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The 165 Ontario Story

How Ontario Canada's Landlords Are
Abusing Above Guideline Increases

Last update: 2024-05-22

On the surface, The 165, as it's called, is a more or less ordinary apartment building.

But, with frequent changes in ownership it has become a glairing example showing how landlords all across Ontario are abusing Above Guideline Increases (AGIs) to jack up rents for existing tenants and present an artificially high profit to investors.

As each of four new landlords has taken control of the building, they launched immediately into a top to bottom renovation and make-over of the whole building, followed by AGI applications. It mattered not that each had purchased a freshly renovated building, they went right ahead and did the work anyway.

Since 2007, tenants of this building have been put through near continuous intrusions from workmen, jackhammers, power tools, loud noise, high dust levels, repeated water shutdowns and more as they are repeatedly inconvenienced by the latest round of work being done.

The game is exposed by repetition and, once understood, shows itself as a major component in Ontario's current rental housing crisis.

About AGIs

An Above Guideline Increase (AGI) is a lawsuit in which a landlord is suing his tenants for more rent. If successful they can increase rents by up to 9% over and above the provincially allowed rent increases. This is taken as up to 3% per year for the first 3 years and can last for up to 25 years.

This is not a given. AGIs require approval from the Landlord Tenant Board in a Tribunal hearing. The landlord must justify each of his claims to the satisfaction of an Adjudicator, to succeed.

As we will see, below, this is a deeply flawed process.

Building history

The "165 Ontario Street" address first appeared in St. Catharines Ontario's municipal registries in 1965. Originally named "Lucerne Apartments" this building is home to about 300 people in 157 units.

When first built, this was a moderately luxurious building with larger than average apartments. The building's skin was ivory coloured glazed brick. The lobby was furnished with couches and a waterfall aquarium that was home to half a dozen huge goldfish. There was music in the elevators and a small office where you could connect with the superintendent and maintenance man who both lived in the building.

When I moved in, on July 2 1984, The 165 was home to a surprising number of long term residents, a couple of whom were the first renters of their units. Others had already been here for 10 and 15 years. There was a sense of community in the building as we all got to know one another and exchanged greetings in the halls. It wasn't uncommon for groups of us to congregate on the front steps during nice weather and have some truly fun conversations.

For reasons unknown the building was allowed to deteriorate somewhat and was in a medium-ish state of disrepair. The hallways were clean but the carpets, doors and walls were showing signs of wear. The apartments themselves were in a general state of good repair. Everything worked well enough but the walls needed a good coat of paint and my apartment needed floor refinishing.

In the late-1990s, by municipal orders, the building was placed under control of a management company who were commissioned to restore the building. These extensive "top down" Renovations took almost 2 years to complete. The result was a very nice 1960s-chique building that was almost empty as people moved out to escape the noise and disruptions.

Once fully renovated, the building was turned over to a second management company who took on the task of re-renting a nearly empty building. After causing considerable chaos with a revolving door of rentals and evictions (both of which they got commissions for) the management contract finally expired and control reverted to the original owners, A&L Investments.

Most buildings get this kind of major renovation once in their lifetimes. The original decor stood for 35 years without major issues. There seemed little reason to think the renovations completed in 2000 would be any less durable, so life went back to normal.

This, however, was not to last.

The onslaught

Picture this: You are finally getting a well deserved night of catch-up sleep and suddenly, at the crack of dawn, you are jolted wide awake by the deafening rattle of a jackhammer, right on your balcony and half a dozen workmen are clustered just inches outside your window.

When it's not the jackhammers and grinders on your balconies, it's workmen swarming the building with some other annoying power tool or a sledge hammer, making noise, blocking the hallways, raising huge clouds of dust and fumes; generally overwhelming your life.

Definitely not fun.

Now imagine it's been like this for 15 years. The work goes on almost every working day and sometimes on weekends, with things being done and then redone as the building repeatedly passes from one landlord to the next.

Renovation fever

This all started in 2007 when the original owners sold the building to Transglobe Property Management, who immediately launched into a round of extensive Renovations that ran from 2008 to 2010.

