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Rental Gazette ■ The VOLUME 12 ISSUE 2 SUMMER 2007 Why Rent Controls Won’t Work Ben Seutter, President, Edmonton Apartment Association the bust of the early 1980s and again during the stringent provincial spending cuts of the 1990s, Alberta landlords have experienced a zero or very low rate of return. Consequently, multi-residential construction starts slowed dramatically. During these periods rental rates plummeted and landlords were obliged to provide incentives to fill vacant suites. The result was often rental income below long-term operating costs. The open market forced many property owners into bankruptcy as investment returns virtually vanished and buildings were repossessed. The story is different today. A booming economy and unprecedented demand have moved rental rates higher. But now, as landlords anticipate more positive returns, they are being asked not to comply with the open market. Recent calls for the imposition of rent controls overlook the fact that controls immediately stiﬂe investment. Investors get nervous at the prospect of insufﬁcient returns and the construction of new rental units abruptly stops. This experience is proven time and again in both Ontario and British Columbia where rent controls have effectively stemmed the supply of new units. The result is an acute shortage of rental accommodations regardless of need, great suffering, frustration and controversy. Rent controls also lead inevitably to cutbacks in unit upgrades, building maintenance and grounds keeping. As landlords predictably reduce expenses in an effort to realize positive returns, tenants are forced to contend with less repainting, older carpets, fewer new windows, aging appliances and much more. Buildings begin to show wear and tear. Resale …continued on Page 4 E arlier in May the Progressive Conservative Party of Alberta held its annual general meeting in Edmonton and voted not to implement provincial rent controls. The debate ﬂared following media reports of an elderly Edmonton woman effectively being evicted from her home by a $400 per month rent increase – which was subsequently reversed by the landlord. The obvious reason for the current shortage of rental housing in Alberta is the huge inﬂux of in-migration – 100,000 newcomers in 2006 with another 100,000 expected in 2007. Early newcomers purchased reasonably priced homes, but as house prices escalate more and more are being forced to rent. For much of the past quarter-century local vacancy rates have hovered near ﬁve to seven per cent. Today, however, most existing units are ﬁlled and the market is attempting to create a new supply. Construction times, typically 18 – 24 months, will likely increase due to labor shortages. Every free market economy depends on the principle of return on investment (ROI). Since INSIDE THIS ISSUE President’s Message .................................... 3 Affordable Housing ...................................... 4 Residential Tenancies Act............................ 7 Tenant Screening ......................................... 8 Federal Budget Disappoints ....................... 10 Insuring to Value ........................................ 11 EAA Hosts CFAA ........................................ 12 Crime Prevention ........................................ 13 Welcome New Members ........................... 16 EAA Landlord Forms ................................... 20 Caretaker Salary Survey ............................ 21 Housing Demand ........................................ 22 Edmonton Apartment Association Phone: (780) 413-9773 Fax: (780) 423-5186 208, 10544-106 Street, Edmonton, AB T5H 2X6 www.eaa.ab.ca executive@eaa.ab.ca The opinions expressed in any article in the Rental Gazette are those of the author of that article and not necessarily those of the Edmonton Apartment Association. ■ President’s Message Ben Seutter, EAA President 2007 sustained effort to hold their MLA accountable for their actions. The tenants are definitely complaining to their MLA and when the MLA doesn’t hear from landlords, then many an MLA makes an incorrect judgment. So where do we go from here? Many of you have written letters to your MLA and to the Editors of our city newspapers and have attempted to dispel some of the myths ﬂoating out there. We need to continue that aspect of public debate. However, we are fooling ourselves if we think that we will win an emotional hot-button debate when the public sees pictures of Granny Smith getting a $400 increase, or the gentleman on oxygen unable to pay his rent increase meeting with Minister of Government Services, Lloyd Snelgrove and Minister of Municipal Affairs and Housing, Ray Danyluk (Edmonton Journal pictures). We simply have to continue presenting the facts. For example: • Landlords didn’t cause the current shortage of housing. It is a byproduct of a hot Alberta economy. • Landlords are not responsible to provide affordable housing any more than grocery stores are responsible to provide affordable food. • CMHC’s numbers state that 2006 rents increased by 10%. The vast majority of landlords are responsible in the way they do rent increases. • T h e m a r k e t w i l l b u i l d n e w re n t a l accommodation when rents come close to market value. Landlords have subsidized Edmonton rents for the past 25 years. • Rent controls don’t build more units. • Rent-control proponents who claim that they are so concerned about the plight of renters do not put their money where their mouth is and use their own money to build and subsidize affordable housing. These facts won’t make front page in a newspaper or be the lead story on radio or TV, but we need to keep reminding our MLA’s of them. Our 2006 EAA President, Clarence Rusnell, sits on the Alberta Residential Tenancies Advisory Committee (ARTAC), which met May 11, 2007 with Ministers Snelgrove and Danyluk in an attempt to work out the details of the new legislation. Bill 34 opened up the RTA to allow for changes by Regulations. These Regulations are still in the process of being written. At this point we are not certain of the speciﬁcs, hence there is no value in commenting on the unknown. There is one additional aspect of housing that Summer 2007 I want to address and that is the humanitarian aspect of the Golden Rule to “Love God with all your heart, and to love your neighbor as yourself.” Our tenants are human beings – not dollar signs and numbers on a balance sheet. They have life and blood and are our equals. And while affordable housing is not our responsibility as an association or an industry, helping those in need in our society is our individual responsibility – especially if we have the means to do so. We didn’t cause the problem but as individuals we have a role to play in addressing the problem and helping in the need. Some practical implications: • Don’t expect an AISH tenant who receives $1050 per month to be able to pay $850 in rent and still have a decent living. • Help our tenants to access funds from other agencies. • For those tenants who can’t afford the increased rents – obviously they need to provide documentation – give them a personal subsidy for a portion of it. • When converting an apartment building into condos for sale, sell off the majority of units and then personally keep the long-term tenants in their existing units. There are many ways of helping fellow humans – let us