Being a lessor

Acquiring a residential rental property

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Introduction

Have you been thinking about investing in rental housing or building an apartment building? Did you recently buy or inherit a rental property? If so, this document is for you. It’s intended to help you make informed decisions and understand the first steps to take as a new lessor.

It gives an overview of the regulations that apply to residential renting in Québec but is far from exhaustive.

Residential property: rules imposed by law

Residential renting is governed by the Civil Code of Québec and the Act respecting the Administrative Housing Tribunal. A significant part of this legislation is public policy, which means it cannot be waived, either by a lease clause or otherwise. These rules are reproduced in the MANDATORY PARTICULARS section of the lease form, use of which is mandatory.

Role of the Tribunal administratif du logement

The Tribunal administratif du logement is the specialized administrative tribunal responsible for applying the law regarding rental housing.

The mission of the Tribunal administratif du logement includes:

  • Deciding on applications submitted to it
  • Informing lessors1 and lessees of their rights and obligations under a lease
  • Promoting conciliation between lessors and lessees

At the Tribunal administratif du logement, legal fees are incurred as soon as a judicial application is filed. They may vary depending on the cost of the rent written in the lease or the nature of the application.

Jurisdiction of the Tribunal

The Tribunal administratif du logement decides in first instance, to the exclusion of any other tribunal, on applications in cases where:

  • a. The sum claimed or the value of the thing claimed, or the interest of the applicant is less than $85,000
  • b. Regardless of the sum at issue, the application concerns:
    • Lease renewal
    • Rent fixing
    • Repossession of a dwelling
    • Subdivision or enlargement of a dwelling or a change of destination
    • Certain types of recourse specific to leases of low rental housing (LRH)

The Tribunal administratif du logement also handles cases of:

  • Demolition where there is no municipal regulation providing for it
  • Sale of a rental building that is part of a building complex
  • Conversion of a residential building to divided co ownership (condominiums) where permitted

This legislation applies to all sites rented for residential purposes, such as:

  • An apartment
  • A house
  • A unit in divided co ownership
  • A room
  • A mobile home on a chassis
  • Land intended for installation of a mobile home
  • Low¬ rental housing (LRH)

It also applies to services (e.g., laundry, meals, infirmary), accessories (e.g., refrigerator, air conditioner) and dependencies (e.g., garage, parking area) included in the dwelling lease or any other document.

Special case: a room

A room is considered a dwelling unless:

  • Only one or two rooms are rented or offered for rent by the lessor within the lessor’s principal residence and those rooms possess neither a separate entrance from the outside nor sanitary facilities separate from those of the lessor
  • It is situated in a hotel establishment
  • It is situated in a health or social services institution

This legislation does not apply to:

  • A dwelling leased as a vacation rental (cottage, etc.)
  • A dwelling in which over one third of the total floor area is used for purposes other than residential purposes (e.g., offices, workshops)
  • Commercial premises

Before you acquire a rental property, it is important to understand the rights, obligations and recourses of lessors and lessees.

Can a prospective buyer visit the dwellings?

An owner who puts their property up for sale has the right to show the dwellings to a prospective buyer. However, there are conditions that must be met:

  • A lessee must be given 24 hours’ notice before each visit. This notice may be verbal.
  • Visits must take place between 9 a.m. and 9 p.m.
  • The lessee may demand that the lessor or a representative of the lessor accompany the visitor.

If the lessee refuses without a valid reason, the owner may apply to the Tribunal administrative du logement for an order to force the lessee to provide access to the dwelling.

What is the lessee’s right to maintain occupancy?

The law entitles the lessee to maintain occupancy. In other words, the lessee has the right to stay in their dwelling as long as they wish, even if the lease is a verbal one, as long as they comply with their obligations.

The lessor may not evict the lessee when the lease expires, because the lease automatically renews, even if a new lease is not signed.

However, certain provisions of the law allow a lessor to terminate a lease when it expires, on specific grounds that will be detailed later (e.g., repossession of a dwelling).

What does that right mean in practice?

Respecting the current lease

Immediately after purchase, the new lessor may not unilaterally change anything about the lease in effect and must respect all conditions of that lease.

For example, if the former lessor went to collect rent at the lessee’s residence, the new lessor must continue to do the same.

Changing a lease in order to renew it

The new lessor gains the rights of the former lessor, including the right to increase rent and to change any other conditions of the lease when it expires.

Such changes may only take effect when the lease is renewed, and in the manner provided by law. Unless changes are made, the lease will automatically renew with the same conditions.

