Interest Rates on Deposits

As we covered in our series on deposits there is interest on both pet damage deposits and security deposits and it is very easy to figure out how much the interest is using the Residential Tenancy Branch interest calculator on their site. The real question here is how do they figure out the percentage each year?

We have to search in the Residential Tenancy Regulations for this answer. Regulation 4 in part 1 states that the interest paid on deposits is 4.5% below the prime lending rate of the principal banker to the Province on the first day of each calendar year, compounded annually. What does this mean for you? Unless the prime rate exceeds 4.5%, there will continue to be no interest payable on security deposits for tenancies that began after January 1, 2009.


-- Hunter Boucher and Al Kemp

More Rental Housing Needed

The Federation of Canadian Municipalities (FCM) recently released a report that suggested Canada’s economic recovery hinged on the need for more rental housing. The FCM report suggested the federal government lower barriers to investing in order to sustain the country’s economic recovery.

Berry Vrbanovic, FCM President said, “To keep our economy growing when fewer Canadians are able to buy new homes, we need to make it easier to invest in and expand the rental housing market. New rental construction will give cash-strapped young families, new immigrants, and an aging population housing options they can afford, and protect construction jobs as governments turn off the stimulus taps.”

According to the report, Canadians are facing high personal debt loans, tighter mortgage rules and an uncertain economic future, which impedes the ability for Canadians to buy new homes. As a result, new home starts in Canada have declined and Canada’s housing sector is producing 50,000 fewer construction jobs than in 2007. 

Investing in housing is one of the most effective ways to create jobs and boost economic activity, according to the federal Department of Finance. In order to experience growth, the renal market must overcome systematic barriers. The condo-building and home-buying boom has increased land prices so high that new residential construction has been pushed out. Rental housing only accounts for 10 per cent of new residential construction in the past 15 years, despite one-third of Canadians being renters. The number of rental units across the country decreased between 2001 and 2006, namely due to the demolition and conversion of rental properties. 

“Municipalities are doing their part to increase and preserve the supply of rental and affordable housing, providing tax exemptions, streamlining approvals and exploring alternative development standards, but we can’t do it alone,” notes Brampton mayor and co-Chair of the Big Cities Mayors Caucus (BCMC) Advocacy Working Group on Housing, Susan Fennell. 

The report, The Housing Market and Canada’s Economic Recovery, calls on the federal government to provide low-interest loans to finance new rental construction; provide incentives to lower rental costs through energy efficiency and reform the tax system to prevent the demolition of existing rental housing.

Short Cuts?

Landlords, like everyone else, are on the look out for the most efficient way to deal with their affairs. And in a perfect world, all of our shortcuts would lead directly to our destination. However, we don’t live in a perfect world, so sometimes it is necessary to do extra work to avoid what could turn into a disaster.

When renting out a building - usually a house or multiplex - that has more than one unit where utilities are not included, it would seem efficient to have one of the tenants put the utilities in their own name, and have them collect a share from the other tenants in the building. This would mean you would only have to deal with collecting the rent and no other money each month. This sounds great, but it opens you up for many other issues.

One potential disaster is that the utilities do not get paid by the tenant who is responsible for them, though the other tenants have been paying their share to the tenant who should be paying the bill. The end result is the utilities being cut off - and the tenants who paid their bills on time coming after you.

Or the opposite; the tenant who is responsible for utilities pays the full bill, but the other tenants decide that they’d rather not pay. Again, the tenant who paid the full amount of the utilities - or could only pay part of them seeing as s/he didn’t have enough money - will be looking to you to fix the issue.

The warning to heed? Unless the utilities are billed for one specific unit only, do not require any of your tenants to have the utility bills in their own name.

-- Hunter Boucher and Carly Ludwar