be active in this area also. Having said all of the above, I am still proud to be an Edmontonian and to do business in our great city. For many years I have said that Edmonton was way “under-noticed” in Canada and on a world scale. Over the years I have had conversations with friends about investing in other areas in North America and I continually maintained that I don’t know that there is a better place to invest than in Edmonton or in Alberta. And given the recent start of construction in “Up grader Alley” I still feel the same way. Edmonton is where the jobs are at, and people will follow jobs. Our EAA ofﬁce staff of Lynn Biggs and Sheryl Brophy has been extremely, extremely busy ﬁelding many calls from media and members regarding all the “rumors” of rent controls. We are thankful for their dedication and hard work. Also, Don Rever – 1st VP and Sonny Crowley – 2005 EAA President – and myself have ﬁelded multiple media interviews. Your Board of Directors continues to be active in the various aspects of the rental industry. On to the fun stuff – the annual golf tournament is slated for June 22 at the Sand Piper Golf Course minutes west of St Albert – see you there. Have a great summer! The Rental Gazette 3 W ow, Wow, Wow – ﬂoodwaters have been ﬂowing since our Spring issue!! Just as ﬂood waters rarely ﬂow the way we think they should, so too has been the case with Legislative changes to the Residential Tenancies Act (RTA) effective April 24, 2007 – a day that will live on in infamy in the annals of Alberta history as BLACK TUESDAY! Those of you, who made business decisions and bought buildings with the intent of immediately increasing rents to cover the higher purchase price, are deeply disappointed and ﬁnancially hurt by the Alberta Government’s decision to change the rules midway during the game. (But don’t expect any tenant to feel sorry for you or to offer to help with your mortgage payment). For the rest of us as landlords – we had additional rules imposed on the way we do business, but we should be thankful that there is no limits on rent increase amounts. We should be thankful that the current government didn’t blink and cave in to illogical thinking regarding the value of rent controls. However, the rent control issue is not dead! The May 15, 2007 Edmonton Journal quoted an Ipsos-Reid Survey stating that “78% of homeowners and 92% of renters in Edmonton and Calgary support rent controls.” What a waste of time by Ipsos-Reid in doing the survey, yet there appears to be a frenzy by some MLA’s and media in reporting such surveys. I am surprised that only 92% of renters support rent controls – a similar question put to taxpayers regarding the amount of tax they pay would probably get a 100% answer. Ipsos-Reid manipulates this “objective” survey by the questions they ask. Maybe they also should have asked the 78% of homeowners that support rent controls if they support price controls on the sale price of their home – i.e. limited to an annual increase of cost of living plus 2% ever since they purchased the house?? The attitudes of our population are inﬂuenced by non-critical reporting – media frenzy reporting – and this critical population mass then influences politicians who wish to get re-elected. Before you know it various forms of rent control are passed as law and the critical thinker wonders how this is possible in Alberta. Well, the earlier discussion is part of it, but most red-neck Albertans who work hard and pay their taxes don’t take the time to become involved in politics and/or make the effort to personally meet with their MLA to discuss these type of issues. The result is that the political decisionmaking then is disproportionately inﬂuenced by the wrong – and maybe popular – thinking. All EAA owners must make an intentional and www.eaa.ab.ca ■ Gov’t Responds to Affordable Housing Task Report Changes to the Residential Tenancies Legislation Take Effect April 24, 2007 renovations to a rental unit. No rent increases will be allowed during that oneyear period. One year’s notice continues to be required for converting a mobile home site to a condominium unit or for other uses. • New offences have been created in the legislation for violation of these key changes. Any notice to increase rent or end a tenancy that doesn’t comply with the legislation would be declared void and could result in a landlord facing ﬁnes of up to $5,000 per tenant, except in the case where a property is being converted to a condominium, the ﬁne could be up to $10,000 per tenant. The changes included in the RTA amendment are retroactive to April 24, 2007, when the government announced its intention to revise the legislation. To assist in answering some of the more common questions that landlords have concerning the application of these changes, the following ‘Question and Answer’ information is taken from the ‘Landlord and Tenants’ section of the Service Alberta website (http://www.servicealberta.ca/dsp_landlords_changes.cfm) and is re-printed here for the information of our members with the kind permission of Service Alberta. You can also view the Amendment by clicking on the link on this website page. Questions and Answers • When do the new rules for increasing rent take effect? As of April 24, 2007, landlords can only raise rent once a year. • How often can a landlord raise my rent? Rent increases will be limited to once per year. Three months’ notice must …continued on Page 5 I n May, the government introduced amendments (Bill 34) to the Residential Tenancies Act (RTA). If the amendments are passed (and it is expected they will be) they will directly impact landlords. They form only a small portion of the government’s overall response to the recommendations made by the Affordable Housing Task Force. The following is a summary of the changes contained in the amendment to the RTA. • Rent can now only be increased once per year. This applies to both periodic (month-to-month) and ﬁxed-term tenancies. Three month’s notice is still required before increasing rent on periodic tenancies (six month’s notice for mobile home site tenants). • One year’s notice must now be provided to tenants before ending a periodic tenancy for the purpose of converting a rental unit to a condominium or to undertake major ■ Rent Controls Continued… …Continued from Cover Page Many association members have already allocated certain units to be kept below market rents. Others have resisted turning suites into condominiums. There is a tangible compassion and respect within the industry especially towards loyal, long term tenants. Working together, within the framework of our free market economy, there are indeed opportunities to ensure affordable accommodations in concert with reasonable rates of return for Alberta’s real estate entrepreneurs. economies suffer. The Edmonton Apartment Association welcomes dialogue with the provincial government regarding possible solutions to rental market and affordable housing concerns. 