Under Section 131 of the Residential Tenancies Act (RTA), tenants are entitles to an automatic rent reduction when their landlord's property taxes have been reduced by more than 2.49% from one year to the next. The Town is required to send notices of rent reduction to landlords by September 15 and to tenants by December 15. While the tenant does not have to get permission from the landlord to automatically reduce the rent, it is recommended that tenants talk with their landlords prior to the effective date on December 31.
Eligible Properties
Rent can be automatically reduced for:
apartment buildings
duplexes and detached houses
"for-profit" cooperatives that are rented
mobile home parks and land lease communities
most private care homes
rented condominiums
rooming houses, boarding and lodging homes
Rent cannot be automatically reduced for:
commercial, industrial or recreational properties
non-profit housing cooperatives
non-profit housing projects
nursing homes
public housing
residential buildings where property taxes increase or do not change
some housing owned by educational institutions
vacation homes
Calculation
The RTA prescribes that if property taxes have been reduced by more than 2.49% between two consecutive years, the rent reduction is equal to the percentage decrease in property taxes from one year to the next, and then multiplied by:
20% for rental residential properties in the multi-residential property tax class, or
15% for rental residential properties in the residential or new multi-residential property tax class
Here is an example of a rent reduction calculation for a multi-residential complex that is currently paying $800.00 per month for rent:
Step 1: Determine Percentage of Property Tax Decrease
Previous Year Property Taxes = $10,000.00
Current Year Property Taxes = $9,150.00
Reduction in Taxes = Previous Year Property Taxes - Current Year Property Taxes = $10,000.00 - $9,150.00 = $850.00
Tax Reduction % = (Reduction in Taxes / Previous Year Property Taxes) x 100% = ($850.00 / $10,000.00) x 100% = 8.5%
Step 2: Determine Percentage of Rent Reduction
Based on the prescribed rate of 15% for residential or new multi-residential properties and 20% for multi-residential properties (as stated in the RTA):
Rent Reduction % = Tax Reduction % x Prescribed Rates (15% or 20%) = 8.5% x 20% = 1.7%
*Please note that Steps 1 and 2 are unique and separate, and that the percentage of the property tax decrease is not equivalent to the percentage of the rent reduction. The rate of either 15 or 20 percent must be applied to the property prior to calculating the value of the rent reduction.
Step 3: Determine Value of Rent Reduction
Rent Reduction = Monthly Rent x Rent Reduction % = $800.00 x 1.7% = $13.60
If a landlord or tenant wants to vary the amount of a rent reduction because they think the amount on the Notice of Rent Reduction is wrong, they may apply to the Landlord and Tenant Board to vary the amount. This action cannot stop the tenant from taking the rent reduction. Once the Board resolves the matter, the ruling would be effective December 31 of the year when the rent reduction originally took effect, and any overpayment or underpayment by the landlord or the tenant would have to be repaid to the other party.
Tenants who live in rental buildings with tax decreases of 2.49% or less do not receive a Notice of Rent Reduction from the Town; however, they may still apply to the Landlord and Tenant Board for a rent reduction.
The deadline for making the application to vary the amount of a rent reduction is March 31 of the year following the day the rent reduction took effect.
Contact the Landlord and Tenant Board if you have any questions or want more information about the rules for automatic rent reductions, exemptions, or making an application.
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