Rent increase? Changes to the lease?

A residential lease automatically renews, and neither the lessor nor the lessee needs to send each other a notice for this to happen.

Renewal of a lease stems from the lessee’s right to maintain occupancy¹. That right is recognized by the Civil Code of Québec and has significantly influenced the current system for fixing of rent. The lessee cannot waive it in advance (for example, with a clause in the lease).

At the renewal of a lease, the lessor may raise the rent or change other conditions of the lease (for example, heating or parking). In doing so, the lessor must comply with the law.

However, the right to maintain occupancy means that the lessee can refuse these changes and continue to live in the dwelling. If this happens, the lessor can ask the Tribunal administratif du logement to rule on the proposed changes.

How does the Tribunal determine the rent?

The legal basis for fixing of rent can be found in the Civil Code of Québec, which stipulates that the Tribunal determines the rent payable, taking into account the standards set by the Regulation respecting the criteria for the fixing of rent.

Except in the case of preferential rent², the Tribunal adjusts the rent based on the applicable income and expenses for the property during the relevant period (the calendar year preceding the lease). If applicable, it can also take into account the quality of services or the use of an accessory or dependency of the property or dwelling.

Under the Regulation, the expenses considered for fixing the rent are:

Operating expenses

Operating expenses are those that the lessor must assume on a regular basis, each year, to manage the building and maintain it in good condition. They include:

• Municipal and school taxes
• Insurance premiums
• Costs of electricity, gas or heating oil (or other fuel source)
• Maintenance costs
• Costs of services
• Management costs

For taxes and insurance premiums, the Tribunal uses the variation in the actual cost over the last two years.

Other expenses are adjusted according to the adjustment percentages established annually under the Regulation respecting the criteria for the fixing of rent. These percentages are applied to the total expenses incurred in the year that precedes the end of the lease.

Management costs are set at 5% of the gross annual revenue of the property, but the actual costs may be considered up to a maximum of 10% of that revenue.

For mobile home parks, there is an adjustment item for snow removal, according to the actual year to year variation in costs.

The rent determination method also includes an adjustment for the property’s net income. This is the difference between the property’s gross income and its operating expenses. The resulting amount is adjusted according to a percentage that is set annually by the Regulation.

Major repairs or improvements

Major repairs and improvements entail costs that are not part of the property’s usual operating expenses. This could involve work to repair or alter the main structural elements of the building (such as the roof, plumbing, heating system, insulation or windows), renovations (such as woodworking or cabinets) in dwellings or common areas, or the addition of new facilities (such as a parking lot or swimming pool).

These expenses are adjusted according to percentages established annually under the Regulation, which are different than the percentages that apply to maintenance expenses.

The only lessees whose rent may be raised as a result of major work are lessees who benefit from that expense. A lessee should not have a rent increase for major repairs done to a neighbour’s dwelling.

For maintenance expenses, however, there is no distinction made between work done in one dwelling versus another. All lessees share any resulting rent increase, regardless of where an expense was incurred.

The hearing before the Tribunal administratif du logement

Upon filing an application to have rent fixed, a lessor receives a form entitled  Necessary information regarding the fixing of rent, often called the “RN form.” The lessor must fill out this form, declaring the income and expenses they wish to have admitted as evidence, and file it with the Tribunal within 90 days.

Within the same time frame, the lessor must notify the lessee of this application, including a copy of the completed form, and file proof of that notification with the Tribunal. Otherwise, the Tribunal will close the case.

The Tribunal administratif du logement will then determine the date, time and location of the hearing for the parties.

The lessor and lessee will receive a notice of the hearing (summons to the hearing) before it takes place.

At the hearing, the lessor must present bills or other documents, called supporting documents, as evidence. These must be the originals, and might include insurance bills, municipal and school tax notices, heating and/or energy bills and any other expenses that the lessor invokes in support of their application.

The Tribunal’s decision and its consequences

The Tribunal renders its decision in writing and sends it to the parties. The new rent and any arrears due since the start of the renewed lease’s term must be paid within one month after the date of the decision.

EXAMPLE: A lessee pays $800 in rent. Their lease was renewed on July 1, but since the lessor has asked for the Tribunal to fix the rent, the lessee is still paying the same rent pending the Tribunal’s decision.

On September 8, the Tribunal renders its decision and fixes the rent at $820.

On October 9, if the decision is not contested, the lessee must pay the lessor the arrears for July, August, September and October, totalling $80 (4 x $20). As of November 1, the lessee must pay the new rent as fixed by the Tribunal ($820 per month).

Contesting the decision

Either party may ask the Tribunal administratif du logement to review a decision regarding an application to fix the rent. They must be able to show that an error was committed and must file this application for review within one month after the date of the decision.

Step one: Notifying the lessee

In order to change a lease, a lessor must first of all give the lessee a written notice³ to inform them of the proposed modifications. This notice must be given within a certain time frame, depending on the type and length of lease. See the table of notice periods below.

Proof the notice was received

The Tribunal recommends that notice be delivered:

• By registered mail
• By hand with an acknowledgement of receipt
• By any other method that allows for a valid proof of receipt to be obtained

What information needs to be in the notice?

The notice must be in writing and must clearly state the modifications proposed upon renewal of the lease, whether they involve the rent or other conditions of the lease. For example, changes might affect the length of the lease or end a lessee’s right to use the yard or parking area.

