Project Management | Building Restoration | Structural Engineering | Roofing Surveys | Condition Assessments | Asbestos and Mould Surveys
McIntoshPerry.com CCI Group merges with McIntosh Perry Consulting Engineers Ltd. to form one of the largest privately held engineering firms in Canada. The new company, called McIntosh Perry, has more than 500 professional and technical staff in nine locations across the country, and provides a full range of services to the rental housing industry.
Editor’s notes Beginnings and endings Well, summer is over, although you wouldn’t know it where I live. The last weeks of summer / first weeks of fall were hotter than any other time of this past summer. It was ridiculously hot – not that I’m complaining, as I love the hot weather. The trees are just as confused as the rest of us, as we don’t seem to be getting the beautiful foliage of past autumn seasons – everything is going from green to brown. On a positive note, my daughter just started grade 2, and she’s complaining about how much harder the work is compared to last year. If only she knew how much harder school and life get… This issue of RHB Magazine features an article on Tom Schwartz, co-founder of CAPREIT, who passed away a few months ago. His influence was felt throughout the entire rental housing industry, and he will be missed. Rather than publishing a post-mortem profile of a successful business person, we asked people who worked with him or knew him personally to give their impressions of Tom, both as an industry leader and as a person. We also feature a new RENTT article with a very different subject – accounting. The panel members discuss the influence and importance of the accounting function in managing rental properties. There is a lot of great information that you won’t find anywhere else, so make sure to give it a read. We also provide a brief overview on EPIC Toronto, an exclusive and unique conference for members of the rental housing industry. The event features speakers from the City of Toronto Hi-RIS program, Toronto Hydro and Enbridge Gas Distribution, who will be discussing incentives that can help apartment building owners with financing energy-efficient upgrades. Don’t forget to check out “Spin Cycle” at the end of RHB Magazine. As usual, we enjoy hearing from our readers and support two-way communication. If you have any comments or questions, send them to firstname.lastname@example.org. I look forward to hearing from you.
Co-founder, Director Juan Malvestitti email@example.com
Co-founder, Publisher Marc Cote firstname.lastname@example.org
Editorial David Gargaro email@example.com
Contributing Editor John Dickie, President CFAA firstname.lastname@example.org
Design Wendy Tabor
Office Manager Geeta Lokhram
Subscriptions One year $37 Cdn Two years $59 Cdn Single copy sales $9 Cdn Opinions expressed in articles are those of the authors and do not necessarily reflect the views and opinions of the CFAA Board or management. CFAA and RHB Inc. Accept no liability for information contained herein. All rights reserved. Contents may not be reproduced without the written permission from the publisher. P.O. Box 6967, Maple, ON L6A 1S7 416-236-7473
Enjoy the issue! David Gargaro Senior Editor
4 | oct 2017
Produced in Canada All contents copyright © RHB Inc. Canadian Publications Mail Product Sales Agreement No. 42652516
rentalhousingbusiness.ca | 5
VOL.10 NO.4 2017
contents RENTT: Getting into the numbers
CFAA President’s Corner What does the National Housing Strategy have in store for the rental housing industry? Which landlords will be affected by the proposed corporate tax reforms?
The RENTT panel members discuss their experiencve on working with accountants, and how their business became stronger because of it.
Tom Schwartz: The passing of an icon Tom Schwartz’s colleagues provide their impressions and recollections of the man who had a significant impact on the rental housing industry.
Energy Programs & Incentives Conference 2017 If you own or manage a multi-unit residential building (MURB) in the Greater Toronto Area, or you’re an engineer or tradesperson who provides services to this market, then you need to experience the Energy Programs and Incentives Conference (EPIC) 2017.
The Regional Rental Association Voice WRAMA, LPMA, HDAA and EOLO all share current industry events and news, and offer some wisdom on the power of knowledge.
6 | o ct 2017
Spin Cycle Catch the final spin with RHB’s Newsreel, delivered weekly to your inbox.
presidentâ€™s corner CMHC and Government of Canada are to announce the new National Housing Strategy on or about November 22. Will the NHS be more of what we have seen for decades, or will it include transformative moves like a nation-wide portable housing benefit, more incentives for private rental construction, or new opportunities for public-private partnerships? Watch www.cfaa-fcapi.org for the new Strategy and CFAAâ€™s reaction to it. On September 13, I appeared before the House of Commons Standing Committee on Health to address marijuana legalization. While the committee recognizes that some tenants will be disturbed by tenants who are smoking or cultivating marijuana in their apartments, it is clear that any solutions to that problem are going to have to come from the provinces. For example, Quebec may prohibit home growing entirely. The Saskatchewan government has told the Saskatchewan Landlord Association that its current plan is to ban growing in multiple-dwelling buildings, and permit it in detached rented premises only with the consent of the landlord.
along with landlords who use corporations to sprinkle income on family members with lower incomes. CFAA has joined the Coalition for Small Business Tax Fairness, and made a submission in the governmentâ€™s consultation, opposing the changes and addressing landlord-specific issues. We are open to input from landlords who are affected. For more information, see page 35. CFAA Rental Housing Conference 2018 will address many issues facing the rental housing industry, including investment issues, new rules and regulations, employment law updates, new technology, issues in rental development, and much more. See page 41. Plan to attend CFAA RHC 2018 in Vancouver, in mid-May 2018, to learn about the most important issues for residential landlords of all sizes at that time. The CFAA-Accompass Rental Housing Employee Compensation and Benefits Survey is now available. To order or for more information, contact email@example.com.
Landlords and CFAA-member associations will be able to use those examples in their own provincial lobbying efforts. See page 38 for more information. Finance Minister Morneau has proposed significant federal corporate tax changes, which will affect some landlords. The changes will only apply to people who receive income as dividends from private corporations, or who hold real estate through corporations. There is to be no change for those who hold real estate in their own name or with their spouse. There will be minimal impacts on REITs and REIT unit holders. Investors who currently pay tax at the top personal rate on passive income should also not be affected. Landlords who earn active business income, and then invest in passive investments will be affected, 8 | oct 2017
Sandcastle Maintenance and Emergency Services HVAC Mechanical Repair Lighting Electrical Services Business disruptions can be expensive - we are only one call away.
What makes us unique?
Trusted Contractor for National Firms Quick Emergency Response Times National Coverage, 1 Point of Contact 24/7 Emergency Dispatch Emergency
Your Local Contractor. Nationally.
Servicing 1,000+ Properties in 185 Markets since 1999
Contact us: 1-877-453-0553 firstname.lastname@example.org
rentalhousingbusiness.ca | 9
IN THIS ISSUE...
Page 35: The proposed federal corporate tax changes will likely affect some corporate landlords. Other landlords will not be affected.
Page 38: Some tenants will be disturbed by others growing or smoking marijuana in their apartments, but the solutions will have to come from the provinces, with their control of landlord and tenant law.
Page 41: CFAA Rental Housing Conference 2018 will take place in Vancouver during the week of May 14. Learn more!
NATIONAL OUTLOOK – DIGITAL EDITION available at www.cfaa-fcapi.org
CFAA Member Associations Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792 Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960 Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435 Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 905-632-4435
10 | oct 2017
Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572
Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560
LandlordBC www.landlordbc.ca P: 1-604-733-9440 Vancouver Office P: 604.733.9440 Victoria Office P: 250-382-6324
Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224
London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999
The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 11 apartment associations and direct landlord memberships across Canada. CFAA is the sole national organization representing the interests of Canada’s $480 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101.
Saskatchewan Landlord Association Inc. (SKLA) www.skla.ca P: 306-653-7149 Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703
RENTAL E XECUTIVE NATIONAL THINK TANK
Getting into the numbers This issue brings together the RENTT (Rental Executives National Think Tank) panel to discuss issues related to accounting, such as the value that the accounting team provides to different parts of the business, getting the team involved in making key decisions, discussing assessment and property tax notices, in-house vs. outsourcing accounting services, advising rental property owners on getting the most benefit from their accounting team, and more. 14 | oct 2017
Jackson Orr Property Manager, Orr Development Corp.
