Article by Heather Waese

With the advent of hydro deregulation and the already skyrocketing gas costs, each landlord is now faced with the daunting task of preserving his or her bottom line.

The Tenant Protection Act provides that landlords may apply for an increase above the guideline where they have experienced an extraordinary increase in utility costs. Each year the government issues a Regulation that establishes what is meant by “extraordinary” for each category of heat, hydro and water as well as property taxes. The following are the extraordinary thresholds that would relate to all applications that have a first effective date of increase in the calendar year 2001.

Operating Cost Catergory	Three-year Moving Average
Heating	5.44%
Hydro	0.31%
Water	1.65%
Municipal Taxes and Charges	-0.79%

A landlord must first determine the two consecutive fiscal periods that would yield the largest net increase. These two twelve-month periods are know as the reference year and the base year and must be the most recently completed twelve-month periods prior to the date of filing the application. They need not be consistent with the reporting periods for income tax purposes and they need not be calendar year. The chosen periods must, however, be the same for each of the utilities and once a fiscal period is chosen it must remain consistent in subsequent years. It is conceivable that an application filed at the end of March 2001 may use the fiscal periods commencing May 1, 1998 to April 30, 1999 as the reference year and May 1, 1999 to April 30, 2000 as the base year. It would be acceptable to reach that far back as the fiscal period May 1, 2000 to April 30, 2001 would not be completed by the filing date of March 30, 2001.

There is a requirement to document all three utilities if an application for extraordinary increase is made. It is not sufficient to claim the increase for heating and ignore the possible reductions for hydro and water. Therefore, an increase in one utility cost may be offset by the decrease in another. Therefore, it may be necessary for a landlord to analyze various fiscal periods in order to determine where the greatest increases together with the smallest reductions are experienced across all three utilities. All invoices must be submitted with the application together with evidence of payment of these costs. Simply submitting the following utility bill that confirms receipt of payment for the previous period’s costs has been deemed to be sufficient evidence of payment for any individual invoice.

The government limits annual increases above the guideline resulting from capital expenditures to 4%. Extraordinary operating cost increases, however, are not subject to that cap. It is possible to justify an increase of 4% above the guideline for capital and an additional increase for the extraordinary operating cost amount.

I have already noticed the substantial increase in the number of applications being filed with the Ontario Rental Housing Tribunal to recover for the increase in natural gas and oil costs. It is expected that the deregulation of the hydro anticipated to be passed in the fall would further impact on the utility costs and therefore on the number of applications filed with the Tribunal.

Heather Waese, President of S.P.A.R. Property Consultants Ltd.