New rental towers free to use controversial fixed-term lease agreements

Fixed-term agreements allow landlords to raise rents above provincial cap, evict tenants more easily

Aquilini Development’s West Tower, a new purpose-built rental building in downtown Vancouver, will use
fixed-term agreements that allow for unlimited rent increases | Chung Chow

New Vancouver rental projects, even those built with the help of generous taxpayer incentives, are allowed to use a controversial form of tenancy agreement that allows for unlimited rent increases and makes it easier to evict tenants.

“We have one-year fixed terms,” a spokesman for Aquilini Developments said of its West Tower rental project, now open and one of three Aquilini will build next to BC Place Stadium and Rogers Arena in downtown Vancouver.

The city charges more than $13 per square foot in development cost levies (DCLs) for new residential developments, but under original zoning for False Creek North in the early 1990s, no DCLs are payable on the 400,000-square-foot trio of Aquilini towers. The project is also exempt from paying community amenity contributions, worth about $30 million, because the city ruled construction of the three highrises “does not create any lift in land value.”

The city normally attempts to capture 75% of the lift in land value after rezoning, which is payable in contributions to civic amenities such as parks or daycare spaces.

Fixed-term rental agreements have come under fire from tenant advocacy groups and the city’s Renters Advisory Committee because they allow landlords to circumvent the annual cap on rent increases allowed under the BC Residential Tenancy Act. The act restricts increases to 2.9% in 2016, but tenants under fixed-term agreements report rent increases of between 10% and 30%.

Read: In tight housing market, landlord dodge rent laws with fixed-tenancy

The city says it cannot prohibit the use of fixed-term agreements, which fall under provincial authority.

Evan Allegretto, director of development for Wesgroup, said his company has yet to decide what form of tenancy it will use for two rental buildings in South Vancouver that are scheduled to be completed in 2017. Wesgroup currently does not use fixed-term agreements in its rental projects, he said.

Cressey Development Group will use standard month-to-month agreements for a 110-unit purpose-built rental project recently approved for Commercial Drive.

Both of these projects paid DCLs, but because they were built under Vancouver’s Rental 100 incentive program, are not required to pay community amenity contributions.

While the City of Vancouver imposed its own cap on Rental 100 building rents, that limit does not apply once the first tenant moves out. These rental caps for a one-bedroom suite, for example, are $1,561 in East Vancouver and $1,717 on the west side of Vancouver. Rents for two-bedroom apartments are capped at $1,972 on the east side and $2,169 per month on the city’s west side.

Mayfield said the practice of allowing fixed-term leases leaves tenants vulnerable when it comes to asserting their rights.

Both developments were approved under the City of Vancouver’s Rental 100 incentive program. The Aquilini's West Tower is not Rental 100 project.

Complaints about fixed-term agreements have been rising over the past few years, said Jane Mayfield, a manager at the Tenant Resource and Advisory Centre (TRAC), and are a problem across the province.

While some landlords use fixed-term agreements for the first year of a tenancy and then switch to a month-to-month agreement, others are asking tenants to sign a clause stating they will vacate the unit at the end of the term. Landlords then offer to renegotiate a new agreement, sometimes with large rent increases.

Aquilini Developments has chosen to adopt back-to-back fixed-term tenancy contracts. While the City of Vancouver imposed its own cap on Rental 100 building rents, after the first tenants leave that limit does not apply. 

The practice leaves tenants vulnerable when it comes to asserting their rights, said Mayfield.

“If they try to bring up any issues or try to enforce their rights or complain about a repair issue or a building manager’s behaviour, that puts them at risk of being told they have to leave,” Mayfield said. “With a vacate clause, the landlord doesn’t have to have a reason under the act to evict them.”

At the end of a one-year fixed-term, Michael Rattray was told he would have to pay 20%, or $350 more per month, to stay in the two-bedroom Kitsilano apartment he and his wife had rented. Rattray has since moved.

After years of renting in Vancouver, Jennifer Sangster encountered her first back-to-back fixed-term tenancy agreement in December 2014. She signed a six-month agreement and was surprised when her landlord wanted her to sign another fixed-term agreement at the end of that period, which included a modest rent increase.

At the end of the second term, she expected to be able to enter into a month-to-month agreement. But the landlord again wanted her to sign another one-year, fixed-term agreement and raise the rent 5%. She ended up moving to another apartment, where she pays more in rent but has peace of mind with a one-year lease that will roll into a month-to-month agreement.

David Hutniak, CEO of Landlords BC, said his organization does not believe fixed-term tenancies are being widely used.

“If any landlords might be using this in a manner which is inappropriate, and we would certainly be very concerned that people are using it to put forward more aggressive increases at the end of the term, that would concern us and we would highly discourage that,” Hutniak said.

Problems with fixed-term tenancies are high on TRAC’s list of priorities, but Mayfield said the sense of urgency doesn’t seem to be shared by the provincial government. The advocacy group has been raising the issue with the Residential Tenancy Board for several years.

In early June, the Ministry of Natural Gas Development and Minister Responsible for Housing emailed BIV a response stating it was “working with stakeholders” on the issue.

Mayfield said TRAC has yet to be contacted by the ministry or the Residential Tenancy Board about that consultation work. BIV’s request to the ministry for an interview for this story was declined.

The City of Vancouver’s task force on renting recommended the province take steps to ensure fixed-term tenancies are not being used to circumvent the rent-increase cap. But the city says it cannot prohibit the use of the agreements, which fall under provincial authority.