Gloria Salomon CEO, Preston Group
Jeffrey Gould Senior Vice President, Regional Group
rentalhousingbusiness.ca | 15
RHB: Welcome to RHB Magazine’s RENTT panel. We appreciate the time and effort involved in participating in today’s discussion and sharing your knowledge. Our readers will benefit from your input and experience. Today we’d like to talk about how accounting is key to running your business. “What is the importance and value provided in including your accounting team in key decisions on your business and financing issues?” Jackson Orr: The input from the accounting team helps us to plan for the future of our company. For example, their assistance allows us to more accurately decide when to make new hires or delay a new development. Without input from our accountants, we may not fully maximize our refinancing capabilities, which could lead to some missed market opportunities. Their feedback also helps us decide when to be more conservative with taking on new business as cash flow may be an issue. Gloria Salomon: Accurately determining building value is very important in financing. The accounting team can help an outside lender see that the property is worth more than prior appraisals by analyzing costs and aiding with projections. Jeffrey Gould: I agree. The accounting team is an important aspect of making both business and financing decisions. RHB: What about their influence on the level and timing of capital expenditures? Jackson Orr: The long-term planning of capital expenditures would be extremely difficult without consultation from the accounting team. We need their expertise to decide which expenditures can wait and which large items need to be planned for now. Gloria Salomon: Being capital intensive, capital expenditures significantly impact our long-term profitability. Ensuring they’re completed at the ideal time and executed successfully (minimizing the duration of the project, using a trusted contractor) is vital. Cash flow projections always have to be balanced against expenses to determine if the expenditure is optimal for the property. 16 | oct 2017
Jeffrey Gould: The accounting team is an essential contributor to making key decisions on the level and timing of capital expenditures. RHB: How about when you decide on launching a new development? Jackson Orr: It would be irresponsible to plan a new development without thorough input from our accountants. We need to have the capability to absorb lost revenue if a building is demolished leading to tenants vacating. Our company must also consider and have significant excess revenue should building permits be delayed or construction costs increase, which are both common for new developments. There are significant soft costs absorbed well before and actual construction takes place. Gloria Salomon: Since the Canadian housing boom can’t last forever and interest rates will inevitably rise, IRR calculations and cost budgeting is very important in the decisionmaking process. A new development has to make monetary sense in the projections in order to ensure viability. Jeffrey Gould: I’d have to concur. Our accounting team is essential in making decisions on launching new developments. RHB: How much do you involve your accounting team in decisions about unit upgrades? Gloria Salomon: Whenever a unit turns over we conduct an NPV/IRR analysis to determine if the suite should be renovated and, if required, how much money to invest into the renovation in order to maximize our ROI. Upgrades will bring in a higher rent, but if you spend too much, and the market is unable to meet your projected rent, then you have over-upgraded. The accounting team has to be involved to ensure you are not over-maximizing your expenditures. Jackson Orr: Our accounting team would be consulted if the upgrade was generally more than $1000. Jeffrey Gould: We would engage our accounting team in general discussions on the issue, but they would not be involved in the decision-making process.
RHB: What about asking rents, or other revenue maximization efforts? Jackson Orr: Rents are typically based on a price per square foot for comparable product in the immediate area so we do not typically consult with our accountants when setting the rent as rents are market based. We do however often discuss how to increase revenues with our accounting team along with creating completely new sources of revenue. They are quite creative and have accurate information on expenditures and the associated cost increases. Gloria Salomon: The most important input for our NPV/IRR analysis is accurately predicting what market rent we can achieve. For each unit that turns over, we carefully analyze current market comparables and our historical lease rates. While analyzing market rents isn’t a technical accounting skill, synthesizing information and using decision-making skills are crucial competencies of the CPA mindset. Jeffrey Gould: That is not a topic that would require involving our accounting team. RHB: How about when having to use capital expenditures to raise legal rents (in provinces with rent control)? Jackson Orr: We have not historically used cap ex to raise legal rents. We would consider raising market rental rates (on new tenants) if we had recently spent a large amount on an expenditure. Jeffrey Gould: We would involved our accounting team in the process of determining whether to use capital expenditures to raise legal rents. RHB: To what extent do you and your accounting team analyze your assessment and property tax notices, as opposed to contracting out that work? How has that approach worked for you? Gloria Salomon: We are more comfortable contracting that work out to the legal specialists who have experience in negotiating with city representatives, and analyze the tax bills to a higher level than we can. Jackson Orr: We analyze all of our property tax assessments thoroughly. We have appealed many assessments over the years through third party companies with small levels of 18 | oct 2017
successful appeals. There is only a cost associated with an appeal if it is successful. Jeffrey Gould: We’ve contracted out these services to associates within the office. It’s been very successful to date. RHB: At what stage in the growth of your rental business did you change from using an in-house bookkeeper (and contracted accounting services and advice, if applicable) to relying on an accountant in house? How did that work out for you? “We have both in-house and outside accountants. When I first started working in the industry, we had only two properties we were directly managing, and as a C.A., I did all the bookkeeping and I prepared the year- end financials and had them reviewed by our outside firm. As we took on more buildings, and more staff, I concentrated more on day-to-day management, and we currently have in-house staff to do all bookkeeping (accounts receivables and payables, payroll, etc.) and we still prepare our year-end financials that are reviewed by our outside accountants. Our outside accountants also provide tax planning advice and do our year-end corporate filing for tax purposes.” – Gloria Salomon on changing to an in-house accountant Jackson Orr: Approximately 30 years ago we brought accounting in house. Before that we consulted with large accounting firms; the company would have been about 50 years old at that time. It has worked out well for us to be able to collaborate and discuss financing and expenditures with our in-house accountants on a timely basis. Jeffrey Gould: We’ve always had in-house accounting expertise, and it has worked out well to our satisfaction. We use outside accountants for year-end statement preparation, and when they’ve been appointed by clients. RHB: In general, what advice can you give rental property managers about getting the accounting systems and staffing right for their businesses? Jackson Orr: They are an integral part of the accurate management and effective costing
rentalhousingbusiness.ca | 19
Top Ten things you can do to
your building for
WINTER this year
1. Ensure your filters are clean and your furnace has been professionally serviced. 2. Ensure air diffusers / baseboard heaters are clean and unobstructed. 3. Clear extra space around your heating equipment in case of emergency. 4. Purchase and stock flash lights. 5. Seal all windows to prevent drafts 6. Flush your hot water tank to remove sediments 7. Add floor coverings (area rugs) 8. Turn off outdoor faucets 9. Insulate piping 10. Remove window air conditioners or cover with insulated liners These top ten tips are the courtesy of Sandcastle Energy Systems
20 20 || oct oct2017 2017
On accounting teams “...Our accounting team is essential in making decisions on launching new developments.” – Jeffery Gould “...It would be irresponsible to plan a new development without thorough input from our accountants.” – Jackson Orr
of a well-maintained portfolio. Not having the proper accounting systems in place may lead to capital expenditures being put off far too long, resulting in much larger repair bills and higher tenant turnover. All discussions concerning growth start with our accountants. Can we afford to hire new people now? Should we put off this capital expenditure in the short term? Can we bid on market land? Gloria Salomon: Of course, the best advice would be to purchase a good rental software program that can handle rent charges and all the legal notices you require. We are very comfortable with Yardi, which is very user friendly and is up to date with RTA requirements. Also, someone with bookkeeping skills is important to keep up with rent collections and bill payments. You do not want your suppliers to have to always ask for payment. If you consistently pay your bills on a timely basis, you will always get better service. Equally important, you do not want your receivables to become uncollectable by allowing balances to grow to the extent that you are spending time and money at the tribunal. Jeffrey Gould: I would always recommend using professionals when you need to set up your internal accounting systems and staffing. RHB: Are you an accountant by training? If so, how has that training and experience helped you as a property manager? Gloria Salomon: I am a C.A. and so is my son, who is now our CFO. I think that financial training is the best background for our business, as it is very 22 | oct 2017
important to be able to keep track of your expenses, and analyze your expenditures. Sometimes, you are presented with opportunities to reduce costs by upgrading your properties with energy-saving mechanical equipment such as boilers or water-saving toilets. You have to be able to look at the costs involved, determine if you have the cash to outlay, and the payback you would be expecting to make good financial decisions. Jackson Orr: I am not an accountant by training; my background is in management. Though I am not an accountant I feel it is very important for managers to have a basic understanding of accounting principles as well as knowledge of expenditures, A/R & A/P, taxes, bank financing, cash flow, etc. Jeffrey Gould: No, I do not have accounting training. I have found that many property managers have little or no accounting knowledge or experience. However, it is important to learn the concepts and understand property management accounting. RHB: Thank you for your time and input.
Tom Schwartz: The passing of an icon Earlier this year, RHB Magazine expressed its condolences for the passing of Thomas Schwartz, president and chief executive officer of Canadian Apartment Properties Real Estate Investment Trust (CAPREIT). He passed away on Tuesday, August 15, at the age of 68, following a battle with prostate cancer. After graduating as a Chartered Accountant in 1975, Tom went on to pursue a career in real estate development, which lasted for more than 40 years. In 1976, he co-founded Intraurban Projects, which developed new housing projects in mature communities. In 1996, Tom (and Michael Stein) founded CAPREIT, and he has served as CAPREIT’s president and CEO since 1998. Together, they built CAPREIT into Canada’s largest multi-family residential REIT, which has more than 50,000 rental units in Canada, Ireland and the Netherlands. “Tom Schwartz was instrumental in the growth of REITs in the Canadian apartment sector,” said John Dickie, President, Canadian Federation of Apartment Associations. “Tom pioneered the adoption of the REIT structure, which had begun to be used in the Office and Industrial sectors, especially in the U.S. In fact, since the apartment space was open, Tom named his REIT ‘Canadian Apartment Properties REIT,’ which was then shortened to CAPREIT. As the first REIT in the Canadian apartment sector, CAPREIT paved the way for the extensive residential REIT development that followed, and is still going on today.” Tom also co-founded the European Commercial Real Estate Investment Trust and served as its Chairman, and was Chair of the Fair Rental Policy Organization of Ontario (now the Federation of Rental-housing Providers of Ontario). He was involved on the boards of many industry and government groups, including the Greater Toronto Home Builders Association, the City of Toronto’s Housing Action rentalhousingbusiness.ca | 23
What have been Tom’s greatest contributions or influences on the rental housing industry? “Tom’s tireless energy in supporting a huge team that supports a huge community of residents that depend on CAPREIT 24/7 for their housing needs. This is such a significant contribution that will live on in the CAPREIT culture and fabric.” – Sam Kolias
committee, the Ontario New Home Warranty Program, the Federation of Rental-housing Providers of Ontario, the Real Property Association of Canada and Chartwell Seniors Housing REIT.
