We regularly work with landlords and tenants and believe that a good landlord and tenant relationship is possible and beneficial to both sides.  There are, however, a number of common misunderstandings when it comes to certain aspects of rental in Ontario.  We often see this take place at the end of an otherwise fruitful and productive tenancy.

We will preface all of the below information with the statement that we are not lawyers, paralegals or representatives of the Landlord and Tenant Board.  This is intended to be a general resource that highlights the most common misunderstandings around ending a lease.  You can and should always seek professional assistance to confirm your approach is legal and correct.

That being said, let’s talk about what people get wrong when it comes to ending a tenancy.

Mistake #1 – You’ll notice I don’t understand how to give notice.

There are periodically changes to the rules around landlords or tenants giving notice to end a current tenancy.  The best source for the current rules will always be the governing tribunal that provides dispute resolution of landlord and tenant matters.  In Ontario, that’s the Landlord and Tenant Board (or the LTB), who operate under Tribunals Ontario.

As of February, 2024, this is the link to the section on their website that specifies how to end a tenancy, whether it is initiated by the landlord or the tenant.

While the rules for the notice a landlord must give (as well as compensation they must provide to their tenant) vary depending on the reason for ending the lease, it is the tenant side of things that we commonly see misunderstood.

If you’re a tenant and want to end your tenancy, you can inform your landlord in writing and as long as you give enough notice and they acknowledge receiving your communication, you should be good.  Tenants will often use a form created by the LTB called the “Tenant’s Notice to End the Tenancy (Form N9)” and you can search online to find the latest version.

Here’s the wording on that form that many tenants (and some landlords) misunderstand.

For most types of tenancies (including monthly tenancies) the termination date must be at least 60 days after the tenant gives the landlord this notice. Also, the termination date must be the last day of the rental period. For example, if the tenant pays on the first day of each month, the termination date must be the last day of the month. If the tenancy is for a fixed term (for example, a lease for one year), the termination date cannot be earlier than the last date of the fixed term.

The common (mis)understanding that is out there amongst tenants is that you can end a tenancy if you give two months notice.  We say misunderstanding, because while this is broadly true, tenants often don’t grasp two key aspects.

First, you can’t break a lease before the end of the lease term, regardless of if you give two months notice.  In the absence of conditions that are in violation of the Residential Tenancies Act, if you sign a lease for a year, you are committed and bound to the terms of that lease until the end of your lease term.  You can’t say you’ll rent a place until November and then give notice in March that you’re leaving in two months.  Well, you can, but it isn’t going to change the fact that you have a lease you need to pay until November.  The two months notice that most people think apply is when you’re at the end of your lease (i.e. it ends in two months and you’re giving notice before the last two months start) or when you’re on a month to month lease.

Secondly, it’s not two months notice exactly.  You have to give at least 60 days and the termination date must be the last day of the rental period.  As we write this article, it is February 2, 2024.  If a tenant is on a month to month lease, where they pay rent on the 1^st of each month, and decides to give their notice, that doesn’t mean that they can tell their landlord I’m leaving on April 2, 2024.  While that is 60 days from today, the termination date has to be the last date of the rental period.  They pay rent on the 1^st of the month, so that means it is the last day of the month at least 60 days after they give notice.

Here’s a few examples.

The tenant pays rent on the 1^st of the month, and it’s February 2^nd.  If they give 60 days notice on February 2^nd, that means April 2^nd, but the last day of the rental period is the end of each month, so that means April 30^th.

Say the same tenant got organized a few days earlier.  The tenant pays rent on the 1^st of the month, and on January 31^st they give notice.  The 60 days notice they gave lands on March 31^st, and the last day of the rental period is the end of each month, so March 31^st is the date their lease ends.

If a tenant pays rent on the 15^th of the month, or the 4^th or the 23^rd or whatever date the landlord and tenant agreed to with the initial lease, then they need to give at least 60 days notice and their lease ends at the end of the last day of the rental period.  So, if they pay rent on the 15^th, and give notice before the 15^th of the month, 60 days takes them to the 15^th of the month two months ahead.

In summary, a tenant must give notice at least 60 days before the last day of their rental period.  Not two months and regardless of the notice given, it has to end on the last day of their rental period unless otherwise agreed.

Mistake #2 – Hold on, when’s the last month then?

In the vast majority of lease situations, the tenant pays for the first and last months’ rent at the start of their lease.  The first month’s rent is pretty clear.  A tenant agrees to rent a unit, their lease starts on March 1^st so the landlord applies half of their rental deposit of first and last months’ rent to the month of March.  The first regular monthly payment the tenant makes for their new rental is April 1^st.