Then in 2011 TransGlobe failed in the aftermath of an expose from CBC Marketplace, was privatised and reformed as Starlight Investments who took control of the building in early 2012. They too immediately launched into a round of more extensive Renovations as soon as they took possession of the property.

By mid 2013 the building had been completely transformed both inside and out. The outer skin was now painted two-tone brown, the balconies were replaced with tinted glass, the lobby and hallways had been redone repeatedly and the interiors of almost all of the apartments had been completely redesigned at least once.

But that wasn't the end of it. In 2016 the building passed to NorthView REIT, who did yet another round of Renovations beginning as soon as they took over the building.

Finally in 2020, Starlight bought out NorthView, regained control of the building for a short while and then sold it to CLV InterRent who took possession in 2021. Now these guys are ambitious. We've now had more than 2 years of the most intense Renovations yet.

Yes, four landlords in a row acquired a recently renovated building and immediately launched into major, mostly duplicate, renovations.

One has to wonder why a new landlord would come in here like a drunken bull in a china shop, changing everything in sight with no consideration for work already done or the tenants living here. Surely they must have noticed they had just purchased a freshly renovated building they could have rented out for years before any extensive work was needed.

AGI playbooks

AGIs were originally designed to help landlords who didn't have the financial resources to cover extraordinary expenses. When working in cooperation with tenants, they serve this purpose very nicely. The landlord upgrades the property and tenants get increased value from their homes, sometimes justifying a small rent increase.

But, that is not how they are being used.

Today's landlords come out swinging. When they acquire a new property they immediately launch into mass renovations, making large capital investments in the building. If you scan down the Full List of renovations done on this building you will see that an astonishing amount of work has been done in a relatively short time. The game is exposed by the repetition of nearly the Same Renovations as each new landlord took his turn.

That they had just purchased a building, freshly renovated by their predecessor, does not matter to them. They don't care about the building's history or condition. They're going to do this work anyway.

It would be quite the mistake to think this is some kind of gift from a generous new landlord.

What we are seeing is an "AGI Playbook", a list of renovations to be performed, followed by AGI applications. These playbooks are written into a landlord's business plan solely as a means to motivate investors. It is used to give a much larger impression of profitability... at the tenant's expense.

Follow the money

Not so long ago, an apartment building was a long term investment, using rental cash flow to pay the bills until it acquired enough value to sell for a nice profit. The payoff was in the building, not the rent.

That all changed in 1993 when Landlords were allowed to trade on the stock market as Real Estate Investment Trusts (REITs). They are now almost totally investor driven. The time scale for return on investments has gone from years to days. Now it is their investors they try to please with constantly increasing dividends and rising share prices. Now the payoff is in the rent.

There's a new hog at the trough. Where rent money originally flowed from tenant to landlord, now it dominantly flows from tenant to shareholder.

Bypassing rent controls

The province of Ontario has a system of Rent Controls that limit how much a landlord can legally increase rent from year to year.

This puts corporate landlords up against a hard limit. Once all their apartments are rented, their income plateaus, increasing only once a year by the amounts allowed by rent controls. They now need to find ways to increase property value and cash flow or they risk an investor sell off that could bankrupt them.

Many landlords have now taken to aggressively bypassing Ontario's rent controls as a means to increase both rental income and portfolio values on their properties.

Fortunately for landlords -but not for their tenants- Ontario's rent controls are rather leaky.

Renovations, being capital investments, are a prime tool. Many landlords -especially REITs- have actually flipped from filing AGIs because they did renovations to doing renovations so they can file AGIs.

There is no denying the effectiveness of this strategy. Using AGIs this building's multiple landlords have managed to Drive Up Rents for long term tenants in this building by nearly double the provincially allowed rates.

Then, as tenants flee the disruption of mass renovations, landlords use easy rent increases on vacant apartments and, eventually, the ability to file AGIs on still occupied units to jack up rents. Finally, they will put on a rental push near the end of renovations to bring in as many new "market value" tenants as they can and catch them up in the resulting AGIs. All done in the name of showing ever increasing portfolio values to their investors.

