Your Building’s Property Taxes Dropped — Does Your Rent Have to Drop Too? Ontario’s Automatic Rent-Reduction Rule
Under the Residential Tenancies Act, a large enough tax cut lowers the lawful rent on its own. Here is the landlord’s year, month by month, from the tax notice to the one-year clocks that follow.
My building’s property taxes went down. Am I legally required to lower my tenants’ rent?
Yes, if two things are both true: the unit is not exempt under RTA s.6.1 (the post-November 15, 2018 exemption), and the building’s municipal property tax fell by more than 2.49% from the previous year. When both are true, it is not your call: under s.131 the lawful rent for every unit in the complex drops by itself on December 31 of that year, whether or not anyone sends a notice.
Source: Residential Tenancies Act, 2006, ss.6.1 and 131; O. Reg. 516/06, s.41 (Ontario e-Laws, consolidations current from September 21, 2026)
Picture the tax notice for your rental building sitting next to last year’s, and the new total is lower. The tempting read is that the saving is yours to keep. Ontario’s Residential Tenancies Act sees it differently: that envelope can start a statutory calendar that ends with a lower lawful rent on December 31, plus deadlines that run into the following spring and beyond.
I want to walk that calendar the way a landlord actually lives it, one station at a time, using only what the Act and its General regulation (O. Reg. 516/06) say. Where the text is silent, I will say so instead of filling the gap.
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The day the lower tax notice arrives: two checks before any arithmetic
s.6.1 switches off ss.131, 132 and 133 for two groups of units:
- units in a building (or an addition) where no part was occupied for residential purposes on or before November 15, 2018 (s.6.1(2));
- units in a detached, semi-detached or row house that had no more than two residential units on or before November 15, 2018, where the unit became a self-contained unit (own kitchen and bathroom, lockable entrance) after that date, and either the owner lived in another unit in the house when it was first occupied or it was carved out of previously unfinished space (s.6.1(3)).
Two qualifiers: a tenancy agreement signed on or before November 15, 2018 keeps the protections for that tenancy only (s.6.1(4)–(5)), and if the exemption is disputed at the Board, the landlord must prove it (s.6.1(6)).
Check 2 — did the right number fall far enough? The trigger compares this year’s municipal property tax with last year’s. O. Reg. 516/06 s.41(2) defines that term as taxes the municipality charges the landlord, including education taxes under Part IX, Division B of the Education Act, but excluding inspection charges for alleged standards breaches, emergency repairs by the municipality, capital-type work by the municipality, work or services tied to a by-law breach, penalties, interest, late fees and fines, amounts the municipality spent under RTA s.219 (vital services) plus its administrative fee, and any other municipal charges. Strip those out of both years first, then compare. The drop has to be more than 2.49% (s.41(1)); exactly 2.49% does not trigger anything.
ℹ️The definition in O. Reg. 516/06 s.41(2) is written for s.131 only. Section 133 and the s.43 recalculation speak of municipal taxes and charges, a different phrase; do not assume the exclusions carry across.
Same week: run the regulation’s formula on your own numbers
Illustrative example (invented numbers, not a real building): a 12-unit building in the multi-residential class, every unit at $1,800 a month. Municipal property tax goes from $40,000 to $36,000, a 10% drop. That clears 2.49%, so 10% × 20% = a 2% rent reduction. Each unit’s lawful rent falls by $36, from $1,800 to $1,764.
Same building, but the tax only goes from $40,000 to $39,100: that is a 2.25% drop, under the threshold, and s.131 does not reduce anything.
Same illustrative building, two ways the reduction can be measured
June 1 to September 15: the city’s notice to the landlord (buildings with 7 or more units)
Under s.131(4) the notice must be in writing in a Board-approved form and must state that rent is reduced, by what percentage and from what date; that tenants may apply under s.135 to recover money if the rent is not reduced; and that landlord and tenants have the right to apply under s.132 for a variation. Keep it: s.44 of the regulation requires a copy with any variation application.
October 1 to December 15: the city’s notice to every tenant
Practical consequence: by mid-December your tenants may be holding a document that names a percentage. If you plan to challenge that figure, the next two stations matter.
December 31: the reduction takes effect, notice or no notice
Read together, the effect is that the notice is a messenger, not the trigger. A building with fewer than 7 units gets no mandatory municipal notice, yet nothing in s.131 or s.41 exempts it from the reduction itself: s.131(1) applies to every residential complex whose tax falls by more than the prescribed percentage, unless s.6.1 takes the unit out. The same is true if a notice that should have been sent never arrives.
⚠️Fewer than 7 units? The Act does not require the municipality to send anyone a notice for your building (RTA s.131(3); O. Reg. 516/06 s.41(5)). That changes who hears about the reduction, not whether it happens: s.131(2) makes it effective on December 31 regardless. Unless s.6.1 exempts the unit, the comparison of this year’s tax notice against last year’s is yours to run.
By March 31 of the next year (or 90 days, if later): the s.132 variation window
s.132 lets a landlord or a tenant ask the Board to vary the reduction, but only on the four grounds in O. Reg. 516/06 s.42(1):
- (a) in the base year the municipality levied other charges on the landlord beyond the property tax that are not on the definition’s excluded list (a)–(f);
- (b) municipal property tax is not actually 20% (multi-residential class) or 15% (other) of the rent charged in the complex;
- (c) the notice has an error in the tax decrease or the rent decrease;
- (d) the tax went up or down again between the day the notice was issued and March 31 of the year after the reduction takes effect.