4 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ Gov’t Response Continued… …Continued from Page 4 a monthly periodic tenancy. • If tenants already had a rent increase within the previous 365 days, will landlords have to refund any excess rent that tenants paid because of a rent increase notice effective May 1? Yes, landlords have to refund any overpayments paid by tenants based on these notices. Any notice to increase rent that doesn’t comply with the legislation is void and could result in a landlord facing ﬁnes of up to $5,000 per tenant. • What happens if a landlord tries to raise the rent before a year has passed since the last increase? Tenants don’t have to pay the new amount, above their current rent. However, they would still have to pay their regular rent on time. The landlord could also face ﬁnes of up to $5,000 per tenant. • How much notice must my landlord provide before rent is increased for my apartment? At least three months’ notice for periodic (month-to-month) tenancies. • How much notice must my landlord provide before they increase the rent on my mobile home site? At least 180 days (six months’) notice for periodic (month-to-month) tenancies. • When can rent be increased for ﬁxed-term tenants (such as those with a lease agreement for a speciﬁc number of months or years)? The landlord and tenant agree to the amount of rent when they negotiate the terms of the ﬁxed-term tenancy agreement. Rent increases are limited to once per year. • How much notice is required before landlords convert a rental unit to a condominium? Periodic tenants have to be given a full …continued on Page 6 still be given. • Will landlords be limited in how much they can raise the rent? No. The legislation does not include any rental caps. • If a landlord gave a rent increase notice that will take effect after April 24, 2007, is the notice valid? Yes, the rent will increase as per the notice if the tenant continues to rent the premises and as long as there has not been a rent increase within the previous 365 days or since the start of the tenancy, whichever is later. Effective April 24th, rents cannot be increased unless 365 days pass since the last rent increase, and the start of the tenancy, whichever is later. Rent can only go up once a year. At least three months written notice must be given to a tenant to increase the rent for www.eaa.ab.ca Summer 2007 The Rental Gazette 5 ■ Gov’t Response Continued… …Continued from Page 5 • Notice for Condo Conversions Rent Increases - One year from start of tenancy or since last rent increase Q. If a landlord gave notice to increase rent on or before January 31 (or February 28 or March 31), will the rent increase take effect on May 1 (or June 1 or July 1)? The rent will increase as per the notice if the tenant continues to rent the premises. Q. If a landlord gave notice to rent increase on April 24, will it increase on August 1? The rent will increase as per the notice if the tenant continues to rent the premises, if the tenancy began on or before August 1, 2006 and the rent did not increase during that time. If the rent was increased within the past year, it cannot be increased again until a year after the increase became effective. At least three months written notice must be given to a tenant to increase the rent for a periodic tenancy. Q. If my monthly periodic tenancy started September 1, 2006 and the landlord gave me my ﬁrst rent increase notice on April 24, will my rent go up on August 1 as per the notice? No, the rent increase notice for August 1 is void. The earliest the rent can be increased is September 1, 2007 after three months written notice. Q. How soon can the rent be increased if a tenant has a ﬁxed term tenancy that ends May 31? The landlord and tenant can negotiate a rent …continued on Page 18 year’s notice to end the tenancy and rent cannot be increased during the year. • How much notice is required before landlords can end a periodic tenancy to undertake major renovations? Periodic tenants have to be given a full year’s notice to end the tenancy and rent cannot be increased during the year. • What if rent causes a ﬁnancial hardship? If rent causes a ﬁnancial hardship, tenants can contact Municipal Affairs and Housing at (780) 422-0122 to inquire about the Rent Supplement Program. Tenants calling from outside the Edmonton dialling area, phone 310-0000 toll-free and follow the instructions. Here are some further questions and answers with examples to assist in providing additional clarity around the issues of: • Rent Increases • Notice for Major Renovations 6 The Rental Gazette Summer 2007 www.eaa.ab.ca YOU ASKED ■ Residential Tenancies Act SUBLETTING A tenant cannot sublet or assign the rented premises to someone else without the landlord’s written consent. A landlord may not refuse permission without reasonable grounds and must give the tenant their reason, in writing, within 14 days after receiving the request. If the landlord does not answer the request within 14 days, the tenant may assume that the landlord agrees to the sublease or assignment. A landlord may not charge a fee for giving consent to a sublease. NOTICE TO UNAUTHORIZED PERSONS If a person is living in the residential premises without the permission of the landlord, the landlord can give that person a notice to vacate. The required notice period will be different depending on the circumstances: • 14-Day Notice is required for an unauthorized person living in a residential premises that is occupied by the tenant. • 48-Hour Notice is required for an unauthorized person living in a residential premises that has been abandoned by the tenant. www.eaa.ab.ca Summer 2007 The Rental Gazette 7 ■ Effective Screening of Prospective Immigrant Tenants Reprinted from The Apartment Investor with permission from Marv Steier, Tenant Veriﬁcation Service Inc. recent arrival to the country. What better way to keep you from running a credit, criminal or background check than to say, “I am new to the country; I have never rented before; I don’t have a SIN or any kind of credit history. But please sir/madam, rent to me because I need a place to live.” Of course you shouldn’t automatically turn down every rental application from a prospective tenant who claims to be a recent arrival to Canada, but you should check out any claim to that status. Here are some tips: Recent arrival to Canada fall into several categories, such as: • Work Visa • Immigrant • Student Visa • Refugee tenant falls into and then ask: • How will the rent be paid? The answer will determine what other inquiries you need to make and/or what documents you need to obtain, such as a employer letter, guarantor, bank statements showing ﬁnancial ability to pay, etc. • Do you have a Social Insurance Number? Prospective tenants are not obliged to give their SIN but you should know that a SIN for the above categories starts with a “9”. All applicants who fall into these categories should have a SIN; otherwise they are here illegally. • Do you have an Alberta Driver’s licence? If the answer is yes, then he/she is not a recent arrival. …continued on Page 9 K nowledge, networking and good business practices are three key elements of a successful landlord business. One component of good landlord business practices is tenant screening. Screening Canadian citizens is relatively easy with the credit reports, tenant reports and criminal record searches that landlords can access. But what do you do if your prospective tenant is not a Canadian citizen or is a recent arrival in the country? How do you determine credit worthiness, tenant worthiness and truthfulness? Landlords should be careful not to accept information about a new applicant without verifying it. Prospective tenants who intend to deceive you never give entirely accurate information on a rental application and that could include