The AGI's secret value

Beyond simply applying for a rent increase, AGIs have a second use. Each capital expense item claimed on an AGI application also carries a Lifetime And Value that is visible on both the application and final order. Once approved by the Landlord Tenant Board, these can be used by a landlord to present an artificially high state of worth.

If we take the example of a $1,000,000 landlord who does a $200,000 renovation with a 10 year lifetime. (for easy numbers)

This is spending money to make money. It increases share values and drives investor interest by providing the appearance of "continual growth".

False claims

Above guideline increases are not automatic. A landlord does not get to increase rents solely because he spent some money. Each claim on an AGI has to be justified according to Inclusions and Exclusions set out in the Residential Tenancies Act and it's regulations. So, we need to ask how much of the renovation work was actually necessary, restorative work that would qualify for a rent increase.

For example:
What are the odds that our balconies needed to be redone 4 times in 20 years when the originals stood for 35 years?

These pictures are typical of hundreds that were taken just a few days before CLV started redoing our balconies. Looking through them, I don't see balconies that were deteriorating or in need of repair. I see nice balconies, in good condition that people were using and enjoying. But, that didn't stop CLV from spending over a year "fixing" them.

(Click for full size image)

A similar examination of the work done on the elevator landings, lobby, apartment doors and in individual apartments will raise the same questions about need and reasons. But landlords are doing this work anyway.

By all indications very few of these AGI claims should be approved, yet virtually all of them are.

The evidence problem

The obvious question at this point is: "If these AGI claims are not credible, how are landlords getting them approved?"

That part is simple: They lie.

In the process of planning a project and preparing for the planned AGI a landlord has every opportunity to build a believable reason the work has to be done that will succeed if it is not challenged.

However; there are serious flaws in the way these AGI applications for capital expenditures are processed that prevent tenants from composing a case in rebuttal.

The biggest problem is that a landlord is under no obligation to inform his tenants that work being done will be part of an AGI application. So tenants don't tend to get involved until much later in the process, usually when the AGI applications arrive. (Which is way too late!)

In fact, a landlord is not even required to inform tenants of any capital work that does not affect their "reasonable enjoyment" in their homes, making it possible to claim items tenants know nothing about.

This effectively prevents tenants from documenting the unaltered workspace, gathering evidence or building a case in rebuttal.

A Tribunal hearing will always come down to a contest between landlord and tenant evidence, hinging on the Residential Tenancies Act's Inclusions And Exclusions. If the tenants can offer no rebuttal, this creates a powerful bias favouring the landlord who almost always wins.

Researching this imbalance on the Canadian Legal Information Institute (CanLII) database very quickly shows that virtually all reported AGI tribunals were heard without challenge and rent increases were almost always granted. Phrases such as "The tenants lead no evidence" are common as are the tenants' desperate appeals to reason. It should also be noted that only a small portion of these cases are actually reported and the ones resolved by consent orders and mediation are not reported at all. If all AGI cases were reported, it is likely this picture would be much darker.

It is impossible to see this as anything but a deeply flawed process that openly invites abuse.

CLV's playbook

Our current landlord's playbook is exposed in their Quarterly Report to their investors, at the time they acquired control over this building. On page 11 they talk about their "Repositioning" strategy of upgrading nearly everything to a more prestigious standard. Then on page 12 they talk about delivering high end amenities that are nice but not necessary. This is renovation work that is being done whether it is structurally necessary or not and they have been Very Busy at it.

On September 18, 2023, tenants received their first Notice Of Rent Increase due to the AGIs CLV has filed. The increase is for 5.5%, 3% over the provincial guideline and took effect on January 1 of 2024. It is likely there will be more of these, depending on how many AGIs have been filed and the claims being made.

Effectively, they are selling luxury to their investors... at their tenant's expense.

Province wide

The abuse of AGIs is much bigger than most people think it is. There is considerable evidence that use of AGI Playbooks is provincial in scale and involves literally thousands of buildings.

