Update on electricity and tenants
When a tenant rents a residential unit, the rent and utilities such as electricity are negotiated. Both parties can agree to include or exclude the cost of electricity in the rent. For some tenants who have electricity included in their rent, their landlord may ask them to agree to pay the electricity charges separately in return for a monthy rent reduction. The Landlord must follow certain rules in asking tenants to pay for electricity directly. These rules are listed below. We strongly advise tenants to seek legal information if they are affected by the issue.
Tenant rights and obligations
Tenants have different rights and obligations depending on the circumstances. The following three possible scenarios involve tenants, landlords and electricity charges.
Scenario 1: New tenants
New tenants who recently rented their units and who have already agreed to pay electricity separately from their rent.
For example: Jim signs a lease to rent a unit beginning July 1, 2009. Both Jim and the landlord agree to a rent of $800 per month. The rent does not include electricity. Jim set up an account with Toronto Hydro or with a sub-metering company to access and pay for electricity.
Scenario 2: Sitting tenants who do NOT pay electricity separately
- These agreements fall under the “vacancy decontrol” rules of the Residential Tenancies Act. This means that the tenant will continue to pay their rent and their electricity separately.
These are tenants who, when they first started renting their units, had electricity included as part of their monthly rent.
For example: Sulekha signs a lease to rent a unit beginning July 1, 2009. Both Sulekha and the landlord agree to a rent of $850 per month. This rent includes electricity. Sulekha does not need to set up an account with an electricity provider.
- In this situation, electricity must be provided as a service included in the rent, unless the tenant gives informed consent to having it removed. The landlord must also provide a rent reduction to the tenant IF the tenant agrees that electricity will no longer be included in the monthly rental charge.
Scenario 3: Sitting tenants who consented to paying electricity separately beginning November 2005
Some sitting tenants were requested to or required to consent to removing electricity from the rent, either directly or through a clause in their lease. In August 2009, the Ontario Energy Board (OEB) released an order stating that from November 3, 2005 onwards, any such clause agreements contained in a lease could not be enforced by the landlord. Landlords wishing to have electricity removed from the rent had to enter into a new agreement with their tenants, based on the requirements set out in the OEB order.
Sitting tenants who agreed to or were required to have their apartments sub-metered, or who were asked by their landlords to have electricity removed from the rent and paid separately to an electricity provider, should get as much information as possible and check out their rights.
The Advocacy Centre for Tenants of Ontario has more information which may be helpful. Go to the CLEO Net site or contact the Tenant Hotline at 416-921-9494.
New Legislation: the Energy Consumer Protection Act
Starting January 1, 2011, the provincial government will implement new rules for separating electricity charges from rental charges. These rules are set out in the Energy Consumer Protection Act. The new law will still require landlords to obtain informed consent from sitting tenants before removing electricity as a service included in the rent. In addition, the landlords are required to follow specific rules including:
- deciding/calculating the amount by which the rent must be reduced when a unit is sub-metered
- ensuring that costs for electrical heat are not paid for directly by tenants, and
- stating which appliances in the rental unit must be replaced, specifically refridgerators. There will also be rules about dividing utility costs among sitting tenants in buildings with six or fewer units.
The City of Toronto’s response
The City of Toronto has been following this issue for some time. In addition to the information above, the City has prepared the following reports and documents: