Security Deposit, What are they used for?
When a tenancy starts in BC the landlord is permitted to collect a security deposit and a pet deposit if there are pets in the rental unit. In BC the maximum allowable limit for the security and pet deposits is 50% of the first month’s rent. For example if the rent is $2000 the security deposit and pet deposit could be $1000 each.
When moving out tenants sometimes misunderstand what the deposits are used for.
We often have requests from people when vacating a property requesting we use the deposit funds as part of the last month of rent. This is not what either of these two deposits are designed for.
A security deposit is to be used for damage and other costs to the unit when the tenant vacates the property. We often experience people who fail to clean the unit to a satisfactory level. They often miss behind the fridges and under stoves for example. In strata corporations there are move out fees applied which tenants sometimes fail to pay.
The pet deposit is a different item which is to be used for specific damage to the unit caused by the animal. The animal would not fail to clean behind the fridge, or book the move out. It would scratch and damage the floors, baseboards, carpets and other items of this nature.
The other main factor tenants misunderstand is that the deposits are not to be returned until the forwading address has been provided to the landlord. A tenant is required to meet and complete the move out inspection report with the landlord or their agent to determine if part of the deposits should be withheld. On the move out form is a section to provide the frowarding address. Some tenants at this time refuse to provide a forwarding address believing that the requirement of the landlord returning the deposit within 15 days allows them to claim twice the amount of the deposit. The time of the 15 days starts when the tenant provides the forwarding address.
The move out form also has a section where a tenant can sign the form and provide the forwarding address but disagree with the proposed withholding of the funds. If this section is indicated then the landlord must file a claim with the RTB for dispute resolution within the 15 day time frame. Failing to file in the 15 days could result in the landlord owing the tenant twice the deposit amounts.
What if the tenant fails to attend the move out inspection, sign the form or provide a forwarding address. A tenant has two years to provide the forwarding address. What this means is that as a property management company we must hold these funds in trust for two years before dispersing them to the owner. If self managed the tenant can provide the address in that two years and then at that time the 15 day period begins. If the landlord has not held the funds they would need to distribute them to the tenant in 15 days.
A landlord should perform the move out inspection even when the tenant fails to attend the meeting and complete the form as if they were in attendance.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
When a tenancy starts in BC the landlord is permitted to collect a security deposit and a pet deposit if there are pets in the rental unit. In BC the maximum allowable limit for the security and pet deposits is 50% of the first month’s rent. For example if the rent is $2000 the security deposit and pet deposit could be $1000 each.
When moving out tenants sometimes misunderstand what the deposits are used for. We often have requests from people when vacating a property requesting we use the deposit funds as part of the last month of rent. This is not what either of these two deposits are designed for.
A security deposit is to be used for damage and other costs to the unit when the tenant vacates the property. We often experience people who fail to clean the unit to a satisfactory level. They often miss behind the fridges and under stoves for example. In strata corporations there are move out fees applied which tenants sometimes fail to pay.
The pet deposit is a different item which is to be used for specific damage to the unit caused by the animal. The animal would not fail to clean behind the fridge, or book the move out. It would scratch and damage the floors, baseboards, carpets and other items of this nature.
The other main factor tenants misunderstand is that the deposits are not to be returned until the forwarding address has been provided to the landlord. A tenant is required to meet and complete the move out inspection report with the landlord or their agent to determine if part of the deposits should be withheld. On the move out form is a section to provide the frowarding address. Some tenants at this time refuse to provide a forwarding address believing that the requirement of the landlord returning the deposit within 15 days allows them to claim twice the amount of the deposit. The time of the 15 days starts when the tenant provides the forwarding address.
The move out form also has a section where a tenant can sign the form and provide the forwarding address but disagree with the proposed withholding of the funds. If this section is indicated then the landlord must file a claim with the RTB for dispute resolution within the 15 day time frame. Failing to file in the 15 days could result in the landlord owing the tenant twice the deposit amounts.
What if the tenant fails to attend the move out inspection, sign the form or provide a forwarding address. A tenant has two years to provide the forwarding address. What this means is that as a property management company we must hold these funds in trust for two years before dispersing them to the owner. If self managed the tenant can provide the address in that two years and then at that time the 15 day period begins. If the landlord has not held the funds they would need to distribute them to the tenant in 15 days.
A landlord should perform the move out inspection even when the tenant fails to attend the meeting and complete the form as if they were in attendance.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
What has caused the rental market to slow down?
