Rent control measures could stifle market supply if the past is any guide, says Toronto real estate lawyer Peter Neilson.

The legislature at Queen’s Park recently introduced legislation that extends rent control to all private units in Ontario. The Rental Fairness Act, 2017 caps annual rent increases by landlords at an amount set by the province, with the rate for 2017 set at 1.5 per cent. The maximum increase allowed in any year under the new law is 2.5 per cent.

Rent control has a long history in Ontario, but in 1991 the provincial government exempted any units built after that year.

Neilson, a partner with Shibley Righton LLP, says the 1991 exception was made in an attempt to spur development of new rental units.

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Politicians hoping to solve the Greater Toronto Area’s housing affordability crisis with legislation should proceed with caution, says Toronto real estate lawyer Peter Neilson.

Ontario Premier Kathleen Wynne has announced plans to introduce a 15-per-cent foreign buyer tax in the Greater Golden Horseshoe Area, taking in communities all the way from the Niagara Region to Peterborough.

Buyers who are not citizens, permanent residents of Canadian corporation will have to pay the levy, which mirrors similar measures imposed last year in B.C.

Ontario’s Finance Minister Charles Sousa initially rejected the idea of copying the B.C. tax in Ontario, but has since backtracked, as house prices continued to rise. In Toronto, they hit an average of more than $900,000 in March, which represented a 33-per-cent spike over the same month in 2016.

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Any bylaws introduced to licence landlords and control the proliferation of AirBnB units in Toronto will almost certainly face legal hurdles and court challenges, says Toronto real estate lawyer Peter Neilson.

Neilson, a partner with Shibley Righton LLP, says Toronto's quest to control AirBnBs and landlords also opens up the proverbial legal can of worms, he says, since it could conceivably impinge on homeowners’ property rights.

“There are so many variables,” Neilson says. “You have a condo owner who lets out a unit through AirBnB and it’s likely no one in the building would be happy about that including the property management. But you’d have to consult the condo corporation declaration and rules to see if it is specifically barred.

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An Ontario Superior Court of Justice injunction issued on behalf of a family restaurant to block multi-million dollar renovations at Toronto’s Manulife Centre has given landlords, tenants and their legal counsel something to chew over, says Toronto real estate lawyer Peter Neilson. 

In the matter of Bloor Street Diner v. The Manufacturers Life Insurance Company, the Bloor Street Diner, a long-time Manulife Centre tenant, argued the extensive renovations planned to make way for Italian food emporium Eataly were prohibited by the terms of its lease.

With the announcement the federal government is boosting the minimum down payment for higher-priced homes in Canada, it will likely be the Toronto and Vancouver housing markets that will be most affected by the change, says Toronto real estate lawyer Peter Neilson.

Starting in February 2016, the Canada Mortgage and Housing Corporation will require a 10 per cent down payment on the portion of any mortgage it insures over $500,000, the CBC reports. The current five per cent rule will remain the same for the portion up to $500,000.

“Homebuyers are currently insisted to put down a minimum of five per cent to qualify for CMHC insurance — protection that lenders insist on when providing a mortgage worth more than 80 per cent of the home's value,” the article states.

Neilson, partner with Shibley Righton LLP whose practice includes the acquisition, sale, leasing and financing of all kinds of real estate, says the cutoff point of $500,000 appears deliberate. In hot markets like Toronto and Vancouver, even modest homes and condominiums can easily surpass the $500,000 threshold.

“Certainly in Toronto and the GTA, even a first-time buyer financing that amount is not unusual,” he tells AdvocateDaily.com.

Neilson says he sees the logic behind the new policy. “By only putting down five per cent, you would be vulnerable to any changes in the market — a market may not seem to be changing yet. However, certainly interest rates are going to go up at some point.”

The more you put down, the more equity you have, he says.

“If your house price stalls and interest rates go up and you have to refinance, you may suddenly be looking at paying significantly higher monthly payments. A higher down payment gives you a bit of caution against that.”

Neilson is curious to see what the long-term impact of the policy shift will be.

“The interesting question is will this have a significant effect on the market? Will it mean people will have to moderate their price range and aim a bit lower or will they just be more cautious and save a bit longer? Who knows? It’s too early to tell if this boost will cool the market because there are so many other factors involved.”

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News that the Canadian Broadcast Corporation has to cut its budget by $115 million over the next three years has some wondering if the broadcaster will sell or lease its downtown Toronto headquarters.

The CBC released its five-year strategic plan earlier this year, and according to an article in the Toronto Star, CBC president Hubert Lacroix was quoted as saying, “We can’t invest in infrastructure that drags us down. We can’t invest our money in bricks and mortar. We have to invest in content.”

The Star reports that “the 1.4-million-square-foot headquarters at Front and John Sts. is considered prime Canadian real estate” and is “valued at hundreds of millions of dollars.”

As businesses like the CBC look to save money and cuts costs, Toronto real estate lawyer Peter Neilson says that leasing less space or leaseback arrangements are common ways for a company to refinance and reduce costs.

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