Ontario Rent Increases: Guidelines & AGIs for Investors

One of the biggest complaints I hear from Ontario landlords is about rent control. “My expenses went up 8% but I can only raise rent 2.5%.” I get it. It’s frustrating. But here’s the thing—if you actually understand the system, there are legitimate ways to keep your rents closer to market. And if you buy the right properties, rent control might not even apply.

Let me break down exactly how rent increases work in Ontario, because the details matter a lot more than most investors realize.

The Annual Rent Increase Guideline

Every year, the Ontario government publishes a rent increase guideline. This is the maximum percentage you can raise rent without applying to the LTB. It’s calculated based on the Ontario Consumer Price Index (CPI), and it’s capped at 2.5%.

Here are recent guidelines:

You’ll notice 2023-2026 all hit the 2.5% cap. That’s because inflation has been running above 2.5%, and the government caps the guideline regardless of actual CPI. Before that, guidelines were much lower—1.2% in 2022, and 0% in 2021 during the COVID rent freeze.

Rules for the Annual Increase

There are specific rules you must follow:

• You can only increase rent once every 12 months
• You must give the tenant 90 days’ written notice using the N1 form
• The increase must take effect on the anniversary of the tenancy or the date of the last increase
• The tenant does not need to agree—this is your right as a landlord
• When a tenant moves out, you can set rent at whatever the market will bear for the next tenant—that new amount becomes the lawful rent going forward

Here’s the key point most investors miss. When a unit is rent-controlled, the lawful rent stays with the unit, not the tenant. So when a tenant moves out, you can charge whatever the market will bear to a new tenant. That new amount becomes the new lawful rent. This is called “vacancy decontrol,” and it’s a critical part of how Ontario’s system works.

This is why turnover matters so much in Ontario. Every time a tenant leaves voluntarily, you get to reset the rent to market. That single event can be worth years of guideline increases.

Above-Guideline Increases (AGIs)

Here’s where it gets interesting for investors. If you’ve made significant capital expenditures on a property, you can apply to the LTB for an above-guideline increase (AGI) that exceeds the annual guideline.

What Qualifies for an AGI?

There are three grounds for an above-guideline increase:

1. Capital expenditures — Major repairs or improvements to the building (new roof, windows, boiler, plumbing, elevator modernization, parking lot resurfacing)
2. Extraordinary increase in municipal taxes and charges — If your property tax or utility costs jumped by more than the guideline amount
3. Security services — If you’ve added new security services to the building

Capital expenditures are by far the most common. Here’s what counts:

• The work must be “extraordinary” — routine maintenance doesn’t qualify
• The expenditure must have a useful life of at least 5 years (the LTB has a table for expected useful life of different components)
• The work must benefit the tenants (not just cosmetic improvements to common areas for the landlord’s benefit)
• The work must have been done within the 18 months before you file the application

How AGI Math Works

The LTB spreads the cost of the capital expenditure over its useful life and allocates it across the units in the building. Here’s a simplified example:

You replace the roof on a 6-unit building for $60,000. The LTB assigns a useful life of 15 years to roofing.

• Annual cost: $60,000 / 15 = $4,000 per year
• Per unit: $4,000 / 6 = $667 per unit per year
• Monthly per unit: $667 / 12 = $55.56

If each unit pays $1,500/month in rent, that $55.56 represents a 3.7% increase. The AGI would let you raise rent by the guideline (2.5%) PLUS 3.7%, for a total of 6.2%.

But there’s a cap: the maximum AGI allowed is 3% above the guideline per year, for a maximum of three consecutive years. So the most you can increase rent through an AGI is the guideline + 9% over three years.

The AGI Process

Here’s how it works step by step:

1. Complete the capital work and keep all invoices and receipts
2. File an L5 application with the LTB (filing fee: $201 per affected unit up to a maximum of $1,005)
3. Serve all tenants with the application and supporting documents
4. Wait for a hearing (this can take 6-12 months)
5. Present your evidence at the hearing
6. If approved, serve tenants with the approved increase notice

The whole process from filing to implementation can take 12-18 months. That’s a long time, but the increase is retroactive to the date you applied. So tenants will owe the difference back to the effective date, either as a lump sum or in installments.

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Exempt Properties: Post-November 2018 Builds

This is the part every investor needs to understand. Properties first occupied for residential purposes on or after November 15, 2018 are exempt from rent control.

That means:

• No guideline cap on annual increases
• No need to file AGI applications
• You can increase rent by whatever the market supports (with 90 days’ notice)
• The exemption stays with the unit permanently, regardless of ownership changes

This was introduced through the More Homes, More Choice Act and was designed to encourage new construction. For investors, it’s a massive deal.

What Counts as “First Occupied After November 15, 2018”?

This includes:

• New construction completed after November 15, 2018
• Units in existing buildings that were never previously used as residential (a commercial-to-residential conversion, for example)
• New additions to existing buildings (if you add a basement apartment to a pre-2018 house, the new unit is exempt but the original unit is not)

What doesn’t count:

• A renovated unit that was previously occupied residentially before November 2018
• A unit that was vacant but existed as residential space before November 2018

The distinction matters. If you buy a property built in 2020, you’re exempt. If you buy a property built in 2005 and renovate it, you’re not exempt—even if the renovation was done after 2018.

Investment Strategy Around Exemptions

This is where smart investors focus their buying criteria. If you’re acquiring a new-build rental property—a condo, townhouse, or purpose-built rental—that was first occupied after November 2018, you have complete pricing flexibility.