The notice must also state the deadline for the lessee to refuse the proposed modification(s), which is one month after the date they received the notice.

The notice must be signed and dated by the lessor (or their mandated representative).

Download the PDF: Notice of rent increase and modification of another condition of the lease

Rent increases

By law, a lessor has three options for describing a rent increase:

1. The proposed (new) rent, in dollars
   Example: “Your new rent will be $825 per month.”
2. The increase, in dollars
   Example: “Your rent will be increased by $25 per month.”
3. A percentage of the current rent
   Example: “Your rent will be increased by 5%.”

If the Tribunal is already processing an application to fix or review the rent and the new rent is still unknown, the lessor can indicate the percentage of increase they plan to add to the rent that the Tribunal will determine.

Example: “Your rent will be increased by 5% of the rent to be determined by the Tribunal.”

A “notice” with no modifications

As we have seen, the law does not require notification to renew a lease, unless modifications are proposed. Therefore, a letter that merely asks the lessee if they want to “stay for another year or not” does not constitute a notice of modifications in the legal sense. The lessee is not required to respond to such a letter.

A notice for each lessee

If a lease has been signed by multiple lessees, it is advisable for the lessor to send the notice of modifications to the lease to each lessee individually.

Step two: The lessee’s reply

Can the lessee refuse the modifications?

A lessee has three options for how to reply:

1. Accept the renewal of the lease with the modifications.
2. Decline to renew their lease and vacate the dwelling at the end of the lease.
3. Refuse the proposed modifications and renew my lease.

If the lessee refuses the proposed increase or any other change, this does not mean that they are required to vacate the dwelling. They must clearly express an intent to leave. Otherwise, the lease will be renewed despite the refusal; the only point in dispute is the increase in rent and/or the other change(s) proposed for the next term of the lease. The lessee cannot turn back the clock and avoid the renewal of the lease, unless they make an agreement with the lessor to that effect.

However, there are exceptions (section F of the lease) when the dwelling is located:

• in an immovable that was built five years ago or less or in an immovable whose use for residential purposes results from a change of destination that was made five years ago or less;
• in a housing cooperative of which the lessee is a member.

In the event of a refusal, the lessee must vacate the dwelling upon termination of the lease. However, for those restrictions to apply, they must be mentioned in the lease of the dwelling (section F of the lease – Restrictions on the right to have the rent fixed and the lease modified).

If the lease was entered into on or after February 21, 2024, and the immovable was ready for its intended use as of that date, the lessor must also, in order to invoke the restriction on the right to have the rent fixed against the lessee, indicate in the lease the maximum rent that he may impose in the 5 years after the date on which the immovable was ready for its intended use.

Does the lessee need to reply to the notice?

The lessee must reply if they are refusing the proposed modification or rent increase, or if they wish to leave the dwelling at the end of the lease.

When should the lessee reply?

In both those cases, the lessee must reply to the lessor within one month after the date they received the notice.

Example: A lessee who receives a notice of modifications to the lease on January 15 has until February 15 to reply.

After this date, the lease will be renewed under the new conditions and new rent.

What if the lessee does not reply?

Not replying to a notice of modifications to the lease within one month is equivalent to renewing the lease with all the modifications proposed by the lessor, including any rent increase.

What if the lessor doesn’t give a notice?

When a lessee wants to leave the dwelling at the end of their lease and does not receive notice of any modifications or rent increases within the stipulated notice period, the lessee must notify the lessor of their intent within the notice periods indicated in the “Table of notice periods” (above).

Useful information

The Tribunal administratif du logement supports lessors and lessees in their efforts to agree on reasonable and freely negotiated rent increases.

To help the parties negotiate, the Tribunal recommends the use of its online calculation tool (in French only) to facilitate agreement on a rent increase.

This form is a very useful tool for calculating the increase that the Tribunal is likely to authorize. If a lessee has refused an increase, the lessor can present them with the form and its calculations and try to negotiate a reasonable increase based on that objective data.

The lessor just enters the information directly into the boxes on the page, and the site will automatically do the calculations. The lessor can print out the page and have everything they need for a frank conversation with the lessee.

For leases running July 1 to June 30

Some people think that a lessee can always wait until the end of March to reply to the lessor. Wrong! A reply to a notice of changes must always be sent to the lessor within one month after the notice was received.

The form is also available at your local Tribunal administratif du logement office and can be mailed upon request.

Step three: The application to fix the rent

An application to modify the lease, commonly called an “application to fix the rent,” is the lessor’s recourse if the lessee agrees to renew the lease but refuses a rent increase and/or other proposed modifications.

The lessor has one month after receiving the lessee’s reply to submit an application for the Tribunal administratif du logement to fix the rent or rule on the proposed modifications.

When deciding on the amount of the rent increase, the Tribunal applies the Regulation respecting the criteria for the fixing of rent.

At this stage, the lessor is no longer bound by the amount requested in the notice of rent increase and can ask the Tribunal for the increase provided for in the Regulation’s criteria. This means that the increase may be greater than the amount listed in the notice of rent increase.

However, the parties may continue to negotiate at any time, even during the hearing before the Tribunal, in order to arrive at an amicable settlement.

If the lessor does not file an application with the Tribunal administratif du logement within one month after receiving the lessee’s reply, the lease is renewed under the same conditions as before.