Upon receiving written notice of modifications to the lease, the lessee has three options:

  1. They may accept the proposed modifications (failure to respond to the lessor’s written notice is equivalent to acceptance).
  2. If they find the proposed modifications unreasonable, they must notify the lessor in writing within a month of receiving the notice of modifications. The lessor must then, within a month of receiving the lessee’s refusal, apply to the Tribunal administratif du logement to decide on the future rent or other modifications. The lease is renewed under the conditions set by the tribunal. This decision is binding on both parties. If the lessor does not apply to the Tribunal, the lease is renewed under the same conditions and for the same duration, which may not exceed 12 months.
  3. The lessee may also decide to move out. They must then notify the lessor in writing of their intention to not renew their lease, within a month of receiving the notice of modifications.

Rules for rent fixing

When called upon to fix rent, the Tribunal administratif du logement does so based on the rent paid by the lessee and on the criteria established under regulation.

The Tribunal considers:

  • All revenue from the property
  • Year to year variation of certain property related costs (e.g., taxes, insurance)
  • Annual indexing of funds disbursed for energy and maintenance costs and major repairs

At the hearing, the lessor will need to justify the requested increase, using invoices or other relevant documentation, so it is important to get such documents from vendors at the time of a transaction.

To better understand what is involved when the Tribunal renews a lease and fixes the rent, consult the Calculation for the fixing of rent section.

For more information, refer to the Renewal of the lease and fixing of rent section.

Exception: Neither the lessor nor the lessee may have the rent fixed by the Tribunal nor change any other conditions of the lease for:

  • A newly constructed building

OR

  • A property that was used for non rental purposes and was altered for residential rental purposes (e.g., a former school turned into apartments)

Two conditions apply:

  1. The property must have been ready for its planned use or its new use for no more than five years. In other words, during the first five years, the lessor may increase the rent or impose conditions as they wish. This right must be exercised in good faith.
  2. If agreed upon since January 1, 1994, the lease must mention this exclusion. If these restrictions are not in the lease in writing, the lessor automatically loses the benefit of the five year exclusion, and the Tribunal may fix the rent or rule on other modifications.

These restrictions must, however, be mentioned in the dwelling lease; if they are not mentioned, they may not be set up by the lessor against the lessee.

If these two conditions are met, a lessee who disagrees with a rent increase or other proposed modification(s) has only two choices: to accept the modification or to leave at the end of their lease. Informing the lessor that they are refusing the modification means that the lessee intends to leave the premises at the end of the lease.

Can a new lessee challenge the agreed rent?

Unless one of the above exceptions applies, a new lessee may ask the Tribunal to fix the rent if the amount they pay is greater than the lowest rent paid over the 12 months prior to the start of their lease. The Tribunal will then handle the case in accordance with the Regulation respecting the criteria for the fixing of rent and may adjust the rent retroactively to the starting date of the lease.

When you enter into a new lease, you must, in most instances, provide the new lessee with a notice indicating the lowest rent paid or the rent fixed by the Tribunal for that dwelling over the 12 months prior to the lease’s starting date.

This obligation may be discharged by completing section G of the mandatory lease form.

However, you do not need to provide such a notice to a new lessee in the following cases:

  1. The dwelling is leased by a housing cooperative to one of its members.
  2. The dwelling is located in a building that was constructed no more than five years ago or converted to residential use no more than five years ago.
  3. The lessee is renting low rental housing.

For the first two exceptions, the lease must mention these restrictions in section F of the lease form.

Do I need to follow any formalities to do major work?

If you intend to do major work in the dwelling, you must follow certain formalities. Major work includes important repairs or improvements, such as renovating the bathroom, installing new cabinets, repairing the heating system, etc.

You must give the lessee 10 days’ notice prior to the start of work, so long as the lessee does not need to vacate the premises or does not need to do so for more than a week.

If the dwelling must be vacated for more than one week, at least three months’ notice is required.

Contents of the notice

Not only do you need to provide notice within the time limits specified by law, but that notice must also include all the following information:

  • The type of work to be done (e.g., redoing the entire electrical system)
  • The starting date of the work and an estimate of how long it will take
  • Any other conditions under which the work will be done if it is likely to seriously affect the lessee’s enjoyment of the dwelling

Also, if the dwelling must be temporarily vacated, the notice must include:

  • How long the lessee must be gone
  • The amount offered to the lessee as compensation2 to cover the expenses involved in leaving the dwelling (e.g., moving costs, storage costs, extra rent paid to stay somewhere else temporarily, etc.)

Temporarily vacating the dwelling

In all cases where a lessee is asked to leave temporarily, they have 10 days after receiving the notice to inform the lessor whether or not they agree to vacate the dwelling. If the lessee does not respond, they are presumed to have refused to leave the premises.

