Committee Transcript 1991-Aug-01 | Legislative Assembly of Ontario

The Chair: The first presenters this morning are the Concrete Restoration Association of Ontario. I would like to call the delegation forward. The committee has allocated 15 minutes for your presentation and you may wish to save part of that time for questions and answers. If you so wish, I can let you know when you have three or four minutes left or you can use the entire time as you like.

Mr Eckardt: Thank you for this opportunity to address the proposed rent control law in Ontario. Our interest in this matter arises from the fact that members of our association, including contractors, suppliers and engineers, repair most of the apartment parking garages in the province. Since we were before this committee earlier this year to offer comments on Bill 4, the temporary rent control legislation, we will keep our remarks as brief as possible.

The members of this committee will recall that the reason underground garages are deteriorating is that the reinforcing steel in garage concrete is rusting as a result of the accumulation of road salt in the concrete. The salt is there, as you know, because it is carried into garages by automobiles and at the molecular level penetrates the concrete to commence corrosion of the steel. As we outlined to you before, a ready example of this is the Gardiner Expressway. That deterioration is precisely what is happening to Ontario's apartment garages.

Let me emphasize that since the fall of 1990 through to today, very little concrete restoration has occurred because of the government's temporary rent control law. Yet the need for these repairs grows. To quote one Canada Mortgage and Housing Corp report on this issue, "The Ontario Ministry of Transportation and Communications' practice is to add 10% to 25% to the amount of delaminations" -- or deterioration -- "determined in a survey if repairs are delayed one year."

To quote the same report again, "Once started, the growth of delaminations may accelerate and indeed be exponential until all areas containing top steel have delaminated."

In other words, time is not on our side, but unfortunately we have lost this year.

Early in July we surveyed our members and others who supply the apartment sector to determine what, if any, work is going on. Because of the shortness of time we have received only 22 responses, but even those few show Bill 4 caused 143 men and women to lose their jobs through the cancellation of $35 million worth of projects.

The responses vary tremendously. Some companies lost over $1 million worth of projects and only had to lay off one person. Most of the others were not so fortunate.

The responses show contractors are not too familiar with lawmaking but they know how the real world works.

Here are some quotes about Bill 121 from working people.

"Restoration is a costly item. No financial institution will lend money with no means of repayment. Therefore no work will be done."

Here is another: "The legislation encourages cosmetic repairs to hide problems, rather than undertaking major expenditures to solve concrete deterioration."

Here is another in response to the issue of tenant safety: "Not immediately in danger but that will change within one year."

Here are some suggestions for improvement: "Have both sides sit down and make an agreement that will not kill the tenant but see the owner compensated reasonably for his expenses."

Finally: "Structural repairs should have a separate category with no penalties and a longer term to allow landlords to commit the large sums of money required."

All this sounds like common sense to me.

Based on this information and my experience and that of my associates, I can say with accuracy that very little work other than minor maintenance is taking place in the apartment sector right now. What is more important, very little will take place under Bill 121 as it stands. This is not something that the government wants, nor landlords, nor tenants, nor us, nor our workers. We have got to find a way of turning this situation around.

Specifically with Bill 121, there are a number of problems and they are linked.

First, the percentage of rent increases allowed and the way in which they are allowed for capital improvements are not great enough to get the work done. The costs are high but the 3% capital allowance does not go far enough to let someone do this work, let alone borrow the money to do the work.

Second, the period for recapture of costs for structural repairs, even spread over two years, is not long enough. This repair process is ongoing, time-consuming, and will be with us for decades to come. There is no escaping that hard reality. These are multi-year programs, and a two-year payback period with the caps, as recommended, are not sufficient.

Third, the way the bill is designed with a 2% deduction out of the annual 5% guideline dedicated towards capital needs to be changed. With this dilution factor, the numbers do not work, so the work will not get done.

A fourth problem arises in the form of the definitions related to the penalties that a property owner faces if he or she applies and if there has been neglect or inadequate maintenance. Those are undefined terms which could deter people from undertaking work and applying for an increase. It seems to us that this needs to be clarified as well.

Fifth, anyone who wants to use the carry-forward cannot make another application for the same period. So in a year that a carry-forward is taken, no work can be done.

Sixth, you have maintenance enforcement penalties to penalize landlords who do not comply with work orders within 30 days. This, as you know, is practically impossible with regard to underground garage projects that take months to organize and years to implement.

Seventh, there is the issue of transition. I think Minister Cooke was quite clear in saying that he wanted a regime that would treat those caught in the Bill 4 freeze fairly. This bill does not do that, and in fact puts some owners in the position of never being able to recapture what they spent on major repairs. This, too, should be corrected. Let's treat those who obeyed the then existing law fairly and let them recapture spent funds over time and with caps, as necessary.

Finally are the definitions in the legislation as to timing, which leave the balance of this year up in the air and the future looking rather bleak when combined with the transitional provisions and the thinness of the funds provided for capital expenditures.

So there are many problems with Bill 121 but they can be corrected. All of us share the same goals of getting needed work done. I do not think I am going to get an argument from any party or any tenant advocate or any property owner on that matter.

In closing, over and above the changes I have discussed we recommend that structural repairs themselves, which are so essential for public safety, be put into a separate category in the legislation and that an additional 1% in rent increases be allowed to cover the high costs and provide an incentive for doing these repairs. That would make for a 4% cap above the guideline for necessary structural repairs.

As well, we recommend that the period for recapture of costs for structural repairs be extended from two to four years.

To conclude, I believe this government is sincere when it talks about wanting to co-operate with the private sector and make changes in the interests of Ontario's society. Bill 121 is a case in point. With some changes you can make this thing work. But it is going to require goodwill on all parts and not just good intentions.

I urge the government and this committee to make this an example of how you can make things work, how you can listen and act in the public interest and govern for all Ontarians.

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The Chair: Thank you. Mr Tilson, two minutes.

Mr Tilson: I must say to you that of all the presentations we heard during Bill 4 presentations, yours stood out along with several others because it covered a vast number of areas. It covered the issue of safety, it covered the issue of quality and it covered the issue of loss of employment. Once again, you have shown the seriousness of it, and I would hope that of all the briefs we receive the government will review this one with some of the most care.

Dealing first of all with the issue of the industry and, I suppose, employment, listening to what you said, if there are no changes in this bill with respect to enabling capital expenditures such as in the concrete restoration area, what do you estimate will happen in the next few years with respect to the industry and with respect to employment?

Mr Eckardt: So far in the last eight months we have been unemployed we have seen up to 50% to 60% unemployment. Right now what is happening is that the firms that were willing to invest in their own companies and technology, etc are using those funds now to survive, to try to hang in long enough to see what is happening, to see if we are going to be allowed to make a living in this province. If it goes on much longer, I can see at least 50% of the firms not being around next year. Translating that into unemployment figures, it could be anywhere from 1,500 to 3,000 people directly or indirectly related to this industry.

Mr Tilson: I have debated this very subject with the former minister in the House, and his response has been, "Well, there's a recession going on."

Do you have any facts that can relate the unemployment that you are speaking of to this specific issue, these specific pieces of bills? In other words, can you refute what the minister has said?

Mr Mackay: Let me give you a personal example. I am an employer. Last year I had 70 people. When this Bill 4 came out, we were asked, "How many jobs are you going to lose; how is this going to affect you?" Some of the people around here asked me that. It was hard to say back then because you go into a traditional slowdown in construction in the wintertime. Here we are in July now, the height of our season, and I have only got 40 people. I have lost 30 guys. That is the first thing.

Second, I am a union company. I have a collective agreement with Local 183, Laborers' International. Those are union guys. I can sit here now and say to everybody, I have 30 fewer Local 183 labourers working for us right now. Nothing to do with the recession. We do not do new construction, which, as you know, has been affected by overbuilding, etc. That is a direct point that hits home.

The other thing that I wanted to say was, when we sat here and we were all exposed to this thing for the first time, talking to all of you people, nobody knew what concrete restoration was. We kept referring to the Gardiner. It was February; the Gardiner was not under reconstruction. It is now. You can see the amount of concrete that is coming out of there. You can see the amount of reinforcement steel that has been taken out of there.

The Chair: Could we just ask you gentlemen to identify yourselves for the Hansard reporter.

Mr Mackay: My name is Bill Mackay, Concrete Restoration Association.

Mr Eckardt: Ian Eckardt, Concrete Restoration Association.

Mr Hakomaki: My name is Harry Hakomaki, Concrete Restoration Association.

Mr Brown: I am interested -- in order to give Ms Poole a chance, I am going to be brief -- in precisely how you arrived at the 1% additional for capital expenditure and the extra two years. Have you gone through this and had a look at whether that would actually provide the amount of funds necessary to make the buildings in Ontario safe for our tenants?

Mr Eckardt: Yes, we have done some sample jobs and things of this sort, and really with minor alterations and some incentives this bill can be a workable situation. What we are looking for in this is something that is fair for everyone, and I think that is the key: that somebody gets an apartment that is in good shape and somebody has his expenses reimbursed for doing that, because this type of work is not the landlord's problem. It is caused by something else and it is brand new and there is no way you could have planned for it.

To answer your question, yes, we went through the samples, and especially for smaller apartment buildings within the large categories, they too can have monstrous $1-million jobs with no way of paying for them under the present legislation. So a rollover, etc.

Ms Poole: Thank you very much for your presentation today. I always find your comments extremely helpful because they are geared to preserving our housing stock, which a lot of people have not paid as much attention to as they should have.

I wanted to talk to you about a problem which you mentioned in your brief: the potential time void from June 6, 1991 to whenever the legislation comes into force. Mr Eckardt, you had phoned me about a month ago raising this very valid concern that the legislation is silent as to what happens about capital repairs from June 6, 1991 onward; that it seems to cover the transition period but is silent on what happens after the bill comes into force.

When I contacted the ministry about this, they said they were contacting their legal people. Their policy people and the minister all told me this was not their intention. I gave them your name and your company's name and advised them of your concern. Has the ministry contacted you to confirm what they said to me, which is that capital repairs can go through during that period, and the period will be covered?

Mr Eckardt: No, we have had no communication with the government in that regard.

Ms Poole: So it is your feeling that if this confirmation is not given, the work simply will not be done because landlords will not be willing to take the risk and spend the money?

Mr Eckardt: I do not think you even play the game without knowing the rules.

Ms Poole: We will try to get that confirmation for you.

Mr Duignan: In your brief, point 6, you say it is practically impossible to have that 30-day limit with regard to underground garage projects. What would you recommend as a fair time period? I know the difficulties of getting in and trying to correct a problem in an underground garage.

Mr Eckardt: My personal feeling is that goodwill plays a big part in this situation. If the landlord shows his intent and starts the job, I do not see why he should be penalized for that. I do not think you can complete a garage restoration job within the time limit. It is impossible. Every job is different. Some could take three years. While it is ongoing, I do not think anybody should be in a penalty position.

The Chair: Very good, thank you. Time has expired. I want to thank the Concrete Restoration Association for appearing before the committee this morning.

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860 PHARMACY AVENUE TENANTS' ASSOCIATION

The Chair: The committee has allocated your organization 15 minutes. You may withhold some of that time for questions and answers. For the record, we need you to introduce yourselves for the Hansard recorders. Your 15 minutes has started.

Miss Adams: We are the tenants of 860 Pharmacy Avenue; my name is Thea Adams and I am the chairperson. To my left are Karen Lightstone, Eleanor Talbot and Celeste Mestern; we are all tenants at 860 Pharmacy.

We are here today to address our concerns regarding Bill 121 and how they relate to our past problems. We did not have an opportunity to address you personally at the Bill 4 hearings as did our landlord's son. Even though we are as emotionally involved, if not more so, than our landlord's son, and as some of us have lived at this address for 10 and even 20 years, we will try not to cry about it as he did.

At the Bill 4 hearings our landlord's son made an appeal to you to honour conditional orders, an appeal that you listened to and which resulted in a 15% rent increase for us. It was ironic that on the same day the order arrived, a letter from the Minister of Housing also arrived stating that tenants would no longer have to fear rent increases of 15% and 20%. I guess he did not mean us.

The conditional order process was a sham from start to finish and, although an interesting story, it is too long to relate here.

We feel the process was a ruse to get bank financing for luxury renovations and capital expenditures that would ultimately increase our rents; or, to quote our landlord's son from the Bill 4 hearings, "My father found out you could get rent increases if you did capital improvements to your property and he went the way of a conditional order just to see how much he could get."

But throughout the process, no one bothered to investigate why the current rents could not finance the capital improvements. If they had, they would have been as surprised as we were.

No one bothered to say, "Use the 18.8% you got in 1982 for capital improvements, as they had been paid for and the money was sitting in our rents." No one said, "Use the 5% that has been built into current rents for capital expenditures." No, they said: "Go ahead and do what you want. The tenants will pay again." Items in our case were submitted with no thought given to the effect they would have on the tenants or on the units. In fact, one of the items submitted was very similar to the one that had been submitted by our landlord in 1982 and again in 1983, and still had not been undertaken in 1989.

Section 29 of Bill 121, although titled "advance determination," seems very much like a conditional order. Subsection 29(1) states, "Before making a capital expenditure or providing a new or additional service...the landlord may apply...for an advance determination." Why? If it has to be done, it has to be done. If the landlord does not like the answer or the price assigned, does that mean it will not get done?

