Archive for month: December, 2017
Important News for Landlords and Property Investors
Changes to tenancy laws, including amendments that limit the use of vacate clauses in fixed-term tenancy agreements and that limit rent increases between agreements with the same tenant take effect December 11, 2017
The Provincial NDP Government has just announced
changes to the Residential Tenancy Act – important news for property investors and landlords. As a landlord this means:1. Fix term tenancies/leases – new rules now apply providing tenants with more protection and limiting a landlords options for termination of tenancy and the raising of rents2. The only way to end a tenancy is for unpaid rent or utilities or if a family member or yourself intends to occupy the rental unit.3. These changes are retroactive and apply to all tenancy agreement in the Province of BC as of December 11th, 2017. These changes supersede any previous agreements you have in place (where the previous agreement may contravene the updated Act).This link will take you the Residential Tenancy Office website FAQ section. Familiarize yourself with the new rules so you don’t run into any issues.
READ MORE BELOW …
What changes have been made to B.C.’s tenancy laws?
Changes to the legislation include limiting the use of vacate clauses in new and existing fixed-term tenancy agreements, limiting rent increases between fixed term tenancy agreements with the same tenant, and strengthening the ability of the Residential Tenancy Branch to investigate and levy administrative penalties for serious repeat and deliberate non-compliance with tenancy laws or orders.
What are the changes related to Fixed-Term Tenancies?
A vacate clause requires a tenant to move out on the date the agreement ends. Landlords will no longer be able to include a “vacate” clause in a fixed-term tenancy agreement except in certain circumstances. These new rules will apply to both new and existing tenancy agreements.
Unless the landlord and tenant agree to another fixed term, the tenancy will automatically continue as a month-to-month tenancy under the same terms as the original agreement. This type of tenancy continues until one party serves notice or they both agree to end the tenancy.
In what kind of circumstances will a landlord still be able to use a vacate clause?
Effective December 11, 2017, fixed term tenancy agreements can no longer include a vacate clause requiring a tenant to move out at the end of the term unless:• The tenancy agreement is a sublease agreement; or• The tenancy is a fixed term tenancy in circumstances prescribed in section 13.1 of the Residential Tenancy Regulation. This Regulation specifies situations where a landlord or landlord’s close family member plans in good faith to occupy the rental unit
The ministry will monitor the use of these provisions, continue to consult with key stakeholders and may add new circumstances as necessary.
What are the changes related to rent increases?
A rent increase for a tenant remaining in a rental unit is limited to the maximum annual allowable amount and can only be increased once every 12 months. Rent can no longer be increased above that amount between tenancy agreements with the same tenant. Landlords must provide tenants with three full rental months’ notice of a rent increase and use the approved form.
Landlords are no longer able to apply for an additional rent increase on the basis that the rent is significantly lower than other similar rental units in the same geographic area.
I have an existing fixed-term tenancy agreement with a vacancy clause. What should I do?
You may want to have a discussion with your tenant or landlord regarding the intended use of the rental unit at the end of the fixed-term.
If you are a tenant, you will not be required to move out at the end of the term unless you are in a sublease agreement, or the landlord meets the specific circumstances identified in the Residential Tenancy Regulation. This Regulation specifies a situation where a landlord or a landlord’s close family member plans in good faith to occupy the rental unit (for example, if the landlord has rented out their home during an extended absence for work, school or travel but has firm plans to return on a particular date.
A tenant who wants to move out on the date originally agreed to in the tenancy agreement will need to provide one month written notice to the landlord. The tenant and landlord may also agree to end the tenancy on the date originally identified as the end of the term. A mutual agreement to end a tenancy (PDF) must be in writing and agreed to by both parties.
If you are a landlord and you intend to enforce the vacate clause under the specific circumstances identified in the Act or Regulation, you should advise your tenant. If the tenant doesn’t agree in writing to mutually end the tenancy and move out at the end of the term, you will need to apply for an order of possession through the Residential Tenancy Branch. At the hearing, the onus will be on you to clearly demonstrate to the arbitrator how you meet the allowable circumstances for a vacate clause.
Are there any other situations where a vacate clause in an existing tenancy agreement can still be enforced?
There are two additional situations involving existing fixed-term tenancy agreements where a vacate clause can still be enforced. If, before the day the legislative amendments were introduced (October 26, 2017):
- A landlord, expecting their tenant to move out at the end of the term, had already entered into a tenancy agreement with a new tenant; or
- A landlord was granted an order of possession requiring a tenant to vacate the unit, but the possession order takes effect after December 11, 2017.
What about landlords who have been relying on fixed-term tenancy agreements to protect against bad tenants?
The Residential Tenancy Act is intended to protect both landlord and tenants. There are options available through the Residential Tenancy Branch to help landlords deal with problem tenants. It is important that both landlords and tenants know their rights and obligations under the Act.
How can a tenancy end without the vacate clause?
Aside from removing the option to use a vacate clause, the rules around ending a tenancy have not changed. For example, a tenant can end a tenancy by providing the landlord with at least one rental month written notice. A Residential Tenancy Branch arbitrator can order the end of a tenancy for a breach of a tenancy agreement by either party. Landlords and tenants can mutually agree to end a tenancy, which must be documented in writing. A mutual agreement to end a tenancy(PDF) is recommended. Landlords can also end a tenancy by serving the tenant one of the following notices to end tenancy:
- 10 Day Notice to End Tenancy for unpaid rent or utilities
- One Month Notice to End Tenancy for cause or when the tenant’s employment has ended with the landlord (this applies when the rental unit is provided as a condition of employment).