It is the last month’s rent that gets confusing for landlords on tenants on a regular basis.

In the above example, the tenant started a one year tenancy on March 1^st and provided their landlord with 10 post dated rent cheques.  The first month (March, 2024) was paid for with the first and last month’s rental deposit.  The second month (April, 2024) was paid for with the first of the ten rental cheques they provided.  Here’s how the year looked.

• April 1^st – Rent Cheque #1 Deposited
• May 1^st – Rent Cheque #2 Deposited
• June 1^st – Rent Cheque #3 Deposited
• July 1^st – Rent Cheque #4 Deposited
• August 1^st – Rent Cheque #5 Deposited
• September 1^st – Rent Cheque #6 Deposited
• October 1^st – Rent Cheque #7 Deposited
• November 1^st – Rent Cheque #8 Deposited
• December 1^st – Rent Cheque #9 Deposited
• January 1^st – Rent Cheque #10 Deposited

Sometime in January, the landlord realizes they don’t have any more rent cheques.  They talk to the tenant who says they want to stay at the unit on a month to month basis and both agree to continue at the same rent as it’s been a good tenancy for all parties.

Here is where the mistake often happens.  Rent is due February 1^st and it is not unusual for either the tenant or the landlord to think that the last month’s rent should be used for that.  No rent cheque is provided and the tenant provides new post-dated cheques starting March 1^st.

The thinking here is that the first and last month’s rent was for the term of the lease, which was one year or twelve months.  The first month is applied to month one and the last month is applied to month twelve.

The mistake here is that the last month’s rent is intended to be used for, literally, the last month of the rental period for that tenant.  So if a tenant decides to leave at the end of their one year lease as above, then applying that rent to the February 1^st rent is correct.

If a tenant continues to stay beyond the initial rental period (whether on a month to month basis, which is what happens if no new fixed term lease is signed, or signs on for another year or some fixed term lease), then the landlord keeps that last month’s rent until…you guessed it, their actual last month.

In summary, the last month’s rent should never be applied to any rental period other than the literal last month of the tenant’s time in the unit.  If a lease is extended, the landlord sets that last month aside until their actual last month and the tenant is responsible for making sure the regular rental payments continue without delay.

Mistake #3 – How interesting!

The final common mistake we see landlords and tenants make has to do with that last month’s rent.

By law, the landlord must pay their tenant interest on their last month’s rent deposit every year.  The amount of interest is determined on a yearly basis in accordance with the Consumer Price Index for Ontario, which is the same amount as the yearly rent increase (the “Guideline”) that is permitted in the province.  In Ontario, that is currently 2.5%, but make sure you check to see the current amount before you make any calculations.

In our experience, the majority of landlords and tenants do not follow this law.  It is not commonly known and the dollar amounts tend to be relatively small.  Regardless, it is the law and the best practice that we suggest our landlord clients follow is to make a note of the annual anniversary of the start of the lease term and do the calculation at that point.  We recommend a separate payment be made rather than adjusting the rent received from the tenant as it typically causes confusion.

Say that a landlord is applying the permitted increase each year (which they can do once every 12 months) and in lieu of the first month of the increase rental rate starting immediately, they start it a month later and that amount can be used by the landlord to top up the last month’s rent amount.  Here’s an example.

A tenant rents for $3,000 per month, starting on March 1^st, 2023.  They agree to remain and the landlord gives the required notice that they will be increasing the rent by the permitted 2.5% as of the start of the 13^th month.  The new rental rate is $3,075.  On March 1^st, 2024, the landlord asks for a rent cheque in the amount of $3,000 and tells the tenant that month’s rent includes them giving $75 back for the interest for the year on their last month’s rent.

A tenant can do the same thing of their own volition, acknowledging the new rent of $3,075 and paying the first month of the new rental amount period at $3,000 and notifying the landlord they withheld $75 of the rent for the interest on the first month’s rent.

As you can imagine, this can cause confusion.  Did the tenant pay the new rental rate on time or no?  Did the landlord ever pay the interest on the first month’s rent?  As a result of the possible confusion we suggest that the landlord make a separate payment to the tenant for the interest on the first month’s rent, the tenant make a separate payment to the landlord for the top up to bring the last month’s rent to the new agreed upon rent, and the new rental rate starts on the date that is allowed based on the notice given.

The rules around renting in Ontario can be complex and we regularly work with our landlord and tenant clients to make sure that the end of a lease is done fairly, legally and with no misunderstandings.  If you think that sounds like the right approach and you need some real estate help on either finding a place to rent or a tenant for your rental property, please get in touch with us to discuss next steps!