Toronto tenants win fight over rental increase they argue was for redevelopment costs

Some tenants living in three Toronto rental buildings are claiming victory after the province's Landlord and Tenant Board ruled that environmental work done on the site in 2021 didn't meet the criteria for a full above-guideline rental increase, or AGI.

The landlord had applied for the increase citing paving, roof and boiler replacement and something called "site remediation." The board's decision, issued in early July, found that the first two claims were valid, but that the last one did not qualify as a capital expenditure. That remediation work had accounted for nearly half the claimed expenses.

"I was ecstatic," said Amy Nyp, of the decision. Nyp has lived in one of the buildings on Greentree Court in northwest Toronto since 2015. "The site remediation is where we were like, 'This doesn't make sense.'"

One tenant advocate is hailing the LTB decision as a victory for all renters, in that similar environmental work will not automatically qualify a landlord for an AGI in the future. However, anxiety remains among some tenants about the future of the site and potential redevelopment.

QMW Corp, the current landlord, did not respond to CBC News' multiple requests for comment by email, and also by phone.

Company argued risk management was necessary

CBC News first investigated the case last year, when Nyp and others argued the work was done to help the landlord at the time — Clearview Heights Holdings Limited — sell or redevelop the site, and that tenants shouldn't be on the hook for those costs. QMW Corp took over the AGI application when it became the landlord in October 2021.

Rental increases for most buildings in Ontario are typically capped at an annual rate based largely on inflation. The limit was 2.5 per cent last year, and remains at that rate this year. Increases above that percentage require LTB approval, through which landlords can raise the rent by an additional three per cent to help cover capital expenses, like major renovations or repairs. 

As part of its initial application during the 2021 COVID-19 pandemic rent freeze, QMW argued for a rent increase of 3.8 per cent, claiming around $647,000 in total capital expenditures, of which "site remediation" accounted for about $295,000, most of which went toward an environmental investigation and assessment.

The assessment is needed to obtain a record of site condition, which is filed with the provincial government before redeveloping a site — and can also provide assurances to potential buyers of a property.

QMW had rejected the tenants' claims that it was doing the work to eventually sell the buildings. It argued at the LTB that it was aware of "soil contamination" on the sites and was therefore on the hook for risk management, including getting a certificate from Ontario's Environment Ministry. It further argued the work was required to comply with City of Toronto housing standards and provincial Environmental Protection Act (EPA). 

But an LTB adjudicator disagreed, saying the landlord didn't show that it was necessary for EPA compliance, nor did the city bylaws require property owners to perform the environmental investigation in question. 

Precedent-setting

Given the LTB adjudicator's rejection of that expenditure, the board ruled that the AGI should be 2.27 per cent instead for two of the buildings — including the one where Nyp lives — and 2.11 per cent for the third.

"I have to pay more, but it's still not as much as what it could have been," said Nyp. "I was concerned that it would be, like, so much that I'm not gonna be able to afford this." 

Nyp estimates her rent will go up by a little more than $20 a month, and she'll have to repay roughly $900 in back rent within the next six months.

One tenant advocate says the decision means other landlords won't be able to argue for an AGI related to this kind of environmental work.

"Had it actually gone through, it would have had a very dangerous precedent," said Chiara Padovani, co-chair of the York South-Weston Tenant Union.

"This is a major victory for tenants because it shows that landlords cannot abuse this process by trying to squeeze in a quarter of a million dollars of completely ineligible expenses." 

Last year, in response to the previous investigation into the rental increases, a spokesperson for QMW Corp denied that the AGIs were to cover costs related to future redevelopment at the site and said in an emailed statement that its application was to "recover costs related to significant property upgrades that directly benefit tenants."

Anxieties over future of site

Nyp says many tenants remain anxious about the site's potential future redevelopment.

CBC News' previous investigation found that internal investor documents outlined a plan to renovate more units to "achieve increased rental income," before selling the site in 2028. Another report showed the landlord had hired architects to assess the site's potential for redevelopment.

"You're going to lose all these tenants that have had rent control and have been here for like 20, 30, 40-plus years," said Nyp.

She added, however, that the experience of fighting the AGI has given her confidence in their ability to organize in the future, should they need to.

"I'm trying to make a backup plan just in case, but at the same time, [I know] if the redevelopment stuff comes that we're still gonna fight."