Kerri-Lynn McAllister was shocked last month to receive notice of an almost 10 per cent increase — $150 a month — on the downtown condo she and her boyfriend had been renting for $1,625.

She was even more surprised to find out the hike — three times what’s allowed for most apartments under provincial rent controls — was perfectly legal.

“I thought this was wrong because we were protected under the Landlord and Tenant Act,” says McAllister, 27, who lives in a 700 square foot condo near Adelaide St. and University Ave.

“I was shocked, and all my friends who live in condos were shocked, to find out that we are powerless,” said McAllister, who works for a Canadian mortgage rate comparison website.



The now-renamed Residential Tenancies Act sets out tenant protections for all rental units across Ontario, but rent control provisions only apply to buildings occupied before Nov. 1, 1991.

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That’s turned out to be great news for condo investors, allowing them to pass on escalating maintenance fees and other costs almost directly to their tenants.

But for a growing number of condo tenants, it’s making for an uncertain future.

Some in the hugely popular Maple Leaf Square area south of Union Station have seen rents for two-bedroom units spike from $2,000 to more than $2,500 per month just in the last three years.

Downtown condo realtor Andrew la Fleur estimates condo rents in the core have jumped 10 to 15 per cent just in the last year because of the perfect storm now hitting Toronto’s downtown.

Although there have been 32,000 new condo units built in the former City of Toronto over the last five years, it hasn’t been enough to keep up with demand from people, like McAllister, willing to pay a premium to live close to work and subway lines.

Tighter mortgage lending rules and out-of-whack house prices have forced many would-be buyers to rent longer, which is also contributing to a shortage of prime rentals.

Even the way new condo buildings come on stream is inadvertently contributing to big rent hikes.

New buildings occupy from the less desirable bottom to the top, so owners on lower floors tend to discount rents for the first year to entice tenants, says Sharon Golberg of DASH Property Management, which oversees more than 250 condo units for investors.

That can lead to a significant jump in rents when the lease is up a year later, to better reflect what’s being charged in the area. As well, maintenance fees can typically jump 50 to 80 per cent from those advertised by developers marketing the building three or four years earlier, notes Golberg.

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The spike in investors’ costs — and rents they charge — can be particularly pronounced in buildings with pools as real operating costs kick in.

Katherine Paliwoda runs seminars for condo investors, who she says are generally shocked to find out the freedom they have to raise rents.

While she stresses that provincial laws are weighted in favour of tenants, she’s had condo investors ask if they can jack up rents to get rid of tenants they don’t like.

“There is no requirement (under the Act) to advice prospective tenants that their unit isn’t covered by rent controls. That is a sore spot with me,” says Paliwoda.

Realtor Andrew la Fleur calls the ability to impose rent hikes of anywhere from $50 to $5,000 a month an investors’ “secret weapon.”

“Wow. Let that sink in for a minute,” he says in a recent blog.

But that’s not quite true, says Kimberly Sears, client relationship manager at DASH, who alerted McAllister, by email and letter as required by law, that she was facing a rent hike because of increases in costs her condo owner was facing.

“We’re not trying to muscle people out of their places,” says the affable Sears, who says she’s had a number of tenants hand in their notice, only to revoke it two weeks later when they realize that high condo rents are now the norm downtown.

Sears and the condo’s owner agreed.

“I might have to go through the same thing next year,” says McAllister, who’s now quietly hoping all those condos yet to sprout up downtown will help drive rents down.

Correction - April 25, 2013: This article was edited from a previous version that mistakenly said that almost 90,000 new condo units were built in the former City of Toronto in the last five years.