Auditing an Inherited Rent Roll: Which Improper Ontario Rent Increases Are Already Locked In
You bought (or took over) a small rental building and the seller’s rent history has gaps: an increase with no notice on file, another taken too soon. The Residential Tenancies Act sorts each one for you, if you ask it three questions in the right order.
If a past Ontario rent increase skipped the rules, is it void or is it lawful?
It can be both, at different moments, because the Act uses two different words. Void is s.116(4): an increase taken without at least 90 days’ written notice on the Board’s form has no effect, and the landlord must give a new notice. Deemed is what ss.135.1 and 136 do afterwards: a notice-defective increase is deemed not void once the tenant has paid it for 12 consecutive months, and any increase is deemed lawful once a year has passed since it was first charged, unless an application to the Landlord and Tenant Board put it in issue within that year.
Source: Residential Tenancies Act, 2006, S.O. 2006, c. 17, ss. 116, 135.1 (in force July 21, 2020) and 136 (e-Laws consolidation from September 21, 2026).
I’m Arthur Zhao, a real estate broker in Toronto. Picture the week after closing on a four-unit building. The seller’s property manager hands over a rent roll spreadsheet and a folder of leases. Unit 2’s rent went up last year, but there is no N1 in the folder. Unit 3’s rent went up twice inside ten months. Unit 1 sits in a basement apartment finished after 2018, and its rent jumped by more than anything you have heard of as the annual guideline.
The instinct is to treat every one of those lines as either fine or illegal. The Act does not work that way. Some of those increases are now the lawful rent no matter how they started, some are still open to challenge, and which pile each one lands in turns on three questions you can answer from the paperwork. This is the audit, line by line, written for the person who now owns the building and the problems that came with it.
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Why the rent roll you inherited is a claim, not a fact
A rent roll records what tenants are paying. It does not record what the law allows you to charge, and the Act treats those as separate things. Section 111(1) says no landlord shall charge rent greater than the lawful rent permitted under Part VII, and s.110 says no landlord shall increase rent except in accordance with that Part.
Buying the building does not put you outside those rules. The Act’s definition of landlord in s.2(1) includes the owner and also the successors in title of an owner. So the rents you collect from day one are measured against the same lawful-rent rules your seller was bound by, and any past increase that never became lawful is a problem you have now taken on.
Two words, two sets of sections
The three questions, in order, for every increase
Run each increase on the roll through these questions one at a time. The order matters: the first tells you whether there is anything to cure, the second and third tell you whether the Act has already cured it.
Was the increase lawful when it was taken?
- Notice (s.116): at least 90 days’ written notice, in a form approved by the Board, stating the new rent. If not, the increase is void under s.116(4).
- Spacing (s.119(1)): at least 12 months since the tenant’s last increase in that unit, or since the unit was first rented to that tenant.
- Amount (s.120): during a tenancy, no more than the annual guideline unless an exception applies. The guideline is capped at 2.5% (s.120(2)), and s.120(3.1) set the 2021 guideline at zero per cent. Units covered by s.6.1 are outside s.120 entirely; see the exempt-unit section below.
A line that passes all three needs no further work. A line that fails any of them goes to question two.
When was the new amount first charged, and has it been paid every period since?
- For a notice defect, s.135.1(1) asks whether the tenant has paid the increased rent for each rental period for at least 12 consecutive months. If yes, the increase is deemed not void.
- For any defect, s.136(2) asks whether one year has passed since the increase was first charged. If yes, the increase is deemed lawful.
The Act does not say how s.135.1 treats a run with a missed month or a partial payment. If your ledger shows gaps, treat that line as unresolved; the answer would come from a Landlord and Tenant Board decision, not from the text.
Was the increase challenged at the Board within that first year?
⚠️According to the Residential Tenancies Act (s.135.1, in force July 21, 2020), the rule also reaches increases first charged before the Protecting Tenants and Strengthening Community Housing Act, 2020 received Royal Assent, as long as the Board had not finally determined the increase’s validity before that day (s.135.1(5)). An old line on the roll is not outside the rule just because it predates the amendment.
Sorting the roll into three piles
Once every line has been through the three questions, it lands in one of three places.
- Locked in. The increase was first charged more than a year ago and no application put it in issue within that year. s.136(2) deems it lawful. For a notice defect, s.135.1 also deems it not void once 12 consecutive months were paid, and s.135.1(3) treats s.116 as complied with. The current rent on that line is the base you work from.
- Still open. The increase was first charged less than a year ago, or the payment record is broken in a way the Act does not address. The tenant can still apply, and the increase may still be void.
- In dispute. An application putting the increase in issue was made within the year. Neither deeming rule applies; the Board decides.
Separately from the deeming rules, s.136(1) does the same thing for the rent figure itself: rent charged one or more years earlier is deemed lawful unless an application within one year after that amount was first charged put its lawfulness in issue.
Sizing an open line: the Board’s own worked example
For a line that is still open, the exposure is a refund claim. A tenant or former tenant can apply under s.135(1) for money collected in contravention of the Act, using Form T1, Reason 1, “My landlord charged me an illegal rent, which I have paid.” Under s.135(4), no order can be made on an application filed more than one year after the money was collected, and the T1 instructions tell tenants to claim what they were overcharged in the last 12 months.
