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British Columbia Aims to Reduce Use of Vacate Clauses in Residential Tenancy Agreements

Posted in Property Law, Tenancy
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On October 26, 2017, Bill 16, the Tenancy Statutes Amendment Act, 2017 ( “Bill-16”), passed first reading, which will be of particular interest to residential landlords and developers. Among other things, Bill-16 enacts amendments to the Residential Tenancy Act (British Columbia) (the “Act”) that reduce or prevent landlords from including “vacate clauses” in fixed term residential tenancy agreements that require tenants to vacate rental units at the end of the term. As a result of these amendments, most fixed term residential tenancies will automatically become month-to-month at the end of their term.

Residential Landlords and Developers

These changes will significantly impact residential landlords because the Act’s regulations presently limit rent increases for month-to-month tenancies. Landlords may only increase rent once in any 12 month period by a maximum percentage equal to BC’s Consumer Price Index + 2% (i.e. the maximum allowable rent increase is currently 3.7%).

For developers, these changes will make it more difficult to obtain vacant possession of a development site where residential tenants are involved. Without a vacate clause, developers will have to increasingly rely on the other provisions in the Act that permit termination of a residential tenancy (e.g. demolition of a rental unit where a developer has all necessary permits and approvals required by law).

Retroactive Effect

Landlords and tenants should take note that Bill-16 contemplates that these amendments to the Act will have retroactive effect i.e. they will render vacate clauses in fixed term tenancy agreements signed prior to the enactment of Bill-16 unenforceable. However, Bill-16 will permit the enforcement of vacate provisions in tenancy agreements entered into prior to October 26, 2017:

(a) if the tenancy agreement is a sublease agreement;

(b) where a landlord has already signed a new tenancy agreement with a different tenant for that rental unit; or

(c) the Director under the Act has granted a landlord an order of possession on the existence of a vacancy clause in a tenancy agreement.

In large part, the provisions of Bill-16 that deal with vacate clauses will come into effect by regulation, which regulations are expected to included circumstances in which vacate clauses will be enforceable by landlords. At this time, draft regulations have not been circulated.

Interestingly, we note that Bill-16 does not explicitly revise Section 14 of the Act, which generally provides that a landlord may agree to amend the standard terms of a residential tenancy agreement (as prescribed under the Act). We expect that the forthcoming regulations will clarify this point and will update this blog post accordingly.