the statement that he/she is a Determine which category your prospective 8 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ Tenant Screening Continued… …Continued from Page 8 Yes. If there is no credit record from a Credit Bureau and you know that the personal information is accurate (because you looked at two pieces of ID) then there is a greater chance that your prospective tenant has been truthful with you. If there is a credit report and it shows bad pay habits and/or a delinquent report, then perhaps your prospective tenant has not been truthful with you and is not a recent arrival. Remember that documents can be counterfeited. Make sure that the answers to your questions are reasonable and straightforward answers. If someone stalls for time or repeats the question, this is often an indication that they are thinking up an answer, often one that is not the truth. So far so good. Now what should I do? Conduct your other due diligence now with the employer, current landlord and reﬁnes. Ask for a pay stub, which shows bi-weekly income – if the income is less or only a little more than the rent, then that may not meet your criteria. If a prospective tenant has refugee status, then he/she will be receiving income assistance from the federal government in which case you should be able to obtain verifying documents. If the prospective tenant is self-employed, then it is prudent to ask for bank statements showing deposits and ﬁnancial stability, company documents, business licence, etc. unless you can otherwise establish that the prospective tenant is a successful entrepreneur. Maybe your prospective tenant drives a Porsche. In that case ask, “Is that your car, sir/madam? It is? Could I see the registration, please, our tenant screening service requires me to do that. Hmmmmmmm. You don’t have it with you; well perhaps you can bring it in then? Sure, next week would be good.” Note: According to the government web site: http://www/statcan.ca/ Daily/English/010215/d010215d.htm, to be eligible to work in Canada, a 900-series SIN cardholder must present a valid employment authorization issued by Citizenship and Immigration Canada. The 900 series is a number issued to non-permanent residents, such as refugee claimants, seasonal workers and foreign students, based on immigration documents that expire. The 900 series can also be issued to citizens of another country, even if they do not reside in Canada, for such reasons as opening a bank account or investing in Canada. Next make sure that you do the following: • Look at two pieces of ID. One should be a passport with photo ID. • Ask for a document that veriﬁes entry status, such as a work visa or student visa. These documents have an expiry date. Visas are an 8 1⁄2” x 11” document with an Immigration and Canada watermark that can be seen when held up to the light or upon close inspection. Visas are on thick paper. • Make sure that the Visa doesn’t expire before any lease. • Request bank statements – there should be a balance that will cover at least three months rent. • For foreign students, request a letter from the school stating that the applicant is a registered student. For workers, request an employer letter conﬁrming the length of contract. Do I order a credit report? www.eaa.ab.ca Summer 2007 The Rental Gazette 9 ■ Federal Budget Disappoints John Dickie, President, Canadian Federation of Apartment Associations landlords in Ontario, Quebec, Manitoba, Saskatchewan, New Brunswick, and Nova Scotia. Alberta and BC have already eliminated their capital taxes. The overall result is that federal income tax treatment for rental properties continues to be much less favourable than it was formerly, and in many cases less favourable than the treatment of commercial property or shares or owner occupied homes. CFAA will continue its efforts to achieve equitable tax treatment for Canada’s residential landlords. Landlords know how difﬁcult it can be to achieve sensible policies from the provincial and municipal government. Inﬂuencing the federal government has extra difﬁculties because the federal government is so much larger than the government of Alberta, and there are so many different departments with their ﬁngers in the action. Changing the direction of federal policy usually takes much effort over many years. The federal Finance ofﬁcials vigorously protect the government’s revenue sources, which makes it difﬁcult to achieve the tax reforms landlords would very much like to see. The only way to succeed is by continuous focused effort. CFAA is applying that effort, and we look forward to success on our key issues in the years to come. Housing Initiatives The March 19 Federal budget provided no new money for social housing, nor for any other housing initiatives. Low-Income Housing Tax Credits were announced earlier, and we assume they will rollout as described. The Homelessness Partnering Strategy A s reported earlier, CFAA focuses most of its efforts on seeking federal tax reform for landlords, and on federal housing policy issues. The March 19 Federal Budget Despite encouraging feedback from the Conservatives, Liberals and NDP on CFAA’s proposed tax deferral on the sale of a rental property and re-investment in another rental property, the 2007 Federal budget provided no such relief for landlords. While the budget increased the CCA rates on manufacturing plant and other non-residential buildings, that relief was not extended to residential rental buildings. The only tax relief beneﬁting the rental housing sector is the incentive provided for provinces to reduce or eliminate their capital taxes. That will beneﬁt many major …continued on Page 17 10 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ The Importance of Insuring to Value Trinity Player, Treasures Insurance (that’s you) are required to carry insurance equal to a speciﬁed percentage of the value of their property. In the event of a claim, it is the Claims Adjusters job to automatically check whether the asset values meet the policy limits. If the limits are less than the required values, the insured (yes, you) will be required to pay for part of the claim, regardless of whether it is a partial or total loss. Unbeknownst to some property insurance clients, this is standard procedure. In fact, one insurer estimates that 40 percent of commercial clients do not insure to value and are unaware of the consequences of doing so. The motivation for clients that do this is generally “to save money” from year to year, but is anyone really saving any money? A few hundred dollars saved at renewal can actually cost you thousands of dollars, if not hundreds of thousands of dollars, more in the event of a claim. Due to the over-heated economy here in Alberta and the corresponding increased costs of labour and material, it is more important than ever to review your Insurance and Risk Management program with your Commercial Insurance Broker. This all begs the question: What is your current Insurance Broker doing to help ensure that you are insured properly and that your policy limits are correct? It is my opinion that, as property owners and managers, you need more that an Insurance Broker to work with you on your Insurance and Risk Management ﬁle. You need a Risk Reduction Specialist. Beyond being merely a product vender, a Risk Reduction Specialist is one who you consider to be a trusted advisor for your business; one