Landlords Not Happy about HST and are Asking Tenants to Leave
One of the benefits of The HST Blog is that I receive information from followers and can share their real life stories about living with harmonized sales tax (HST) and the negative effects of HST.
I have received an email from a follower, B, about her mother being asked to leave a rented condominium unit by a landlord. B has informed (and I have changed a few details to protect B [look for brackets]):
My mother has rented a condo for the last 3 1/2 years in [Ontario]. She does not have a lease but merely an agreement with the landlord to pay monthly [rent]. The landlord showed up for the rent check on Sat May 1, 2010. At that time he informed her that [the landlord's] family would be moving into the condo and he gave her a brief letter and he signed it. He gave her 2 months notice that she has to be out by (coincidentally) June 30, 2010.
I have heard that landlords can only increase rent by a certain percent (2.1% ?) but this is how some landlords can get around that. I started looking for some rentals in [Ontario] online as soon as my mother informed me about this [meeting with her landlord]. I did phone one person that was advertising a sublease for 3 months for $1100.00 per month. He informed me that after the sublease the rent was being increased to $1270.00 per month.
What this real life story tells us is that HST is affecting the decisions of landlords and negatively impacting tenants (already). Rentals of residential real property are not subject to Ontario retail sales tax (ORST) or British Columbia social services tax (BCSST). Rentals of residential real property are exempt for goods and services tax (GST)/HST purposes. This means that landlords are not entitled to claim input tax credits and cannot recover GST/HST paid on purchases. HST (and GST) would be payable on landlord's costs such as electricity, heating fuel, landscaping, snow removal, repairs, management fees (paid to third parties), security, supply and install fixtures (carpets, paint, cabinets, etc.), etc.
As a result, if a landlord's costs of operating the property increase due to HST, then the landlord will want to pass those increased costs on to the tenants. However, the landlords may not be able to pass on the costs to existing tenants (under the landlord-tenant laws). Some landlords are asking the existing tenants to leave so that they may charge new tenants a higher amount of rent. Under the law, landlords are limited in the reasons for asking a tenant to leave. One of the acceptable reasons for asking a tenant to leave is that the landlord is moving into the residential real property unit.
What we are learning is that HST may result in homelessness of individuals as landlords ask tenants to leave. HST is negatively affecting some seniors on fixed incomes who have been asked to leave their rented homes. It may not be easy for individuals to find new affordable housing. In addition, moving ones possessions requires friends/family or a moving company (which costs money).
What we might see is landlords increasing rents and tenants having to accept the higher costs (if they can afford the higher rent) even if the rent increase is contrary to the law.
These negative effects cannot be solved by a one-time cheque.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
Correct me if I'm wrong, but rent is not subject to the HST if used in a long-term residential settings, and since land lords (if they are GST/HST registered) can get refunds on the GST they have spent, how does the HST impact these people? Sounds to me like it's an excuse to raise rents.
Cyndee adds: I need to correct a misunderstanding - landlords do not collect HST on rents relating to residential real property (e.g. an apartment) because the transaction is exempt. As a result of the exempt status of the supply of the residential real property, the landlord does not recover the GST/HST that they have spent (on things like repairs, renovations, painting, maintenance, landscaping, snowremoval, heat, etc.). Most landlords are not GST registered because of the exempt status of their supplies. Even if they were registered for GST/HST purposes, they cannot cliam input tax credits and recover GST/HST paid in respect of the exempt rental activities.
Hi Cyndee,
Just an update about my 81 year old Mother who had to move by June 30th because her landlord said a member of the family was moving in.
I got my Mother another apartment in the same building. I am at her place this weekend and low and behold, the apartment she had is advertised for rent on the board. It gives the same phone number as her landlord and his first name. There’s really no way to prove he gave her notice due to the HST though because he can just say that the family member changed their mind. Mums girl friend is phoning to see how much he’s asking for the apartment but there’s no answer at the number right now. It will be interesting to see how much he increased the rent!
This is excatly the situation I am in and have no choice but to get rid of my existing tenant and hoping the new ones can afford the increased rent.
I see no benefit of the added taxes (HST).