Often now when speaking with a client or potential clients the most common question is why is the rental market slow at the moment. The first question is has the Air BnB ban caused the rental market to decrease that much?
Our response is that although the Air BnB ban has contributed to the current market conditions it is not the main or only cause of the slower rental market.
When covid occurred in March of 2020 the first reaction to the rental market was rental prices decreased. In the fall of 2020 the housing sales market started to increase and many individual rental products were sold removing a large number of rental products from the market, which created a significant supply shortage compared to demand.
Governments at various levels have attempted to control the housing market with the implimentation of the Empty homes tax in Vancouver which required a property be occupied for at least six months of the year. The Provincial government had implemented the Speculation tax which also required home owners to occupy the unit or have it rented to avoid the speculation tax.
During covid the economy started to experience high levels of inflation and in 2022 the bank of Canada started to increase the interest rates to slow inflation. This eventually had an effect on the housing sales market which led to less rental properties being sold and removed from the rental market.
The BC Government in 2022 made a change to the strata property act eliminating the right of some strata corporations to have a rental restriction bylaws. Prior to this, properties built before 2010 had the ability to restrict the number of rentals in their building. The intention of this change was to increase the number of rental properties in the market.
The federal government then brought in a restriction on foreign buyers being allowed to buy property in Canada which took effect January 2023. This would slow housing sales which has an effect on the rental market.
Prior to covid and during covid both federal and provincial governments were trying to control the increasing costs of housing by providing developers incentives to build more purpose built rental properties adding more supply to the market.
Provincial governments and other officials complained about the amount of immigrants being brought into the country at increased levels in the past few years. The federal government made changes to the immigration policy reducing the number of students and imigrants that would be permitted to enter the country reducing the demand for rental properties.
In the lower mainland many new condo and rental developments were in the process of being built and are completed and are now entering the rental market increasing the supply to the rental market.
In 2024 the BC government brought in a restriction on short term rentals throughout the province with some exceptions including spaces in your primary residence, and some smaller communities. This prohibits people from renting out full condos or homes on short term rental sites which adds more product to the rental market.
Starting January 2025 a new tax, the anti flipping tax was brought in to prevent people from buying and selling properties in a short period of time. If you buy and sell a property within two years the seller will be subject to an additional 20% tax on the profit of the sale of the property.
The current rental market has been affected by all of the above factors. The one other factor that governments don’t like to admit is the economy has slowed and may or may not be in what is considered a recession.
For all of the above reasons the rental market has slowed causing a greater supply than demand for rental properties. When the supply is greater than the demand this is called a tenant favourable market, which allows tenants to take their time to find the right property and negotiate with landlords for the best rental price of the property. During tenant favourable markets we also find more questionable tenants seeking to move and relocate. Why does this increase?. When small landlords have a property vacant for multiple months it might be difficult for them to continue to keep the property payments without incoming rent, causing landlords to make decisions on potential tenants without performing their due diligence.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Subletting, what is it?
What if a tenant says I want to sublet my unit?. What are a landlord’s rights?.
The RTA says a landlord can’t reasonably refuse a tenants permission to sublet the property if there is more than six months left on the fixed term of the tenancy agreement. The key point here is the fixed term.
First let’s look at what a sublet is. This is often missunderstood by tenants. To sublet your apartment means that you, the tenant vacate the unit and someone else resides in the unit until you return to occupy the unit. When the tenant sublets the unit they continue to be the tenant who pays rent to the landlord and the other party becomes a sub tenant of the current tenant. The original tenant is still responsible for all activities at the property while it is subletted.
What subletting is not. It is not two people renting a two bedroom unit and one party vacating the unit and the other party having a different roommate renting the second bedroom. This would be an end to the current tenancy and the two new people renting the property under a new contract.
A tenant wishing to sublett must provide and the landlord can ask for details to confirm there is a legitimate reason for the sublett. A job transfer to another location would be considered a valid reason, and the landlord could request the documentation from the employer to verify this situation.
If the tenant is granted permission to have another party rent the second bedroom then there is no official process to remove that person from the property when the other party returns. When the one party subletts they agree to a subcontract with the subtenant for a term shorter than the current fixed term.