Subsection 29(2) refers to the matter of it being an eligible capital expenditure. By whose criteria? Your employees', the landlords' or the tenants'? Clause 29(2)(b) states it is okay if the tenant gives consent. Give us a break on this one. If you as a tenant want an apartment or a leaky tap fixed or maybe even that hole in your wall fixed, of course you are going to agree with what the landlord wants so that you can get the needed repair done.

As an example, I needed a new countertop in my kitchen but I did not want the new cupboards, as they were smaller and made of inferior materials. So because I did not consent to it, I did not get the new cupboards but I also did not get the new countertop that I really did need and still do need.

Clause 29(2)(c) talks about how much will be allowed in respect of the expenditure and that the higher costs will be taken into consideration. In our case, the increases for some items were 62%, 64% and in one case 315% higher. But we understand rent increases will be limited to 3% above guideline, so why put tenants through this procedure? If something needs to be done, it needs to be done and cost should not be the determining factor.

Clause 16(1)(a) states that if a capital expenditure was substantially completed on or after the first day of January 1990 and before the sixth day of June 1991, the landlord may apply for the 3% above guideline. Will our landlord be allowed to apply for this, as the work was completed in that time frame? We hope not, as a special exception was made for him and other conditional order landlords under Bill 4 that allowed them rent increases up to 15%. We feel a special exception should be made once again, only this time the exception should be made that they not be allowed to apply under Bill 121 to grandfather any remaining amounts of money outstanding from their conditional orders.

If you do allow this, you are talking about rent increases of 15% in 1991, approximately 8% in 1992 and a probable 8% in 1993, for a total of 31%, and even if you do not factor in the compounding, it is a far cry from your election promises, or even that of Bill 4. Is this part of your Agenda for People?

Subsection 16(2) covers my favourite topic, of neglect in maintaining rental units and complexes. Who is going to judge this, and by what standards? In the past when tenants tried to prove this, your employees threw it back at us, "This doesn't count; you don't have work orders," but we, the tenants who live in these buildings, do know when maintenance goes down. We do not need a work order to tell us that. Why is it, when it is our word against the landlords', ours is wrong and theirs is right, even when documentation is supplied?

Subsection 17(1) once again talks about capital expenditures by consent of the tenant. This is not realistic, the way you have phrased it. It is not strong enough. Landlords have ways of getting tenants to consent, like, "Would you like that extra parking space you've been asking for for years?"

Clause 15(3)(a) mentions once again about whether a capital expenditure is eligible or not and again we hear the words "neglect" or "does not require replacement." By whose determination? Your employees', the landlords' or the tenants'? Maybe if this had been in place, we would still have the milk boxes we wanted but the landlord did not. Somehow or other I doubt it.

Subsection 21(2) puts a cap on the maximum rent of 3% over guideline; and although this is better than 45%, will it be a rubber-stamp process? Will proper documentation be required? What can we say about the carry-forward? Not much.

What happened to your election promise of one rent increase based on inflation? Also, it was very disappointing not to see a true "costs no longer borne" section. It was brought up as a concern of tenants at the meetings you held. Time after time and for ever and for ever, tenants pay for capital expenditures. Take, for example, something as simple as a smoke detector for 28 units at a cost of $537.50, with an annualized allowance of $93.20 for a useful life of 10 years. When the 10 years are up, does that amount come out or is it used for something else? No.

Just think about larger items such as a new roof, a new boiler. The cost of these are in the rents for ever: When a new roof is needed, let's go to rent review again and apply for some more money. Even with a cap of 3%, if this continues year after year it will not take long for rents to skyrocket.

Another disappointment was that the capital reserve fund was not given consideration. This would have taken the financial onus off the tenants and put it back on the landlord where it belongs for repairs and ongoing maintenance to keep their buildings up. There are moneys built into our rents right now for capital expenditures, approximately 5%, that landlords use for who knows what, but we can speculate.

Overall the bill has made some small improvements, but it is a far cry from your election promises and does not address another concern we have had throughout the years. It is that some of the staff who work for rent review have what could be interpreted as a landlord bias. If the same staff are going to administer this new bill, it will be no better than the old bill.

In closing, we would like to address a comment we have heard just recently made by landlords, that Bill 4 and this bill are putting people out of work. We say that if landlords had been doing their repairs and practising ongoing maintenance and not just trying to raise rent by the way of the previous legislation, the employment market would not have been artificially inflated but taken its natural course. We know that our building needed new windows for approximately eight years before they were installed. Just look around at the buildings in Metro. Do you tell me they all needed windows in the same year?

These hearings, although just starting, have a sound similar to those of Bill 51. The landlords said, "Give us this legislation or we won't build any more units." Where are all those units today? Now the cry is, "We won't repair because we can't pass on the cost to the tenants." Why must the rental stock in Ontario be maintained on the backs of tenants? All we want is a place to live where we do not have to use the largest portion of our salaries to pay rent, that is clean and well maintained on an ongoing basis. Is this too much to ask? Even though it is not April 1 but August 1, please do not make it seem like an April fool's joke on us.

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Ms Harrington: I thank all four of you for coming. I think we realize the type of situation that you have been facing out there for several years, which is really a very good example of what was wrong with the previous legislation. I would like to assure you that the whole point of this government bringing forward this legislation is real protection for you. It is very difficult to make it fit every particular situation and every building across the province. I want to touch very briefly on some of your concerns, although I recognize I cannot answer in one minute all of your questions. Maybe you could come to me again, to my office and talk to me about it. First of all, we recognize that you have to have more protection with regard to maintenance, and we are trying very sincerely to make maintenance enforceable. As you said, you are not believed or whatever. You also illustrated that there is a compounding effect in the rent and in the increases every year and that this is what has to be used to pay for it, say the concrete restoration or these other things that are building needs.

Landlords must plan ahead for things and not just take advantage of the system and give tenants what they need, which is exactly what you said: a decent place to live. You are not asking for anything more. And you are perfectly willing to work with the landlords, to be reasonable and talk together. Your question about costs no longer borne is something the government is open to discussion on. Thank you.

Mr Tilson: I must say that when I listen to you I agree there are problems with the existing legislation and there are problems with this future legislation. There is an area I would like to hear your comments in, because you have obviously observed the previous system and you are looking as to how you are going to be able to work with the existing system from the tenant's perspective. One of the concerns I have had is the adverserial system that is created by governments, all three governments: Tory, Liberal and NDP. They have all had to accept some of the blame in creating this system.

The difficulty as I see it is that the tenant is on one side, the landlord is on the other side. You are critical of course of the government as to whose side they are on, and games are played by both landlords and tenants. There are games that are played and it is going to get worse with this legislation. It is going to get unbelievably worse for both sides. Do you think this is the answer, this adverserial system with a government sort of in the middle, adjudicating between the two sides?

Miss Adams: I think we do need government interference. We live in a 30-unit building which is rather small. We now live in an area that is very prime real estate, and without this legislation I can see that our rents would probably have gone up hundreds of per cent. I did talk about equity in current rents. For some reason, landlords seem to feel it is their money and they have no obligation to put some of this money back into their property. We have documentation that our building has been paid for and has been remortgaged to support other items that did not occur in the building, because nothing happened in the building between 1982 and when all this stuff started when he was going for a 45% rent increase.

So, yes, I think it is necessary, even if it has created an adverserial role. But I think that is more on the part of the landlords, because they feel that money is theirs and they can do what they please with it.

Ms Poole: I would like to thank the witness for her presentation today. You have put your point across very clearly. Mr Chair, instead of asking a question, I would like to follow up on several points these witnesses made with the ministry. I would like the ministry to provide us with two items of information. First is a definition of neglect and inadequate maintenance, because I share these witnesses' concerns about putting all this power in the hands of bureaucrats without giving them guidelines. We have to know before we pass this legislation what the rules are, particularly with such a limited right of appeal. So before the end of these hearings I would like a definition of neglect and inadequate maintenance that the ministry intends to bring in as regulations.

The second item follows from what our witnesses have talked about in costs no longer borne. Our caucus had an amendment during the Bill 4 hearings about costs no longer borne, and at that time the government told us that this was something it would consider for the long-term legislation. So the second piece of information I would like is an explanation from the ministry of why a costs-no-longer-borne provision is not in Bill 121.

The Chair: Thank you. Time has expired for your presentation. Thank you for appearing before the committee this morning.

Miss Adams: Thank you very much for the opportunity.

ROBINWOOD MANAGEMENT CORP LTD

The Chair: The next delegation is Robinwood Management Corp Ltd, Rob Herman. You have 15 minutes and you can withhold any of that time for questions and answers.

Mr Herman: Good morning, ladies and gentlemen. My name is Rob Herman and I would like to take this opportunity to thank you for letting me speak to you today. My point in coming here is to try to illustrate to you why your goal of lowering rent increases while at the same time improving the standard of maintenance cannot be realized in the adverse climate that has been created. Let me give you an example. I manage a 70-year-old apartment building in the downtown area. It has always been well maintained and there have been no work orders on the building in the 10 years I managed it. However, time had taken its toll and the major building systems have reached the end of their useful life.

Before undertaking the required renovations, I received written agreement from all the tenants in the building to the proposed work plan and the rent increase. I got approval from the city of Toronto and the Ministry of Housing, and between 1989 and 1990 I spent $500,000 on the building and extended its useful life by 25 years. Then retroactively I was caught in the moratorium. The tenants had agreed to a $180-a-month increase, but now under Bill 121 I may get back between $9 and $18 a month, and even the tenants do not feel that is right.

For example, Raymond St Onge said in the Toronto Star: "Last year my landlord did extensive repair work to our building. Now the NDP have told my landlord he can't be repaid for doing the repairs. That's so unfair. How can they do that? The work is already done. How will he pay for it, and what about the future of my building?" As well, Jeffery Stone was quoted on the CBC as saying, "They worked awfully hard, and I think he deserves more."

The message you are giving me is: "We don't care about the merits and justice of your case. You will be tried with all the others." That is totalitarianism, not democracy. If you were sincerely trying to be fair to both sides, the legislation would allow the rent review officer to deal fairly with the capital work that was caught in the moratorium. This would allow people who have invested in their buildings under the laws existing at the time to recoup their money and not be retroactively wiped out. But your intent is not to be fair or reasonable. It is simply to come along with a scythe and cut us down at the knees and then expect us to co-operate in maintaining our buildings. Do not count on it.

Last year I had 20 well-paid tradespeople working for me. This year I have one, and this is the way it will remain unless you introduce some meaningful amendments to Bill 121. I understand you want to keep rent increases down. There is not one responsible landlord who would object to that. But the legislation must be fair and it must allow us to finance necessary work. The way it is written, it does not. Perhaps if Minister Cooke had entered into meaningful consultation with the landlord community prior to the introduction of Bill 121 instead of two half-hour meetings in nine months since you have been in power, then the legislation might have been something we could live with.

Since reading Bill 121 I know how a rape victim must feel, because I say to myself, "What did I do so wrong that I deserve this?" In a lot of ways I was a model landlord. I had no work orders against my buildings, received tenant approval before starting major projects and I always lived within the letter of the law. Some of the buildings I manage have been in my family for over 50 years and we have never sold an apartment building. If my tenants are having a problem in any of the buildings I manage, they are always free to pick up the phone and call me personally. Perhaps that is why in August 1989 one of my tenants, Miss Madeline O'Hallorin, was quoted in the community paper as saying, "I wish all landlords were like Herman." She should know, because our family has been her landlord for over 50 years.

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If this legislation is what you are doing to the best, what kind of signal are you sending to the landlord community as a whole? Not a very good one. The signal that is being sent is similar to the ones currently in vogue among the so-called non-profit housing advocates.

Bill Morris of the Co-op Housing Federation of Ontario told me that he did not think that private individuals should be allowed to own rental property, that it should all be owned by the state. Similarly, Penny McCabe of the Parkdale Tenants' Federation, who I think spoke to you yesterday, told me that as far as she was concerned private sector landlords should not be allowed to be in business.

Obviously, Bob Rae's quote on the subject, about making it so tough on us and then offering to buy us out, is revealing as to the present government's position. But I think that Michael Shapcott of the Rupert Hotel Coalition, which was just granted $30 million from the provincial government, said it best in the June issue of Toronto Life. Excuse the offensive language; this is what Michael Shapcott said, not me: "If Jesus Christ were here, he would tell private sector landlords to get the fuck out of the housing business." These are the people who are supposed to be housing advocates? Get serious. By and large the private sector has been doing a good job of maintaining the rental stock in this province, and personally I think you have a lot of nerve treating us like criminals and then thinking we are going to kowtow to your decrees.

I love my province and I am a bit of a housing advocate myself. Between 1987 and 1989, I visited every regional landlord association in this province, as the chairman of the small property owners' committee of Fair Rental, in an effort to encourage landlords to fix up their buildings and improve tenant relations. I assisted the Ministry of Housing in the making of a TV show on apartment management and maintenance, and I wrote booklets on the subject of apartment maintenance and tenant relations.

Let me read you a quote from one of the booklets I wrote. The heading in the booklet is "Listening to Tenants" and it goes like this: "Tenants are your customers and one of the best sources of feedback about your business. Frequently their point is a worthwhile one. Sometimes you can improve tenant relations and save money at the same time."

Do you think for one minute that I am going to continue going around this province trying to encourage landlords to maintain their buildings under your regime of terror? There is no way. I am not interested. I do not have the time. For landlords to fix up their buildings under the proposed Bill 121 is financial suicide.