who will guide you through the process, take the time to explain these policy differences and help you obtain the best premiums for the best terms, all the while helping you to reduce your total cost of risk. At Treasures Insurance we are proud to be Risk Reduction Specialists and I would be more than willing to provide you with more information on the products and services we offer our clients and prospective clients. Do not wait for a claim and risk your ﬁnancial stability, review your values regularly, and do not jeopardize your assets or your company’s future over a few hundred dollars in premium. W hen insuring your buildings and equipment, one of the most important elements to consider is setting the proper values or limits of insurance. It may seem like a simple point, but setting improper values is one of the most common errors made on commercial insurance policies and those improper values can, in the event of a loss, cost you a lot of money, often much more than anticipated. As apartment owners and managers, the properties you own are, quite literally, the cornerstones of your business. You depend on these assets to maintain your standard of living and those of your valued employees. Your buildings also provide shelter for thousands of Edmontonians. As a result, having proper replacement cost valuations on these buildings is critical to ensure that you are promptly indemniﬁed for your loss (meaning, you are returned to the position that you were in, immediately prior to the loss or damage occurring, as soon as practicable). Another reason that insuring to value cannot be emphasized enough is Co-Insurance. On almost every insurance policy, insureds SUMMER LAWN & MAINTENANCE NEEDS 12735 - 50 Street Edmonton, Alberta T5A 4L8 Order Desk: 478-1554 Fax: 472-2657 www.metrosupply.ca • Lighting • Hardware • Heating • Appliance Parts • Electrical • Tubs/Showers • Sinks • Blinds • Lamps • Appliances • Cleaning • Ceiling Fans • Repair Parts • Cabinets • Doors • Locks • Faucets • Fans • Bath Access. • Complete Home Packages www.eaa.ab.ca Summer 2007 The Rental Gazette 11 ■ EAA Hosts 2007 CFAA National Conference John Dickie, President, Canadian Federation of Apartment Associations form, and the roadblocks and ways around them; • 3:10 pm - The pros and cons of seeking that particular tax reform and how to seek it; and PLENARY DISCUSSION: • 4:00 pm - Plenary discussion of lessons learned and steps from here. • 5:00 pm - Conference concludes. For more information, contact: president@cfaa-fcapi.org. Come and join other landlords across Canada as we work to create CFAA’s strategy and tactics to achieve tax reform for the rental housing industry! CFAA Association Conference The tax policy conference is being held in conjunction with CFAA’s internal association conference. Again EAA landlord members can attend with no registration fees. The program for that conference is the following: Wednesday, June 6 • 6 pm - Opening Dinner Thursday, June 7 • 8:45 am - Reports on CFAA’s business for the year past, discussion and ideas for the future; election of the new Board of Directors. • 1:00 pm - Developments from across Canada that may affect landlords in your city. • 3:00 pm - How can associations offer more and better service to their members Advice services for landlords; and networking events. • 6:00 pm - Drinks and dinner with your colleagues across Canada. Friday, June 8 • 8:45 am - How can associations offer more and better service to their members? Recognizing member achievements; and providing value to supplier members. • 10:45 am - tax policy conference (see above). Please join your colleagues across Canada, to get ahead of what is happening in the landlord business, in association work and in income tax policy. EAA is pleased to support CFAA as one of 17 member associations across Canada. Together, our members own or manage more than 1,000,000 rental homes. CFAA is the sole national organization representing the interests of Canada’s $30 billion rental housing industry. For more information, go to www. cfaa-fcapi.org. CFAA Tax Policy Conference I n co-operation with the Canadian Real Estate Association, the Canadian Federation of Apartment Associations (CFAA) will be holding a rental housing tax policy conference in Edmonton on June 8, 2007. EAA landlord members are welcome to attend that conference with no registration fees. The conference program is the following: SPEAKERS: • 10:45 am - Van Colaco, CA, and Jacyn Koski, CA, KPMG - The tax disadvantages of rental housing, including lack of rollovers on sale and reinvestment, passive vs. active business income and CCA rates. • 11:30 am - James Mckellar, Associate Dean, External Relations and Director, Program in Real Property, Schulich School of Business, York University, Toronto - Why do we need tax reforms for income producing real estate? What are some of the options for tax reform? What are the major roadblocks to reform? What would it take to motivate political leadership to consider such reforms? • 1:00 pm - Jim Brennan (CREA); John Dickie (CFAA); Chris Conway (REALpac) What are groups doing about tax reform? What lessons have groups learned from past efforts? DISCUSSION GROUPS (divided by possible tax reform goal) • 2:00 pm - The beneﬁts of a particular tax re- 12 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ An Ounce of Prevention Cst. Dale Brenneis, Program Coordinator & Sean Woods Edmonton Police Services, Crime Prevention Program neighbors and police. Taken alone, few of the following crime prevention techniques will have a signiﬁcant impact. Taken together, they are very effective in deterring would-be criminals from wanting to move onto your property. NOTE: Not every property owner can afford to apply all of these principles, but the presence of at least a few will suggest to prospective tenants the presence of a concerned and responsible landlord: • Community facilities. Recreational or other facilities encourage neighbors to become acquainted. • Architectural planning. Alcoves and concealed areas where an intruder could gain entry unnoticed are nonexistent or minimal. In larger complexes, buildings are set back from the perimeter street to deter the casual passerby from entering the complex area. Offstreet parking is provided in a secure place with controlled access. • Lighting. Entrances, walkways, parking lots, complex perimeters, activity areas, and backyards should be well lit. Check your property at night to ensure the quality of lighting. • Fencing. All parking areas adjacent to the perimeter of the complex have a six foot fence, or a wrought iron barrier to the outside, to deny access from the outside and to prevent parking lots from being used as shortcuts. Where possible, fence design should allow for maximum visibility (i.e. iron rod fencing, chain link fencing). • Proper Signage. All signs need to be current, well-maintained, and placed in the correct areas (“no parking” signs should be placed in parking lots, for example). • Landscaping. Bushes around windows and doorways are well trimmed and do not impair the view of entrances and windows. Plants are used as barriers to ground ﬂoor apartment windows, i.e., rosebushes planted under windows, trimmed to just below the window sill. Any trees should be “trimmed up” six feet from the ground to prevent criminals from hiding underneath them. • Clearly-posted addresses. Only the criminal