“Tom’s leadership in building an amazing team around an incredible vision. Tom’s contribution to our industry will be forever remembered.” – Sam Kolias, CEO, Boardwalk Rental Communities
RHB Magazine contacted a number of prominent people in Canada’s rental housing industry, who either knew or had dealings with Tom. The following are some of their thoughts and musings on Tom Schwartz.
“One of Tom’s visions was to transform the residential real estate business into one that was professional and based on good service. Tom ensured that CAPREIT led the way in making this happen.”– Mark Kenney, Chief Operating Officer, CAPREIT
What were the keys to making CAPREIT one of the largest and most successful REITs in Canada? “Tom realized early on the benefit of having strong support functions in place and that it would make the company successful. He focused deeply on the people side of the business as our employees are the ones on the ground making sure CAPREIT maintains our buildings to a high standard in keeping them safe, clean and secure. The buildings are important, and the focus on the employees who run those buildings even more so.” – Jodi Lieberman, Chief Human Resources Officer, CAPREIT 24 | oct 2017
“Tom was a visionary. He saw before many others the opportunity to attract institutional capital to a sector that was positioned for growth. Tom’s leadership in this area led to benefits for existing apartment owners, for residents, for investors, and he demonstrated the opportunity for many who chose to follow in his footsteps.” – Vince Brescia, President and CEO, Ontario Energy Association “Tom’s deal-making skills and big picture vision on acquisitions and dispositions were a key driver to CAPREIT’s growth and success, while maintaining a detailed oversight on the operations and not only
driving the top line revenues but having industry leading energy and expense savings measures. Also CAPREIT’s vision of regional offices and the investment in human capital and having great staff made them the success they are today.” – Daniel Drimmer, President and CEO, Starlight Investments How would you describe Tom as an individual and a business person? “Tom was a thoughtful individual who paid a tremendous amount of time considering how the business impacted others. Tom was always very decisive in his plan to grow the CAPREIT business. Most notably, Tom was kind and always took the time to say thank you.” – Mark Kenney “Tom was brilliant and always had a vision for the company and its next steps. At the same time, he was remarkably humble and down-to-earth. He respected his employees and could talk to anyone, at any level, and find common ground.” – Jodi Lieberman “Tom had a huge heart for those less fortunate and provided
housing for a diverse, inclusive population at affordable prices.” – Sam Kolias “Tom was the consummate professional and gentleman. His style and professionalism instilled confidence in those around him and in those who wanted to invest in the sector.” – Vince Brescia “Tom was very decisive, thoughtful and quick in his decision making. His greatest attribute was a deal is a deal and a handshake is a handshake, something I could always count on and which is a dying art in the business.” – Daniel Drimmer What have been Tom’s greatest contributions or influences on the rental housing industry? “Tom’s tireless energy in supporting a huge team that supports a huge community of residents that depend on CAPREIT 24/7 for their housing needs. This is such a significant contribution that will live on in the CAPREIT culture and fabric.”– Sam Kolias “Tom played a critical role in contributing to the health of the rental sector through his volunteer efforts at FRPO. I still recall Alan Greenberg, Mitchell Abrahams and myself taking Tom for lunch to talk to him about becoming Chair of FRPO at a critical time for the industry – when the government was contemplating changes to rent controls.
Although it was a particularly busy time for CAPREIT, Tom nonetheless agreed to take on the role. Having someone of Tom’s stature proved to be an important part of FRPO’s success in maintaining the positive reforms and investment climate achieved through the rent reforms of the late 1990s when changes were ultimately made in 2007.” – Vince Brescia “He was a very outspoken leader in the business community, doing a great job representing all apartment owners, well respected by all his staff and site staff at the buildings, and considered a gentlemen and a ‘go-to guy’ by his competitors and someone whom everyone always wanted around in a deal because Tom was the guy you wanted on your side and in the trenches next to you on tough deals.” – Daniel Drimmer What have you learned from Tom over your career? “Tom was an incredible mentor. He encouraged people to never settle for the status quo, but to push boundaries and take risks when you can live with the worst-case scenario. He also encouraged people to surround themselves with a strong, positive and trusted team.” – Jodi Lieberman “Tom’s philosophy was that the good guy can win in business. We are all better off treating people with
respect and doing what is right. Fortune will naturally follow in business.” – Mark Kenney “Relationships last forever as do our memories. Tom’s sincere care for others, mentorship and guidance to his peers, team, residents and all stakeholders will live on forever.” – Sam Kolias “I suppose there are many ways people have learned from Tom given the diversity of his strengths and capabilities. What I learned most from Tom is watching how he conducted himself in important situations. His combinations of statesmanship, calm, positive reinforcement and confidence proved effective in many challenging situations. It is something we should all try and emulate.” – Vince Brescia “Always being a gentlemen in every situation, always giving everyone an audience and the time of day, respecting, complimenting and progressing his own staff who all wanted to work for him, and the meaning of a handshake Tom was a real ‘mensch,’ a friend, a mentor and will be deeply missed and forever remembered by myself, not just for his amazing business accomplishments and his time and commitments to charities, but also, and especially for the genuine and sincere person and friend he was, always having fun along every step of the way!” – Daniel Drimmer
Final thoughts “Our industry has lost a pioneer and a giant. Your legacy is the path you gave us to follow. We thank you for everything you’ve done. You will be greatly missed.” – Marc Côté, Publisher, RHB Magazine
rentalhousingbusiness.ca | 25
26 | oct 2017
Energy Programs and Incentives Conference 2017 If you own or manage a multi-unit residential building (MURB) in the Greater Toronto Area, or youâ€™re an engineer or tradesperson who provides services to this market, then you need to experience the Energy Programs and Incentives Conference (EPIC) 2017. This exclusive conference is by invitation only, for pre-selected MURB owners, managers and qualified product/service providers. It takes place on November 6, 2017 at the Pearson Convention Centre in Brampton, Ontario, and coincides with the 3rd Annual Rental Marketing Awards (hosted by Amber MacArthur), which celebrates outstanding marketing achievements in the industry. EPIC Toronto is a unique event that will showcase active energy programs within the City of Toronto, in addition to rebates and incentives that can help building owners and managers, as well as engineers and tradespeople, with moving projects from concept to completion. What truly makes this event unique is that it brings together representatives from the Tower Renewal â€“ Hi-RIS Program, Toronto Hydro, Enbridge, engineers and service providers who will share their input, provide advice and answer questions on program eligibility, submission and approval. 28 | oct 2017
EPIC Toronto offers attendees an unprecedented opportunity to participate in a forum that brings together like-minded companies to discuss energy-saving initiatives. Experts will walk participants through what incentives are available, explain how they work and the savings involved, determine whether or not an energy audit is required, and provide direction on how to apply and qualify for incentives. They will also get access to tools that will help them to implement effective, actionable energy management strategies. By attending EPIC Toronto, youâ€™ll also get the opportunity to collaborate with energy program managers and industry professionals to identify
rentalhousingbusiness.ca | 29
#reflections, with its biopic format, provides us with an inside look into the lives and professional milestones of Canadaâ€™s leading real estate executives. Our upcoming episode features Shmuel Farhi of Farhi Holdings Corporation.
To watch the trailer, visit: www.perpetualmediagroup.ca/reflections
30 | oct 2017
Various benefits with Hi-RIS, PUMPSaver, Audit Funding and more • • • • • • •
Low-cost-fixed rate financing for up to 20 years Water conservation benefits Greater energy efficiency Large incentives to update to energy efficient equipment Replacements on some lighting equipment Work toward lower energy bills Reducing natural gas usage
new energy-saving opportunities and financial support initiatives. You can network with Toronto-based apartment owners and managers, evaluate innovative products and services, learn about best practices in environmental, sustainability and energy management, and more.
City of Toronto Hi-RIS Program Hi-RIS is a City of Toronto program that helps apartment building owners with implementing needed capital improvements that provide energy efficiency and water conservation benefits. The program provides low-cost, fixed rate financing for terms of up to 20 years. Buildings with three or more storeys located in Toronto are eligible and can receive up to 10 per cent of a building’s current assessment value (CVA) in financing. Hi-RIS uses the Province of Ontario’s local improvement charge (LIC) regulations to advance funding to property owners to cover the cost of improvements. The City of Toronto is the first Ontario municipality to offer the LIC financing program. The program is part of the City’s Tower Renewal Program, which provides free services to apartment building owners and residents. Tower Renewal works with utility partners, Toronto Hydro, Enbridge Gas, and the City’s Water and Solid Waste divisions to identify conservation measures and innovative savings opportunities for buildings. 32 | oct 2017
Toronto Hydro Toronto Hydro provides a number of incentives that can be applied toward retrofitting MURBs to offset the capital costs of equipment efficiency upgrades. The Retrofit program provides incentives that cover up to 50 per cent of the project’s cost, and are paid based on energy savings. Retrofit projects have a simple payback of one to five years. The PUMPSaver program provides building owners with free installation of a variable frequency drive on heating and/or cooling circulation pumps. The Audit Funding program covers up to 50 per cent of the cost of an energy audit. On the lighting side, Toronto Hydro offers up to $2000 in incentives per building that can be applied toward lighting upgrades. It also has a new program in development that will provide free in-suite lamp replacement and free smart power bars.