Ms Harrington, let me ask you one question about housing supply. I watched you during the Bill 4 hearings and you seem like a reasonable person. Minister Cooke has said, when he was minister, that new buildings will not be under rent control for five years because that will give landlords a chance to break even. Would you take $10,000 out of your RRSP and invest in an apartment building where at the end of 10 years or at the end of five years the best you are going to do is break even on your $10,000? Would you make that kind of investment? No way.

That is really all I have to say. In summing up, there is just a lot that has to be fixed with this legislation, and I will not be fielding any questions because you are really not interested in my concerns. I have seen you question other landlords before and you were simply sitting there with closed ears, trying to defend your legislation rather than sincerely trying to amend the problems.

Mr Mancini, this is no way a reflection on the way you have chaired the committee, but I do not want to participate in this any longer. Thank you.

The Chair: Thank you very much for your presentation this morning.

Mr Tilson: Mr Chair, I am not asking a question, but I would like a copy of his remarks.

Mr Herman: I will get some made up.

320 LONSDALE ROAD TENANTS' ASSOCIATION

The Chair: The next presenter this morning is 320 Lonsdale Road Tenants' Association. Mr Stewart, good morning. Could you identify yourselves for the record. You have been allocated 15 minutes by the committee. You can use some of the time for questions and answers, but you will have to reserve the time.

Mr Stewart: The gentleman on my right is Randall Withell, who is president of the 1500 Bathurst Street Tenants' Association. He has helped me develop this brief.

I guess my brief is going to be quite technical, dealing with section 105 of the Rent Control Act. We are dealing with that because this section is inconsistent with other sections of the act and previous legislation. The pass-through mechanism which this is attempting to address in terms of property tax reductions should be rejected as it fails the test of reducing the number of applications filed and is inequitable and inconsistent. Furthermore, I think we have found a simpler solution.

Subsection 105(1) will further distort property taxes paid. Subsection 105(1) ignores several key components of property tax. Property tax is in fact based on four components in terms of how it is flowed through to tenants' rents. It is actually based on the assessment of the building, the mill rate, the total gross rent of the building and a tenant's individual rent. This section of the act assumes that decreases in the assessed value of a property or a unit will decrease the maximum rent when this is not necessarily so.

Under the Rent Control Act, and all previous rent review legislation, increases in property tax are calculated as a percentage of rent and not on a per-unit assessed value. For example, in our building, which had been reassessed in 1988, the increase in taxes allowed by the Ministry of Housing under a whole building review was approximately $26,000. This resulted in rents being increased by 12%.

Property tax expressed as a percentage of total gross rental income creates different dollar amounts of taxes paid for similar units. In 320 Lonsdale Road, the example I just gave you, the property taxes represent 26% of gross rental income. The property tax paid for one-bedroom units, which, by the way, are all the same physical size, varies from $1,500 to $2,300 and for two-bedroom units from approximately $1,800 to $2,500.

This property tax paid by individual tenants varies according to the rent paid and not the assessed value. Under the Assessment Act, though, similar apartments are assessed the same and are based on the assessed value of the whole building. For example, again using 320 as an example, the one-bedroom units are assessed at $5,730 and the two-bedroom units at $6,600. Thus, property taxes payable according to the Assessment Act for one-bedrooms would be approximately $2,000 and for two-bedroom units approximately $2,400. The two-bedroom units then would be assessed at 15% more than the one-bedroom units.

So property taxes owing under the Assessment Act do not equal property taxes owing under rent review. The Assessment Act equalizes property tax on the basis of the physical characteristics of the units, whereas rent review apportions property taxes on the basis of rent paid.

Under the Rent Control Act, though, we also have some problems within that legislation. Increases and decreases in property tax under sections 14 and 24, which are the landlord and tenant applications for extraordinary operating cost increases or decreases, are passed through on a percentage of rent basis. However, decreases under section 105 are going to be passed through on the per-unit assessed value, which is completely inconsistent with the rest of the act and previous legislation. This results in a situation that is unfair, inequitable and unacceptable.

Assuming the assessed value of 320 Lonsdale is reduced by $20,000, property taxes would decrease by $7,000. This means that property tax decreases experienced by individual tenants would range from 9% to about 15%, whereas under the percentage basis they would all receive the same percentage decrease.

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As illustrated, a complete lack of consistency exists between section 105 and sections 14 and 24. We think that if section 105 must remain, and we are not convinced it should, it must be made consistent with other sections of the act. Decreases in taxes must be based on the percentage-of-rent method.

Section 105 also has exclusions. Clause 105(1)(b) means that several tenants are not covered equally. In order to have section 105 triggered, a municipality must pass a resolution requesting the province to get involved in this pass-through mechanism, which means that unless you are in, probably, Metro Toronto, most municipalities are not going to participate. Therefore, these tenants are not going to be included and they will have to file a section 24.

Furthermore, clause 105(1)(c) only provides for decreases in complexes of units greater than three. That means that any apartments over stores and any apartments in homes or in buildings with just three units are not going to be covered by this section of the act. They too will then have to file a section 24. We think both these clauses should be deleted.

Section 3 of the act, which deals with exemptions in terms of the categories of tenants, again eliminates the opportunity for tenants to obtain a property tax decrease. These tenants would include people like those in Ontario Housing or residents who are not members of non-profit co-operatives.

Just quickly then, enforcement and administration of section 105 is weak and unwieldy. It does not tell the landlord to pay any moneys owing forthwith and one might have to file a separate application demanding payment. Furthermore, in terms of the administration, it is estimated that approximately 200,000 units in Metro Toronto will be subject to the decreases. We think that is going to be an administrative nightmare.

Furthermore, in terms of timing, if an assessment is appealed, sometimes it takes two and a half to three years to get through the system to go up to the Ontario Municipal Board. What are you going to do if there is another application that comes down the pipeline under section 14 or 24?

Just going on, under market value assessment and the Rent Control Act, landlords face the loss of a building. The 3% cap is there and yet some of these landlords will be capped out under market value assessment increases. For example, on Lonsdale Road property tax increases in 1990 ranged anywhere from 25% to 105%. Our landlord would cap out under this legislation, only receiving $7,000 and that would mean that he would have a deficit of $20,000.

We think what he will do then is not only reduce his profit but actually reduce maintenance. Work orders will come out and then what will happen once the work orders are out is his rents will be frozen and once the rents are frozen and he is in a further deficit position -- this of course accumulates every year -- what happens is eventually the city is going to own the property.

Our solution is that we believe property taxes should be separated from rent. We think this would help the province in terms of eliminating administrative problems. There would be fewer applications under sections 14 and 24. Landlords would not have to deal with the uncertainty and the burden of property tax increases. In terms of collecting the tax, there would be no difference. It would still be in the rent, but separated from the rent. It would be like a commercial landlord.

There are several benefits for tenants. Decreases in property tax would automatically be received from the municipal government. They would be able to file assessment appeals and hire agents to work on their behalf and obtain the full benefits if they are successful in their appeal. Tenants in similar units would pay similar taxes, which is more equitable than the current system. Eliminating property tax from assessment calculation would also eliminate the tax on the tax which currently exists. There are other benefits in my brief, but I would really like to take some time to answer some questions.

In summary, we would really urge the committee to reject the pass-through mechanism proposed under section 105 and actually request the minister to separate out the two, property tax from rent. I would also ask you to read the brief fully, because I have had to try to take just the major points.

The Chair: The Liberals have the first round of questions.

Ms Poole: Thank you for your presentation today. As you say, it was quite technical, but it raised a very valid point. In June, when the legislation came out, I raised a similar point with the ministry about the effect of market value assessment, particularly in the city of Toronto, when and if reassessment does occur.

The way it sits right now, in 1998 the freeze would be lifted and a large number of city of Toronto tenants and home owners would have huge tax increases. Your solution seems to provide for both alternatives. It makes it much easier if there is a reduction for the tenant to get it directly. It certainly makes it much easier for the landlord not to have to worry about a $20,000-a-year deficit on property taxes, something he does not have any control over. I think it is obvious that the 3% you talked about in the cap would not be sufficient in the event of a major reassessment problem such as we may face in 1998.

One thing I would like to ask the ministry, Mr Chair, and as a former Minister of Revenue I am sure you are quite interested in this particular problem, is if it would take a look at this brief, which has been quite comprehensive, and give us an opinion of whether the problems pointed out by these gentlemen can be corrected in the legislation, either by eliminating that section or by providing a new section which would separate property taxes from rents. I would ask the ministry for that third item of information.

The Chair: Okay. It has been noted and we will distribute the information when we receive it.

Ms Harrington: You have certainly done a lot of work. I understand you have had substantial increases in your rent over the past few years. What Ms Poole has asked for I was actually going to ask our staff to try to respond to today, but I just do not think we have the time to have staff interact directly with you. I would like to have them answer your question about direct tax collection, if there is any way that fits with this legislation.

I also got a very clear message that you are concerned about the maintenance provisions and a cyclical effect. That is something I would like to look into as well.

Mr Stewart: Can I make one comment?

The Chair: Very briefly.

Mr Stewart: The other thing is that under market value assessment, even though reassessments under market value assessment will not happen until 1998 in terms of the full impact of increases, any reassessment can occur at any time, and the Minister of Revenue has kept that out. For example, reassessments that occurred on 320 Lonsdale Road can occur at any time.

Mr Turnbull: You have certainly hit my hot subject here, alluding to market value reassessment. You of course live in a building which is likely to have a significant increase in assessment under market value reassessment. One of the great problems we have in the core areas of Metropolitan Toronto is that we are likely to see very large tax increases. This bill runs totally in conflict to the suggestion that a landlord could possibly maintain his building and at the same time pay increased taxes.

I wholeheartedly agree with your suggestion that taxes should be separated out. I suggest maybe even going a step further, that municipal taxes might be billed directly to the tenants. At the moment, the tenants have very little way of finding out what the true tax is. You have done excellent research and you understand it very well, but I have known a lot of tenant groups that have had great difficulty in finding this out.

It does several things. First of all, it confronts the tenants with the reality as to what a large portion of their rent is taxes and is not in fact of the landlord's making. At the same time, it would eliminate this great problem in Bill 121 that essentially landlords, with the best will in the world, could not possibly, in the corollaries of Metropolitan Toronto, maintain their buildings, because all the money would be used for tax bills and then some more.

I just want to --

The Chair: The time has expired. Thank you.

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WALL PROPERTY MANAGEMENT INC

The Chair: The next presenter is Wall Property Management. We will be following the same procedure. If you wish to take part in questions and answers, we can inform you as to when you have four or five minutes left, or you can use all the time to make your presentation if you wish. You have until almost 11:16.

Mr Wall: Members of this committee, I would like to address you the following way. If a politician has the glasses on this way, he speaks the truth; if a politician has the glasses on this way, he speaks the truth; if a politician has the glasses on this way, he speaks the truth. But as soon as he opens his mouth, he lies.

I am a small landlord who manages a few apartment buildings. I would like to highlight a few areas of the proposed legislation, which I find reflects a total lack of understanding of investments: first, the cap imposed of 3% over the guideline; second, the reduction of 2% of operating allowance in each year for capital applications; third, the reduction of rents due to energy conservation and capital expenditures. These are only a few of the areas I find inequitable, but due to the time restraints today, I will limit myself to just these.

To explain my anger, I would like to use one of my properties as an example. I filed an application on September 28, 1990, under the Residential Rent Regulation Act for capital expenditures totalling in excess of $900,000. I had anticipated a rent increase effective January 1, 1991, of approximately 22%. Retroactively, legislation was passed which stopped all consideration for all capital expenditures, but throughout the hearings into Bill 4, Mr Cooke promised fair treatment in the permanent legislation.

I would like this committee to look at how this "fair treatment" will deal with my property, in Bill 121, by following the example that I have handed out. Do you have that in front of you? Thank you.

We are dealing with a 170-unit apartment building at Eglinton Avenue and Kennedy Road in Scarborough. The age of the building is 30 years. The annual revenue is about $1 million. The capital expenditures caught in the moratorium are in excess of $900,000.

The nature of the capital expenditures is as follows: energy-efficient windows; waterproofing; a garbage compactor system resulting from environmental bylaw changes outlawing incineration, which was previously permitted; appliances; plumbing; a new roof; electrical work; a new fire alarm, updated to today's current code; an emergency lighting system and generator, again updated to today's code; installation of smoke detectors, updated to today's fire codes. These items were not required due to neglect or faulty maintenance. The moneys were spent as the items had reached the end of their useful life and required updating.

The anticipated justified rent increase under Bill 51 would have been 22%; overall increase allowance, $160,000 on capital. Your proposed treatment under Bill 121: the initial year allowance is $30,000, equalling 3%; the second year allowance, approximately $31,000, a further 3%.

The cost of financing: Funds were borrowed at prime plus 2%, ranging from 12% to 13%, so interest averaged approximately 12.5%. The annual financing, interest costs alone, is $112,500. The shortfall in the initial year is therefore $82,500; the loss or shortfall in the second year is $51,000, and the shortfall in each subsequent year is $51,000 less a compounding factor. That is your treatment of a landlord who tries to maintain and upgrade his building. The above losses only recognize the cost of interest on the loan, not repayment of any principle. Is this fair treatment?