element beneﬁts from the address being difﬁcult to read from the street. If your complex consists of several buildings, each building should be identiﬁed on at least two sides with large building numbers clearly visible to adjacent parking areas both at day and night. • Permanent map (for large complexes). Located at each driveway entrance, this includes a “you are here” point of reference. The maps are well-lit and clearly visible in all weather conditions. • Doors/locks. Every apartment has solid core entrance doors with case-hardened steel single-cylinder deadbolt locks, one inch throw bolts, and corresponding security strike plates. These doors are equipped with 180° peepholes. • Common areas. Storage areas are to be kept locked, and doors which are otherwise locked are not being propped open. Common area doors (stairwell doors, entrances to parkades, laundry rooms, workout rooms, etc.) should have windows built in that allow residents to see into the area they plan to enter. Please note that all doors must meet local ﬁre code regulations. How Does Your Neighbourhood Look? A clean, well-kept neighbourhood is a positive indicator, but appearances can be deceiving. Be able to recognize warning signs in your area. The following features of a neighbourhood suggest the presence of criminal activity and could deter potential quality applicants from applying for tenancy within your building: • Grafﬁti. Gangs use grafﬁti to claim their territory, challenge other gangs, and intimidate a neighbourhood. Taken alone, grafﬁti may not be signiﬁcant, but when coupled with other …continued on Page 14 J ust as the merchant depends on the customer for his livelihood, so does the landlord depend on the tenant. This places the tenant in a unique and powerful position. By refusing to rent from landlords who close their eyes to illegal activity, the tenant conveys a clear message to the rental community that they will seek out responsible, dedicated landlords. Those landlords who allow illegal activity on their property will see their occupancy rates decline and their proﬁts dwindle. This article is intended as a guideline to help you, the landlord, maintain a property that not only keeps your current tenants happy, but also attracts potential tenants that want to live in a crime-free building. How Does Your Property Look? Criminals prefer to act anonymously, and as such will look for properties where they won’t be seen or identiﬁed. Good landlords know this and will make their properties visible to www.eaa.ab.ca Summer 2007 The Rental Gazette 13 ■ An Ounce of Prevention Continued… …Continued from Page 13 or other chemical smells, heavy machinery or exhaust fan noises, or expensive vehicles owned by people otherwise. Should you see any of the above in your neighbourhood, be sure to document your observations. This could potentially assist the Police in future investigations. Be a Responsible Landlord Responsible landlords take the applicant screening process very seriously. Don’t be afraid to request application fees or deposits, and don’t hesitate to include detailed questions on the tenancy application. By being diligent in regards to the application process, you will be able to screen undesirable individuals. This also gives quality applicants the piece of mind that comes from knowing that all applicants are being screened equally, and that the landlord is trying to keep the criminal element out. Professional 2 or 3 NCR Landlord Forms are available for purchase through the Edmonton Apartment Association (413-9773). Effective landlords are active managers, committed to providing honest tenants with quality housing and keeping dishonest residents out. Effective landlords: • Thoroughly screen each applicant using credit checks, employment checks, and contact at least two to three previous landlords. • Apply rental criteria equally to every applicant. • Insist upon a complete application, ﬁlled in on-site or during an application interview. • Require two pieces of good identiﬁcation, i.e., driver’s license, military ID, citizenship card, etc. • Document everything in writing. • Conduct periodic inspections of the property. • Encourage community gatherings so neighbors can get to know each other. Effective landlords will have rental agreement provisions like the following: • If the building is part of the Crime Free Multi-Housing (CFMH) program, all tenants will be required to sign the CFMH Lease Addendum. • No sub-leasing. …continued on Page 15 indicators of criminal activity, it could be a warning sign. It is very important to remove grafﬁti from your property within 24 hours; this will discourage individuals from spraying grafﬁti on your property in the future. • Unusual trafﬁc. In a working or middleclass neighbourhood, regular visits by people in BMWs, Jaguars, Rolls-Royces, and Cadillac cars are highly suspect. Heavy biker-type trafﬁc may also be a signal of criminal activity in your area. • Fortiﬁcations. Homes and apartments with blacked-out windows or other unusual and extraordinary fortiﬁcations, such as electriﬁed fences or walls topped with razor wire, are suspicious. • Suspicious people. Bandanas prominently displayed, extreme hairstyles, tattoos, and the use of hand signals may suggest gang involvement. Also, if you see people exchanging small packets for cash, there is a problem. • Miscellaneous signs. Other signs include heavy condensation on the inside of windows, large packages being moved between vehicles and home, trucks and vans with out-of-province plates, “lookouts”, ammonia 14 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ An Ounce of Prevention Continued… …Continued from Page 14 The Role of the Tenant Now that you’ve scrutinized your building, neighbourhood, and landlord, you may wish to take a look at your tenants. A quality tenant will: • Use the various parts of the premises (including electrical, plumbing, sanitary, heating, ventilating, etc.) in a reasonable manner, taking into consideration their intended purpose and design. • Keep the premises as clean and safe as possible. • Dispose of garbage, ashes, rubbish and other waste cleanly and safely. • Keep plumbing ﬁxtures clean. • Not destroy, deface, damage, impair or remove any part of the premises or permit another person to do so. • Not disturb the neighbor’s peaceful enjoyment of the premises. Encourage your tenants to do more than the minimum: suggest that they become involved in the neighbourhood, watch out for their neighbors, assist in keeping your building “safe by design”, and report suspicious activity to the police. If your tenants have a positive sense of community and are proud of the building you rent to them, the probability that they will rent from you long term will most likely increase. Finally, view your relationship with your tenants, neighbors, and police as a partnership. By working together we can effectively prevent criminal activity from occurring on rental property. Edmonton Crime Free-Multi-Housing Program If you are a landlord and would like to learn more on this subject why not enroll into the Crime Free Multi-Housing Program? The Crime Prevention Unit of the Edmonton Police Services partners with The Edmonton Apartment Association to deliver this program twice a year. The next program will be offered on November 14 & 15, 2007. For information on registering please contact the EAA ofﬁce at (780) 413-9773. • Only