Enbridge Gas Distribution Enbridge has an affordable housing multi-residential program, which provides building owners with up to $100,000 in incentives to upgrade equipment and improve efficiency. Applicants can also get rebates for conducting an energy audit. Enbridge provides free energy efficiency upgrades to housing providers of social housing units (single-family homes and multi-residential buildings) throughout
its franchise area. These include professionally installed energy saving measures such as low flow showerheads and heat reflector panels, which are installed behind radiators and baseboard convectors to improve heating efficiency and resident comfort. This program is part of the company’s ongoing effort to help customers reduce the use of natural gas and lower energy bills.
Important details to remember •
November 6, 2017
Pearson Convention Centre in Brampton, ON
Hi-RIS Program offered by the City of Toronto
Toronto Hydro has several programs to help cut costs and add incentives to update your buildings.
The Retrofit Program covers up to 50% of the cost of retrofitting MURB projects
Use RHB’s special registration code to obtain a significant discount on the cost of admission
As the exclusive media partner to EPIC Toronto, RHB Magazine would like to offer its readers a special registration code, which significantly reduces the cost of admission. We feel that this event provides significant tangible value and an opportunity for owners/managers to put millions of dollars back into their properties. For more information on registration and the event, please visit www.mingorally.ca/epic2017/rhbguest.
rentalhousingbusiness.ca | 33
BOOST ENERGY SAVINGS
Optimizing your water systems can be a quick and easy win! Many buildings are fitted with oversized domestic cold water booster pumps that run needlessly 24/7. Upgrading to a new booster pump package with Variable Frequency Drives (VFDs) can reduce electricity consumption by up to 85%.
EXPERT HELP, FREE OF CHARGE Our Energy Experts will calculate your ongoing energy savings and potential incentives, and even help complete your application. Get in touch today. MIKE MULQUEEN
GET PAID TO UPGRADE • Retrofit Program incentives pay up to 50% of project costs • Typical ROI period is less than two years • VFDs also prolong motor life and help reduce maintenance costs since pumps will run more efficiently while providing balanced pressure throughout the building • Typically a fast and easy retrofit
BUSINESS PROGRAM HOTLINE:
Lead, CDM Business Development (MURB) email@example.com 416-542-3046 LEE MASUCCI CDM Key Account Consultant firstname.lastname@example.org 416-542-2821 TRAVIS RIGGIN CDM Key Account Consultant email@example.com 416-542-3391
torontohydro.com/boosterpumps Subject to additional terms and conditions found at torontohydro.com/business. Subject to change without notice. Save on Energy is powered by the Independent Electricity System Operator and brought to you by Toronto Hydro. OMOfficial Mark of the Independent Electricity System Operator. Used under licence. A registered trademark of Toronto Hydro Corporation used under licence. ”Toronto Hydro” means Toronto Hydro-Electric System Limited.
34 | oct 2017
The proposed federal corporate TAX changes The proposed federal corporate tax changes only apply to people who receive income as dividends derived from private corporations, or who hold real estate through corporations.
“There are apparently no plans to affect people who hold real estate in their own name (or with their spouse), or public companies or REITs. Investors who currently pay tax at the top personal rate on passive income should also not be affected.” The proposed changes would not immediately end the use of family trusts to achieve income splitting. However, if the proposed corporate tax changes are adopted, then a reform of the rules on family trusts could follow. The government consultation paper is called “Tax Planning Using Private Corporations”: A Google search of that name will pull it up. The consultation on the proposed reforms closed on October 2, but the lobbying around the reforms will certainly continue after Oct 2, and probably right up to when the 2018 Budget is decided (usually in February.) In the Financial Post, Jack Mintz wrote two helpful articles on the unfairness of the proposed tax reforms, one on Sept 6, and one on Sept 20.
Some basic facts on the two key reforms are set out below. Member associations and landlords are invited to check CFAA’s website for the latest information, and are invited to email firstname.lastname@example.org with their issues and concerns. Please also send us any letter of submission you send to the Minister of Finance, the Department of Finance or the government on the tax issue.
rentalhousingbusiness.ca | 35
Energized for Tomorrow 36 | oct 2017
SEPT/OCT 2017 Type of Income
Combined Tax Rate Federal & Provincial – on average
1. active business income up to the small business limit ($500,000 federal limit)
For landlords, this rate is only available for the income that results from management activities or fees.
Includes rental income earned by corporate rental housing providers with more than 5 full-time employees
Includes rental income of corporations and rental housing businesses with fewer than 6 full-time employees
This tax is refundable when the dividends are paid out, since they are then taxed in the hands of the payees.
2. active business income in excess of the small business limit
3. Passive income
4. Portfolio dividend income
TOP PERSONAL TAX RATE
Income sprinkling (also called income splitting) Current regime – with the right corporate set-up, some business income can be directed to a spouse or adult children (who have low incomes), thus reducing the total tax paid by a family. (That typically works best with active business income, but it can work with rental income.) Proposed regime – preventing income sprinkling by tests of reasonableness of the payouts compared to the capital and work contributed to the business. See govt consultation paper at pages 18 – 28. Issues and implications – this is an area on which the doctors and other professionals are up in arms. It may affect relatively few landlords as landlords. Those affected have created Canadian controlled private corporations (“CCPCs”) to collect a management fee, thus turning some rental income (which would usually be passive income) into active business income to gain the small business rate. This area would also affect many mid-size landlords who achieve active business status for their rental income by having more than 5 full time employees. The consultation
Or slightly higher in some provinces
paper says the government expects to gain $250M of tax revenue per year by stopping income sprinkling. (That seems low to some observers.) This reform is the issue that has generated most of the political backlash.
Taxing passive income earned within a corporation Current regime – corporations which earn income typically do one or two or three things with the income: namely, reinvest it into the business, distribute it (as dividends or salary), or invest it in other businesses or investments. Some of those investments produce passive income: e.g. real estate. That passive income is taxed at the high rates, but the objection is that the active income that went into the investment was taxed at lower rates, and that gives those owners an advantage over other people who paid tax on their incomes at the higher rates. Proposed regime – increase the tax rate on such “second generation” income above normal rates, potentially to 73%. The stated goal is to be fair between income which received the favourable rentalhousingbusiness.ca | 37
SEPT/OCT 2017 rates, and income which did not. The government proposes a tracking system (which would likely be an accounting nightmare.) For more details, see govt consultation paper at pages 32 – 53. Apparently, for pure holding companies (which did not receive tax-preferred income) no increases will apply, and they will be able to avoid the tracking system. That would save many people who hold rental property through corporations from being negatively affected by the proposed reforms. Implications – While not in keeping with the government’s stated goals, the higher taxes could accidentally apply to the “second generation income” of landlords who receive the active business tax rate on rental income (because of having more than five full time employees.) That could affect a great many mid-size landlords to a large extent. Reports say the government is looking to gain $1B to $2B of tax revenue per year by taxing passive income in corporations.
That is almost certainly the largest part of these proposed reforms, but it is a part that has generated little political backlash so far.
CFAA’s actions CFAA has taken action on the proposed tax reforms. That includes consultation with landlords who will be affected if the proposed changes are enacted, and submissions to the federal government, which are available at www.cfaa-fcapi.org. As this issue goes to press, the government has announced several changes in direction for the proposed tax reforms, primarily to ensure that smaller private corporations are not much affected, or benefit. Many of the details have still not been released. CFAA will be evaluating the details of the proposals and pushing for new rules which impose the least possible negative effect on landlords.
Marijuana update On September 13, CFAA President John Dickie appeared before the House of Commons Standing Committee on Health to address marijuana legalization. While the committee recognizes that some tenants will be disturbed by tenants who are smoking or cultivating marijuana in their apartments, it is clear that any solutions to that problem are going to have to come from the provinces. For example, Quebec may intend to prohibit home growing entirely. At the committee, CFAA made the following points •
Smoking marijuana should be banned anywhere that smoking tobacco is banned. In addition, landlords should be able to ban the smoking of tobacco or the smoking of marijuana.
– Safety hazards due to electrical
overloading, and excess humidity – Interference with other tenants through
strong odours – Potential liability for the landlord and
risk to the tenants and mortgage holder – Potential cancellation of building
insurance or the calling of a mortgage with financially disastrous results for an innocent building owner. Failing a prohibition on home growing, there should be a system which requires the landlord’s consent for home growing.
In the limited situations where marijuana is legitimately prescribed for medical use, ingested marijuana may offer all of the benefits without any of the negative impact on other tenants.