The property has been owned by the same landlord since 1969. Projecting this annual shortfall, and without considering future required capital expenditures, you can easily see that the equity in this property will quickly be eroded and will eventually reach the point where lending institutions will no longer lend money for future work. Any future work required might result in a work order; therefore, I will need additional funds or I will face the probability of rent reductions, which would only compound the problem.

The legislation states that the rent officer shall look at rent reductions before he considers any rent increases. It says "shall," not "may." Furthermore, if my expenditures of approximately $300,000 for windows result in any energy savings, the reward for this improvement will go as a reduction in rent increases to the tenants, and I am left with the losses.

This building is only one example of my experiences. I have another property in Newmarket that is approximately 50 years old which I completely gutted and rebuilt. This application for rent increase was also caught in the moratorium. Now this "fair treatment" will allow me a rent increase of $3,600 over two years on a renovation that has cost in excess of $200,000. Is that fair treatment?

Who will pay to maintain the properties when the investors are driven out? If the government has to maintain these buildings to the levels that are demanded from landlords, the deficit that currently faces Ontario will double. Have you given that any thought?

I therefore would like to make the following recommendations: first, that you reconsider the cap of 3% over the guideline; second, that you consider changing the 2% reduction of the guideline for capital expenditures to a 1% reduction, and have this only apply once to any given application, not in each subsequent year; third, that you reconsider the reduction of rent increases due to energy savings resulting from capital expenditures, until the expenditure is paid for.

In my closing remarks, I observe today's Globe and Mail, and I quote:

"In shuffling his cabinet yesterday, Ontario Premier Bob Rae set out to try to win the goodwill of the province's business community and admitted that he needs business support if his government is to succeed."

You have the opportunity to be addressed during these upcoming hearings by a great many landlords and other interested groups such as tenants, who on the other hand are employees as well. The segment of the economy which landlords represent is vital. If this quote is correct, if Mr Rae means what he says, and his new Housing minister, Ms Gigantes, then I am ready to see the deeds which you undertake where you have an opportunity to change this piece of ill-conceived legislation.

I further quote from the same article: "The Premier shifted three ministers and added a fourth and all have a mandate to work with business groups and private companies. Their job is to try to convince them that the government is more pro-business than it has been painted." Again I invite you to take this opportunity during the hearings to look again at what you are doing.

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Mr Tilson: Many of your comments I have given in speeches in the House, and I agree with a lot of what you have said. The four socialists over there will make statements to you: "Why have the landlords taken so long to do all of these things? Why are they doing it all in one year? They are ripping off the system and they are gouging the system. If they had been maintaining the buildings as they should, all of these capital expenditures would not be needed in one year." I have been waiting for someone like you to come and help me defend that position. Could give your comments on that allegation? Because if they do not make it next -- you might as well be prepared for it.

Mr Wall: I appreciate the opportunity to comment on this. I would like to answer this way. At least 50% -- you have a good number of this percentage in your ministry, of how old apartment buildings are. In answer to the question, it is a planned process over years. The example I gave you is a landlord who has owned a building since 1969 and has spent $900,000 on this capital application. Previously the building was maintained with other sections. It is a 170-unit building; it is a big building. There are ongoing capital items proceeding at all times; there are not only items which are picked in order to facilitate rent increases.

Buildings have to be maintained and scheduled. Mr Griesdorf pointed this out to your committee yesterday. Landlords plan these expenditures. They are ongoing. There are the costs of keeping and updating a building to the required new fire systems, security systems, emergency lighting systems -- again, I did not mention this particularly in my speech, but that is what should be added on, in addition to the energy savings, as I mentioned to you.

Mr Mahoney: Did you have conditional order approvals on the $900,000 in repairs? And what was the reaction of your tenants to all of the work that you did and to your subsequently getting caught in the moratorium?

Mr Wall: The work was necessary and appreciated by the tenants, and the tenants feel that it is completely unfair. They realize that necessary work has been done to the building. The comments I have are that they understand that this is unfair, that no return on invested moneys --

Mr Mahoney: Do they know about the 22% rent increase?

Mr Wall: Yes, obviously.

Mr Mahoney: And?

Mr Wall: The response was very favourable. After this 22% rent increase has been applied, it is only $600 for a one-bedroom apartment in a modern, up-to-date building. There is great understanding on their part.

Ms Harrington: I will just make a brief statement and then my colleague Mr Abel has a question.

I agree certainly that landlords must plan ongoing repairs, and there are very many landlords who did not go to rent review for extra financing but managed, with very careful planning, to do it within the guideline increase. I am hoping that will happen. It is important to have stabilized rents for tenants. You, as a landlord, probably understand that as well as we do. That is the guiding force behind this legislation, as you know.

I wanted to reiterate that our government does want to work together. Maybe, as you say, the new cabinet is more focused in that direction.

Mr Abel has a question for you.

The Chair: Very quickly, please.

Mr Abel: You indicated you want guideline increases for financial and economic loss. How would I, or you for that matter, explain to a tenant that he is expected to subsidize your financial and economic loss, or any financial and economic loss that may occur? How would I explain that to a tenant or to a group of tenants?

Mr Wall: A fair tenant will understand that in any part of the world, investment and a dollar need a return. If a dollar does not receive a return on investment, the dollar shall not be spent.

The Chair: Thank you. I am sorry, time has expired for your presentation, sir.

AFFORDABLE HOUSING ACTION GROUP

The Chair: The next delegation is the Affordable Housing Action Group. We will be following the same procedure. You can withhold some of your time for questions and answers and you have 15 minutes. We would ask you to identify yourself for the Hansard record.

Ms Stewart: I am Fiona Stewart, co-ordinator of the Affordable Housing Action Group, a Toronto-based provincial coalition of faith, labour, housing and social service organizations. We have come here today to speak to Bill 121.

In terms of a written submission, we would like to endorse the submission made yesterday by Leslie Robinson from Metro Tenants Legal Services and add our name to that part of the written submission. We may along the way submit further documentation, depending on what other deputants are saying or depending on new information which is brought to our attention.

We always believe in starting off on the good side of things, so we are going to tell you what we like about Bill 121. There are obviously much stronger maintenance provisions. Landlords no longer have the same right to mismanage buildings in the way they did, because they will not be receiving their increases, and that part we really like. There will be no rent increases more than 3% above the guideline. We like that to a degree, but we have some serious problems with it, which I will get into in a few minutes. Financing costs, unnecessary capital costs and consulting costs --

Mr Tilson: I am having difficulty hearing you.

Ms Stewart: I am sorry.

Mr Turnbull: Excuse me, just as a point, there do not seem to be any loudspeakers in this room.

Mr Tilson: It is our turn to attack the room, Mr Chair.

The Chair: This is one of the worst committee rooms in the building. Unfortunately, we are stuck with it. Successive governments since 1900 have refused to spend any money on upgrading this building.

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Ms Stewart: I will try to speak louder.

Financing costs, unnecessary capital costs and consulting costs are no longer considered for rent increases. We are very pleased with this. We always resented the fact that tenants were paying for rent review consultants and lawyers to represent tenants before the rent review board.

Unfortunately, there are a lot of things about Bill 121 that we find will be very difficult for tenants in this province. We know that tenants possibly could be facing 8% rent increases perhaps, by the time the 3% factor is figured in, if landlords choose to go to the rent review board. We are very wary of this, because we know that people's salaries do not meet it and we know that this will end up in economic evictions.

Our major concern is that rents are already overinflated, and this is not redressing the problem. We know there is a correlation between the use of food banks and the high rents that people are paying. This is not only the case in Metropolitan Toronto; it is the case in Kitchener, Hamilton, Waterloo. It is not a Toronto-based problem; it is a provincial problem. People are going hungry so they can pay their rent, and we firmly believe that the NDP must keep its commitment to having the guideline tied to inflation. Without this, we know that people will suffer and we will never redress the issues of poverty.

On some more technical sides of the issue, on the change in capital expense pass-through, we fear that the overdue and increasing need for capital improvements in rental buildings will be no better addressed by this bill than it was by the RRRA. We consider the inclusion of capital expenses cost pass-through as the biggest broken promise to tenants by the new NDP government. As long as rents are allowed to increase faster than tenants' incomes, the affordability of rental housing will continue to erode, causing homelessness and other affordability problems for tenants.

There is no good reason to increase rents faster than inflation in housing if it is being kept up to its original standard. If rental housing deteriorates, rents should increase slower than inflation, and in fact we know that even under past legislation some landlords have not been keeping up their buildings. We feel that tenants should not be paying for the wrongdoings of landlords in the past and for their negligence. As in all businesses, we believe that we should put money away for a rainy day and we believe that landlords have that commitment.

We want to really express our disappointment that many groups spent a long time doing a study on reserve funds. We believe that there should be some type of reserve fund for private renters. What will happen to the money that should be spent on costs of maintenance? It will go directly into the landlords' pockets under this bill, with no stipulation that it has to be spent on ordinary kinds of repairs, and this is a real concern to us.

We find it odd that this is the only sort of housing that is not governed by reserve fund legislation. When we look at the Condominium Act, condominiums must have a reserve fund. When we look at the Co-operative Corporations Act, the co-ops are required to have a reserve fund. All private non-profit housing in this province is required to have a reserve fund. So we ask the question, "why is it that private landlords are not required to do the same thing?

We do not look at housing as the type of business where it is a commodity being passed back and forth. Rather we see it as something as universal as health care or education. In this country, people cannot live without housing; it is unrealistic. As I said before, unless the legislation is tied to inflation, we have grave fears that there will economic evictions and that food banks will continue to be a successful business in this province, and that is not what we expected from this government.

At this point I really have nothing further to add, except that once again we fully endorse the submission made yesterday by Leslie Robinson from Metro Tenants Legal Services.

The Chair: Okay, thank you. We have about two minutes per party for questions.

Ms Harrington: Thank you very much for coming. I have a couple of things. Yesterday in the news I think we all saw the customs officers in Niagara Falls walking up and down protesting on the Rainbow Bridge. What they were chanting was, "Zero per cent won't pay the rent." I think it very clearly illustrates, although they probably have very good salaries, that rent is primary to all the rest of your expenses. It is even more so with the people you are discussing, or the majority of our society.

There are a couple of things I wanted to mention to you that I would like to carry forward, and that is that the rents are already inflated, the horrors of the past, and that unfortunately, and it was pointed out yesterday, the worst thing about this bill is that it sits on top of previous legislation. I would like to tell you that we just cannot go back and redress all the sins of the past. We have to start as of October 1, which is what we are trying to do.

The cost of land and the flipping of apartment units have all added up to operating costs now which are high for landlords, and what we have found out since October 1 is that there is a problem with aging buildings, you know, the concrete, underground parking, plus many other things of 20- and 25-year-old buildings. We think it is our responsibility to both the landlords and tenants of this province to make sure that there is maintenance and major repairs. That is why we have, as you mentioned, this cap of extra pass-through, which is a problem. It is a very difficult situation and we will try to take into account what you have told us.

Mr Tilson: You made some comments with respect to reserve funds, and of course the legislation fortunately did not deal with that. I feared that it would, and fortunately it did not. However, in case it does, I would like to ask you two questions with respect to reserve funds.

The first question is, where is the money going to come from? Is the money going to come from the taxpayer? Is the money going to come from the landlord? Is the money going to come from the tenant? When you start talking tremendous capital expenditures, contributions by landlords and tenants are nickels compared to what is required.

The second question is, would this not penalize good landlords? Contrary to what the four socialists over here say, there are good landlords in this world. There are landlords who do set plans forward and do do work over the years to keep their buildings up. There are a lot of bad landlords. Would this reserve fund principle not penalize those good landlords?

Ms Stewart: To answer your first question, I think it has been quite apparent over the last 25 years that landlords have not spent money annually doing proper repairs. Had they done those repairs, they would not be in the situation today where they are asking for huge capital increases. A reserve fund is like an insurance fund. It is the only protection. It protects the landlord because he can do a long-term maintenance plan, he can amortize the funds over a number of years. Yes, we do believe landlords should have to put that money into their buildings.

Mr Tilson: Where does it come from?

Ms Stewart: It comes from the landlords. The landlord benefits in that the value of his property increases when his building is well kept, and when he wants to go and sell it, all the money he has put into it is going to make a big difference, whether he has an underground garage that is crumbling or one that has been repaired properly and all sorts of other selling features. Certainly the boards of directors of non-profits, who are also landlords --

Mr Tilson: They are not subject to rent controls.

Ms Stewart: That is true, they are not.

Mr Tilson: They get government moneys. They get government contributions. They get government subsidies. Co-ops and non-profit housing are strictly subsidized by the taxpayers.

Ms Stewart: A lot of private accommodation gets funds.

Ms Poole: Thanks for your presentation, Fiona. I wanted to follow up on the capital reserve fund as well. I like the concept, but it is much more difficult to implement with rental housing than it is with the others. The other ones you mentioned, like condominiums, co-operatives, are new creatures. They are 15 years old, or younger, in most cases. It is relatively easier to start off with a new building and put a reserve fund in, because it is going to be 10 or 15 years before you really have to draw on it to any extent, so it can build up. One of the big problems we have with rental housing is that the vast majority of it is older than 20 years. I see that as problematic. I sympathize with what you want to do; it is just going to be extremely difficult to do it. One thing that Leslie Robinson suggested yesterday was that we start with new buildings.

