Rental Agreements: Tips for First-time Landlords
Congratulations! You just bought your first Vancouver rental property, and are looking forward to the extra income your investment will provide. Or perhaps, you have owned your property for a while and are now considering renting as a way to help balance your budget. Either way, you have many things to consider before you can begin receiving rent cheques.
The Rental Agreement
The most natural place to start is the rental or tenancy agreement. The standard tenancy agreement that you can find on the Government of BC website should be your first stop. Every tenancy must have a written rental agreement and both parties - tenant and landlord must sign and date.
What happens if a tenant moves in without an agreement in place? Then the standard tenancy agreement takes precedent and becomes enforced - yes, even if no paperwork or signatures were given or received.
Once signed the landlord then need to provide a printed copy to their tenants within 21 days of entering into the agreement.
How long will the tenancy agreement be in place? In other words, how long will the tenant be renting the property for?
The two options are:
- Fixed term. This is for a specific period of time. For example: a year, a month or a week. Regardless of the length of time the tenancy can not end before this fixed duration (except in special circumstances).
- Periodic. This is a tenancy that does not have a specific end date. The rental tenancy would simply continue until the landlord or tenant serve notice, or both decide to end the tenancy. For example, a month-to-month tenancy.
Often times a tenency agreement will be written up that states a duration of a 1 - year rental that renews on a monthly basis indefinetly - or until terminated by either party.
Another thing to consider after reading over the standard agreement is that you have the option to include an addendum. An addendum is an extra page that is added to the standard agreement that contains additional terms. The addendum is an opportunity for the landlord to include specific rules such as cleaning duties, the banning of overnight guests, or anything else that could be used to outline, clarify and enforce. Keep in mind that the terms of the addendum need to be reasonable and fair, and can be challenged in court if they are otherwise. If a judge finds that a term in the rental agreement grossly favours one party it might not be enforceable - even if the tenant signed the agreement years before.
Many landlords use the addendum to include rules on smoking, vaping, etc. It is important to have these rules in place and in writing before the tenant moves in to ensure that you are protected to the fullest extent of the law.
The two main types of deposits are security or damage deposits and pet deposits. As a landlord you can only request half of the first month's rent for either of these and the landlord can only request a deposit for one - not both.
The deposits are seperate and can only be used for the associated damage. The pet deposit can only be used for damage that a pet has caused and likewise, the security deposit can only be used for damage that is above and beyond the regular use of the property.
You have 3 cats? No worries, the pet deposit is capped at 1/2 months rent and does not increase based on the number of pets.
A landlord can also ask for a key deposit. A key deposit is for access to buildings other than the main rental suite. A landlord may consider charging a key deposit for access to a storage shed, for example, or a garbage room. This deposit is used to help cover the cost of changing the locks if the tenant fails to return the key at the end of the rental term and can not be an exorbitant charge.
If a tenant fails to pay either a security deposit or a pet damage deposit within 30 days of entering into the rental agreement the landlord can serve notice to end the tenancy.
All deposts must be returned to the tenant, with interest*, within 15 days of the end of tenancy, unless the tenant agrees in writing that you may keep the deposit. In order to return the deposit however the tenant needs to give the landlord their forwarding address in writing so that the deposit can in fact be returned.
*Typically interest isn't paid as it can be too cumbersome to calculate. If a landlord chooses not to pay interest then both parties need to initial the tenancy agreement that stipulates that interest will not be paid on any of the deposits.
A landlord can simply increase the rent according to the rental market right? NO! Even if a tenant agrees to pay more they will have recourse so do not raise a tenants rent arbitrarily.
Rent increases are strict and are set each year by the provincial government. Historically it was 2% + the rate of inflation but the current government has done away with the 2% in order to provide more affordable housing and is now based on the rate of inflation soley.
For 2020 B.C's annual allowable rent increase has been set at 2.6% - which is the province’s current annual rate of inflation.
Even if your tenant is paying below market prices, or you have not issued a rent increase in 2 years - you can only issue a rent increase once every 12 months and at the rate prescribed.
As a landlord it is important to document everything. It goes without saying that the Tenancy Agreement needs to be written in accordance to Tenancy Act of BC, and that any good landlord will be kept abreast of new changes to the Act. It's also good business to have proof of the property's condition prior to the tenant move-in and proof of condition upon move-out. Keep this mind: A tenant can apply to challenge the amount withheld by the landlord for up to two years of the end of their tenancy!
So you can see that 'document, document, document' would be a wise adage. A good way to document is to take pictures. A prudent landlord does pre and post inspections with the tenant to ensure that no issues arise at a later date and that reasonable expectations are set.
We have just touched on the subject of tenancy agreements. It is imperative for a landlord to know and understand the Tenancy Act so that they can ensure that they are not in violation of any of the rules. Visit the BC Gov website to understand more about your rights as a landlord.
Talk to a VRE specialist today to learn where the hot markets are and how you can begin to grow your real estate portfolio. #landlord