Rent cap loophole? Halifax-area landlords defend use of fixed-term leases

A generic rent sign in front of a home. (Shutterstock)

HALIFAX -

Some Halifax-area landlords on Monday defended their use of fixed-term leases as necessary to recoup costs under Nova Scotia's rent cap, despite criticism the leases help property owners skirt the rules.

Their comments to a legislature committee were in reaction to a government bill that would extend the five per cent cap on rental increases to the end of 2027.

Opposition parties and housing activists say the bill's failure to address fixed-term leases has created a loophole that allows large corporate landlords to boost rents past five per cent for new tenants. However, smaller landlords told the committee on Monday that they too benefit from fixed-term leases, which they said help them from losing money on their investment.

Jenna Ross, of Halifax-based Happy Place Property Management, said her company started implementing fixed-term leases "because of the rent cap."

"Rent is what we need to invest in our properties and pay our bills," Ross told the law amendments committee. "Insurance, property tax, mortgages -- all of these costs have gone up and up far beyond what can be raised under the current rent cap."

Unlike a periodic lease, a fixed-term lease does not automatically renew beyond its set end date. The provincial rent cap covers periodic leases and situations in which a landlord signs a new fixed-term lease with the same tenant.

However, there is no rule preventing a landlord from raising the rent as much as they want after the term of a fixed lease expires -- as long as they lease to someone new.

Ross said landlords under her small management company are able to set rental amounts through new fixed-term leases. "We almost do it exclusively unless our landlord's request a periodic lease," she said.

Landlord Yarviv Gadish, who manages three properties in the Halifax area, called the use of fixed-term leases "absolutely essential" in order to keep his apartments presentable and to get a return on his investment.

Gadish said that without the option under the current cap "I would just not be able to make it," because of costs such as heating that have skyrocketed and property taxes that have more than doubled.

"I would really consider moving out of the market as many small-time people like me will do. This will leave it for the big sharks."

He added that fixed-term leases at least give landlords like him a "measure of control."

Margaret Anne McHugh, co-chair of tenant advocacy group ACORN's Dartmouth chapter, told the committee that the rent cap is ineffective and has simply made evictions "easier and faster at a time when we have a record number of people sleeping on the streets."

The current rules, she said, encourage landlords to evict tenants on fixed leases because by doing so they can jack up the price.

"Fixed-term leases have made Nova Scotia the eviction capital of Canada," McHugh said. "The rent cap is meaningless as long as landlords can continue to get around any security of (rental) tenure with a fixed-term lease."

As it stands, the bill would seem to satisfy landlords but provides little for tenants, she said.

Meanwhile, proposed changes to the Residential Tenancies Act would also allow landlords to issue eviction notices after three days of unpaid rent instead of 15 days, while tenants would be prohibited from subletting units for more than they are currently paying.

As well, the bill proposes clearer conditions for landlords to end a tenancy, such as criminal behaviour, disturbing fellow tenants, repeated late rental payments and extraordinary damage to a unit.

Following the public presentations Monday, the governing Progressive Conservatives used their majority on the committee to return the rent cap and tenancy act bills to the legislature without amendments.

This report by The Canadian Press was first published Sept. 16, 2024.

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