Ms Stewart: That is also our position. We understand. We have looked into the issue. We have spent hours discussing it. We understand the problems of implementing this with 25-year-old buildings. However, there are equity co-ops that are doing it, the co-ops that are not covered really by any act. Buildings prior to the Rental Housing Protection Act certainly have to do it. There are ways and means out there of doing it to older buildings, but we would be perfectly happy to start with new construction. We believe that would be a first step, and then perhaps in the future we could work towards addressing the issues of the older stock.

We endorse what Leslie said. We agree with it. As I said, we have spent a long time consulting. Leslie is a member of our group too. That is what we would like to see as a starting position.

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Ms Poole: I think that would make sense. Also, the rents would be reflecting right from day one that there would be this buildup, and then landlords would not need to be going for large rent increases because it should be contained within the rents.

Ms Stewart: That is right.

The Chair: Very good. Thank you for your presentation.

LANDLORD SELF HELP CENTRE

The Chair: The next delegation is the Landlord Self Help Centre. The committee has allocated 15 minutes for your presentation. We will be following the same procedure. If you would like questions and answers, we will have to save some time at the end of your presentation.

My name is Peter Libman. I am the president of the board of directors of the clinic Landlord Self Help Centre. With me is Alda Pereira, who is one of the staff members. This morning you also had the benefit of a presentation from our treasurer, Rob Herman, who spoke to you about an hour ago. So you have actually had two presentations from us, although Rob gave his on behalf of his own company.

Our clinic is a legal aid-funded clinic that has been in operation since 1976, about 15 years, and it primarily helps out the small landlord. The small landlord is defined by legal aid as a landlord with one to four units, usually owner-occupied. To get any assistance from our clinic, they also have to meet legal aid's financial assets and income test. Our clinic really assists the small person, not anyone with any large portfolios.

We have five staff members at the clinic. We manage to deal with about 18,000 small landlords a year, so we are very busy at our clinic. We advise and we put on seminars for them. In August I see our staff at the clinic have ambitiously scheduled 26 seminars for small landlords, so it is a very active clinic. I have a list of the seminars. It is unbelievable how many they try to fit just into a 30-day period.

I would like to thank the Chairman for the opportunity, on behalf of the clinic, to make this presentation. I think perhaps it is trite to say that all landlords are against rent control and I think most economists are also against it, but we also have to be aware of the political realities of the situation. In this province we have had three different parties, three different governments that have brought in rent control.

The Conservatives first brought it in in 1975, although they exempted newly built buildings. In 1985 and 1986 the Liberals extended it to make it universal, and now this government has completely revised that system and introduced a rent control system as opposed to a rent regulation system.

There are features in this new Bill 121 which do assist the small landlord. I appreciate the government is looking after some of the interests of the small landlords. The previous government had one section in Bill 51 that was primarily to help small landlords. That was section 91 dealing with chronically depressed rents -- the 2% catch-up -- but unfortunately the government never proclaimed that section and of course it is not in this bill.

One of the features for the small landlords is the fact that they are allowed to continue with the building operating cost index guideline increases per year without an application. Because we do not have the regulations for the bill, I assume the formula for the rent increases will be almost identical to the present system. I do not think anyone has come up with a successful argument why that formula should change. It is a formula that makes sense. It is tied into inflation and deals with the components a landlord encounters in the proper operation of a building.

Another feature that is of attraction to small landlords is the fact that the government has not imposed the rent registry for the one to three units, which primarily are the users of our clinic. You have brought it in for the four to six, but you have not made it retroactive to August 1, 1985, which the previous bill did. I think the government probably realizes that if you made a long retroactive period, you would have the same problems we encountered in Bill 51 when we started a system with an 18-month retroactivity. It led to incredible backlog and delay. Some of the buildings that tried to register in 1986 still have not registered because of problems with the 9R forms and problems like that. The government certainly is aware of the cost factor and the problems with trying to bring in all the units.

In terms of the technical part of the bill, I personally have spent two and a half hours with ministry staff, as only a lawyer could, and have dealt with every word of the bill. My copy of Bill 121 is well marked with annotations and I have told them, in my opinion, the drafting and the other technical problems that I think are incumbent or that you find in the bill. I trust the government staff will take my comments to heart in whatever revisions come up and redrafting at the next reading, and that the government will at least consider those revisions. I am not not going to go through the same comments because I do not have two and a half hours, but I am sure they are available to the committee, if you want them, from ministry staff.

The one area I do want to bring to your attention, because I think this probably will affect small landlords more than large landlords, is section 39 and the related sections. That is the section of the act that deals with the rent penalty, where the government finds it has work orders or bylaw infractions registered with it for longer than 30 days.

Just as a way of background, I should indicate that I was a member of the advisory committee that negotiated that bill, so I am very familiar with the discussions that went into that bill. Under the present bill, Bill 51, both the landlord and tenant representatives agreed to a standards board, which became section 15 and section 16 of the present act. This government has replaced the standards board. They have taken it out completely and I cannot say that I am opposed to that.

I do not think the standards board lived up to the expectation that the Rent Review Advisory Committee members had for it in late 1986, but in replacing it with section 39 and the related sections, they have not carried forward the safeguards of the standards board as found in section 16 of the present act. What those sections say, when you review them, is that when the minister is to determine a rent penalty, he is to look at various factors, like the availability of materials for making repairs and the financial considerations: Can the landlord obtain money for financing to do these repairs? Are there people available who can do the work? Obviously, if you have an order to repair the swimming pool in January and it is an outside pool, you are going to have a lot of difficulty in doing that.

As Rob Herman mentioned in his presentation, a lot of the buildings are older and are really incapable of major repairs without basically tearing them down and starting over again. It is a fact that we have an aging rental stock in Ontario, and the standards board and the minister were directed to look at all those factors before imposing a rent penalty. Section 39 does not bring any of those factors in. It only says that 30 days after the imposing of this notice to the landlord of the work order, the minister will make these rent penalties. I think the government seriously has to reconsider that and perhaps bring in, if not the same safeguards as section 16, at least a hybrid version of it.

The final comment I want to make, because I want to leave some time for questions and comments, because Mr Herman did not, is that I think the success or failure of the whole system will depend upon the personnel who administer it. I presented many cases before the hearings board, most of them on behalf of tenants, including my own parents, and I was very disappointed in the quality of the hearings board officers and of the hearings themselves.

I have made these comments to the ministry and I trust that under the new system we will get qualified people and that we will have adjudicated hearings that leave you with the sense that you have had a system based on the real merits of justice when you walk away from it, a phrase which I notice is not in the new bill, but I take it that the same intent is behind the legislation.

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Ms Poole: Thank you for your comments today. I was particularly interested in your comments about the work orders and the enforcement of the maintenance provisions. I have seen certain problems in the bill as it now stands.

You may be aware that the Liberal caucus had proposed what on the surface might look to be a similar provision in the Bill 4 hearings, an amendment which was rejected at the time, but there were two significant differences: One is that our amendment only dealt with substantive repairs, and the other is that there was a provision that the landlord would have to show he had made every effort to substantively complete the work. If these two things failed, then there could be a rent penalty.

You have said that when the standards board was replaced with this legislation it did not bring in the same safeguards, what the minister had to consider prior to the rent penalty. Could you just give us a few more comments on that and what you would like to see?

Mr Libman: In Bill 51, our present law, we built into the definition what we called the triple S definition. I think it is two "substantials" and "subsisting." We left that to the regulations, and then we left what that meant to interpretation. Perhaps that was a mistake. We probably should have defined it, but at least that was one level of a safeguard.

Another definition we put into Bill 51 which is not in the present bill was "wilful and ongoing neglect," and there were reasons for all the words. Because Bill 51 was the product of a committee, every word was debated, especially by the lawyers on the committee, and every word had a reason behind it. When I see these words omitted in the present bill -- they may be picked up in regulation, but I would feel better having them in the bill itself and not being left to regulation.

Mr Duignan: Would you be in favour of the establishment of a new rent control advisory committee?

Mr Libman: Yes, and I would even be willing to be on it, notwithstanding the fact that in 1986 I spent 98 days at hearings of various committees. Once you are into the system, you want to follow it through to the very end.

Mr Duignan: Would you like to see that as part of the bill?

Mr Libman: I do not think you need it in the bill itself. In Bill 51, I think in section 11, we built in what we thought might be a new rent control advisory committee by talking about periodic review, but it was not picked up by the government. In 1986 the minister, by his powers as Minister of Housing, designated this advisory committee. It was not part of any legislation, just a general authority. I think the minister certainly could do that and it is obviously an advisory committee to him, and then he makes the presentation to the House.

I think it is critical to have the opinions of both landlord and tenant representatives. I notice Leslie is in the room; she was in there with the committee for the tenants. You develop a rapport between landlord and tenant representatives, and I think all sides try to work together for the benefit of all. Advisory committees are really useful and I certainly would like the minister to consider a new advisory committee. In fact, I think it was in his green paper as one of the options he had.

Mr Duignan: What would you consider as the most important amendment to this legislation?

Mr Libman: I think the number one most important amendment is section 39, the work orders, and the comments I have just made. The second most important amendment would be dealing with the extraordinary expenses, and I would like to expand the definition. I think the present law has three times as many items as the bill, things like extraordinary increases in interest financing, which is really out of the control of the landlord. There are some of the economic things I would like amended, but I think the work orders are my number one priority.

Mr Tilson: I, as one member of the committee, would love to have your crib notes on the act.

Mr Libman: The ministry staff has them. They took down everything I said. I did not take down the notes because I was talking at the time.

Mr Tilson: I would like you to elaborate somewhat on the rent registry system, particularly in your emphasis on those under six units. A number of landlords with under six units have contacted me and said, "Listen, we are in a recession; there are vacancies, we are going to lower our rents," and they have lowered their rents. The difficulty is, of course, in getting into the registration system. It is going to make it very difficult for them to do that, so I would like you to comment on that point.

The second point is with respect to the bureaucracy. Under Bill 51, registration essentially was there but it never really happened. You have obviously had some experience. Technically it should have happened, but it did not happen. If this government goes through with the rent registration system it has said it is going to go through with, what do you anticipate that will mean in new civil servants in this industry?

Mr Libman: I am optimistic that the experience the government has had in the past five years with the rent registry will be taken to heart and that it will not repeat the mistakes. On January 1, 1987, when Bill 51 came into effect, first of all they built in the 18-month retroactivity, which was a nightmare.

Second, they were not ready in terms of registration. They had not finalized what forms they wanted, and over the first two years they kept amending the forms and saying, "Even though you have filled out the proper forms, we're going to discount them." I am hoping that when they extend the registration, they will have a well thought out plan. They have between now and January 1, so they have lots of time. They are not under the pressure that they were back in 1986. I am hoping they will do a better job.

I think it is a nightmare. I have a client who filled out his registration form in 1987. In 1991, four years later, he still has not got it through the rent registry. That is just ridiculous for something that we thought was a simplified form.

For your other question about the rent being too high, in the one case I did on behalf of my parents and other tenants for a building on Walmer Road, the landlord was successful in getting about a 22% rent increase which he sought because it was pursuant to the bill, the financial loss and all those other things we put in there. But the effect was that the tenants could not afford it and they just moved out. Once you get the rents up to the $2,200-a-month level, tenants cannot afford it and they are going to look for another place to live. So the landlords really did themselves a disservice.

Mr Tilson: If this goes through, there is no way the rents are going to be reduced; no way in a million years. They will lie vacant.

The Vice-Chair: Thank you. As usual, we enjoyed your presentation.

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ONTARIO PUBLIC SERVICE EMPLOYEES UNION

The Vice-Chair: The next presentation will be made by the Ontario Public Service Employees Union. I would ask that you introduce yourselves for the purpose of Hansard. You have seen the way the committee is operated. You have 15 minutes to make your presentation. If you would like to reserve some time for conversation with the committee, that will be fine.

Ms Whitehead: My name is Carol Whitehead and I am a staff person at OPSEU.

Ms Bobb: I am Yvonne Bobb, chair of the ministry employee relations committee for the Ministry of Housing and the Ministry of Municipal Affairs.

Ms Mitchell: I am Judy Mitchell, a member of OPSEU and a member of the Metro Toronto tenants' association.

Mr Ross: My name is Don Ross. I am with the rent review hearings board.

Ms Mitchell: We appreciate the opportunity to speak to you this day and to provide input into the proposed rent control legislation, Bill 121.

The Ontario Public Service Employees Union has over 100,000 members working in the province of Ontario, and these include workers in the Ministry of Housing and the legal clinics. As a representative of these staff, OPSEU has a unique position to provide information "from the floor up" as to what may be problematic in the legislation and what may need clarification or amendment if Bill 121 is to live up to the government's intention to better protect tenants from high rent increases and to ensure the maintenance of existing rental housing.

Given the limited time we have to make this presentation, we will today focus on some of the major issues that we think should be given consideration if the legislation is to work in practice. We will, of course, follow this up with a written submission.

In addition, the members of OPSEU who compiled this brief, and who work in areas where there is a variety of work to be administered and represent workers in these areas, would like to offer to this committee, and to the minister's office, our continued support in this project and the benefit of our knowledge and experience.

Mr Ross: OPSEU's position is that Bill 121 is a good piece of legislation which, with extensive revision, can be made a whole lot better. There is no need to be rushing this bill. Bill 4 allows the opportunity for at least an additional year of review of this legislation, should it be appropriate. Our main concern is that there are too many loopholes and too much ambiguous wording within this proposed legislation, which relies on guidelines, regulations and the goodwill of the bureaucracy to interpret and enforce. There is currently staff input through the committees being formed within the Ministry of Housing and we think this is a worthy initiative. Many aspects of housing policy, though, are political, not merely procedural. The clearer the legislation is, the fairer it will be and the easier to administer and implement.