If the lessee refuses to vacate, the lessor may apply to the Tribunal administratif du logement within 10 days of the refusal to have it rule on the advisability of the evacuation and set conditions it considers just and reasonable.

Abusive conditions

If the lessee is not asked to leave the dwelling or agrees to do so but wishes to contest some of the conditions in the notice, the lessee has 10 days after receiving the notice to ask the Tribunal to change or remove the conditions that they consider abusive.

The hearing

Whenever the lessee or lessor applies to the Tribunal, all work is immediately suspended unless the Tribunal decides otherwise. These hearings will be given priority by the Tribunal.

At the hearing held by the Tribunal on the conditions of work to be done, the lessor must show that the work and conditions are reasonable and (if applicable) that vacating the dwelling is necessary.

In its decision, the Tribunal may impose conditions that it considers just and reasonable.

For more information, see the Major work section.

Repossessing a dwelling

Can the buyer live in a dwelling in the building or have a family member live there?

The owner may retake possession of a dwelling in order to live there personally or have certain individuals live there.

However, note that someone who jointly co owns a property with someone other than their spouse may not repossess a dwelling3.

Who can the owner repossess a dwelling for?

  • The owner
  • The owner’s parent or child
  • Any other relative or person connected by marriage or civil union if the owner is their main source of moral or material support
  • A former spouse if the owner remains the main source of moral or material support following their legal separation (resulting from a judgment), their divorce or the dissolution of their civil union

If the new owner wishes to occupy a dwelling currently occupied by a lessee, they must personally provide the notice of repossession of the dwelling once the sale is concluded.

When a dwelling cannot be repossessed

Notwithstanding the above, an owner may not repossess a dwelling if the lessee or the lessee’s spouse is 70 years of age or older, has occupied the dwelling for at least 10 years and has income equal to or less than the maximum threshold to qualify for a dwelling in low rental housing, except in one of the following situations:

  • The owner is 70 years of age or over and wishes to occupy the dwelling.
  • The beneficiary of the repossession is 70 years of age or over.
  • The owner is 70 years of age or over and wishes to have a beneficiary under 70 years of age reside in the same building as themselves.

How to proceed

The lessor (owner) must send the lessee written notice of their intent to repossess the dwelling at the end of the lease.

This notice must include the following information:

  • The date on which the lessor wants to repossess the dwelling
  • The name of the person who is to live dwelling
  • The degree of relationship or the bond between the lessor and the beneficiary
  • The restrictions and exceptions that apply in certain circumstances where the lessee or their spouse is 70 years of age or older (see the section  When a dwelling cannot be repossessed).

Timeline for notifying the lessee:

  • No less than six months before the end of the lease, for a lease with a term longer than six months
  • No less than one month before the end of the lease, for a lease with a term of six months or under
  • No less than six months before the intended date of repossession of the dwelling, for a lease with an indefinite term (written or verbal)

Lessee response

Upon receiving notice of the repossession of their dwelling, the lessee has two options:

  1. If they agree to depart at the end of the lease, they must inform the lessor in writing within a month of receiving the notice of repossession.
  2. If they refuse to depart, they must inform the lessor of this refusal within a month of receiving the notice of repossession.

Important: If the lessee does not respond, they will be deemed to have refused to depart.

What happens if the lessee refuses the repossession of the dwelling?

The lessor must apply to the Tribunal for authorization to repossess the dwelling, within one month of receiving the lessee’s notice of refusal or of their presumed refusal (if the lessee does not respond to the notice). During the hearing, the lessor must demonstrate that they truly intend to repossess the dwelling for the purpose stated in the notice, and that the repossession is not a pretext for a different end. In the interim, the lessor and lessee may attempt to negotiate conditions they both deem fair and reasonable, so that the lessor can exercise their right of repossession.

If the Tribunal authorizes the repossession of the dwelling, it may impose conditions that it deems fair and reasonable. These conditions might include a compensation payment from the lessor to the lessee, often equivalent to moving costs.

If the lessee is able to demonstrate before the Tribunal that the repossession is being carried out in bad faith, they can claim damages and potentially also punitive damages.

If you plan to purchase a condominium occupied by a lessee in a rental property converted to divided co ownership, you may not be able to carry out a repossession.

For more information, see the Repossessing a dwelling section.

Is it possible to convert the property to divided co ownership (condominiums)?

You should be aware that, if your property includes a rental dwelling or has included one in the past 10 years, not all municipalities will authorize you to convert the property to divided co ownership. You should verify what bylaws are in effect in the municipality in question.

Authorization by the Tribunal

Authorization by the Tribunal is required in all cases, even when all dwellings are occupied by undivided co owners.