According to the Landlord and Tenant Board’s T1 instructions, the arithmetic looks like this. A tenant paying $800 a month was told on January 15, 2015 that rent would rise to $820.80 on February 1, 2015. He paid the new rent from February to November but believed he should have stayed at $800, because he had not received a proper 90-day notice and the amount was above the guideline. He applied on November 18, 2015. Over the 12 months he paid $9,808 against $9,600 at the old rent, and claimed the $208 difference.
One cap frames the upper end. The T1 instructions state that the most the Board can order on a claim is $50,000, and that once the Board issues its order, any claim above that amount is gone. That tracks s.207(1) and (3) of the Act.
Exempt from the guideline is not exempt from the notice
The unit that looks most alarming on an inherited roll, the one with a large jump, may be the one with the least to worry about on the amount. Section 6.1, in force December 6, 2018, takes certain units out of s.120 (the guideline) and several related sections: units in a building, or an addition, no part of which was occupied for residential purposes on or before November 15, 2018, and qualifying self-contained units created in a detached, semi-detached or row house after that date. A tenancy agreement entered into on or before November 15, 2018 keeps that particular tenancy outside the exemption (s.6.1(4)).
What s.6.1 does not touch is just as important for your audit. Sections 116, 119, 135, 135.1 and 136 are not on its list. So for an exempt unit, “above the guideline” is not a defect at all, but an increase taken without 90 days’ written notice is still void under s.116(4), and the one-year deeming rules run exactly as they do for any other unit. And if a tenant disputes the exemption, s.6.1(6) puts the onus on the landlord to prove it.
💡 My view, from the landlord’s side of the table: s.135.1 is a cure, not a method. It exists to stop old notice defects from unravelling settled rents; it is not a reason to skip the notice and wait out a year. If an increase on the roll is still open, the Act already says what to do: give a new notice before taking the increase (s.116(4)). And keep the two 12-month counts apart. The s.119 gap runs from the date of the tenant’s last rent increase and controls when you may raise the rent next. The s.135.1 count is 12 consecutive months of payment of a void increase. Whether a void increase resets the s.119 date is not spelled out in the Act, so I would time a fresh notice so that it works under either reading.
Three things outside the audit
- Who answers for money the seller collected. s.135(1) lets a tenant apply for an order against the landlord, superintendent or agent who collected or retained the money, and the s.2(1) definition of landlord includes successors in title. The Act does not spell out how those fit together for overpayments collected before you owned the building, so put that question to your real estate lawyer while the agreement of purchase and sale can still address it.
- Agreed increases under s.121. Relief for an increase a tenant agreed to in exchange for work or services the landlord did not deliver runs under s.122, with its own two-year limit, and s.136(3) preserves it. It is a separate track from the notice and guideline defects above.
- Prosecution. Charging rent greater than the Act permits is also an offence under s.234(x). That is an enforcement route separate from a tenant’s refund application at the Board.
Late Fees, NSF Charges, Key Deposits: What Can an Ontario Landlord Legally Charge a Tenant Beyond Rent? →How Ontario Landlords Legally Raise Rent: Guideline, N1/N2 Notices, and Exemptions Explained →Beyond the LTB: What Ontario’s Rental Housing Enforcement Unit Can (and Can’t) Do →First-Time Renter Guide →
Frequently Asked Questions
I’m buying a fourplex and one tenant’s increase was first charged nine months ago with no notice. What should I do?
That increase is still void under s.116(4) and inside the one-year window in which the tenant can apply, so treat it as open, not locked in. The Act’s own fix is a new notice before taking the increase (s.116(4)), which means at least 90 days’ written notice on the Board’s form. Raise who carries the risk of a refund claim with your real estate lawyer before closing.
If a tenant moves out and a new tenant signs a new lease, does the one-year clock carry over?
s.135.1 and s.136 are written about the tenant who paid and the date an amount was first charged; neither section addresses a change of tenant, so I will not fill that gap. What the Act does say is that for a new tenant under a new tenancy agreement, the lawful rent for the first rental period is the rent first charged to that tenant, subject to s.111 (s.113).
Does a basement unit created after 2018 still need 90 days’ notice for a rent increase?
Yes. s.6.1 exempts qualifying units from the guideline in s.120 and several related sections, but s.116 (90 days’ written notice) and s.119 (12 months between increases) are not on its list. An increase on such a unit without proper notice is void under s.116(4) like any other, and s.6.1(6) puts the burden of proving the exemption on the landlord.
What should I ask the seller for about past rent increases?
For each unit: copies of every notice of rent increase given, the date each new amount was first charged, the payment ledger since then, and any Landlord and Tenant Board application involving the rent. For a unit you are told is exempt from the guideline, ask for evidence of when the building, addition or unit was first occupied, since s.6.1(6) puts that onus on the landlord.
Is the 12 months between rent increases the same as the 12 months in s.135.1?
No. s.119(1) requires at least 12 months to have elapsed since the tenant’s last rent increase before the next one. s.135.1(1) asks whether the tenant has paid a void increase for at least 12 consecutive months; it is a cure for a notice defect, not a scheduling rule.
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