Our understanding of the government's stated philosophy on housing policy is that it is to preserve and maintain rental housing in Ontario. To do this we need healthy and viable landlords and adequately protected tenants. We feel that the legislation must strive to eliminate grey areas. In Bill 121, the principal grey areas are maintenance standards and enforcement, public education, the concept of maximum legal rent, exemptions, proof required for increases above the guidelines, the calculation of the guidelines, capital expenditures, costs no longer borne, carry-forwards and the rent registry. Again, our time today does not allow us to address all these issues. We will outline some of what we feel are our more pressing concerns and expand on the others in our written submission to follow.

Regarding maintenance standards and enforcement, minimum provincial guidelines must be in effect and enforced. The current proposal leaves room for interpretation which may not guarantee that the province maintains bottom line responsibility to ensure adequate maintenance across the province. Proposed section 112 of the bill currently reads that, "The director may appoint inspectors for the purposes of this act." However, in order to ensure that the province lives up to its responsibility, we would suggest amending that section, for example, to read, "The director shall appoint inspectors."

Current province-wide standards regarding enforcement are grossly inconsistent and therefore discriminatory both against tenants and landlords. There is a right to adequate maintenance; enforcement should not depend on where one lives. Maintenance issues are often a matter of some urgency for tenants, and if not addressed quickly can result in higher cost to landlords because of rapid deterioration.

The problems are difficult to avoid in a system where both municipal and provincial governments provide a service. Similar situations are currently being addressed in reviews of ambulance services and income maintenance delivery. In addition, many other services are being reviewed under the Hopcroft report. We feel the administration of these services should be at the provincial level for consistency and fairness. As a minimum, where a municipality is not fulfilling its responsibility, ensuring enforcement of provincial standards, the province must step in in a timely manner and the legislation must provide for this.

The legislation must guarantee that tenants' rights and landlords' responsibilities are equally guaranteed. The section on compliance with standards requires that landlords' claims for compliance must be responded to by the director, but does not make the same provisions for tenant complaints of non-compliance. This must be amended or a new section created to ensure that tenant claims of insufficient maintenance are also responded to by the province.

Wherever maintenance standards are not being complied with, a work order must be given. We suggest that subsection 37(1) be amended to read:

"If an inspector is satisfied that the landlord of a residential complex has not complied with a prescribed maintenance standard that applies to the residential complex, the inspector shall" -- not a discretionary item, but "shall" -- "make and give to the landlord a work order requiring the landlord to comply with the prescribed maintenance standard." This should not be discretionary.

Other issues around maintenance will be addressed in our written submission. Both tenants and landlords need to understand their rights and responsibilities under the law. The government must guarantee that this information is accessible and available to all. Current public education is insufficient and can be addressed in a number of ways.

Ministry of Housing staff must be allowed to interpret the legislation. Currently we are restricted from doing anything but stating what the act says and referring further questions to legal aid or other legal sources. You would probably agree that legislation is often indecipherable. Link this to legal aid and other legal services which are often difficult to access, such as the situation in Toronto where legal aid and tenant legal information phone lines are busy virtually all day. Wherever you are in Ontario, your constituents would find it difficult to receive the information and support they require.

Bill 121 should allow staff to give basic interpretation of the legislation. These may be official interpretations to ensure objectivity, which would be legitimate in straightforward, simple language if made available in different languages to serve our multicultural province and also the developmentally disadvantaged. The public service provides viable models for public education which you may want to consider. Both the Pay Equity Commission and the worker adviser section of the Workers' Compensation Board would be appropriate.

The Ministry of Housing should ensure that legal clinics and community legal education of Ontario are sufficiently funded to guarantee that tenants requiring legal assistance and information receive it. To ensure fairness, section 59 should be changed to ensure that all applicants receive a hearing unless all parties agree that an administrative review is sufficient; and subsection 59(6) must be removed so that neither a tenant nor a landlord ever loses the right to a hearing. There are many ways to deal with this, including the reintroduction of an appeal level. The legislation should also provide for tenants and landlords to make application for a panel of three to hear their case, which may be granted at the director's discretion and which is an option that should be left open.

We have concern about inequities in the current formula for calculating both guideline and allowable increases. The current formulas are problematic and we suggest that some creative thinking needs to be done to ensure that formulas are fair to all. For example, the allowance for different guidelines for large and small buildings is discriminatory both against tenants of small buildings, including many outside the city of Toronto, and landlords of large buildings. Some tenants pay twice for hydro and cable, once through the allowable increase for costs that are built into the guideline, and then again because they pay their own hydro and cable bills. We suggest you may want to give this issue more study to ensure fairness in the calculations for all concerned.

With capital expenditures, we again have major concerns. Bill 121 includes a 2% allowance for capital expenditures built into the formula. Under the previous legislation, 1% has been built into the formula since 1986. Landlords should be required to prove that this allowance, which tenants have been paying as part of guideline increases since 1986, has in fact been spent before they should be allowed an increase above the guidelines. Landlords have the documentation necessary to prove this as they are required to keep it under the Income Tax Act.

There is also the principle that capital expenditures should be replaced at the end of their useful lives. Tenants should only pay for these things once. The legislation should be amended to include a section that says, "Any rent order which includes an allowance for capital expenditures above the guideline must state the anticipated useful life used for the calculation and include as a condition of the order that the rent will be reduced by the same percentage as allowed for that specific expenditure at the end of the useful life."

Both current and proposed systems contain disincentives that discourage landlords from renewing capital expenditures because the allowance is for ever and the useful life expires long before that.

In addition, capital expenditures for items that are rented should be considered operating costs. The legislation should be amended to add, "Where capital expenditure items are replaced by rental items, the rental items shall be deemed to be included in the operating cost and no increase in allowance provided for."

The definition of "capital expenditures" is too broad and could potentially be interpreted to cover what could be considered operating costs. To avoid this, the definition should be amended to include "any major expenditure which is (a) not undertaken as an operating cost, and (b) the benefit of which would extend for more than one year."

It is obvious that our concerns are many and varied. We have front-line, day-to-day experience working with the legislation. We want to ensure that we can administer this new act fairly and within the spirit of the Legislature's intentions. Developing strong legislation with few loopholes is a large task, and leaving too much open to interpretation is, we believe, problematic and unnecessary.

Working together, we can shape this bill into the great piece of legislation it can become. Given the range of our concerns contained in this and in other submissions that you will hear, and even from your own legal staff, we urge you to extend your deadlines.

We thank you for considering this and we can take any questions if they can be squeezed in.

The Vice-Chair: We have time for one question from Mr Mammoliti.

Mr Mammoliti: It is always nice to know that the people who are actually drafting up the bill and their representatives can come in front of a government and state their opinion. I think that is great. On that topic, we have had some criticism, however.

Ms Poole: On a point of clarification, Mr Chairman: Did OPSEU address this bill? Is that what you just said?

Mr Mammoliti: That is what I am getting into.

The Vice-Chair: You do not have a lot of time.

Mr Mammoliti: I understand that 175 of the employees you are representing are the ones who are drafting this bill, working on this bill.

The Vice-Chair: Do you have a question?

Mr Mammoliti: We had some pretty negative comments about the bureaucrats who are drafting the bill. More specifically, even this morning, somebody said that to make this bill effective the bureaucrats who are working on it should be changed. What do you have to say to those people who are negative towards your union members, the people you represent? They had some pretty negative things to say.

Ms Whitehead: To clarify, the majority of the people that I presume you are referring to, the 175 people who as you say are drafting the bill, are the people who are on the steering committees and other committees currently being developed within the ministry. Many of them are not OPSEU members; a few of them are OPSEU-appointed members.

We are still working to ensure that there is official OPSEU representation on the committees, so most of them in fact are not OPSEU members. As far as I know, all those committees are doing is drafting the guidelines and regulations that will help them to administer the bill. Our point here in fact is that while that is obviously an important and necessary part of administering any legislation, this committee as government officials responsible for the legislation itself should be making it as tight as possible so that regulations and guidelines are limited only to how it is actually administered.

Mr Mammoliti: You did not answer my question.

The Vice-Chair: We had trouble finding the question.

Mr Mammoliti: My question was, what do you have to say --

The Vice-Chair: The time has expired. Mr Mahoney has a question he might want to ask after the committee has adjourned.

The committee recessed at 1205.

AFTERNOON SITTING

The committee resumed at 1402.

TANDEM REALTY ADMINISTRATION INC

The Vice-Chair: Good afternoon. This afternoon the business of the committee is to conduct hearings on Bill 121. Our first presenter will be Mr Bert Reitter, president of Tandem Realty Administration. Good afternoon, sir. You will have 15 minutes to make your presentation, including time for questions, so if you wish to entertain some questions you need to leave some time. Will you introduce yourself for the purposes of Hansard.

Mr Reitter: My name is Bert Reitter and, as the Chairman indicated, I am the president of Tandem Realty Administration. We own and manage a number of apartment buildings and town house complexes within the city of Toronto and environs. I have been in the business since 1967. In other words, my experience predates rent review and rent control and I believe I am eminently qualified to speak in respect of the issues.

I felt there would be a number of reasons or methods in which this subject could be approached. One would be a minute, paragraph-by-paragraph study of the proposed Bill 121. First of all, I would not be able to do that in the time allotted to me and, second, I felt there were other people who would do that. I ask you to listen to me for the next 10 minutes because I will speak to you a little more about the philosophical implications of this legislation.

On July 2, 1991, three prominent members of the New Democratic Party -- namely, Mrs Akande, Mr Marchese and Mr Silipo -- convened a public meeting at Harbord Collegiate Institute. The announced purpose for this meeting was "to discuss the New Democrat government's new rent control legislation." Messrs Marchese and Silipo, along with some support staff, replied to a number of tenants' questions, technical questions and "what happens if" questions.

What were the highlights of this meeting? Let me tell you. A speaker from the audience at one point suggested that housing was surely an inalienable right of all Canadians and should therefore not be for profit. To this, Messrs Silipo and Marchese nodded in agreement. Wait a moment, it gets a lot better.

A very small landlord who owns a triplex asked how he should make his mortgage payments when the interest rates rose from 8% to 11.5% and he, by virtue of this legislation, was not able to pass that increase on to anybody. He informed us that he would clearly have no choice but to go bankrupt. He was told to, "Get out of this business if you can't afford it." "Become a stockbroker," yelled a gentleman who stood next in line to the microphone and who was known to be an employee not only of the Ministry of Housing but of its rent control branch. He yelled, "Become a stockbroker."

This landlord had just told us that he used all his savings as down payment for this triplex which he will now likely lose. When he was told he should get out of this business and become a stockbroker, Messrs Silipo and Marchese nodded sagely in agreement. If anybody thinks that is only the opinion of some individuals and surely not government policy, then let me enlighten you.

This meeting was attended by Mr Fred Gloger, who was introduced to us as a policy adviser to the Premier. Mr Gloger, at this point, did not jump up and say: "Wait a moment. This `housing is not for profit' idea is not shared by the Premier or by the Premier's office." Quite to the contrary, he sat silently and thereby, I am certain, told us all that this is the policy of this government.

Consider for just a moment then the implications of this philosophy. Clearly it says housing is such a basic need of all humans that no one should make a profit out of such a need. The private sector must therefore be eliminated and the public sector must take over. Other people will tell you what the economic implications of that philosophy are. Economists, considerably better versed than I am in these matters, will tell you the disaster that this philosophy brings.

Take housing away from the free marketplace and soon society will no longer be able to afford the creation of new and better places for people to live. All of this economists will tell you. Let them tell you that privately produced rental housing is the cheapest housing available.

I am just a small landlord, so I am asking you this question: Once you have driven me out of this market, how long will it take before you look around for other areas that you consider "essential" products and that therefore must be controlled?

If housing is essential and an inalienable right and not for profit, then surely food is even more so. Then to stay faithful to this philosophy -- and by God, the NDP will stay faithful -- we cannot allow a farmer to grow the food for profit, nor must Loblaws or the corner 7 Eleven, run by Ma and Pa, do so for profit's sake. Food, after all, is an inalienable right and must not be grown for profit.

The fact is, the farmer will not like to stay on the farm under these circumstances, so he must be forced to stay. Civil servants will run the grocery stores after those have been retroactively expropriated from their rightful owners -- I know that you know what I mean when I say they have been retroactively expropriated from their rightful owners. Expropriated, by the way, without compensation.

After housing and food surely must come clothing and then transportation, all inalienable rights which ought to be provided to all without profit to anyone. Does this sound a little bit familiar? Does this just start to have a familiar ring? Does it not sound a lot like the bankrupt system that is now coming begging to the free world? I suggest to you it does.

You may well suggest that I am using hyperbole, that I am exaggerating, that the present government does not try to drive the private sector from the housing market, that indeed the NDP wishes to have a mixed, well-balanced economy. If this is what you believe, I feel sorry for you. You have obviously not done three important things.

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You did not listen to Mr Rae's explanation of how he would get public ownership of this province's rental apartment buildings, announcements he made prior to the election; you did not comprehend the immorality of Bill 4, and please note the word "immorality"; nor did you study the devastating impact of the proposed Bill 121 on the future of our apartment buildings.