those listed on the rental agreement are permitted to occupy the unit. • No criminal activity will be tolerated. • Residents will not unduly disturb the neighbors. • Visitors may stay no longer than X (“X” to be determined by landlord) days, and only with the landlord’s permission. Effective landlords live up to their responsibilities. They will ensure that their property is well maintained: • Roofs, walls, doors, and windows are water and weather-proofed. • There are no vermin, rodents, rubbish, derelict vehicles, or garbage on the property • Heat, electrical lighting and wiring, plumbing, water supply, safe drinking water, and sewer connections are supplied and maintained. • Sufﬁcient garbage receptacles and removal. • Floors, ceilings, and walls are in good repair. • Ventilating, air conditioning and other facilities are continually inspected & maintained Private Property Signage Specialists www.eaa.ab.ca Summer 2007 The Rental Gazette 15 ■ Welcome New Members The Edmonton Apartment Association is pleased to welcome the following new members: ■ Mark Your Calendar EAA Event Schedule 2007 June 15 ...................T.E.A.M. Exchange Lunch June 12 ...................General Meeting June 22 ...................EAA Golf Classic Tournament July 13 ....................T.E.A.M. Exchange Lunch July ........................No General Meeting - Summer Break August 17 ...............T.E.A.M. Exchange Lunch August ....................No General Meeting - Summer Break September 7 ..........T.E.A.M. Exchange Lunch September 18 ........General Meeting October 16 .............Annual EAA Trade Show November 9 ...........T.E.A.M. Exchange Lunch November 14/15 ...Crime Free Multi-Housing Program November 20 .........Annual General Meeting January 2008 .........Gala Awards Banquet-TBA EAA #208, 10544 - 106 Street, Edmonton, AB T5H 2X6 Ph: (780) 413-9773 Fx: (780) 423-5186 www.eaa.ab.ca executive@eaa.ab.ca OWNER / MANAGER MEMBERS 1269548 AB Ltd. ...........................................Mary Lou & Gerry Towns Advantis Ltd. ...............................................................Norman Selleck Brown ............................................................................... Linda Brown DePrato............................................................................... Ed DePrato Jardin Properties Ltd. .................................................Kathleen Purser JKBC Holdings Ltd. ................................................... Donald Mancell L & M Custom Homes ................................................Michael Thibert Perdicaris.....................................................................Chris Perdicaris “PREFERRED SUPPLIER” SERVICE MEMBERS CEG Energy ............................................................. Michael Yurechuk ReMax Accord Realty .................................................. Sammy Khosah ReMax Elite – Paranych Group Ltd............................. Terry Paranych Independent Insurance Broker ...........................................Brad Steel 16 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ Federal Budget Continued… …Continued from Page 10 the threshold for its housing allowances for families from an income of $20,000 p e r year to $28,000 per year. Ontario has allocated $185M to create a new portable housing allowance program, taking advantage of the ﬂexibilities gained by CFAA. All of these steps by other provinces make it easier for the Edmonton Apartment Association and Calgary Apartment Association to promote housing allowances or rent supplements, and the City of Edmonton recently created a new rent supplement program. Such housing measures are positive ways of addressing housing affordability problems, and can be used to help prevent the imposition of rent control or conversion controls. As CFAA has explained in its material before, housing allowances provide assistance for tenants at the minimum cost to taxpayers. Housing allowances also help tenants pay their rent in existing private rental accommodation, whereas new construction results in the displacement of private rental units. CFAA is happy to see positive results from our federal housing policy work, even as we work hard to extend those positive results to federal tax reforms. The EAA is pleased to support CFAA as one of 17 member associations across Canada. Together, our members own or manage more than 1,000,000 rental homes. CFAA is the sole national organization representing the interests of Canada’s $30 billion rental housing industry. For more information, go to www.cfaa-fcapi.org. (HPS) replaced SCPI as of the end of March, and is funded at $270 M over 2 years. Compared to SCPI, HPS has more emphasis on permanent solutions, and less on studies of homelessness. The federal government has told CFAA that funding will be available to subsidize the homeless in private rental units. In 2004 and 2005 CFAA’s political opportunity was on housing policy because the Martin government was not interested in tax reform, but was interested in housing policy. Through CFAA’s housing lobbying, the federal government introduced ﬂexibility in the application of federal housing funds. That opened the door for the provinces to apply federal housing money to housing allowance or rent supplement programs rather than new construction subsidies. BC, Saskatchewan, Manitoba and Quebec have all expanded their housing allowance programs within the last 18 months. The latest expansion was the BC decision to raise www.eaa.ab.ca Summer 2007 The Rental Gazette 17 ■ Gov’t Response Continued… …Continued from Page 6 Q. What if a ﬁxed term tenancy agreement has a clause that states the rent will automatically increase on a date during the ﬁxed term contract? The rent cannot be increased unless 365 days have passed since the tenant moved in or since the last rent increase, whichever is later. If the 365th day occurs during the term of a ﬁxed term tenancy, the landlord cannot increase the rent until the tenancy agreement ends. Q. What are the penalties if a landlord fails to abide by the temporary notice periods? Landlords who fail to abide by these notice periods are guilty of an offence and liable to a ﬁne of up to $5,000 for each offence. Major Renovation Notices Changed three months notice to at least 365 days notice Q. If a landlord gave a termination notice on February 1, (March 1 or April 1) for the tenant to move out on May 1, (June 1 or July 1) so the landlord can do major renovations, does the tenant have to move out as scheduled? The tenant will have to move out as these notices were given before the April 24, 2007 legislation changes. Q. If a landlord gave a termination notice on or after April 24 for the tenant to move out on August 1, to do major renovations, does the tenant have to move out as scheduled? No, the major renovations termination notice for August 1 is ineffective. On or after April 24, 2007, landlords have to provide at least 365 days termination notice to complete major renovations for periodic tenancies. Fixed term tenancies expire on the date speciﬁed in the tenancy agreement. Q. Can a landlord increase the rent during the notice period for a major renovation? No. Landlords cannot increase the rent after they give a termination notice so major re…continued on Page 19 increase on June 1, as long as 365 days have passed since the tenant moved in or since the last increase, whichever is later. Q. How