Rent Protections? Tenants Pay Up in British Columbia

By: 

John Cooke, Tenant Advocate

What follows is a brief, fact-driven analysis of legislative changes to the Residential Tenancy Act that took place in 2002, the structural import of these changes, and how key sections of the new legislation have affected the tenant community since the changes went into effect.

In 2002, the Residential Tenancy Act [1996] (which will be referred to as “the Act” in this article) was repealed and the Residential Tenancy Act [2002] (which will be referred to as “Bill-70”) came into force.

Bill-70 and its predecessor, the Act, are both pieces of provincially enacted legislation that serve to govern the relationship between landlord and tenant in the province of British Columbia. Any similarities between the two end there. In my view, from an advocacy reach, the Act was, in its spirit and intent, consumer protection legislation, whereas Bill-70 might best be characterized as an end-run, as there was little or no consultation with representatives from the tenant community prior to passing the bill and pressure on the government from a very agitated landlord lobby in BC wanting nothing less than wholesale legislative change.

The selling point for legislative change employed by then Solicitor General Rich Coleman was two-fold: Mr. Coleman held out that Bill-70 was a plain language, user-friendly document; and he claimed that tenants “…for the first time would have rent protections in the province of British Columbia.” The opposite, I would argue, is true, as these so-called rent protections have since proven to be nothing less than an unmitigated disaster for the tenant community of BC.

This sentiment is not merely a vagrant opinion with no visible means of support, and, to perhaps better illustrate my point, I would want to first provide the reader with a comparative analysis as it relates to rent protections and attempted rent controls in BC.
 

Residential Tenancy Act 1996: The Rent Protection Formula

Under the Residential Tenancy Act [1996], landlords who wanted to increase a tenant’s rent were required to issue the tenant with a Notice of Rent Increase not less than three calendar months prior to the effective date, and on a standardized form approved by the Director of the Residential Tenancy Branch.

The tenant had the legal right to dispute the rent increase within 30 days of receiving the notice. If the tenant elected to dispute, the landlord would then have to justify to an arbitrator at hearing their previous year’s costs in order to be successful.

A formulaic guide contained within the legislation would help an arbitrator determine:

  1. if the Notice was frivolous, capricious or vexatious,
  2. if any rent increase was justified,
  3. if the rent increase requested should be adjusted to a lesser amount,
  4. if, in the event any increase would be justified, whether the increase should be phased in over a period of time so as not to create undue hardship on the tenants, or
  5. whether the landlord’s Notice of Rent Increase would be dismissed outright, with no leave to reapply.

Note that if 5. were the finding, an arbitrator would order that the landlord not issue the tenant with another Notice of Rent Increase for one full year from the date of the decision. 
Generally speaking, a landlord would be able to raise a tenant’s rent with the rate of inflation and possibly more if it could be reasonably demonstrated that:

  1. there had been an increase in government taxes and/or levies,
  2. there were major repairs and improvements completed in the previous year, or
  3. there had been a significant increase in commodity rate prices such as natural gas or other heating fuels.

This was a fair system for both landlords and tenants in that the Rent Protection Formula ensured the landlord a fair market return on his or her investment while at the same time protecting the tenant from prohibitive and unjustified rent increases.

It is important to bear in mind that, of the more than 22,000 applications for arbitration commenced province-wide with the Residential Tenancy Branch (RTB) in the year 2002, only 868 were filed by tenants disputing rent increases. Clearly, and contrary to any assertions voiced by Mr. Coleman, the rent protection system worked very efficiently and did not, as suggested by him, create a strain on the RTB offices.
 

Bill-70 and the Elimination of the Rent Protection Formula

With the advent of Bill-70, the entire Rent Protection Formula was repealed to allow the following: “…a percentage for annual rent increases to be set each year by the provincial government,” in other words, by the provincial Cabinet. The Annual Allowable Rent Increase, or ARI, as set by the Residential Tenancy Regulation, is calculated as the inflation rate plus 2%.

The ARI provision provides no real incentive for landlords to maintain their buildings. Landlords are now allowed to issue annual rent increases even if they neglect to abide by the Residential Tenancy Act or municipal standards of maintenance bylaws in providing service and repair. For those tenants already living in sub-standard, near derelict, or what are often described as demolition rentals, this is very definitely a serious setback.

In addition, all tenants are now deprived of the right to dispute a proposed rent increase at arbitration if the increase is issued in accordance with the Regulation, whereas previously a tenant could dispute any Notice of Rent Increase, especially in circumstances where a landlord had failed to perform on their obligations and responsibilities to ensure that adequate standards of maintenance were met.

To further illustrate the effect of the ARI and the impact it has had on the tenant community, I have put together the chart of historical maximum allowable rent increases, below:

Using year to year ARIs as set by Cabinet and provided on the Residential Tenancy Branch website, the chart shows an 11 year history of annual allowable rent increases dated from 2004 to 2014 inclusive, based on an average fair market value for a one bedroom rental unit (in Victoria) in the year 2004, and assuming that the same tenant continues to maintain occupancy of the suite from 2004 through to the present.

The chart shows a $319 cumulative rent increase from 2004 to 2014, or nearly 45%. If the tenant were to move out any time during this period, the landlord could conceivably gain even more in market value, as there is no limit on the amount a landlord can increase the rent when there is a turnover in tenancy.

The government knew that by allowing the ARI increases in the first place, they would also have to eliminate the tenant’s right to dispute these increases, which they have done. It is, in my view, unconscionable for the government to take away a tenant’s right of dispute.

Bill-70 repealed important consumer protection legislation, leaving the province’s approximately one million renters vulnerable to rent gouging, the threat of wholesale economic evictions and the naked vicissitudes of the marketplace. It is socially regressive legislation that serves to adversely affect the tenant community, especially the working poor, families, seniors and persons with disabilities. Moreover, Bill-70 has done more to exacerbate the crisis of homelessness, and in many cases the most vulnerable in our society have lost their stability of tenure, ultimately to be put out on the streets. In my view, this so-called rent protection legislation needs to be repealed in its entirety.

If you have any concerns regarding the current rent protection system, please contact your Member of the Legislative Assembly, or TAPS at 250-361-3521.