I think it now behooves us to take a closer look at the salient points of Bill 121. I will only tell you the very fundamental, skeletal points are as follows:

Buildings over six units may increase rents without application by one half of the rent control index -- which is sort of a word for the inflation factor -- and may add 2% for minor capital expenditures. For major capital expenditures and extraordinary cost increases, they may add an additional 3%, if that is necessary. This 3%, however, seems obtainable only if the landlord can prove he has indeed spent the previously allowed 2%.

Let me, together with you now, look at an example. There is an apartment building of 150 suites. It generates $90,000 per month, is 20 years old and requires the following major capital improvements -- a new roof for $150,000; plumbing lines for $100,000, galvanized replaced with copper; and the garage slab, about which we have all heard so much in the last months, for $250,000 -- for a total of $500,000. The lifespan -- let us assume there will be no changes; there might well be -- will be 15 years, 20 years and 10 years respectively. I am going from table 1 of Bill 51 now.

The interest rate granted will be 11.5%. These funds borrowed from a lender under the same circumstances will require $6,252 a month to repay, or 6.95% of the rent roll of this building we have just illustrated. Under part VI of the Residential Rent Regulation Act, which is now largely suspended, this landlord, upon application to the minister, would have obtained 11.35% increases in his basic rent which would have included the 6.95%, or $75,060, for this previously spoken of capital expenditure.

With that $75,000 built into the rent structure of this building, he would have been able to pay back the banker or whomever he has borrowed that money from at 11.5%, the building would have had a new roof and new plumbing lines, the tenants would have been more comfortable in that same building and the landlord would not have looked at bankruptcy. He would have been able to repay the loan of the $500,000 in the same period that was given to him as an amortization period in this legislation.

The new legislation which we are now looking at changes this entire issue completely so that an increase of only 7.6% can be obtained instead of the earlier mentioned 11.35%, of which only $32,400 is for the capital expenditures. We are actually saying to this landlord, "It is all right for you to obligate yourself to pay back $75,000, but we will allow to flow into your income stream only $32,000." The landlord will have an annual deficiency of $42,660.

Please let me draw your attention very briefly to schedule A, which is attached in the submission that is before you. I will not bore you with the details. I will only tell you that if you wish to have anything explained on that schedule A, I will be more than happy to do so.

Let me just tell you one thing. Once this landlord has reached year 2000 with his building, he will have lost $854,000 -- a hell of a way to celebrate the turn of the century; $854,000 will have come out when compared to what he rightfully should have been able to expect.

Since not many landlords can be expected to do so, we of course have to have legislation in force which has coercion and penalties as its adjunct. This legislation provides for the director of rent control to appoint rent control inspectors who shall have the powers of entry, search and seizure. Think about it. Even the drug squad needs to have a judge's warrant before it can do that. Under this legislation, that does not seem to be necessary.

Let me just very briefly tell you one other thing. The New Democratic Party decided that two thirds of inflation was too much to pass into the guideline because surely operating expenses amount to only half of a building's income and therefore it is a sufficiency to allow half of the inflation factor. What was not considered was obviously this. A landlord whose building's rent is very low and who should therefore surely be a good friend of this government because he is a good friend of his tenants will be the one whose operating expenses inevitably will be more than 50% of his income, because that percentage is simply an expression of the relationship between income and operating expenses, and the lower his rents, the quicker he will be driven from the marketplace. This is the madness of this proposed legislation.

I suspect that my closing sentence will fall on totally deaf ears. Ladies and gentlemen of this House, do not pass this law. Do not do that to your children.

The Vice-Chair: We have less than a minute and it is the Conservatives' turn.

Mr Turnbull: Mr Reitter, just because of the pressure of time, would it be reasonable to say that this proposed law totally disregards the difference between buildings which already have had a lot of renovations and bypassed those rent increases and those which have not had any renovations because they were not quite at that point?

Mr Reitter: Absolutely. It treats every building as if it came out with a cookie cutter, and buildings do not come out with a cookie cutter.

Mr Turnbull: So people who have already had the renovations can probably make it within this legislation.

Mr Reitter: They can make it for another five years and then they will go down the pike.

Mr Turnbull: But the others cannot.

Mr Reitter: I will go down the pike the day after tomorrow. They will go down the pike five years from now.

The Vice-Chair: Unfortunately, the time has expired.

The next presentation will be from Jack Pennings, Persons United for Self-Help in Ontario.

Mr Tilson: Mr Chair, on a point of order: The subcommittee met at the lunch break with respect to the first of the two notices of motion I discussed. Could you advise me when it would be an appropriate time to raise that issue for the committee?

The Vice-Chair: I would prefer that it be raised following the hearing of the witnesses so that we do not inconvenience people, but there may be some breaks in the schedule, and if that occurs, it may be better that we deal with it then.

Is Mr Pennings here? Is there anyone representing Persons United for Self-Help here this afternoon? In that case, Mr Tilson, we could consider your motion right now.

Mr Tilson: Mr Chair, I would like to put forward the motion, which the subcommittee has agreed on in principle, subject to the committee's approval, and it is a motion that the members of the standing committee on general government invite a representative from the financial community to attend the hearings on Bill 121 and to offer comments on the proposed rent control legislation.

I put that motion forward. The only issue the subcommittee did not discuss is whether there would be some sort of consensus of the subcommittee that would suggest an individual or what. We did not discuss that process.

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The Vice-Chair: Mr Tilson has made a motion. Do you wish to speak to it?

Mr Tilson: If you ever give me a chance like that, Mr Chair, I would never back off that.

The Vice-Chair: Remember, we have 15 minutes.

Mr Tilson: I will be my usual brief self. We are continuing to hear comments, specifically from the landlord and contractor delegations, that they are having more and more difficulty getting funding to complete financial expenditures because of the implications of Bill 121. Accordingly, I believe there do not appear to be any independent financial individuals, whether it be from banks, trust companies or whatever, who have this knowledge, scheduled to come and address the committee on the implications of Bill 121. That is the intent of the motion.

Ms Harrington: I understand it was agreed at the subcommittee that this will be proposed if we have any problems.

The Vice-Chair: That is my understanding.

Mr Duignan: With an understanding that we have a person who is mutually agreeable.

Mr Abel: I support Mr Tilson's motion, but I also think it is important that we have an opportunity to mutually agree on who this person will be. I think we have an understanding of that nature.

Mr Tilson: Agreed.

The Vice-Chair: I was at the subcommittee meeting. I think we have agreement.

Motion agreed to.

Ms Harrington: Mr Chair, would it be possible that we would be able to respond equally, as well as the Conservative Party, to Mr Reitter? I was not sure what the rules were when you said there was one minute left. How do you pick which party will respond?

The Vice-Chair: We do the parties in rotation. If you remember, Mr Mammoliti spoke to the last presenter and no one else had an opportunity because of time constraints. The Chair tries to be as fair as possible, but given the time constraints, we are in a difficult position.

Ms Harrington: I understand.

BOARD OF TRADE OF METROPOLITAN TORONTO

The Vice-Chair: The Board of Trade of Metropolitan Toronto: Are the representatives here? Good. If you would come to the table and identify yourselves for the purposes of Hansard, we will have 15 minutes for your presentation. If you would like to leave some time so that the committee may question you, that would be appreciated.

Mr Cline: Good afternoon, ladies and gentlemen. My name is Barry Cline and I am speaking today on behalf of the Board of Trade of Metropolitan Toronto. The board is North America's largest community chamber of commerce/board of trade, with some 15,000 members.

We have commented on rent control for many years. While not an organization that has a direct stake in rent controls, we do represent many people who are either landlords and/or tenants. I might add on a personal note that I am a small landlord who is also a tenant. In addition, as a voice of business, the board of trade is always concerned with the investment climate in this province and the real estate sector.

We have participated in the process leading to Bill 121. We forwarded written comments on Bill 4 when it was before this committee, as well as commenting on the discussion paper which preceded the new legislation. In addition, in early July of this year the board met with the former Minister of Housing to discuss a number of issues, including the new rent control legislation.

I am aware of the time frame allowed us, and therefore I will focus on the major components of the legislation which we feel are grossly unfair to the landlord and hence lead to a lack of rental housing investment and construction in the province. Following my comments, I would be pleased to answer any questions you might have.

1. Limit on capital expenses: This is perhaps the greatest problem with Bill 121. In order to qualify for the additional 3% allowed for capital costs, a landlord will have to show that he/she is already spending 2% of the allowed guideline on capital costs. Not only does this eliminate any profit for landlords, but the proposed guideline is clearly not adequate for major repairs and renovations to Ontario's aging rental stock. Landlords/investors will be allowed 6% for additional capital costs only if they have spent 10%. Such a cost cannot cover major capital expenditures such as parking garages.

The board would propose that the legislation be more flexible in this area by either extending the amount of time allowed to recover costs beyond two years or by increasing the percentage allowed, which will still have to go before rent review.

2. Limit for extraordinary expenses: The bill in its present form will limit the number of extraordinary costs. These costs, the board believes, should be separate from the guideline allowed for capital costs. We have all recently heard of possible double-digit increases in Ontario Hydro rates over the next three to four years. In addition, many municipalities are seriously considering higher water rates to promote conservation. Surely these additional costs should be passed along to tenants.

In addition, the board believes that other costs beyond a landlord's control, notably, insurance rates and mortgage rates, must be dealt with in the same manner. A landlord should not be forced to cover possible increases in a three- or five-year mortgage from, say, 11% to 13% or 15%. Similarly, in the interests of fairness, there should be a mechanism in the legislation to ensure lower costs for tenants associated with reduced mortgage or interest rates.

3. Rent reductions: Of great concern to potential investors and business in general is the proposed provision in the legislation that a single tenant can, for inadequate maintenance, seek rollbacks in rents for an entire complex. All increases would be stayed until the issue is decided, creating an air of uncertainty in terms of capital flow and a landlord's ability to finance ongoing maintenance. How can maintenance and capital projects be completed when increases are not guaranteed? We do not even know what "inadequate maintenance" means, because the guidelines accompanying the legislation have not even been published.

4. Message sent to the business community: The legislation in its present form does not convey the impression that owners of real estate in Ontario will be permitted a fair rate of return on their investment, nor does it convey a positive message to any potential investors that they can expect any reliability or certainty in the rules governing investment decisions. In this vein, the present legislation is unfair and will lead to even greater rental housing stock shortages.

I would like to thank you for your time and would welcome any questions you might have.

Ms Poole: I am still formulating my question. I have one, but can we pass to the right?

The Vice-Chair: We can move to the government caucus then.

Mr Duignan: In the whole area of capital expenditures, do you support some sort of reserve fund for new buildings under Bill 121?

Mr Murphy: In our response to the discussion paper that the minister put out, and when we met with the minister he asked us about that, we think it is a good initiative for new buildings, obviously, that --

The Vice-Chair: Excuse me, sir, but could you introduce yourself?

Mr Murphy: I am Jim Murphy. I am the staff person with the board, manager of the urban affairs department.

In terms of a capital cost reserve fund for older buildings -- I think over 60% is the figure that has been used for the existing rental stock in the province is that over 20 years -- and catching up to that or establishing some sort of a reserve fund to cover a lot of maintenance costs or capital costs, which are going to come in the next couple of years just through use and aging, it would be difficult. We just were not sure in terms of the mechanism that might be used to implement such a thing to catch up, since those costs may be happening relatively soon. But for newer buildings we thought it was something that should be looked at.

Mr Duignan: Would you support something along the line of a capital insurance fund, partially funded by tenants and, say, government, to deal with older buildings?

Mr Murphy: In our discussion paper to the minister, we talked about such an insurance fund. We thought it should be funded mostly by tenants, obviously, because they were going to accrue the benefits of it, but something like that should be looked at. We thought it was something that was not included in the discussion paper, for example, and we did not have the expertise to comment on whether it was the appropriate way of doing it. But obviously funding capital costs was the major issue at hand here. Certainly looking at how you ensure that will happen and trying to find some way or mechanism -- being creative -- would be helpful.

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Mr Mammoliti: You said the tenants are the ones who would benefit. Why do you say that? Would the price of the apartment not go up with any improvement? Would the landlord not benefit as well. Why do you say just the tenants?

Mr Murphy: Barry might want to answer that, but even under the existing legislation I think the government is saying that, for the 3% which is the guideline it is allowing, tenants should fund that. This is a capital cost, so I think that is kind of an accepted way of doing that.

Mr Mammoliti: Do you not think the landlords would benefit from it as well?

Mr Murphy: Sure, absolutely, but so would tenants, obviously, in terms of the conditions they are living in.

Mr Mammoliti: Your statement was just tenants and I wanted to clarify that. I do not believe it is just the tenants who would benefit; it would be reciprocal.

Mr Murphy: Obviously a tenant and a landlord will benefit, whether it is a new parking garage or whatever type of capital cost.

Mr Mammoliti: Of course the landlord will make a profit off it.

Ms Harrington: One of your main points, I thought, was that there should be a separation between the capital costs and the extraordinary operating costs. Are you saying you would prefer that a landlord be able to apply for both? I just want to reiterate that the intention of this bill is protection for tenants, because put yourself in that position: If your rent goes up 10%, 15% or 30% it means a whole change in your lifestyle. You have to cut back on everything else in order to fund it or else move out. That is the choice.

As people who own property, I would think you would be concerned about the continuity of your tenants and the stability of their lives and the whole community really. That is the intent of the bill: protection against huge increases that change people's lives. What we are hoping is that the landlords can plan ahead for any necessary capital repairs so that there are not these huge increases, that it be a more gradual type of thing. That was just to clarify that is the intent and we want to work with landlords to do that.