There should be volume restriction on the plant growth area to prevent growers from using use a screen of green (SCROG) technique to produce lots of marijuana from four plants. Current leases do not prohibit marijuana smoking or growing, simply because it is against the law now.
Growing marijuana in multi-unit or rented dwellings is more problematic than marijuana smoking. Concerns include:
The current regime prohibits smoking and growing, and especially in Ontario and Quebec, landlords will only be able to impose those
38 | oct 2017
NATIONAL OUTLOOK terms themselves when they enter into new leases with new tenants. Existing tenants would effectively be grandfathered to grow and smoke, which would be against the interest of the majority of tenants.
the committee hearing, CFAA President John Dickie spoke with him and he assured CFAA that the provinces are working on the changes they need to make to landlord and tenant laws to deal with the situation. Mr. Blair said that in most provinces it is the Justice Department that has carriage of the file. According to Mr. Blair, Ontario addressed the age limit and distribution issues first as they are more time critical, but he expects the province to deal with landlord and tenant issues in the next few months.
Submissions from other presenters The previous day, witnesses included government representatives from Colorado and Washington State, who said the sky had not fallen with legalization. Another witness was John Conroy, a lawyer who has been instrumental in the fight to legalize marijuana for medical purposes. He said that the most common complaint received about medical growing now is about odours. He added, most users want to buy their pot in a store, not to wait for it to be delivered, and not to grow it themselves. Dr. Page, a plant scientist, suggested that the proposed height limit of one meter be abandoned, and that the limit of four plants per dwelling be increased to somewhere between six and ten plants to allow for the fact that some of the plants produced from seeds are male plants and do not produce useable pot, and plants would necessarily be at different stages of their life cycle as they grow. (The government appears to plan to eliminate the one meter height limit, but not to allow more plants.)
Provincial and municipal implications The landlord-tenant issues will need to be addressed by the provinces. Bill Blair, a former Toronto Police Chief, is the Parliamentary Secretary to the Minister of Justice. He has carriage of the marijuana legalization file. After
At the moment in Ontario, the problems are going to be worse than with tobacco because people are not going to be allowed to smoke pot outside or in pot lounges (like bars, but for pot), forcing them to smoke in their homes (and apartments). Landlords may want to promote freedom for people to smoke pot outside or in pot lounges because that will give users a place to smoke pot other than in their apartments. As well, because Ontario is banning privately run pot shops, and opening only a limited number of pot stores, people will want to grow their own. Instead, in Quebec, the provincial government apparently intends to ban home growing. The Saskatchewan government has told the Saskatchewan Landlord Association that its current plan is to ban growing in multiple-dwelling buildings, and permit it in detached rented premises only with the consent of the landlord. Landlords and CFAA-member associations can use those examples in their provincial lobbying efforts. Further regulations may come from the municipalities since they can restrict where certain activities take place within the municipality. For example, a municipality could prohibit growing pot in multiple-unit dwellings. That would enable a landlord to proceed against a tenant for an illegal act, rather than for substantial interference with the reasonable enjoyment of other tenants. In Ontario and other provinces, that would facilitate the enforcement of a non-growing rule. The government appears to plan to eliminate the one meter height limit... rentalhousingbusiness.ca | 39
CFAA Suppliers Council
CFAA would like to thank all of its Supplier Council members for their continued support.
If you would like to join CFAAâ€™s Supplier Council, email email@example.com for more information. 40 | oct 2017 40 | j u ly /au g 2 01 7
CFAA Rental Housing Conference 2018 in Vancouver The Canadian Federation of Apartment Associations looks forward to returning to Vancouver for CFAA Rental Housing Conference 2018 at the Coast Coal Harbour Hotel in downtown Vancouver from May 14 to May 16. Join us for the sunny Spring season in Vancouver. Enjoy nearby Stanley Park or English Bay, or take in the rich culinary offerings and nightlife of Granville Street, Yaletown, Gastown or Granville Island. Turn your business trip into a vacation by enjoying the museums and gardens of Vancouver, or by exploring the mountains of North Vancouver. A little further afield, drive to Whistler for spectacular views and recreation, or drive to Harrison Hot Springs to relax in their famous spa. Only a short ferry ride away are Victoria and the world-renowned Butchart Gardens, on scenic Vancouver Island. Or visit the wineries of the sunny Okanagan Valley.
During the afternoon of May 16, CFAA and Landlord BC will offer sessions of particular interest to rental owners and operators in BC. Sessions will cover topics such as apartment sales, the new health and safety requirements, the BC political scene, and the BC marijuana regime. Rental owners and operators will be able to attend the afternoon (after lunch) at an economical registration rate.
For more information Follow www.CFAA-RHC.ca, or email events@cfaa-fcapi. org to sign up to receive more conference details and CFAA’s electronic newsletter. Rental industry suppliers are invited to contact firstname.lastname@example.org to receive information about sponsoring or exhibiting at the conference, on one, two or all three days.
Conference program CFAA-RHC 2018 will start on Monday, May 14, with an afternoon building tour of the Bridgewater, the Hollyburn property which won CFAA’s award for New Development of the Year in June 2017. Located in North Vancouver, the Bridgewater features a rooftop terrace with a fire pit and community gardens, and a resident lounge with fireplace and kitchen. There is bicycle parking, a gym, and electric vehicle charging stalls. In-suite amenities include washer/dryer, and a second full bath in 2BR units. A second building for the tour is to be determined. The Welcome Reception will follow. On Tuesday, May 15, CFAA will kick off with a keynote speaker, the Executive Roundtable and the Suppliers Council Showcase. The afternoon will see a choice of topics relevant to landlords from across Canada, including panel discussions and presentations. From 4:30 to 6:00 we will enjoy the Networking Reception, leading up to the CFAA Awards Dinner. Be the first to learn who has won CFAA’s 2018 Rental Housing Awards for rental housing personnel, suppliers and new or renovated buildings! (For more details about CFAA’s 2018 Awards Program, e-mail email@example.com.) The morning of Wednesday, May 16, will feature another keynote speaker and a choice of several sessions about national issues, such as the corporate tax reforms and marijuana legalization across Canada.
rentalhousingbusiness.ca | 41
42 | oct 2017
Land market values have increased significantly over the past five years.
Trust the experts in land disposition to guide you through every step of the sale process.
PERSPECTIVE We advise clients through actionable perspectives, aligning knowledge and experience with commercial and cultural insight
SCALE Globally integrated commercial real estate and investment services
CONNECTIONS Powerful connections, bringing together the right people, resources, and capital on every opportunity
Call to ask us how 416 495 6257 | LSGGTA@CBRE.COM www.cbre.ca/mclsg 44 | oct 2017
President’s message The most recent market interference from the Ontario Liberal government reminds rental housing providers about the importance of engaging with local landlord and property manager associations. In addition to supporting each other through the challenges that come with property ownership, local associations provide an organized and systematic mechanism for providers to be heard. It is necessary for rental providers to voice their concerns about the bureaucratic nightmares and financial implications that result from short-sighted, knee-jerk legislation like the Rental Fairness Act (RFA). If you are not a member of a local association or FRPO, I encourage you to reach out to them.
Experience with the LTB In addition to advocacy, belonging to an association can provide support from other members through their experience and wisdom. While attending an Ontario Landlord Tenant Board tribunal in early September, I witnessed three cases where landlords were seeking rental arrears from tenants who had not paid rent for a myriad of reasons for anywhere from four to five months. I witnessed one case where the tenant had not been paying rent and had also likely vacated the premises without any communication to the landlord. My impression was that none of these housing providers had experience with the tribunal and were somewhat caught off guard by the process, venue and atmosphere influenced by the adjudicator. The conversations and contacts yielded through association membership would surely have helped these people.
License feedback The City of Waterloo opened an online form requesting feedback regarding the Residential Rental License Review. The licensing program in Waterloo began in 2012 and has been seen widely
as a duplication of existing public services, tax on tenants and cash grab. If you are a rental housing provider in the Waterloo Region and have missed the early-October deadline, contact the City of Waterloo Municipal Enforcement Services for more information.
Next meeting The next WRAMA general meeting is being held on Wednesday, October 11, 2017. We welcome Jim Murphy from the Federation of Rental-housing Providers of Ontario (FRPO). With the ongoing fallout from the passing of the Rental Fairness Act (RFA), Mr. Murphy will provide the provincial perspective he has gained hearing from rental housing providers large and small who are trying to reconcile legislation that continues to diminish the residential tenant experience.