Here’s what that looks like in practice. Say you buy a new-build condo in 2024 and rent it for $2,200/month. After one year, comparable units in the building are renting for $2,500. On a rent-controlled unit, you’d be stuck with a 2.5% increase to $2,255. On an exempt unit, you can issue an N1 with 90 days’ notice and go straight to $2,500.

Over five years, that difference compounds significantly.

Timing Strategies for Rent Increases

Whether you’re dealing with rent-controlled or exempt properties, timing matters.

For Rent-Controlled Units

Serve the N1 early. You need to give 90 days’ notice. If your tenant’s anniversary is January 1st, you need to serve the N1 by early October at the latest. Build a calendar reminder system. Missing a year’s increase is money you never get back, because next year’s guideline increase applies to the current rent—not what it should have been.

Plan capital work strategically. If you know you need a new roof and new windows, don’t do them five years apart. Bundle them into a single AGI application. The 3% annual cap is per application cycle, so one large application covering multiple improvements is more efficient than multiple small ones.

Track your lawful rent carefully. If you inherit a building where the previous owner never raised rents, you can’t retroactively apply missed increases. The lawful rent is whatever the tenant is currently paying (or whatever the last properly issued increase was). Start raising rents immediately and don’t skip years.

For Exempt Units

Watch the market constantly. You have pricing power, so use it. Track comparable rents in your area quarterly. If the market moves up $200/month and you wait a year to adjust, that’s $2,400 in lost income.

Balance increases with retention. Just because you can raise rent 20% doesn’t mean you should. A good long-term tenant who always pays on time has real value. Vacancy and turnover costs—cleaning, painting, showings, lost rent—add up fast. A moderate increase that keeps a great tenant is often worth more than a maximum increase that triggers turnover.

Document everything. Even though you don’t need LTB approval, the tenant can still dispute an increase they believe is in bad faith. Keep records of comparable rents in the area to justify your pricing.

What Happens When a Tenant Disputes Your Increase

For guideline increases, there’s not much to dispute as long as you followed the rules (90 days’ notice, N1 form, correct amount). If the tenant simply refuses to pay the increase, you can file an L1 for the difference as arrears.

For AGI increases, tenants can—and often do—challenge the application at the hearing. Common arguments include:

• The work wasn’t necessary
• The useful life assigned is too short (making annual cost too high)
• The work didn’t benefit tenants
• The invoices are inflated

Come prepared with before and after photos, engineering reports if applicable, multiple quotes showing you got fair pricing, and clear documentation of why the work was necessary.

The Bottom Line

Ontario’s rent increase system is restrictive, but it’s not a dead end. Guideline increases plus strategic AGI applications keep your rents moving up on controlled units. And if you focus your buying on post-November 2018 properties, you sidestep rent control entirely.

The investors who struggle are the ones who buy rent-controlled units, never raise rent, never apply for AGIs, and wonder why their returns shrink every year. Don’t be that investor. Know the rules, use them, and build rent increases into your business plan from day one.

Frequently Asked Questions

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LendCity

Published

July 21, 2026

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10 min read

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Above Guideline Increase Ontario Landlord Property Management Rent Control Rent Increase Ontario

Key Terms

Capital Expenditures

Capital Expenditures

Major one-time expenses for property improvements that extend the useful life of the asset, such as roof replacement, foundation repairs, or new HVAC systems. CapEx differs from regular maintenance and is typically budgeted separately in investment property analysis.

Common Area Maintenance

Common Area Maintenance

Expenses for maintaining shared spaces in commercial properties, including lobbies, parking lots, landscaping, and hallways. CAM charges are typically passed through to tenants as part of net lease structures.

HVAC

HVAC

Heating, Ventilation, and Air Conditioning systems that control temperature and air quality in buildings. HVAC is often one of the largest energy expenses in rental properties, and upgrading to high-efficiency systems can significantly reduce operating costs and increase NOI.

Landlord Tenant Board

Landlord-Tenant Board

A provincial tribunal or administrative body that resolves disputes between landlords and tenants, handles eviction applications, and enforces residential tenancy legislation. Each Canadian province has its own board or tribunal with specific procedures and timelines.

New Construction

New Construction

New Construction refers to residential or commercial properties that have been newly built and are being sold for the first time, offering Canadian investors the advantage of modern building standards, warranty protections, and potential appreciation as the property enters the market. For investors, new construction provides opportunities for capital gains, customization options, and often incentives from developers, though it may involve longer closing timelines and construction risk compared to resale properties.

Notice Of Assessment

Notice of Assessment

A document issued by the CRA after processing a tax return, confirming income reported and taxes owed or refunded. Mortgage lenders require Notices of Assessment as proof of declared income, especially for self-employed borrowers.

Plumbing

Plumbing

The system of pipes, drains, fixtures, and fittings in a building that distributes water and removes waste. Plumbing issues are among the most costly repairs in rental properties, and older galvanized or polybutylene pipes often need replacement during renovations.

Porting

Porting

Transferring your existing mortgage to a new property without penalty, keeping your current rate and terms. Useful when moving before your term ends.

Property Tax Assessment

Property Tax Assessment

The process by which a municipality determines the value of a property for taxation purposes. Investors can appeal assessments they believe are too high, potentially reducing annual property tax expenses and improving cash flow.

Property Tax

Property Tax

Annual tax levied by municipalities on real estate based on the assessed value of the property. Property taxes fund local services and are a significant operating expense that investors must account for in cash flow projections.

Hover over terms to see definitions. View the full glossary for all terms.