While LandlordBC offers its members a comprehensive, proprietary tenancy agreement template, the often-unfortunate reality is that many landlords still end up using either the standard residential tenancy agreement publicly available on the Residential Tenancy Branch’s (RTB) website coupled with an addendum or their own custom tenancy agreement template obtained from a different source.
Unlike in some other Canadian jurisdictions, British Columbia’s Residential Tenancy Act (RTA) does not require landlords to use a tenancy agreement appearing in any mandatory form. However, the Act states that (1) a landlord must prepare a written tenancy agreement (2) such tenancy agreement must include the standard terms as set out in the Schedule of the Residential Tenancy Regulation, and (3) a term of a tenancy agreement is unenforceable if it is inconsistent with the RTA or its Regulation, is unconscionable or is unclear. Moreover, a further section of the RTA states that a landlord or tenant may not attempt to avoid or contract out of the Act or its Regulation.
In practice, this does not leave a lot of room for creativity when it comes to drafting such agreements. Rather, it means that landlords must be extremely careful when using a tenancy agreement template that they have obtained online or one that they have heavily edited to their liking without the assistance of a lawyer. In either such case, the odds are high that one or more terms will unenforceable.
Admittedly, once signed, parties will usually only ever bother to read their tenancy agreement again in the event of a dispute. However, when faced with a tenancy issue, it would be an extremely unpleasant surprise to learn that part of the terms that you thought governed the legal relationship with your tenant cannot be relied upon.
Here is a list of the top five problematic clauses that our law firm has seen landlords insert into their tenancy agreements along with a brief discussion of how these clauses contravene the RTA and/or its Regulation.
- Illegal Deposit
Ex. “In addition to the security deposit, the tenant is required to pay a furniture damage deposit of $2000.”
While the RTA provides that a landlord may require the tenant to pay a security deposit, such deposit must not exceed half of one month’s rent payable under the tenancy agreement. Likewise, where the landlord requires a pet damage deposit, such deposit must not exceed half of one month’s rent. In practice, this means that if both a security deposit and a pet damage deposit are received, the total funds held in trust by the landlord throughout the tenancy cannot exceed one month’s rent.
There is certainly a practical concern that such legislative limit may be too low given that a problematic tenant may leave a landlord hopelessly attempting to recover monetary compensation for property damage or unpaid rent from a tenant who has few (if any) assets. However, barring any future legislative changes, a landlord who requests any additional deposit (such as a furniture damage deposit for furnished rentals) or one who exceeds these legislative limits will be required to return such deposit (or any excessive portion) if a claim is made by the tenant. In the alternative, a tenant who learns that a landlord is holding an illegal security deposit may simply deduct the overpayment from their rent.
- Sublease Prohibition
Ex. “A tenant may not, under any circumstances, sublet the rental property.”
The likely reason why landlords hate sublets is because they allow a new occupant to take possession of the rental property that the landlord had little-to-no input in choosing. In a tight rental market, subleasing the rental property may even allow the principal tenant to profit off such arrangement.
Nevertheless, the standard terms of the Residential Tenancy Regulation already spell out the mandatory rules for sublets. Notably, in all cases, the tenant must obtain the written consent of the landlord. While this requirement does provide the landlord an opportunity to scrutinize a prospective subtenant to make sure that they will be able to pay rent, the standard tenancy terms also state that for fixed-term tenancies where there are six or more months remaining in the term, the landlord must not unreasonably withhold consent to sublet. In short, this means that an outright prohibition on sublets will be unenforceable as it is inconsistent with the standard terms, particularly with fixed-term tenancies.
- Automatic Deduction of Deposit
Ex. “If the tenant terminates the tenancy early, the landlord may automatically deduct from the security deposit the costs of re-renting the rental property and any loss of rental income.”
Our firm regularly reminds our landlord-clients that unless a deposit is dealt with in accordance with the RTA, it has the potential to become an expensive liability. While it may appear counterintuitive, the RTA does not give a landlord any automatic, unilateral right to decide what portion of the security or pet damage deposit is returned to the tenant.
Rather, unless a written agreement is reached with the tenant at the end of the tenancy allowing the landlord to retain all or a portion of the security or pet damage deposit, the landlord has only two options: (1) return the deposit(s) in full to the tenant or (2) make a claim against the deposit(s) by filing a dispute resolution application with the RTB. Notably, both options are subject to a 15-day deadline.
Therefore, any term in a tenancy agreement that purports to allow the landlord to automatically deduct an expense from a deposit will be unenforceable. What’s more, if the landlord does not deal with the deposits in accordance with the RTA and relies on such unenforceable clause to withhold the deposits, upon a claim by the tenant, the RTB is empowered to order double the return of the security and/or pet damage deposit to the tenant. Such punitive order will add insult to injury after a landlord learns that this term in their tenancy agreement is, in fact, illegal.
- Mandatory Professional Cleaning
Ex. “At the end of the tenancy, the tenant is required to arrange for professional cleaning of the rental property, at the tenant’s expense.”
While it is an unfortunate reality of being a landlord that a tenant may not have the same high standard of cleanliness as that of the landlord, the RTA already sets the standard that must be complied with by the tenant at the end of the tenancy. The tenant is required to leave the rental property “reasonable clean, and undamaged except for reasonable wear and tear.” Any higher standard of cleanliness imposed by the landlord, such as professional cleaning, will likely be found by the RTB to be inconsistent with the RTA and therefore unenforceable.
The same logic applies if a landlord collects a cleaning fee from the tenant at the beginning of the tenancy for the purpose of ensuring that the rental property is professionally cleaned upon the tenant’s move-out. Not only does such term impose a standard of cleanliness that is inconsistent with the RTA but it will also often form an additional, illegal security deposit.
- Mandatory Vacancy following a Fixed Term
Ex. “At the end of the fixed term, the tenancy is ended and the tenant must vacate.”
In December 2017, the RTA was amended to remove the unfettered use of fixed term tenancies with mandatory vacate clauses. Nevertheless, some landlords are still unaware of the very limited circumstances in which they are permitted to require a tenant to vacate at the end of a fixed term.
Before these legislative changes, landlords in British Columbia were permitted to require the tenant to move out at the end of a fixed-term simply due to the expiry of such term. Currently, the general rule is that unless the parties agree to extend the fixed-term portion of tenancy, it will continue on a month-to-month basis.
There are two narrow circumstances in which a landlord is able to require the tenant to vacate at the end of a fixed-term (1) if the tenancy agreement is a sublease agreement or (2) the landlord or the landlord’s close family member intends to occupy the rental property at the end of the term. If a landlord is seeking to rely on either of these two exceptions, it should be explicitly stated in the tenancy agreement. Otherwise, a clause requiring the tenant to vacate at the end of a fixed-term will likely be struck down as unenforceable and the tenant will be permitted to stay at the rental property, contrary to the landlord’s expectation.
For a ‘mom-and-pop’ landlord, it will rarely (if ever) make sense to pay a lawyer to draft a custom tenancy agreement. The easiest way to ensure that your tenancy agreement complies with the requirements of the RTA is to use an industry-template such as the one offered by LandlordBC. Larger multifamily landlords and property management companies who are looking to insert more complex or customized terms in their tenancy agreements should contact a lawyer to ensure that their agreements withstand legal scrutiny.