(NC)-Thinking of supplementing your income with a rental property or unit? According to recent research, sixty-nine per cent of Canadian homeowners think that owning a residential rental property or renting part of their home is a good investment. But homebuyers considering this need to keep some important legal dimensions in mind. Work closely with your real estate lawyer to anticipate these issues:
Legal or illegal rental unit?
Provincial and municipal laws determine whether an apartment is legal or not. Things to consider include: what the unit is to be used for, whether there is legal parking, rules surrounding minimum square footage and number of units allowed by zoning, legality of the rent charged, condition of the property and required repairs.
Income stream is not guaranteed:
If there is outstanding repair work required, a landlord may not be able to increase the rent for a new tenant until the repairs are done. Depending on the rules of the specific province, if the property is not well maintained, tenants can obtain a rent freeze or apply for reimbursement for costs associated with repairs.
Don't count on raising the rent whenever you want:
Existing tenants may already have leases that limit when and how the landlord can raise the rent. Although rent increases can usually be taken once a year, there may be complicated legal requirements in terms of the form to be used and how it is to be delivered. In some cases, the amount of the increase may also be limited by law.
There are condo-specific issues:
Most condominium corporations have restrictions about unit owners renting to tenants. Most allow rentals as long as tenants abide by buildings by-laws and rules.
Other things to keep in mind:
Houses where rooms are rented that share a kitchen and bathroom are often considered boarding houses and may fall under different laws and requirements. Also, renting part of your home may affect the tax treatment of your principal residence by triggering a sale for tax purposes or losing part of its tax-free status for capital gains purposes.
A useful resource for homebuyers is the TitlePLUS Real Simple Real Estate Guide, a website that provides information on what lawyers do and how to avoid fraud, as well as mortgage calculators, a locate-a-lawyer feature and other tools. It is available for free at www.titleplus.ca.
- News Canada