- Two Month Notice to End Tenancy for landlord’s use or when the tenant no longer qualifies for the subsidized rental unit.
Why are you making these changes?
The B.C. government is committed to doing more to protect renters in B.C. It is important that tenants have the sense of security they deserve when signing a fixed-term rental lease. By closing the so-called fixed-term lease loophole, landlords will no longer be able to bypass rent control.
Mortgage Qualifying rule changes effective January 1, 2018
BC Mortgage Rule Changes limits borrowing power
- On January 1, 2018 OFSI (The Office of the Superintendent of Financial Institutions) is imposing new rules where lenders will now require a minimum qualifying rate for uninsured mortgages to be the “greater of the five-year benchmark rate published by the Bank of Canada (BOC) or the contractual rate plus 2%. The benchmark rate today is 4.99% and the best five-year uninsured mortgage rate today is 3.29% therefore in this instance to qualify for a proposed new mortgage the lender will use 5.29% (the greater of the two rates) to ensure borrower (s) ability to debt service.
- Although the payment structure and actual interest rate will be based on the contractual rate, this change in having to qualify at an inflated interest rate is designed as a stress test to ensure that in the event of increases to mortgage rates overall the borrower (s) ability to weather any increase is satisfactory.
Current Qualifying Rules
- Current mortgage qualifying guidelines require that borrowers with less than conventional 20% down payment must (a) limit the purchase price maximum to below $1,000,000.00 and (b) the mortgage must be insured with a minimum down payment of 5% for purchase price up to $500,000. If the purchase price is over $500,000.00, down payment is 5% for the first $500,000 of the purchase price and 10% for any remaining portion. These borrowers currently qualify at the BOC rate of 4.99%.
- Conventional borrowers with 20% or more available as a down payment are currently exempt from having to qualify at the benchmark rate until the end of 2017 if they are taking a fixed rate for a 5 year term.
- For all borrowers, for terms less than 5 years or for variable rate mortgages a borrower(s) must qualify using BOC benchmark rate.
Biggest Impact of BC Mortgage Rule Changes
- The biggest impact of the new BC mortgage rule changes for potential home buyers will be on the amount these home buyers/ borrower (s) are able to qualify for;
- (a) Purchase price $625,000.00 with 20% down payment $125,000.00 = $500,000 mortgage. Contract rate of 3.29% = $2441.26 per month amortized over 25 years, with combined annual income required of $103,422.00 to service the debt vs
- (b) Qualifying rate of 5.29% equals monthly payments of $2991.12 with annual income required of $124,041.00, or
- Based on (a) above and assuming borrower (s) total combined income is $103,422.00, under new rules, the maximum mortgage amount is now reduced to $408,079.66 from $500,000.00 a difference of $91,920.00 which substantially impacts borrowing power and limits and/or reduces maximum price limits on potential properties.
How do the Rule Changes Impact Current Properties Under Offer
- Current properties with a firm offer, even if closing past December 31st, 2017, will be underwritten under the old guidelines. However, if the mortgage amount changes or the property they are looking to buy changes, they will be subject to the new underwriting rules.
What Steps Should BUYERS be Taking NOW
- Home buyers are encouraged to revisit their mortgage broker/lender to assess the impact of the new rules on their buying power
- Lenders may hold rates on pre-approvals for potential buyers if submitted prior to December 22nd given the holiday schedule
- If your mortgage is coming up for renewal after January 1st, 2018, you will have the opportunity to renew with your current lender without requalifying. However, should you want to refinance and take additional funds or switch to a lender who is offering a better rate, you will need to qualify under the new rules.
Tracy Nettles and Darnelda Siegers
Mortgage Alliance – Enrich Mortgage Group Ltd
Sunshine Coast BC
November continues on a positive trend for residential home sales on the Sunshine Coast, BC while overall inventory continuing to drop.
The jump to buy now continues because of the upcoming mortgage stress test for all mortgages including uninsured mortgage purchases, starting January 2018.
HPI (Housing Price Index) rose 21% to $592,300 over November last year along with the total dollar volume up 20% to $48,187,677 in total home sales.
Unit sales moved up 12% to 67 homes sold, along with the average price of a home on the Sunshine Coast continuing to climb by 7% to $719,219.
Inventory dropped with only 277 total available homes for sale and 78 newly listed homes in November 2017.
Detached Home Sales
The average price of a detached home on the Sunshine Coast rose 15% over October to $779,961.
Total sales volume fell slightly to $38,998,077 with just 50 homes sold. Inventory levels matched, dropping 9% to 235 listings with 61 new listings of detached homes for sale.
It continues to be a seller’s market with a 21% sales success ratio.
Townhome and Condo Sales
The average price of a condo and townhome skyed 28% in November to $573,009 while total sales volume held steady at $9,089,600.
The number of townhomes and condos sold dropped 24% to 16 attached home sales while the number of homes for sale remained level at 41 units.
The condo and townhome market remained strong with a sales success ratio of 39%.
Land-only property on the Sunshine Coast persists its monthly up-down trend. The average sale price of land grew 19% to $352,566.
Total sales volume rose 37% to $5,288,500 with 15 units sold.
Total active land-only listings were 198 with 20 new listings offering more choice in the marketplace for the month of November.
Sales success ratio continues its buyer’s market trend at 7%.
Timing, pricing and location are the biggest factors in how quickly a property will sell in a busy market like the Sunshine Coast BC.
Speak with a REALTOR® licensed in your area to gain insights into current real estate market activity in your neighbourhood.
For all your real estate buying, selling and investment needs on the Sunshine Coast BC contact Russ Qureshi and his team at https://coastlifestyles.ca