Tenants feel the pressure of special promotion tax

Tenants attorney Issa Agon stands in front of one of the apartments he represents in Vancouver on July 30.Jimmy Jeong/The Globe and Mail

Trish Everett had been living in her apartment on Nelson Street for 12 years when she received notice from her landlord that she and fellow roommate, Zachary Commont, might face rent increases to help the landlord cover the cost of building updates.

If allowed, roommates will see their rent increase by an additional 3 percent each year for three years, on top of the usual maximum increases already allowed by law.

Their West End Vancouver building is 20 years old, and the repairs, they say, include updating the lobby with marble finishes and an energy-efficient garden lighting system. Although the vacated units are routinely renovated in the building, no upgrades are planned for their unit or any other occupied units to their knowledge. Since tenants have banded together and got help from the Vancouver Tenants Union (VTU) to fight a landlord’s increased capital expenditure, technically called an additional rent increase (ARI), they say the mood between management and tenants has become tense.

“We had perfectly fitting tiles, perfectly fitting finishes on the lobby walls, and now we have a fancy fancy lobby that nobody in the building asked for,” she says.

VTU’s volunteer advocate, Issa Agon, represents about 300 tenants in three West End apartment blocks all facing the same predicament, which is very stressful and sees that they are on the losing end — even if they are going to win, he says, because of the time and effort required to go through a very complex process. Filled with legal jargon and hundreds of pages of documents. He says fighting increases is like going to small claims court.

An ARI law introduced in British Columbia last year allows landlords to reclaim money used for eligible repairs and upgrades to buildings. Landlords are required to notify tenants and then attend Residential Tenancy Branch (RTB) hearings to plead their case, while also giving tenants the opportunity to present evidence and challenge the increase. Mr. Agon says the three West End owners use lawyers to represent them.

Mrs. Everett calls it the David and Goliath battle where the tenants have to provide expert witnesses if necessary, to prove that the landlord did not perform the necessary maintenance to avoid the expenses being claimed, for example.

ARI’s are allowed up to a maximum of 9 percent, in stages over three years, in addition to the usual maximum rent increases set by the county. At the moment, the annual increase is 1.5 percent, but due to inflation some expect it will rise next year. Assuming the annual increase goes up to 2 per cent, and the landlord’s request to add 3 per cent on top of that for repairs is approved, Ms. .

However, it does build up, says Mr. Agon.

Over the next three years, it’s likely to reach 15 percent or more [total] According to Mr. Agon. “If the average price for a one-bedroom is $2,200, that’s an increase of $330 a month. We’re talking about $3,000 or $4,000 a year, maybe more. So that’s not small.”

Everett says there is no indication that the capital spending increase is temporary until the cost is paid off.

“This was negotiated to allow landlords to get some cash back when they have to put in a significant amount to rebuild a roof or replace windows. I can understand that this is a great investment. I understand that, I sympathize,” Ms. Everett says.

“But at some point they will have recovered that cost, and the tenant’s rent will never go back. There is no expiration date for this. So at some point, the fancy hotel lobby, gym and fancy lights in the garden will have paid off, but we will continue to pay for it indefinitely. named “.

The tenants interviewed say the new legislation is so complex that they have little legal advice, and that advocacy groups like the VTU are already overblown. Details from the other cases heard at RTB have not been made public, so it lacks information about the previous.

Landlords are allowed to apply for rent increases to cover repairs that were incurred in the previous 18 months, and which likely won’t happen again for at least five years. Reasons for the increase include the installation or repair of a major system or component, such as the roof, for example, in order to maintain the building. Other reasons include improved energy efficiency and security.

The landlord has to go through many hoops to prove that they need to raise the rent for capital expenditures. Both sides are burdened with the cumbersome and lengthy process. A big part of the problem, Mr. Agon said, is that the system is not set up to deal with the dozens of tenants trying to get a fair hearing. The 79 tenants of the 109-unit Barclay Street building in Joani Bisson were served with the increase. There was a preliminary hearing and a first hearing, which was postponed to a later date to give the owner time to show more evidence. Like others, a decision has not yet been reached due to the postponement, and so they are waiting.

Ms Besson said they were not given accurate information and a handful of tenants attended the first hearing.

“None of us knew what was going on,” she says. “His property has increased in value in the last five years… Whoever of us rents doesn’t own a building. We don’t have any shares and we are required to pay the bill.”

Jennifer Kalita, who lives on Harrow Street and works as a copywriter, describes the process as a “nightmare,” taking time away from the care and work of sick family members. She pays $1,690 for a one-bedroom. It says the units are now available for rent at $2,300. The next hearing will take place in September, seven months after the first hearing. Many of the tenants in her building speak English as a second language. There was fear and confusion among a lot of tenants about ARI, so not everyone signed up to oppose it.

“It was so overwhelming,” she said. “The terminology was legal, very confusing, a multi-page document, and it wasn’t clear what was going on. All we could be sure of was that the owners wanted a 9 percent increase over three years.”

A Ministry of Housing spokesperson said in an email response that since the capital expenditure increase was introduced on July 1, 2021, they have received 199 applications from landlords as of July 28 this year. Of those, 30 have undergone hearings and their files have been closed. Of those 30 applications, 25 landlords got approval to give their tenants an additional rent increase.

Owners cannot claim work caused by deferred maintenance, or which can be covered by a grant, for example.

The ministry noted that the changes are the result of the Rental Housing Task Force, which also eliminated an additional 2 percent in 2018 on top of the inflation rate (the landlord continues to question the move). In 2018, the maximum increase in rent was 4 percent.

If the goal is to ensure a secure long-term rental, it benefits tenants if the buildings are maintained and landlords are incentivized to hold onto them. If operating costs rise significantly, LandlordBC’s CEO says, the sale will take place.

He says landlords are dealing with inflation and raising interest rates. Prior to these challenges, the county scrapped the 2 percent increase on top of inflation. And then, they dealt with a rent freeze during the pandemic. It will not be known if the maximum rent increase for 2023 responds to the inflation rate for a few months. Mr Hutniak said there was a “very real risk” that it might be cut.

“We appreciate that renters, like all British Columbians, face challenges these days, but renting safe and healthy housing comes at a cost.”

He points out that there has been no significant response to ARI by owners. RTB is so crowded that the process from start to finish probably takes about a year.

“Overall, while we support the ARI process, it is by no means a panacea for our sector, and the broader rental housing system.”

It is, he says, a “necessary tool” to help maintain the current stock of apartments.

“The alternative is to let it age and redevelop, which frankly would make more economic sense and generate more units.”

In the meantime, the VTU will continue to fight, with many cases they can handle. Mr Aggoune said the legislation does not consider that tenants have limited means to properly challenge the increase.

“This is happening in the midst of a housing crisis, in the midst of an inflation crisis,” Mr. Agon said.

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