High rents, job losses contributing to lease breaks, defaults
As the torrential storm of job losses in the province escalates, Calgary’s rental community is beginning to feel the fallout.
Rental management groups in the city are reporting a higher incidence of lease breaks and defaults on rent this year as energy sector woes reverberate throughout the economy.
“We’ve certainly had to do a lot more of this recently than in years’ past,” said Brett Turner, owner of Redline Real Estate Group Inc., which manages a multitude of rental properties from single-family homes to small apartment buildings.
“We’ve seen significantly more lease breaks and defaults on rents than ever before.”
According to Canada Mortgage and Housing Corp., the average monthly rent for a two-bedroom unit is expected to rise to $1,325 by the end of this year, from $1,322 last year. Next year, it’s expected to average $1,335.
In a separate report issued earlier this year, the Canadian Rental Housing Index April 2015 survey ranked Calgary as the most expensive major centre in Canada to rent a home. According to the index, the average monthly rent in the city was $1,123, outpacing both Vancouver ($1,089) and Toronto ($1,026).
Meanwhile, Statistics Canada reported a loss of nearly 15,000 jobs in the province in November, which matches the worst monthly loss since the end of downturn in 2009.
It also pushed overall employment in the province below levels of a year ago — the first time during this downturn that has been the case. The unemployment rate increased by 0.4 percentage points to seven per cent, the highest rate since April 2010.
Turner said in the situation of a lease break or default on rent, landlords and tenants should refer to the Residential Tenancies Act, which defines the rights and responsibilities for both parties in the province. The legislation is enforced by Service Alberta.
Several situations define a breach of lease, including non-payment of rent and “lease breaks” – a term used to define a tenant walking away from a lease before the term is up and forfeiting the security deposit.
Often the situation is not that black and white; in most situations, shades of grey prevail.
If a tenant defaults on rent, then a landlord can remit a notice to the tenant in writing that they have breached their lease. The tenant would then have 14 days to pay the rent.
If the rent is not paid after that period of time, then the landlord can proceed with a formal eviction process, obtaining a court order and having the tenant removed from the property by a bailiff.
“That would be the most severe scenario,” said Turner, who advocates good communication to work out an amiable solution with the tenant first, before resorting to drastic measures.
He added, “there are ways to stick-handle around payments if the tenants are otherwise great and the owners are amenable,” noting it can be defined terms for repayment of the rent, a partial abatement or a chance to make the rent up in full by the following month.
If the situation can’t be resolved, recourse is available through the provincial courts or the Residential Tenancy Dispute Resolution Service, which offers landlords and tenants an alternative means of resolving serious disputes outside of a courtroom.
Turner’s advice to landlords when difficult situations arise is to “run the numbers; keep it objective rather than getting emotional.”
Often the best solution is to work something out, he said.
“You can be on the right side of the law, but it doesn’t necessarily mean that you are going to be able to collect the money,” said Turner. “You can’t get blood from a stone. If the tenant can’t afford to pay their rent, it is quite unlikely that they have a lot of resources.”