Above-guideline rent increase (AGI)가이드라인 초과 인상 (AGI)

What is it?

In Ontario, most tenants’ rent can go up once a year, and only by the rent increase guideline the government sets. The guideline for 2027 is 1.9%.

An above-guideline increase (AGI) is when a landlord applies to the Landlord and Tenant Board (LTB) and gets an order allowing a bigger increase. The application is Form L5.

The key point: the landlord cannot decide this alone. Until the LTB makes an order, the tenant does not have to pay more than the guideline amount (Residential Tenancies Act, section 126 (5)).

The three reasons a landlord can apply

• An "extraordinary" increase in municipal taxes and charges. This includes property taxes (and education taxes). Penalties, late fees and interest do not count.
• Eligible capital expenditures: major or significant repairs, replacements or additions whose benefit lasts at least five years. Examples are work to protect the building’s structure, plumbing, heating, electrical, ventilation or air conditioning systems, access for people with disabilities, energy or water savings, and security (section 126 (7)).
• Security services: the operating cost of security provided by people who are not the landlord’s employees. The service must still exist at the time of the hearing.
• Nothing else qualifies. Ordinary work, regular maintenance, mostly cosmetic work and work to make a building more luxurious are not capital expenditures.

How much higher can the rent go?

Example: if the first increase takes effect in 2027, the 2027 guideline of 1.9% is used. 1.9% + 0.95% = 2.85%, so taxes must rise by more than 2.85% to be "extraordinary" (O. Reg. 516/06, section 28). The LTB does the exact calculation from the application.

From application to order

1. As usual, the landlord gives a written notice of rent increase (Form N1) at least 90 days before the increase. To collect more than the guideline, the higher amount must be on the notice.
2. The landlord files Form L5 with the LTB at least 90 days before the first increase date (section 126 (3)). They must include their costs and proof they paid them (for example, contractor invoices and cancelled cheques). The fee is $233 for the first 10 units plus $10 for each additional unit, up to $1,000.
3. The LTB schedules a hearing and usually orders the landlord to give the tenants a copy of the application and the Notice of Hearing. Hearings can be by video or phone, in person, or in writing. Written hearings are most commonly used for AGI applications.
4. Tenants can look at the documents the landlord filed and send their own evidence and arguments by the deadline. Tenants can choose a spokesperson, or hire a lawyer or paralegal.
5. The LTB sends a written order to the landlord and every affected tenant. It sets the percentage allowed and when the rent can go up.

An example

This is an estimate for reference only. In one year the increase cannot be more than the guideline plus 3% of the previous lawful rent (Residential Tenancies Act, section 126 (11); O. Reg. 516/06, section 33). The actual amount follows the percentage and dates in the LTB order.

What tenants should know

• Before the order, you only have to pay up to the guideline. But if you pay only the guideline amount, you may owe the landlord the difference once the order is issued (LTB Form N1 instructions). You may choose to pay the higher amount on the notice; if you do, the landlord must pay back anything above what the order allows (section 126 (6)).
• If the building has serious maintenance problems, send evidence to the LTB. The LTB can dismiss the application for that unit, or stop the increase until the work is done (section 126 (13)). There are also special rules if ordered elevator repairs were not finished.
• You can also file your own Form T6 (tenant application about maintenance) and have it heard separately.
• What the LTB does not consider: the landlord’s or tenants’ finances or ability to pay, income tax rules, and the yearly guideline itself.
• Check that the work really happened. For example, if the landlord says the parking garage was renovated, compare the documents with what you see.

Watch out for

• New tenants: an increase in the order cannot be charged to a new tenant who moved in after the landlord’s filing deadline (90 days before the first increase) (section 126 (14)).
• When the work is paid off: the part of the rent increase for capital expenditures must come off again on the date set in the order, for tenants who still live there (section 129).
• Units exempt from rent control: units such as those in buildings first lived in after November 15, 2018 are not covered by the guideline, so the AGI rules (section 126) do not apply to them either (section 6.1). There is no percentage cap for those units.
• A written agreement (Form N10) is different. In exchange for major repairs or a new service, a tenant can agree in writing to up to the guideline plus 3%, with no LTB application. The tenant can cancel within five days of signing.
• If an increase had the wrong notice, date or amount, you can challenge it at the LTB within 12 months after it was first charged. After that it may be treated as lawful (section 136).

For landlords and investors

Landlords often apply for an AGI after big work that affects the whole building (for example, a roof, boiler or elevator). The work must be finished within an 18-month period that ends 90 days before the first increase date, and fully paid before filing (except required construction lien holdbacks).

Replacing something that did not need replacing usually does not count. A replacement can still count if it improves access for people with disabilities, saves energy or water, or improves security (section 126 (8)).

If you buy a tenanted building, check for a pending L5 application, past AGI orders, and any tenant T6 applications. They change the rental income. Talk to your lawyer and to me before you buy.