Annual panel discussion Every year, WRAMA gathers a number of experts from various fields to discuss what is happening in the rental housing market throughout the Waterloo Region. It’s an opportunity to review what has happened over the past year, and look ahead at potential trends. This year’s panelists include James Craig, Senior Sales Associate with CBRE Limited (who spoke about the sales and investing side of residential real estate); Adam Hoffman, President, Hoffaco Property Management (who spoke about the property manager’s perspective of rental accommodations, specifically student rentals); and Alex Oda, Licensed Paralegal, Cohen Highley Lawyers (who spoke about the legal side of the rental housing industry). The panelists began with a discussion of the issues, challenges and opportunities faced throughout their respective niches within the residential rental housing market in the Waterloo Region. Mr. Craig noted that the declining availability of rental properties (for tenants and investors) was one of the key issues facing real rentalhousingbusiness.ca | 45
estate sales professionals. He explained that residential real estate (particularly in the Waterloo Region) is a highly sought after asset class, and there is an inventory shortage due to the greater number of buyers compared to the number of sellers. “When properties do come to market, there is a lot of competition,” said Craig. “Buyers are very aggressive in their bidding. There is also a higher standard required for available product, so with shrinking vacancy rates, good product is hard to find.” Conversely, Mr. Hoffman found that there was a huge drop-off in the number of potential investors contacting his firm to purchase rental properties, and there were more rental property owners looking to sell than buy. This could be tied to his company’s focus on the student rental market, and expenses increasing at a faster rate than rental rates in Waterloo’s traditional student housing market. He also noted the change in customer psychology and perception of valuation and operating profit of rental properties in the future. Mr. Oda’s issues focused on his interactions with the Landlord and Tenant Board (LTB) – specifically payment plans when tenants are in arrears and motions to set aside. Landlords will typically pursue an eviction when a tenant is in arrears of rent and breaches on their payment plan. Mr. Oda has found that tenants are taking advantage of the ability to file a Motion to Set Aside to stay the eviction order, even when it is not merited, and the result is a delay in payment that leads to delays in termination and much higher arrears for the landlord. “What this means for landlords, large and small, is to prepare for extended delays and start the process as early as possible,” said Oda. 46 | oct 2017
“Payment plans should be seen as a good option, but landlords need to be aware of the possible delays and ensure they act quickly when a breach has occurred.” Mr. Craig and Mr. Hoffman were in agreement that there are many opportunities for rental property owners to increase their rental income by upgrading their properties and units. They found that tenants – both families and students – were willing to pay higher rents for better amenities, upgraded features and condo-quality units. All of the panelists agreed that local building and construction, including improved transportation options via the LRT, would greatly benefit the Waterloo Region as a whole, as well as its rental housing industry, over the long term. Mr. Craig noted that there was very strong growth of new projects, from low rise to high rise, in both condominiums and rental properties. Due to low inventory and absorption, there are a lot of rental units coming available, yet decreasing vacancy rates. There are also more people looking for land to develop, with demand expected to increase. Mr. Hoffman added that the construction has made it more difficult to lease many student properties, as new supply has outpaced enrolment growth. New properties that have bigger units and more amenities are seeing demand with stable and increasing rents, but older properties that are further away from key areas are becoming more difficult to rent. For non-student properties, there is a lot of unmet demand for mid-priced properties, so rents are increasing. “The impact of the LRT has not been felt on renting,” said Hoffman. “It remains to be
seen if it provides a larger market for farther away student rental properties.â€? The Rental Fairness Act was another hot topic. Mr. Oda stated that the RFA would affect all landlords, especially those with buildings that were exempt from rent control. He thought that there would be fewer developers as a result of an increase in Above Guideline increases. He also believes that it will impact smaller landlords who want to move into their rental units, as there are strict requirements for evicting a tenant for Landlordâ€™s Own Use, so there might be more smaller landlords selling their units.
All the panelists voiced the sentiment that WRAMA had a positive influence on their business, and the rental housing industry in general. They stated that the association helps to keep landlords and others in the industry informed of trends, legislation and other important issues, and it helps them to be better in their respective businesses.
Mr. Hoffman stated that the RFA would result in delays or cancellations of planned rental projects. Fewer property owners would also be able to afford upgrades to their properties. Mr. Craig agreed, adding that development charge exemptions for new multi-family projects could help encourage growth. The panelists had different perspectives on the future of the rental housing industry in the Waterloo Region. Mr. Oda believed that the upcoming provincial election would have a significant impact on the market, and that the volume of cases before the LTB would continue to increase. Mr. Hoffman felt that there would a number of unintended consequences that would follow from the Rental Fairness Act, including fewer upgraded properties and higher rents for tenants. Mr. Craig believed that with more product being added to the space, and more condominium investors providing rental properties, that tenants would have more options of more affordable properties. rentalhousingbusiness.ca | 47
48 | oct 2017
Renting options expand for landlords as London City Council approves granny flats After years of debate, London city council voted on July 25 to permit secondary dwelling units — also known as granny flats — across the city. Council’s 8-4 decision to amend its Official Plan and Zoning Bylaw creates investment opportunities for landlords, who will be able to operate two rental units in single detached and semi-detached homes, and street townhouses. The secondary dwelling units will include a kitchen, bathroom, and living and sleeping areas. They could be located anywhere in a home or in an accessory structure as long as the structure is on the same parcel of land. For tenants, a greater range of affordable rental housing will now be available in all areas of the city, including near Western University and Fanshawe College, in what the city refers to as the near-campus neighbourhoods. Municipalities across Ontario have long struggled to solve the acute shortage of affordable housing. The province enacted the Strong Communities through Affordable Housing Act, 2011 which, among other things, required municipalities to enact Official Plan and Zoning Bylaw provisions to permit secondary dwelling units. The province recognized that these units are typically some of the most affordable on the rental market and are an efficient way to increase the stock of affordable housing in diverse areas of municipalities. Initially, London council had planned to enact amendments permitting secondary dwelling units across the city except in the near-campus neighbourhoods. In the summer of 2016, council decided to remove this restriction from the proposed amendments. However, the restriction made it back into the proposal by the summer of 2017, after the Ministry of Municipal Affairs
President’s message: Knowledge is the key to success With the frequent changes in the residential housing industry, it’s critical that property managers encourage their staff to stay up to date. LPMA helps by conducting Property Management 101, a two-part seminar taught by some of the best in the industry. The first seminar takes place November 7 and will deal with the basics of property management, including leasing and rent rules as well as maintenance and repair. The second seminar, which will be held on November 20, will focus on how to maintain cash flow. Topics will include enforcing the lease, dealing with problem tenants and rent arrears. Participants will receive a binder filled with valuable course material and a certificate for completing the course. These seminars are ideal for site staff, administrators and property managers. Register online at www.lpma.ca/calendar or call Brenda Davidson at the LPMA office, 519-672-6999. Lisa Smith, LPMA President and Housing approved the proposed Official Plan amendment with this restriction in place. (It had been submitted to the ministry for approval prior to council’s decision to make this change.) At a public participation meeting of the Planning and Environment Committee on July 17, city staff recommended that the committee leave the restriction in place. It also received numerous written and oral submissions from the public, both supporting and opposing the restriction. Members of the public who supported the near-campus restriction expressed concerns about the creation of student ghettos and numerous homes in concentrated areas being left unoccupied and unattended in summer rentalhousingbusiness.ca | 49
months when students leave. These concerns were intensified by the fact that, in approving the city’s proposed Official Plan amendment, the ministry removed a requirement that the primary dwelling unit be owner-occupied. Councillor Phil Squire steadfastly opposed the idea of permitting non-owner-occupied secondary dwelling units within near-campus neighbourhoods. He noted that there is already a high proportion of homes being used as student rental properties in these areas. Those opposed to the near-campus restriction highlighted the benefits of secondary dwelling units. The include assisting residents with the costs of home ownership; allowing elderly or ill people to house a family member or a live-in caregiver; integrating people of varying income levels; and increasing the city’s stock of affordable housing. Mayor Matt Brown opposed the near-campus restriction, expressing deep concerns about the current shortage of affordable housing throughout the city. Ultimately, the committee voted to put the proposed amendments before council with the near-campus restriction removed and council passed the amendments. The only restrictions will be reasonable ones; for example, there will be no basement units permitted in flood plain areas. Landlords should refer to the bylaw before investing in a property with the intention of establishing a secondary dwelling unit. There are certain technical requirements that need to be considered to ensure compliance with the bylaw. Mark Melchers is an associate lawyer with Cohen Highley LLP in London
50 | oct 2017
Tips for maintaining a healthy relationship with tenants When it comes to landlord-tenant relations, getting off to a good start is only half the battle. The other half centres on maintaining the relationship with a thorough knowledge of the appropriate legislation and a hefty dose of common sense. London lawyer Joe Hoffer says that it’s in landlords’ best interests to treat tenants with consideration. For example, he recommends that landlords conduct maintenance inspections in the first three months of a tenancy to determine how the tenant is treating the unit. One way of notifying tenants is to give them written notice at least 24 hours before the time of entry, specifying a window of time between the hours of 8:00 AM and 8:00 PM, the minimum requirement under the Residential Tenancies Act. Alternatively, the landlord could give the written notice several days ahead of time. “That typically gives the tenant a bit of a heads up so they don’t have to start cleaning the apartment right away,” Hoffer says. “I just think some common sense in terms of giving that notice goes a long way in communication.” In the case of bad tenants, Hoffer believes the individual likely won’t clean the unit in advance. Even if the tenant removed evidence of a grow-op, there would still be visible damage. “The key is to give them a heads up that you’re coming in and if there are problems, chances are you’ll see them,” Hoffer observes.
