Thinking About Renting Your Basement?

The Toronto rental market is very strong and, if you don’t really need the living space in your basement, the idea of pulling in an extra $1,000/month or more in rent can be very appealing. Before you embark on renovations to convert your basement into an apartment, however, here are some things you should bear in mind:

  • While there are no zoning restrictions in Toronto on adding a ‘second suite’ to your house, there are specific requirements that you must meet in order for your basement apartment to be ‘legal’, and you should ideally have the renovations done under a building permit to make sure all of these requirements are met. The most important of these have to do with the fire code and, even if you decide to do the renovations without a permit, you should at a minimum make sure you understand and meet the fire code requirements. There are fire code consultants who can help you with that. The very last thing you want is to have a fire in the apartment and have your insurance coverage invalidated because of fire code violations – and God forbid someone should get hurt in such a fire!
  • As of April 30, all new leases must be on the standard lease form developed by the Ontario government. Click here to access the new forms.
  • When you sign a tenant to a lease, you cannot simply ask the tenant to leave when the lease expires. Under the Ontario Tenancies Act, a tenancy automatically converts to month-to-month on the same terms as the original lease when the lease expires. The only way that you can ask the tenant to leave is by taking over the apartment for your own use (or for your parents’ or children’s use). You must give the tenant at least 60 days notice to do so, and you must give the tenant an extra month’s free rent. Once the tenant has left, you will not be allowed to rent the apartment to someone else for at least one year, and you could be fined if you rent it sooner.
  • If the tenant doesn’t believe that your notice is in ‘good faith’ (for example, if they suspect that you are trying to get rid of them so you can fix up the apartment and rent it for more money), then the tenant doesn’t have to leave, and you will need to go through a potentially lengthy and expensive process to get an eviction order.
  • Your basement apartment will be subject to rent control, meaning that you will only be able to raise the rent once per year by a maximum amount specified by the government, based on the annual increase in the consumer price index. Since rents are going up more quickly that the CPI, this means that the rent you earn will get further and further behind the ‘fair market rent’ the longer the tenant stays. This, of course, will give the tenant an incentive to stay as long as possible.
  • You can include a ‘no pets’ clause in your lease contract, but this clause will have no legal force, meaning that you cannot ask a tenant to leave just because they get a pet, even if they agreed not to do so when they signed the lease. If someone in the house is allergic to the pet, or if the pet is disruptive, you can appeal to the Tenant Board and you might be able to get the tenant evicted or the pet removed.

The bottom line is that you need to be aware of exactly what you are getting into before you set out to become a landlord in your own house!