficult to renovate the current stock and build new units at the necessary pace. Some units are even leaving the rental market for lack of profitability. The example of the rental condo sector is conclusive, with thousands of rental condos being put up for sale and leaving the rental market".

 

An information session on Bill 31 will be held on March 27. The event will be in French only. To find out more about this event or to register, click here.