In September of 2018, the Government announced the annual rent increase formula would be changing, essentially removing the additional two percent added to inflation, along with this announcement came a promise to address landlords’ costs for necessary capital expenditures with a transparent and easy to use Additional Rent Increase process. LandlordBC led much of the conversation with the RTB with the aim to ensure the result would be a transparent and accessible process for both landlords and tenants.
The process, legislatively activated July 1, 2021 and now open to applications through the RTB’s online portal, allows landlords to apply for an Additional Rent Increase to recoup the costs of necessary capital expenditures in the residential property.
For a capital expenditure to be eligible it must be made for the purpose of:
- Installing, repairing, or replacing a major system or component such as electrical, mechanical, or structural that is necessary or,
- Reducing greenhouse gas emissions or energy use or,
- Improving the security of the rental property.
Ineligible expenditures include:
- Repairs needed as a result of inadequate repair or maintenance by the landlord.
- Expenditures where the landlord has recouped the cost from another source.
Landlords with eligible expenditures will be able to apply through the RTB’s online portal for this Additional Rent Increase which will result in what is essentially a Dispute Resolution hearing where both the landlord and tenant(s) will have an opportunity to discuss the matter with an arbitrator. When making the application landlords may include all capital expenditures made over the previous 18 months (from the date of application) and must include all units the landlord intends to increase on one application.
Increases through this process will be calculated by taking the total eligible expenditures divided by the number or dwelling units which is then divided by 120 months (10-year amortization). The increases will be capped at three percent but may be spread out over three years to a maximum of 9% over the 3-year period in addition to normal annual increases. This means that if the tenants’ increase is eight percent, they will receive an increase of three percent in the first year and again in the second year with an increase of 2 percent occurring in the third year. Landlords will be able to utilize an RTB calculator to determine what their potential increase may be before applying.