Trust loses appeal over rent increases: Court says landlord should have stopped collecting charges
One of Canada's largest landlords has lost its appeal against a group of Toronto tenants who said they were overcharged rent since 2023 to pay for upgrades to the building.
According to a Divisional Court decision released last week, CAPREIT (Canadian Apartment Properties Real Estate Investment Trust) and residents in a 427-unit building at 100 Wellesley St. E.agreed at the Landlord and Tenant Board (LTB) to rent increases to last for 10 years to cover capital expenditures, starting in 2013.
Court documents show those expenditures included renovations to the parking garage and common areas. But while CAPREIT began lowering the above-guideline increase (AGI) amount in 2023, Divisional Court ruled that the landlord should have stopped charging it altogether, and ordered CAPREIT to pay costs to the 16 tenants who brought forward the case.
CAPREIT owns more than 45,000 apartment units and townhomes across Canada and the Netherlands worth some $14.5 billion. Neither CAPREIT nor its lawyer Kevin Lundy responded to the Star's requests for comment. Karen Andrews, a lawyer with the Advocacy Centre for Tenants Ontario representing most of the tenants in the case, said shebelieves this case is of great public interest because she suspects hundreds of thousands of renters in Ontario are paying AGIs.
"Many landlords don't get to taking them off," she said, because tenants don't know they are meant to be temporary. In Ontario, landlords can apply to the LTB for AGIs to cover certain capital expenditures, such as major building upgrades or repairs.
If approved, they can raise rents in rent-controlled apartments beyond the regular provincial limit. For example, Ontario's rent increase guideline for 2026 is 2.1 per cent, so a tenant with a three per cent AGI this year would have a rent increase of 5.1 per cent.
The AGI remains part of the tenants' rent for the "weighted useful life period" of the upgrade or repair, according to the Residential Tenancies Act (RTA).
AGIs of more than three per cent are spread over more than one year. In the case of the 100 Wellesley St. E. tenants, CAPREIT and the renters settled the AGI proceedings at the LTB by agreeing to an 8.3 per cent AGI, phased in over three years, starting in 2013, the court's decision notes.
The decision says "AGI increases are temporary and are permitted to continue for the duration of the 'weighted useful life' of the expenditure, which the parties agreed was 10 years."
After 10 years, CAPREIT decreased the tenants' rents by the amount of the first increase. However, tenants argued it should have reduced the entire 8.3 per cent increase at once.
The renters then filed a complaint with the LTB, saying they were entitled to "recoup unlawful rent, that is, the excess amount the landlord charged them by failing to decrease their rent all at once," the Divisional Court decision says. The LTB sided with CAPREIT in a 2024 decision, finding the RTA did not specify how rent reductions must be applied, and a "common sense approach" would suggest the landlord was entitled to phase them in.
Tenants then requested a review, and the LTB sided with them in a 2025 decision. It found the board seriously erred in its 2024 decision, and that the terms of the 2013 agreement required the landlord to reduce the rent by the entire increase 10 years after the first increase.
The landlord then appealed to Divisional Court.
Page 1 of 3In its decision released last Monday, the court said the LTB review was correct to side with the tenants, with Justice Lisa Brownstone writing that the language in the 2013 order "is not ambiguous."
"As the review decision noted, and the parties concede, the RTA requires every order that approves an AGI to specify a date on which the rent will be reduced," the decision reads. "The order contained the required legislated elements," it continues. "It specified that the rent reduction was to occur, if a tenant who occupied the rental unit on the date of the increase continued to occupy the unit on the reduction date."
However, Brownstone said the determination of this case "rests on the interpretation of the 2013 order," and therefore the court doesn't need to determine "the broader statutory interpretation question of whether phased-in rent reductions are permitted by the legislation."
The decision adds that if a landlord fails to properly reduce the rent, it is tenants who "bear the burden" of applying to the LTB to assert their right.
The court ordered the landlord to pay the tenants costs of $5,000, including disbursements and HST. Andrews and co-counsel Rosalea Thompson told the Star they negotiated with the landlord so that whichever side won would pay the other $5,000 in costs, and the court agreed.
Thompson said the case shows how difficult it is for tenants who believe they are paying unlawful AGIs "to assert their rights," noting they have a one-year limit to challenge the rent. Andrews added that many tenants, including in this case, are too afraid to come forward.
"People are intimidated because there isn't really a lot of affordable housing out there," she said. "People will just tolerate it because they're so afraid of fighting with their landlord."
CREDIT: Manuela Vega Toronto Star