I first got into this issue in 2014, after a disastrous hearing in SOL-40297-13. It went so badly off the rails that I filed a review request and got an order for a de novo (new) hearing. When investigating Starlight (our landlord at that time) for the tenant's defence I initially discovered another 18 Buildings that were painted like The 165 and had identical tinted glass balconies. On deeper investigation, using Google Street View, I uncovered a total of 100 Buildings from their portfolio, all done the same way within a two year period. It is simply not rational to believe that such a large cluster of buildings, of varying age, size and structure, scattered all over the province would all need identical renovations in such a short period of time. Something else was going on, behind the scenes. This was a Corporate Branding scheme.

Mine is not the only evidence of this activity. A February 2021 Report from Renovictions-To shows us, in stunning detail, just how bad and how widespread this disgraceful practice has become. A recent CBC News Story carries a list of over 2,600 Ontario buildings affected by AGIs. A Second Article details 275 buildings in the city of Hamilton, alone.

There has been a steady increase in AGI applications. Since the 2006 enactment of the Residential Tenancies Act (RTA) and a 2007 shift in Tax Exemptions from the Harper government, this once obscure process is being used more and more. The Landlord and Tenant Board's annual report for 2005-2006 reported 209 L5 (AGI) applications. This has risen to 613 in their 2021-2022 report, which also notes an all time high of 758 in 2019; an overall increase of 300%.

Socially harmful

Coupled with the current shortage of rentable units in the province, this massive loophole has become a prime tool for landlords to increase both rents and property values, giving investors a stronger incentive and providing higher returns for shareholders; all at the tenant's expense. In this building alone, landlords have used AGIs to Force Tenants to pay for over $2,700,000 in renovations, most of which are of dubious merit.

After more than a decade of abusing AGIs it is likely landlords are collecting literally millions of dollars in undeserved rent increases, province wide, every month. Many now display a strong sense of entitlement. Not only do they think they are allowed to do an end run around rent controls, they seem to think tenants automatically owe them the extra money. AGIs have become the goose that lays golden eggs and it's very unlikely landlords will give that up any time soon.

The most vulnerable -those on pensions and social assistance- are the most severely impacted. Many find themselves involuntarily living in construction zones, enduring months or years of disruption only to be sued for the cost, at the end. Many are at their budgetary limits and some are even ending up homeless because of it. The load on social services such as food banks and clothing charities is increasing. Local economies suffer as people have less to spend and local businesses are feeling the strain.

There can be little doubt the current abuses of the AGI process by Ontario's landlords are socially harmful.

The fix

The principles of Natural Justice upon which the Ontario Tribunals are based require that for a fair hearing both parties must be equally able to provide testimony and evidence before a neutral adjudicator. It is clear that the current process for capital work in AGIs does not meet this requirement. In most cases the tenants are blocked from providing credible evidence and testimony in counter. This, as explained above, is a result of bringing the tenants into the process long after any evidence they might use in a hearing has been destroyed by the work performed.

Fortunately the fix is quite easy.

Simply modify paragraph 126(4) of the Residential Tenancies Act to require a landlord to announce their intention to file an application for an Above Guideline Increase:

Information For Tenants
  1. (4) If A landlord intends to make an application under this section that includes a claim for capital expenditures, the landlord shall post notice to the tenants 60 days before work commences describing the nature of the work to be carried out and the intention to make an application.

    (4.1) When an application is made under this section that includes a claim for capital expenditures, the landlord shall make information that accompanies the application under subsection 185 (1) available to the tenants of the residential complex in accordance with the prescribed rules.

Since the landlord is already obliged to post notice under Ontario Regulation 516/06 part 8, in order to avoid rent abatements, this adds only the small additional burden of announcing their intention to file for an AGI. But for tenants it provides a window of opportunity for them to examine the worksite and gather evidence and information about it's condition. This in turn allows them to participate fully, with evidence and testimony, in the resulting hearings.

The benefit of this is two fold:

First: it restores fairness, allowing equal participation by both parties in a tribunal hearing
and
Second: tenants will be able to expose false claims, preventing abuses by landlords.
Sometimes the simplest changes make all the difference.
Lets keep everyone honest: Make the process fair!