If the current tenancy is on a month to month tenancy there is no requirement for the landlord to approve the tenants sublett the unit. The tenants would in this case terminate the agreement and end the tenancy and the landlord would seek a new tenant for the property. If the fixed term has less than six months on the term the landlord is not required to approve a sublett to a tenant, as in this situation the landlord could again seek a new tenant to mitigate their loss.
Understanding your rights as a landlord is important when tenants inquire or ask about changing the terms of their agreement.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Flipping Tax, Yes Another Tax on your property.
During Covid the housing sale and rental prices increased dramatically. The result of this has caused all levels of government to step in and try to reduce the cost of housing and the most recent way for the BC government is to implement another tax for home sellers.
The anti-flipping tax came into effect Jan 1, 2025. What is the flipping tax? This tax is to help reduce speculative house buying and selling. What is speculative house buying? This is when someone buys a home and in a short period of time, turns around and sells the property for a profit due to the increase in value in the market.
The new flipping tax is making it a requirement of owners to hold onto their properties for a minimum of two years. If you purchased a property in 2024 and sold it in 2025 you will be subject to the flipping tax. The tax rate is 20% of the profit on the home. If you bought your property in 2020 and sold it in 2025 then you would not be subject to the flipping tax. The intent of the tax is to encourage people to hold the properties for a few years before selling the property.
How is this going to affect the current rental market?. A few things could happen.
This tax could cause people to delay buying a property to live in as they are unsure what their short term future is and don’t want to be in a position where they must sell and pay the flipping tax. It may delay current owners who recently bought from selling their property as well. This may cause those people to seek a place to rent which would help the rental market and it would put more downward pressure on sales decreasing the price to buy a property.
When there are less options for selling your property, the owner will try to rent the property which will add more inventory to the market. We anticipate the rental quantity will increase in the short term as there are many developments currently under construction that will be completed in the next year and those owners would be subject to the flipping tax. They will look to the rental market for their property increasing supply which will decrease the demand.
The market could go the other way as well and many people may choose this is a good time to buy due to the above pressure pulling down the prices, making it more affordable to own instead of renting. A strong rental market coincides with a good sales market.
We anticipate this is going to create an initial increase in product entering the rental market affecting the rental prices. We are not sure how long that will affect the market and how far it will push rental rates down. We anticipate it will have an effect on the market for at least two years. The tax will eventually slow down new construction as most new construction is developed with investors in mind and they may opt out of purchasing products if they are required to hold them for a minimum of two years which eventually will slow development in the market place. After that there will be a decrease of products entering the rental market.
We always advise clients who are investing in a rental property that to realize gains you need to hold the property for three to five years, more like five in slower growing or declining markets like we are in today. In that case it would not affect the investor who holds the property for five years before disposing of it.
For more information on the anti- flipping tax visis the BC government website in the link below.
https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Would it help if tenants’ rents were reported on their credit reports?
We often hear tenants calling for rents to be included on the credit report services to help them secure a tenancy. Is this really necessary? The questions for the landlord should be what are you using the credit report for in the tenant selection process? What information are you looking for on the credit report?
The tenant selection process is and should be a long process. It starts with the first contact from the potential tenant inquiring about the property. From that point on it is a constant interview of the potential tenant, until the final decision to rent the property is made. Many details are provided in the pre-screening process and the showing of the property that a landlord should make notes of and review when the application form is supplied to confirm those details match the information provided.
We often hear infomation about employment that is not what the applicant puts on the application form. This can include location, estimated income or role at the employer. When the information provided is incorrect it should be a red flag the applicant is trying to provide information to make them look better than they are. We have received phone numbers that are direct to individuals and when we call the company indicated on the application form the individual is not employed at the company.
We contact landlord, personal and employment references with the intention to verify the information provided. When you ask an employer if the 50K salary is accurate when the application says they earn 75K and the employer doesn’t correct you, that is a red flag.
When you call a personal reference whe syas they have been friends for 20 years and they have no idea what they do for work, they are not really long time friends.
We use the credit report as the final step to verify there are no glaring financial issues that could be of a concern. The credit report provides more information than just the credit score.
It shows the credit score. If shows they have one or two car loans, as discussed in the application process. It shows the previous address the applicants lived at. All of these details are information that helps the landlords determine if the person is telling me the truth about who they are and are they going to be a good tenant.
Our experience is people who are good tenants, don’t hide anything, they provide the information we ask for in a timely manner and we are able to find the details about their work, places of residence online before we begin making calls to verify the details.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com