London Property Management Association (LPMA) is a non-profit organization, located in London, Ontario, Canada, that provides information and education to landlords.
Membership is open to landlords and property management professionals who own or manage one or more residential rental units.
LPMA represents the interests of both large and small property owners. The association has more than 400 landlord members representing approximately 35,000 rental units.
Sign up online www.LPMA.ca, or call Brenda Davidson at 519-672-6999 for more information.
During a tenancy, many small landlords get into trouble when they ignore one tenant’s complaints about another. Landlords have a legal obligation to investigate and to communicate with both parties as the arbiter. If the investigation revealed there was no merit, the landlord must let the complaining tenant know the results and that the landlord won’t pursue it, Hoffer says. However, if the grievance had merit, the landlord should send a letter to the subject of the complaint, outline its nature and ask the tenant to cease the behaviour. If the complaints continue, the landlord is obligated to serve an N5 notice of termination, which gives the tenant an opportunity to correct the problem. If the tenant fails to do so, Hoffer says the landlord can bring an application to evict. If the landlord didn’t investigate, the complaining tenant could bring an application against the landlord for interfering with the tenant’s reasonable enjoyment of the premises and for an abatement of rent. “Many small landlords end up trying to be the complete arbiter, the judge and jury and they can make a real mess of it,” Hoffer says, adding that the landlord can be perceived as the problem by both tenants. Rent arrears are another common issue during a tenancy. It’s best for landlords to act on them right away, Hoffer advises, although they don’t need to terminate a tenancy when a tenant is in arrears. “If it’s the first time ever, you start with a friendly reminder.” says Hoffer. “Within a few days if there’s no response, you either serve a
notice of termination, which is the N4 based on arrears of rent, or you serve an L9 application, which is an application for a judgment for arrears of rent only.” Sometimes tenants want a landlord to serve the N4 when they aim to leave before the one-year lease is up. That’s the best outcome for a landlord, Hoffer says, if a tenant has ongoing problems paying the rent. If tenants can pay, but aren’t making it a priority by the first of the month, the L9 is effective. The landlord must pay a $190 filing fee to the Board and the landlord is eligible for reimbursement by the tenant for the full amount of the arrears and the filing fee. “That usually gets tenants in line and makes sure that they’re paying the rent on time,” Hoffer says. “It’s really a judgment call by the landlord how they want to deal with it.” Operating a business professionally pays dividends for landlords, Hoffer says. “It ensures, in most cases, a good and respectful tenancy arrangement between the landlord and the tenant,” Hoffer says. “It can result in positive references from tenants to other prospective tenants. And if problems do arise, it puts the landlord in a much stronger position if they have to go to the Landlord and Tenant Board.” Operating a business professionally pays dividends for landlords. – Hoffer rentalhousingbusiness.ca | 51
COMFY LIVING FOR TENANTS. COMFY ENERGY BILLS FOR YOU. Weâ€™ll cover up to 50% of the cost when you upgrade to high efficiency equipment. The Affordable Housing Conservation Program provides incentive for insulation upgrades, heat recovery, building automation systems, building assessments and other custom measures.
Learn more at uniongas.com/affordablehousing.
52 | oct 2017
President’s message The government released a Fair Housing plan that greatly impacts landlords. Our October dinner meeting covered details on the changes and how they affect you. We have also been concerned over the recent cities that have started licensing landlords or, like Toronto, have chosen a Landlord Registry. In an effort to stop the same thing from happening in Hamilton, HDAA has retained Maple Leaf Strategies to assist with our ongoing discussions and advocacy regarding the legalization of rental housing, and proactive property standards enforcement. We hope over the next few months to grow the membership and gather forces to ensure that landlords are not unnecessarily burdened with additional costs. Arun Pathak, HDAA President
Should landlords be tenant advocates? Over the last few years I have turned into a good tenant advocate. No, I am not boasting that I am good at being a tenant advocate. I am saying that I have been working hard at being an advocate for things that benefit good tenants. The list of things I am advocating for is quite long but I have given a few examples below. 1. Fair property taxes The multi-residential tax rate in most municipalities is higher than the residential rate. I am advocating for equalization of the tax rates. Any reduction in taxes of more than 2.49% has to be passed onto the tenants in a rent reduction. This could be a potential rent reduction of $100 or more a month. I support this because it will benefit tenants. Landlords could find they have lower bad debts, more timely rent collections, happier tenants and less competition from home ownership. The lower rents should also ease the pressure on the food banks and generally reduce poverty.
2. Adequate Ontario Disability Support Program and Ontario Works Benefits These benefits should be at a level that the recipient can afford to pay a market price for their housing, usually rent. Governments are aware that these benefits are inadequate but chose to do nothing about them. This forces landlords to be the ones who subsidize the welfare system instead of the government taking full responsibility. The end result is a long-term deterioration in the housing stock because the funds are not available to upgrade buildings. 3. Rent paid by good tenants should not cover damages or unpaid rents from bad tenants It has generally been accepted by society that all shoppers pay for the losses from shoplifting; however, we have not applied that to rents. When a tenant in a multi-unit rental property does not pay his or her rent, that cost is distributed among the other tenants in the building. This happens either through a rent increase that may not have been needed or a lack of maintenance or upgrades to the building because of loss of revenue. Most tenants leave their apartment in good condition when they move; however, some leave a pile of garbage as well as damage to the unit. Good tenants should not have to pay for those repairs; a small damage deposit would eliminate most of those problems. Those landlords who do a budget always allow for bad debts and adjust other items to make the budget work. If the eviction process was quicker, then the amount of bad debts would be less and the repairs and maintenance budgets would be higher. 4. Good tenants should not have to put up with bad tenants Every now and then a tenant will move into a building and disturb or disrupt good tenants. In some cases, it is noise, parties, too many frequent visitors (drug trade), noisy pets, pet urine in hallways, etc. It takes too long to get rid rentalhousingbusiness.ca | 53
of problem tenants and good tenants have to put up with the problems for weeks and often months as the LTB gives the benefit of the doubt to the problem tenant. Good tenants also put themselves at risk of reprisals when they give evidence at the LTB. 5. Pet-free or smoke-free buildings Some people have allergies to pets; however, they cannot ask their landlord to make their building pet-free. The same goes with smoking; this also applies to the smell of marijuana coming from apartments into common areas of buildings. 6. Mental health issues There is often a lack of support for people with mental health issues and the landlord and neighbours are unable to find the best way to get support for them. In one case we had a man threatening and frightening young children. He was removed from the building by the police but taken to hospital instead of being arrested. He would leave the hospital and be back at the building within an hour or two. One tenant would phone the police up to 20 times a day to report his neighbour was being murdered. When we consider many of these issues, it is clear that the interests of the landlord and good tenants align and are different from those tenants who are disruptive or don’t pay their rent.
“Yes, landlords have to be tenant advocates. I would like to ask all members of the HDAA to recognize this and work toward becoming good tenant advocates. What is good for
good tenants is good for good landlords.” – Arun Pathak, HDAA President
Three wins with maintenance management software Maintenance is a crucial part of property management that is directly associated with the value of your assets and the satisfaction of residents. There is always something that needs to be updated, replaced or repaired. As a result, effective property maintenance takes time, effort and money. But the good news is you can make everything a little easier using modern maintenance management software. Automating maintenance will help you save time, increase onsite efficiency, and improve resident satisfaction and relations. Save time Online and mobile work orders make submitting and completing maintenance requests speedier – and not just for you and your staff; it’s more convenient for residents as well. Mobile work order capabilities save residents the time it would otherwise take to visit the office or place a call during business hours. Submitting maintenance requests online or using an app is easy for residents to do. Then you can quickly route those work orders to maintenance techs using a mobile device so they can get onsite, upload progress photos and complete tasks without delay. Using technology, you can approve and process maintenance requests faster and avoid time-consuming conversations with your residents or team. Mobile maintenance management cuts down on interruptions and
Hamilton and District Landlords Since 1960, the Hamilton and District Apartment Association has grown significantly. Our member landlords and property managers manage in excess of 30,000 units throughout Hamilton, Burlington, Brantford, Guelph, Mississauga, Oakville, St. Catharines and into the Niagara Peninsula. The association is a highly respected organization, sought out regularly by government, industry, media and the public. To join, submit the application form available at www.hamiltonapartmentassociation.ca, or contact HDAA at 289-208-5445. 54 | oct 2017
allows you to get to other tasks that require your attention. Increase property efficiency The efficiency of your team is crucial to your success. Maintenance management software will help make your properties more efficient too! Mobile apps for work orders and inspections can instantly record inspection data in real time. Well-designed solutions provide the ability to upload photos and videos, record voice messages during walk-throughs, and automatically generate work orders and initiate tasks. This kind of automation lets you be more proactive in your property care, rapidly responding to problems before they escalate. Making early repairs can stop small issues from growing into more serious situations, and you may be able to avoid breakdowns and keep your equipment and appliances working longer. Each building is different, but if you take the time to do a complete walk-through of your properties using your maintenance management software, you can create an action plan that ensures each one is running smoothly.
driver. Good property maintenance improves resident satisfaction. A study by SatisFacts showed that “quality of maintenance service provided” is one of the highest-ranking factors for an apartment resident’s lease renewal decision. When you can respond to resident work orders and other concerns more effectively, resident satisfaction increases. And that’s a win for everyone! In addition, well-maintained properties are easier to lease. Using maintenance software to keep your properties in top condition and provide excellent customer service will help you attract and convert more prospects. In fact, one renter preferences study showed that two of the top five factors influencing leasing decisions are “property appearance” and “community amenities.”
