How much the commercial rent can be raised in Ontario?
Legally there is not any limit on how much a landlord can increase the rent annually. Although residential and commercial properties have different laws in small claims court in Toronto, this issue can be the same for commercial and residential properties, nursing homes, vacant residential units and social housing units. But in first step, before deciding on a rental increase a landlord should consider various factors such as the tenant’s business type and economic situation. Keep in mind that when the demand is seasonal or follows a specific cycle, business revenues can be different in the given time. Consult a paralegal Toronto expert, if necessary.
You can also try to consider the need to retain the tenant with their capacity to pay and make a balance. In most cases, the best solution is to negotiate with the client even though it seems rather complicated at first. It is because, tenants are aware of the business costs and expected revenues so they would like to fit the amount of rent into their costs and be certain of making a specific amount of profit. At the same time, as a landowner you are aware of the costs of ownership and the amount of rent you should get to have a positive balance. So it is fair for both of you if you can agree on a win-win situation. It can be possible for you to consult a paralegal for some fundamental advice.
Deciding on a fair amount of rental increase
Formerly the expenses needed for operating a commercial building was covered by increasing the amount of rent when the lease agreement was renewed or a new one was made. Nowadays, most of the landlords find better ways to confront with unpredictable changes in the real estate market. The most common way is adding an escalation clause in the lease. The same as before, this clause will give the landlords the right to increase the amount of rent when the expenses of property operation go up.It is better to negotiate and discuss the escalation clause with your tenant in order to reach a standard agreement on commercial rent increase percentage which is fair for both sides. The most common escalation clauses include:
1. Increasing the rent regularly and over the lease period
2. Pro-rating the taxes, , heat, maintenance and other expenses
3. Automatic rising of the rent relating to Consumer Price Index
As mentioned above, a landlord should evaluate the business’s current situation, its capacity to pay, the existing and the potential revenue. The market rents should be checked, the neighboring and other nearby locations’ rents should be evaluated as well. If it is possible, you can gain help form your partners or a paralegal Toronto expert. Checking the latest market lease rates is another effective way. And finally you can gain enough information to set the ideal rate for your commercial property.
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