Repossession of a lessee’s dwelling by an owner becomes prohibited as soon as the lessee receives a notice of intent to convert to divided co ownership. Simultaneously, authorization by the Tribunal becomes required to carry out any work other than urgent or maintenance work.

Is the property part of a housing complex?

If you are interested in a property located in a housing complex, you must obtain authorization from the Tribunal before proceeding with the sale.

A property is part of a housing complex when:

  • Multiple properties are located in proximity to each other and together comprise more than 12 dwellings.
  • These properties are jointly administered by the same person or by related persons within the meaning of the Taxation Act (a spouse, a company of which the person is the principle shareholder, etc.).

AND

  • Some of the properties have an accessory (e.g., a pool or parking lot), a dependency (e.g., a shed) or, excluding a common wall, part of the structure (e.g., the roof) in common.

If a sale is conducted without prior authorization from the Tribunal, any interested party may apply to the Superior Court to have it declared null and void.

What about the demolition, division, change of destination or enlargement of the dwelling?

If you plan to make one of these changes, there are specific regulations that you must comply with. See the section Eviction to divide the dwelling, enlarge it substantially or change its destination.

After buying: two things to do right away

  1. Notice of change of owner
     

    As soon as the transaction is complete, the lessees of the property must be notified individually and in writing of the change of owner. This may be done by either the former or the new owner. If notification is given by the new owner, it is preferable to avoid any uncertainty by including a copy of the act of acquisition or a letter identifying the new owner and written by the notary who received the deed of sale.

    Until a lessee has been personally notified, they may not be held at fault for continuing to pay rent to the former owner.

    If these formalities are not carried out and a lessee is uncertain of who the owner is, the lessee may apply to the Tribunal for authorization to deposit their rent with them.

  2. Cases before the courts
     

    As a new owner, it is in your interest to inquire about court cases to which the former owner is a party.

    Continuance of suit and intervention are two proceedings that may be of interest if you wish to take over any active applications.

Managing a lease

A written or verbal lease?

A written lease is much more beneficial for all parties, because its clauses are proof of their existence for both lessor and lessee. This means they are less likely to be contested than a verbal (oral) lease. Even in the case of a verbal lease, however, a lessor is required by law to give the lessee a document in writing.

Within 10 days of entering into the lease, the lessor is required to give the lessee a copy of the lease. In the case of a verbal lease, the lessor is required to give the lessee a document in writing that states the lessor’s name and address, the lessee’s name, the rent and the address of the rented dwelling, as well as containing the particulars stipulated under government regulation.

This document forms part of the lease. The lease or the document in writing must be created using the form prescribed by government regulation.

Furthermore, if the lease is renewed and the parties agree to make modifications to it, the lessor must give the lessee a document in writing setting forth the modifications to the initial lease. This document must be provided before the renewal takes effect.

However, the lessee may not apply for the lease to be terminated if the lessor fails to comply with these requirements.

Entering into a lease: main points

Even if you plan to purchase a residential rental property in which all of the dwellings are currently rented, sooner or later you will have to enter into a lease with a new lessee.

The main points of this process are outlined in the section Signing a lease.

Rules concerning access to the dwelling and visiting rights

Once you’re a lessor, you have the right to verify the condition of your dwellings or to carry out work there. You must exercise this right with judgment. You are required to give the lessee 24 hours’ notice. This notice may be verbal, except for major work, for which the notice must be in writing and contain certain information.

However, if repair work is urgent and necessary (for example, a major plumbing leak or sparks in the electrical panel), you may have that work done immediately without having to notify the lessee.

Except in cases of emergency, visits must take place between 9 a.m. and 9 p.m. Repairs must be done between 7 a.m. and 7 p.m.

If one of your lessees chooses not to renew their lease, you will be able to visit the dwelling. In that case, the lessee is required to allow visits between 9 a.m. and 9 p.m. No notice is required, but you should still inform them in advance of every visit.

The lessor must act in a reasonable fashion and respect the lessee’s privacy and free enjoyment of the dwelling and the inviolability of the lessee’s home. It is best if the lessor and lessee can come to an agreement on the conditions for visiting the dwelling.

Note, however, that the lessee may demand that you or your representative accompany any potential lessee who visits the dwelling. Otherwise, the lessee has the right to refuse you access.

For more information, refer to the Access to the dwelling and visiting rights section.

1. The term “lessor,” found in the Civil Code of Québec, refers generally to the owner of a property.

2. This compensation is payable on the date the lessee vacates the premises. If it proves insufficient, the lessee may be reimbursed for any other reasonable expenses incurred.

3. There are some exceptions to this rule for properties whose titles of ownership were registered before 1988. Contact the Tribunal administratif du logement for more information.