The purchase of investment properties has always been a popular way to make money in real estate. In the City of London, particularly in the last couple years, a large number of out of town buyers have been purchasing rental properties here rather than in the Greater Toronto Area. The relatively inexpensive cost of investment properties when compared to Toronto and very low vacancy rates make London an ideal choice for investors.
One of the things many out of town (and local investors for that matter) don’t know is that the City of London requires some rental property owners to obtain a rental licence for their rental units. The City passed the Residential Rental Units Licensing By-law (the “Rental By-law”) in 2013 in order to improve tenant safety. The Rental By-law requires that all rental units comply with fire, property standards and zoning.
In general, you must obtain a licence under the Rental By-law when you own a residential building containing 4 or fewer rental units. A rental license is not required for apartment buildings, if a rental unit constitutes the principal residence of the owner, for converted dwellings which contain 5 or more units, and a number of other narrow exemptions. It should be noted that if you rent a unit through services such as Airbnb, the unit must comply with the Rental By-law.
As with most government processes, applying for a license is not always an easy and uncomplicated matter. The initial application will cost you $165.00. You will also need to obtain a fire inspection in advance of your application at a cost of $171.00. When an application is submitted, it must contain a sketch of the unit floor plan, the fire inspection report and the four page Self-Certification Checklist. The application is then reviewed for compliance with the Fire Code, property standards and zoning. An inspection to ensure compliance with property standards will then be scheduled.
One of the biggest hurdles my clients encounter when applying for a rental license is compliance with the City of London’s Zoning By-law. All rental licence applications will be reviewed by a municipal zoning officer. The review process can take several months. A zoning officer will ensure that the number of units being applied for are legal and have all necessary permits from the City. In some cases owners may find out through this process that one or more of their units were not legally created with a building permit or the zoning in the area does not allow additional units. In some situations an owner can provide evidence that their units should be “grandfathered” because they were created prior to the introduction of the relevant Zoning By-law. In these situations, affidavits of previous owners and old real estate and phone listings can be used to prove to the City that the unit is legal non-conforming. In some cases, owners are not able to prove that all units in their building are zoning compliant. An application for a minor variance or a rezoning will then be necessary. As you might expect, these application processes can be quite lengthy and costly, particularly if you require the services of a planning consultant.
When a rental licence is obtained, it is only valid for one year from the date it is issued. You must apply each year to renew your licence. The annual renewal fee is $55.00.
Failure to comply with the Rental By-law can result in large fines. The maximum fine for a first conviction of up to $25,000.00 for an individual and $50,000 for a corporation. Maximum fines for subsequent convictions can be doubled.
If you are in the market for a residential investment property it is imperative that your lawyer confirm that all units are legal so that you will not have issues when you apply for your rental license.
If you have any questions or would like more information do not hesitate to contact me.