Deadline (s.42(2)): where a municipal notice is required (7+ units), the later of 90 days after you were given the notice and March 31 of the following year. Where no notice is required, the later of 90 days after the tax notice that produced the reduction was issued and that same March 31.
Evidence to file (s.44): municipal taxes for the reference year and base year; for ground (a), the other charges in both years; for ground (b), the rents charged in the complex; and a copy of any municipal notice. According to s.43, the Board recalculates using the actual decrease divided by total annual rents × 100; on grounds (a), (c) or (d), if total annual rents are not proven, it falls back to the s.41(3) formula. Any order takes effect on the same December 31 date (RTA s.132(4)).
💡 My own read: the 20%/15% multiplier is an assumption the regulation makes about your building, not a fact about it. The law gives the landlord no option to skip the reduction, but it does give one honest lever: test that assumption against your real rent roll under s.42(1)(b) before the s.42(2) deadline. If your numbers support the default, there is nothing to argue; if they do not, the window to say so closes, at the latest, on March 31 or 90 days after notice, whichever is later. Put the date in the calendar the day the lower tax notice arrives.
After that: the one-year clocks in ss.135 and 136
- s.135(4): no order is made on an application filed more than one year after the money was collected or retained.
- s.136(1): rent charged one or more years earlier is deemed lawful rent unless an application was made within one year of when that amount was first charged and its lawfulness is in issue.
How those two provisions interact for a missed s.131 reduction is not spelled out in the text, and I am not going to guess. If you are on either side of that question, it is one for a lawyer or paralegal and, in the end, for the Board. (For how the one-year deeming rule works on the rent-increase side, see the related article on s.136.)
Sidebar: the tenant’s separate route under s.133
Section 131 is not the only provision that connects taxes and rent. Under RTA s.133, a tenant may apply to the Board for a rent reduction because the municipal taxes and charges for the complex went down. This is an application, not an automatic adjustment, and it runs on its own rules in O. Reg. 516/06 s.45: the base year is the last completed calendar year before filing; decreases from an assessment appeal are subtracted in the calculation, except that an appeal decrease is not counted if the application is filed more than 12 months after the appeal decision (or if it concerns a tax year before 1996); and according to s.45(6), an order takes effect on the first day of the first rental period that starts on or after the filing date. The s.6.1 exemption switches off s.133 as well.
Auditing an Inherited Rent Roll: Which Improper Ontario Rent Increases Are Already Locked In →Ontario’s 2026 Rent Increase Guideline and Above-Guideline Increases Explained →The Property Tax and Rent Part of the Ontario Trillium Benefit (OEPTC): Who Qualifies and How Much →First-Time Renter Guide →
Frequently Asked Questions
I didn’t notice the tax drop and kept charging the old rent. What happens when I find out the next year?
Under RTA s.131(2) the reduction took effect on December 31 of the year the tax fell, whether or not any notice was sent, so the higher amount was not the lawful rent from that date. A tenant may apply under s.135 to recover money collected in contravention of the Act, but s.135(4) bars an order on an application filed more than one year after the money was collected, and s.136(1) deems rent charged a year or more earlier to be lawful unless an application was made within a year. The Act does not say how those rules combine for a missed s.131 reduction; that is for legal advice and, ultimately, the Board.
Our property tax went down because we won an assessment appeal. Does that count?
Section 131 and the O. Reg. 516/06 s.41 definition compare one year’s municipal property tax with the previous year’s and do not mention appeals specifically. Separately, s.42(1)(d) allows a variation application if the tax rises or falls between the notice date and March 31 of the year after the reduction. On a tenant’s s.133 application, s.45 subtracts appeal decreases but ignores them if the application is filed more than 12 months after the appeal decision; how a particular appeal plays out under s.131 is for the Board.
My building was completed in 2020. Do I have to reduce rent when taxes drop?
Not under s.131. RTA s.6.1(2) says ss.131, 132 and 133 do not apply to a unit in a building where no part was occupied for residential purposes on or before November 15, 2018 (the exemption has applied since December 6, 2018). If a tenant disputes it at the Board, s.6.1(6) puts the burden of proving the exemption on the landlord, so keep the occupancy records.
Does a tax-driven rent reduction affect my next guideline rent increase?
The Act’s wording is that the lawful rent itself is reduced (s.131(1)), not that the tenant receives a one-time credit. The rules on later increases sit in s.120, which limits increases in the rent charged during a tenancy to the guideline (capped at 2.5% a year by s.120(2)). How a specific future increase should be calculated is a question for a lawyer or paralegal, not something this article settles.
The city’s notice has the wrong numbers. How do I fix it?
O. Reg. 516/06 s.42(1)(c) lets a landlord or tenant apply under RTA s.132 if the notice contains an error in the tax decrease or the rent decrease. The deadline under s.42(2)(a) is the later of 90 days after you were given the notice and March 31 of the year after the reduction takes effect. File the two years of tax figures and a copy of the notice (s.44); any order takes effect on the original December 31 date (s.132(4)).
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