Improve occupancy and resident satisfaction
Considering the fast-paced world we live in, speed, agility, and the ability to adapt are crucial for customer satisfaction and retention. Fortunately, you can now automate your property maintenance tasks using technology. The efficiency that comes with automation results in smoother operations, happier residents and increased overall success for your property management business.
Resident satisfaction has been a hot topic in the past few months, with maintenance being a key
– Peter Altobelli, Vice President of Sales and General Manager, Yardi Canada Ltd.
September 13 – Dinner cruise: We had a fantastic night sailing around Hamilton Harbour. October 5 – Dinner meeting: Joe Hoffer, Cohen Highly: Bill 124 The Fair Housing Act
November 8 – Dinner meeting: Topic: Ask the board
November 22 – Morning education seminar: Superintendent training, Are they a good ambassador for your property?
rentalhousingbusiness.ca | 55
56 | oct 2017
Update on the Rental Fairness Act For notices of termination for personal or family use issued in Ontario on or after September 1, 2017, new rules are in force under the amendments to the Residential Tenancies Act (RTA) made by the Rental Fairness Act (RFA). First, the time period for which the landlord requires the property must be at least one year. A landlord can no longer evict a tenant to use their property for a university or college term or for a period of mere months until another property is ready for them. Second, the property needs to be owned at least in part by an individual, rather than being entirely owned by a corporation. (There might still be a grey area for trusts, or in situations where a human being landlord deals with tenants even though a corporation holds title, or where a corporation holds a property in trust for one or more human beings. That is because the RTA contemplates that there can be several landlords, not just the legal owner on title.) Third, the landlord is now obliged to pay the tenant one month’s rent as compensation for having to move. That payment is due by the termination date. Before the September changes, there was no compensation due for personal or family use, although compensation was generally due for termination for major repairs, renovations, demolition or conversions in residential complexes of five or more residential units. That new requirement seems harsh for landlords who have moved out of their residence, due to a foreign posting for example, and who want to move back into their previous home. We can hope that the next government will make allowances for small landlords in that situation. All landlords, realtors and property managers should note that certain actions between the time the landlord gives the notice and 12 months after the tenant vacates will create a presumption of bad faith, allowing the tenant remedies unless the landlord proves their good faith. The actions which create a presumption of bad faith are:
• • • • •
Any advertisement of the unit for rent Any rental of the unit Advertising the unit or the building for sale Demolishing the unit or the building Taking any step to convert the use of the unit or the building
The new rules “tie a landlord’s hands” if they terminate for personal use. If there is a problem with a tenant, it is now even more true that the best way to proceed is to address the problem directly, e.g., for interference with the landlord’s lawful rights and interests, or for persistent late payment of rent.
Other RFA changes and their status A consultation on the terms that will be included in the new, mandatory, standard lease consultation is proceeding. Other changes are not yet in force, and might not come into force, namely: •
AGI changes (preventing applications for utility cost increases) Elimination of the current tenant defense to a second N5 notice that the tenant has not voided the first N5 notice Penalties for not giving a right of first refusal, when the tenant is entitled to that right A ban on collecting rent said to be due after a termination
Note that rent due up to the date the tenant vacated can still be collected after a termination, but it will be clear that a landlord will not be able to collect rent after the tenant vacates pursuant to a notice of early termination. By John Dickie, Chair, Eastern Ontario Landlord Organization, and Partner, Dickie & Lyman, Lawyers LLP
rentalhousingbusiness.ca | 57
Pressures for landlord licensing in Ottawa Landlord licensing has been implemented in Oshawa, North Bay, London and Waterloo. In all cases, the pressure to bring in licensing arose from the reactions of long-standing residents to student renters. Homeowners objected to noise and disturbances coming from housing rented by students, and sometimes the students’ failure to deal properly with their garbage and to maintain the properties in a tidy condition. Except in the case of Waterloo, the requirement applied only to smaller properties, such as single-family homes or buildings of fewer than four or five units. In Waterloo, licensing applies to townhouse complexes as well. In none of those cities does landlord licensing apply to apartment buildings. However, a landlord registry is being rolled out in Toronto, where it will apply only to buildings of 10 or more units, on three or more storeys. In Ottawa, worrisome motivations for councillors to consider landlord licensing include the problems that long-standing residents face from students in Sandy Hill and around Algonquin College. ACORN is also pressing the city to introduce landlord licensing, but they see it as a way to make landlords perform better, especially for low-income renters, who ACORN sees as having less clout and fewer resources than middle-income and upper-income renters.
Preventing landlord licensing – what we can learn from Toronto At the Fall 2017, EOLO Networking and Education Event, EOLO members heard from Ted Whitehead, the Director of Certification at the Federation of Rental-housing Providers of Ontario. Ted gave an interesting and engaging account of how Toronto’s landlord registry came to be, and what we can do in Ottawa to prevent it happening here. Ted stressed the importance of being organized and ready for renewed pressure for licensing in Ottawa after the successful campaign in Toronto to impose their landlord registry. To successfully combat pressure for licensing, both advocates and landlords need to be building positive relationships with City councillors, tenants, staff and community members to get the word out that professional property managers are doing a great job and helping to build the community. Thankfully, as David Lyman, Vice-President of EOLO, pointed out in his Political Update, EOLO has been working hard to combat licensing in Ottawa. Efforts include improving relationships in Sandy Hill between tenants, landlords and community members from which much of the pressure for licensing arises.
BECOME AN EOLO MEMBER NOW! EOLO invites Ottawa area landlords to join the organization. Have your interests and concerns heard, and benefit from EOLO’s support. As an EOLO member, you will: • Receive prompt email notification of relevant City rule changes • Be able to attend two networking receptions each year • Be able to attend two free education events each year 58 | oct 2017
•R eceive EOLO’s newsletter with more information about new issues Banner Ad at the City and and developments in provincial funding programs and landlord-tenant laws. To apply for membership, go to www.eolo.ca, download the membership application form and send it to us at the contact info on that website.
In speaking with City councillors and other key stakeholders, EOLO and other opponents of landlord licensing make these points:
what is required is not a piece of paper in a City file cabinet, but rather the delivery of appropriate services.
Landlords are heavily regulated now, with tenants able to call in City property standards officers to issue work orders, and tenants able to apply to the Landlord and Tenant Board for orders or compensation for persistent maintenance or repair problems.
A licensing regime is not directed at the real problems (which exist in some few cases), but rather creates new requirements and offences.
The few landlords who ignore their obligations now are probably as likely to ignore licensing requirements, so that a licensing system will primarily impose new requirements and costs on people who are complying with the rules now. Licensing regimes require the landlord to file plans for maintenance and for garbage removal or for parking, when
Licensing would require a bureaucracy to administer, when the City is trying to contain staffing and operating costs.
Licensing would raise the cost of rental housing, which will tend to make rental housing more expensive.
Licensing would raise the hassle factor in operating rental housing, which will tend to reduce the supply, which will also tend to make rental housing more expensive.
In some cases, licensing smacks of age discrimination because its driving force is often to try to keep student-renters out of neighbourhoods.
Ted’s lessons for the landlord community are a good reminder for us to be on our guard and working to continually build positive relationships with our tenants, team members and community members.
The Toronto landlord registry bylaw requires: •
Names and contact information of all building owners
Names and contact information of the building operators
Specific information related to the building and related elements (i.e., materials used in construction, number of floors & units, accessibility features, availability of cooling spaces, heating & cooling systems, security features) Sub-metered electricity information including name of local distribution company/provider servicing
Information relating to specific management and maintenance practices, and information requirements for the following defined areas: • • • • • • • • •
Tenant service requests Tenant notifications Pest management Waste management plans & requirements Cleaning plan and requirements Licensed contractors for maintenance State of good repair capital plan Record keeping Not renting a unit to a new tenant where there is a property standards order related to the unit
rentalhousingbusiness.ca | 59
Catch the final spin with RHB’s Newsreel, delivered weekly to your inbox. Eight ways to market your seasonal business during the off-season We’ve all seen it before: pumpkin spice lattes roll around and before you can say “Halloween” we have snow on the ground and your rental offices become a ghost town. We’re all familiar with the challenges of the dreaded off-season, but don’t let the seasonal slumps get you down. Instead of sitting around and waiting for your season to start again, use this valuable time for marketing! 1. Grow your database while the season’s still hot 2. Gather customer reviews 3. Continue creating remarkable content ... with an off-season twist 4. Stay social all year 5. Stay in touch via email, too 6. Generate off-season hype 7. Differentiate yourself within a niche demographic 8. Offer seasonal offers and move-in incentives Seasonal marketers who think long term and use their off-season time wisely can help send rental demand through the roof when peak season begins again. 60 | oct 2017