soon can the rent be increased if a tenant moved into a unit for a six-month ﬁxed term tenancy and has not had a rent increase? The landlord and tenant can negotiate a rent increase when 365 days have passed since the tenant moved in or since the last rent increase, whichever is later. If the six-month ﬁxed term tenancy: started on: the earliest rent increase is: Nov 1, 2006 ……… Nov 1, 2007 Dec 1, 2006 ……… Dec 1, 2007 Jan 1, 2007 ………… Jan 1, 2008 Feb 1, 2007 ……… Feb 1, 2008 Mar 1, 2007 ……… Mar 1, 2008 Apr 1, 2007………… Apr 1, 2008 May 1, 2007 ……… May 1, 2008 18 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ Gov’t Response Continued… …Continued from Page 18 Q. If a landlord gave a termination notice on April 24 for a tenant to move out on November 1 for a condominium conversion, does the tenant have to move out as scheduled? No, the condominium conversion termination notice for November 1 is ineffective. On or after April 24, 2007, landlords have to provide at least 365 days termination notice to convert to condominiums for periodic tenancies. Fixed term tenancies expire on the date speciﬁed in the tenancy agreement. Q. Can a landlord increase the rent during the notice period for a condominium conversion? No. Landlords cannot increase the rent after they give a termination notice to convert the building to condominiums. Q. What are the penalties if landlord fails to abide by the notice periods? Landlords who fail to abide by these notice periods are guilty of an offence and liable to a ﬁne of up to $10,000 for each offence. Encourage your tenants to speak with you if they have questions. You can also direct them to the Service Alberta Call Centre in Edmonton if you are not able to assist them. The Call Centre’s toll free number is 1-877427-4088. pairs can be completed. Q. What are the penalties if a landlord fails to abide by the notice periods? Landlords who fail to abide by these notice periods are guilty of an offence and liable to a ﬁne of up to $5,000 for each offence. Condo Conversion Notices Changed 180 day notice to 365 days Q. If a landlord gave a termination notice on February 1, (March 1 or April 1) for the tenant to move out on August 1, (September 1 or October 1) because the building is being converted to condominiums, does the tenant have to move out as scheduled? Yes, the tenant will have to move out as these notices were given before the April 24, 2007 legislation changes. www.eaa.ab.ca Summer 2007 The Rental Gazette 19 ■ Board of Directors EAA 2007 Board Members EXECUTIVE COMMITTEE BEN SEUTTER, President DON REVER, 1st Vice-President LARRIE BODDY, Treasurer CLARENCE RUSNELL, Past President & CFAA Representative DIRECTORS ERIN ASSALY, Public Affairs & Web Site Chair BILL BEGLEY, Constitutional Committee Chair GEORGE FABI, Membership & Beneﬁts Chair PAULINE FINDLAY, Educational Chair LUCILLE GANS, Trade Show Chair & CFAA Representative RICK HAMILTON, Director at Large (Govt Liaison - Fire Code) BOB HILLIER, Newsletter Committee Chair SONNY MIRTH, Government Liaison Chair DONNA MONKHOUSE, Program & Social Chair GAIL NELSON, Director at Large (Education & Membership) EARL ROYER, Director at Large (Education Committee) CRYSTAL SKEAD, Director at Large EAA OFFICE STAFF LYNN BIGGS, Executive Director director@eaa.ab.ca SHERYL BROPHY, Administrator executive@eaa.ab.ca EAA OFFICE: #208, 10544 - 106 St, Edmonton, AB T5H 2X6 Ph: 413-9773 Fx: 423-5186 www.eaa.ab.ca 20 The Rental Gazette Summer 2007 www.eaa.ab.ca ■ EAA Conducts Caretaker Salary Survey Average Monthly Cost per Suite $38.80 $31.02 $33.85 $38.11 $33.27 $34.92 $34.99 67 # Surveys 7 28 10 8 8 6 Edmonton Caretaker Salary Survey March 2007 Building Size 1 - 15 Suites 16 - 36 Suites 37 - 69 Suites 70 - 99 Suites 100 - 150 Suites 151 + Suites Monthly Salary Range $11.36 - $72.22 / Suite $10.00 - $59.10 / Suite $25.00 - $55.17 / Suite $26.19 - $51.42 / Suite $20.18 - $44.87 / Suite $14.73 - $49.80 / Suite Average Cost / Suite of all responses Total Responses www.eaa.ab.ca Summer 2007 The Rental Gazette 21 ■ Strong Economy Supports Housing Demand in 2007 and 2008 Richard Goatcher, Senior Market Analyst in unsold spec homes this spring will also cause some retrenchment as will a shortage of lots in some choice locations. On the heels of a four per cent increase in 2006, multiple unit starts will reach 6,000 units across Metro this year for the ﬁrst time since 1982. Tight inventories in both the new and resale markets will sustain demand for new condominiums due to their cost advantage over lower-density detached housing. Activity levels will moderate slightly in 2008 but should still approach the 5,500 unit mark. Sales in the existing home market hit a record 21,984 units in 2006, representing an 18 per cent gain over the previous benchmark set in 2005. Improved supplies of new listings entering the market will permit another record year on the MLS® in 2007. Next year, sales will pull back by close to six per cent as higher prices take their toll on demand from entry-level buyers but 2008 will still represent the second best year on record. A combination of recordsetting demand and a pull-back in new listings sent home prices soaring across Greater Edmonton in 2006. Prices on the MLS® grew by an unprecedented 29 per cent to an average $250,915. Extremely tight conditions in the ﬁrst quarter of 2007 have caused prices to rise even faster this year. Look for the year to end with residential resale price of close to $340,000, representing an increase near 35 per cent. In 2008, price gains will slow as supply levels improve relative to demand. Edmonton’s rental apartment market will experience continued tightening over the forecast period due to strong demand from newcomers and a shortage of new units entering the market. CMHC expects to ﬁnd an apartment vacancy rate of 0.7 per cent this October, representing the tightest rental market since 1977. This compares with a vacancy rate of 1.2 per cent reported in CMHC’s October 2006 Rental Market Survey. Further declines are expected in 2008 to around 0.5 per cent. The average rent for a two-bedroom unit will increase from $808 per month in October 2006 to $970 in October 2007. Further gains will push the average two-bedroom rent to $1,115 in October 2008. Edmonton, May 15, 2007 – A strong regional economy combined with stable mortgage rates and continued positive in-migration will sustain housing demand across the Edmonton Census Metropolitan Area (CMA) both this year and in 2008, according to Canada Mortgage and Housing Corporation’s (CMHC) spring 2007 Edmonton Housing Market Outlook released today. “Total housing starts will moderate slightly this year in Greater Edmonton to 14,150 units but will still represent the third highest year on record,” noted Richard Goatcher, CMHC’s Senior Market Analyst for Edmonton. In 2008, total starts will decline by a further eight per cent to 13,000 units, which is slightly below the total reached in 2005. Following a 19 per cent increase in 2006 to a record 9,064 units, single-detached starts will drop by 10 per cent this year to 8,150 units with further declines anticipated in 2008. Soaring costs will encourage more buyers to look at new multi-family units this year and a moderate improvement in resale inventory should draw off some prospective buyers. An up-tick 22 The Rental Gazette Summer 2007 www.eaa.ab.ca www.eaa.ab.ca Summer 2007 The Rental Gazette 23 ��