Mr Murphy: Two things on that point: One of them might be that what is allowed in the guideline might not be enough to cover projected increases in mortgage rates. I do not think anybody knows where they may head in two or three or five years. If there is an increase, I think it is unfair that a landlord should cover those costs. Similarly, the other costs: Home owners have to cover increases in property taxes or increases in water rates or whatever. I think similar costs should not be sheltered from tenants but should be passed along; these costs that are inevitable.

Mr Turnbull: Basically I want you to tell the NDP why an investor invests in anything, be it property or anything. I know this sounds a very simplistic question, but it is deliberately so.

Mr Cline: Why does he invest? One word -- profit.

Mr Turnbull: Yes. Do you view profit as something disgusting and something to be discouraged?

Mr Cline: Not at all.

Mr Turnbull: No. I suspected you would answer that way. The stated goal of the government, now that they have rejigged the ministries, is to have the co-operation of private business. Can you imagine that private businesses are going to want to stay in anything that is going to drive them into the ground and make them go bankrupt?

Mr Cline: If there is no profit margin or if there is going to be a loss, then obviously they are not going to invest. Without the investment there is no housing stock.

Mr Turnbull: The problem as I see it -- I would like you to comment on this -- is we have two sets of investments and gradations between the two. You have mature investments, where somebody has owned it for a long time and maybe they have done a lot of renovations and probably they have the rents up to a degree that it is a reasonably profitable venture. Then you have other buildings that may not have been in the ownership for very long and may need a lot of renovations and their rents tend to be low.

It seems to me that if you want to look at it simplistically, you could say this legislation is certainly not going to really harm in a significant way large landlords who have a large portfolio. They can weather the storm. They may not make as much profit, but they can weather the storm. But the small landlords, particularly the ones who have not been in the business for very long or those who have older buildings, are now going to be driven out of the business because of these kinds of regulations. The very people the NDP would say they want to encourage, the small business people, are going to be driven into bankruptcy. Can you comment on this?

Mr Cline: Absolutely. I can speak on behalf of the board or I can speak on my own, being a small landlord. I am also a tenant. I rent an apartment in the city, but I am also a small landlord, and the majority of landlords in this province are small landlords. They have played by the rules. They have not stuck it to anybody. Now all of a sudden down the road they have to make some repairs or mortgage rates go up. It may cost them an extra $50 a month for a mortgage or for taxes but that really eats into their costs. Maybe they are just making do, just getting by. With this type of thing they will either have to sell it, get out of business or not make any repairs at all, and unfortunately you know what that means to the residents.

Mr Turnbull: So this legislation is not going to be a terrible hardship to the people who get rents of $1,200 a month; it may not be a hardship at all. Whereas if they have rents of $100 a month, and there are such buildings in this province, that is going to be a terrible hardship. Would your advice to the government then be to have more sensitivity in terms of the background of the building in terms of the age, the condition and the profitability to the landlord and the amount of rent?

Mr Cline: I would agree 100%.

Ms Poole: Thank you for your presentation today. I want to ask you about the appendix to your brief, which was your letter to David Cooke on June 27, 1991, about this legislation. It talked about the record vacancy levels in the GTA and you said the statistics also lend credence to the board's belief that certain exemptions to the rent control legislation that would encourage construction should be granted. But then you go on to be fairly critical of the one attempt the government has made to encourage new construction. You have said the measure to exempt new apartment units for five years will do nothing to encourage more apartment construction by the private sector. This is based on the well-founded fear of developers both large and small that this or another future government will merely place rent controls on these units. Do you have any ideas for exemptions to the rent control legislation that you believe would encourage construction?

Mr Murphy: In our response to the discussion paper we talked about an exemption for luxury units, to use the high end as something that might encourage construction. We gave a figure we referred to earlier in terms of somebody who pays $1,200 or whatever the cost might be. The minister in our meeting said that after five years these units are going to come under rent control. He said there was no hope this would be extended or anything like that to guarantee certainty to investors or developers.

We were looking at two things: First, in terms of a luxury unit exemption for people who may be able to afford to pay higher costs in any event and are being protected by the existing legislation, the existing rent controls; and second, in terms of trying to get new development in gear. You do not do it by just staying in a time frame of five years, which really ignores the existing economic situation in the province, where there are high vacancy rates. You might want to ask landlords when you travel across the province about problems they may have in terms of renting their units. That is another issue that has come to the fore because of the times.

Ms Poole: I appreciate those comments. Have you also considered having some sort of exemption based on vacancy rate? Obviously if the vacancy rate is 6% in a particular area of the province, the market will determine what the rents are and the rent should be fairly low and much more affordable than when it is a very tight market. Have you done any research or have you any comments on that?

Mr Murphy: We have not commented on that in the past, although with the existing situation it might be something that would deserve further study and further comment. Clearly it is a matter of supply and demand. If the demand is not there and the supply outstrips it, then obviously you have a problem in terms of filling it. We have always said -- people or economists or the board of trade, which has opposed rent controls in the past -- that if you remove these, then maybe there will be a role for the private sector, but in terms of vacancy rates, that is something we have not discussed.

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INVESTORS PROPERTY SERVICES

The Vice-Chair: The next presentation will be by Investors Property Services, Brian Fulcher. You have been here for a few minutes so you have seen the procedure we follow. You have 15 minutes to make your presentation and have questions from the members. You can allocate that as you will, but the members always appreciate the opportunity for questions.

Mr Fulcher: My name is Brian Fulcher. I am president of Investors Property Services. We are a small property management company. We manage mainly small residential properties. Most of them are houses and such small buildings as two, three and fourplexes. Due to the time limit of 15 minutes here, this presentation will start with and be limited to the sections most damaging to the landlords of Ontario and the housing industry in general.

Subsection 21(2), limits on capital expenditures, and sections 14 through 18, which do not allow for an extraordinary increase in costs due to remortgaging: Approximately 10 years ago, during the 1981-82 downturn in the economy and real estate market, I left the chemical industry and became a full-time landlord with the goal of developing small properties for long-term income. I already owned and lived in a fourplex and immediately purchased a large, run-down, 13-room boarding house. Following approval by the committee of adjustment, and obtaining the building permit, I worked a year and a half developing this property into a quality fourplex. I have since purchased two small houses and one commercial building with a main floor storefront and three residential units.

I spend eight to 10 hours per week managing and maintaining these buildings, but after 10 years they provide no net income. My income is provided through managing and maintaining residential and commercial buildings for other landlords.

The purchase and development of these properties has been dependent upon remortgaging of the properties after the work was completed. Remortgaging of these properties was dependent upon increasing rent significantly. The cost of development of these properties was 30% to 50% of the purchase price. Limiting rent increases to 3% or 3% for two years does not even begin to finance this type of work, especially when the rents of run-down buildings are very low, and 3% of very low is still very low.

Bill 121 must apply in a just and fair way to all buildings; otherwise it is not good legislation. As it is currently written, it fails to do so with regard to subsection 21(2).

Subsection 22(2), capital carry forward: This section makes an arbitrary distinction between buildings based upon number of units. This is not fair, just or even logical. The distinction must be made based upon the need of buildings to be improved and the capital costs of the improvements.

Clause 38(2)(d), 30 days to comply with work orders: A lot of work has to do with work orders with property owners. Serious work orders cannot be cleared in 30 days. Times easily go 60 days or more for good reasons of economy and weather, just to mention two reasons. A work order requiring an application under the Rental Housing Protection Act can take more than eight months just to get proper permits. Similar previous legislation resulted in an enormous number of notices being sent out in duplication of city work orders and did not result in any marked improvement in the time required to clear the work orders.

Subsection 16(1), transition, capital expenditure: If this is an attempt to remove the retroactivity of Bill 4, then it fails to do so. Work done through the retroactive period was done on the basis of legislation at that time, allowing for full recovery over time of substantial capital costs. In this respect Bill 121 is still retroactive in allowing only a 3% increase in rent for capital costs. It also delays further capital work until the landlord can qualify for another 3% increase.

In general, Bill 121 affects the smallest landlords in the most severe ways. It is too complex and lengthy for the average small landlord to comprehend, yet if a landlord neglects to follow its exacting requirements -- for example, subsections 7(1) and 7(2), to use the correct rent increase forms at least 90 days prior to a rent increase date -- he can be severely financially punished in court by having a clever tenant apply under the same section, subsection 7(3), for a return of rent increases. This has happened in court very often.

Bill 121 should not be imposed upon small landlords. Their rent is substantially controlled by the rent allowed in medium and larger buildings and they should be allowed to operate individually through personal negotiation with their tenants.

Mr Tilson: You are quite right. The bureaucracy that is being created by this legislation is certainly accelerating the previous bureaucracy. With a twinkle in my eye, it will probably give you more business to do as a business consultant because only people like you will know how to fill out the forms. I am simply amazed when I start hearing the staff of the Ministry of Housing explaining what one is going to have to go through. It is even more complicated than before. Perhaps you could comment on the whole subject of bureaucracy and how it will probably create a whole new class of people who will be able to simply spend their time filling out forms for small landlords and even tenants.

Mr Fulcher: The small landlord does not understand what is happening now. I do not believe the majority of tenants understand either. You are right that there is a bureaucracy of people outside the government who have gone into business in just understanding what the government is trying to do. It is very counterproductive and it makes very little sense.

Mr Tilson: Certain rent increases are guaranteed by Bill 121.

Mr Fulcher: They are just not enough.

Mr Tilson: I know that. That is not what my question is, because there may be market forces in particular areas of the province where there is no need for rent increases, or because of the economy in particular areas and because of the condition of a particular building, it may even be subject to rent decreases, but no landlord is going to have a rent decrease because of where that could put him down the line.

I do not know whether you agree with that. In other words, I suppose the fairness that landlords in the past may have wanted to exhibit towards tenants -- if the financial ability were there and they could still make a reasonable profit because of the free market, they may have reduced their rent. Now it would not pay them to reduce their rent. Do you have any thoughts on that?

Mr Fulcher: Actually, today there are a lot of landlords in the city of Toronto being forced to reduce their rents; otherwise they are going to have a vacancy.

Mr Tilson: That is right.

Mr Fulcher: In effect, this legislation is of no value to those landlords. It is not helping them at all. Legislation like this has put them in this position of having vacancies and having to reduce rents.

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Mr Tilson: With rent controls in other jurisdictions, and I am thinking specifically of Sweden and some European countries, it simply pays for certain middle-class and certain wealthy tenants to stay in their rental accommodation because rent control freezes them at low rents. It does not pay them to go out and buy a home. I am telling you that is the fact.

Mr Fulcher: It is true, there are lots of tenants in this city --

Mr Tilson: My question to you, in your experience as a management consultant, is whether you have noticed that trend starting to occur in Ontario and specifically in Toronto, which I gather is your bailiwick.

Mr Fulcher: I have had several tenants buy a house this year, but it is a major decision for them because they have to decide to leave the comfort of rent controls and go into the housing market. There is no incentive for people to go out and buy their own home if they are protected so well by rent controls.

Mr Tilson: If there was one major amendment that you would recommend -- obviously from my perspective there is a whole slew of amendments -- this government to consider, other than withdrawing the legislation, which I have suggested but it was not received very well, what would that be?

Mr Fulcher: You cannot expect to make one bill apply to all buildings everywhere in the province. It does not make sense. You cannot do that. It is just not logical. They have to somehow treat buildings separately and individually.

Ms Poole: You have raised a concern I have with the act in relation to work orders. While I am in agreement that something should be done to enforce work orders where they are being ignored by a landlord, particularly where they jeopardize the health or safety of the tenants, I am concerned with the 30-day provision and the fact that they do not relate just to substantive work orders, and second that they do not consider extenuating circumstances.

You have named one here which I want you to elaborate on, but another that comes to mind is if, for instance, a building inspector goes in in December and says, "The exterior wall work is crumbling and needs to be replaced," that work cannot really be done, or even be commenced, probably until about April. Meanwhile, the work order is on, it goes into non-compliance, the landlord has a rent penalty put on and yet has no recourse. A second example is an underground parking garage which takes many months and in some instances years.

A third example happened in my own riding just recently where we had a call from a tenant who said: "The landlord hasn't had the air-conditioning on all week and it is incredibly hot, and he's just being nasty and mean. Do something about it." So we phoned the landlord to see what the problem was. They had ordered a part, and for that particular machine the only part was in the United States, and it was going to take four weeks. They were doing all the rest of the work, but they had to wait for that part. There are extenuating circumstances like that.

You have mentioned one other one: the Rental Housing Protection Act. Can you give the committee an example of where you need a permit under the RHPA and it would be a lengthy process that would apply and you would be caught with this particular provision?

Mr Fulcher: I will give you an actual case. I have a client, normal people, who went out and bought a house about two years ago. They thought they were buying a house with four rental units. They found out very shortly afterwards, when the building inspector came by to renew the rooming house licence, that it was supposed to be a rooming house. The previous owner appears to have converted it to four units. This not only contravenes the zoning in the area but it requires approval under the Rental Housing Protection Act to convert this property to a four-unit dwelling. Actually, the Rental Housing Protection Act does not allow a conversion from eight units to four units. It is mired in bureaucracy at the moment, and it has been for eight months since we put our application in. It is stopped right now.

Ms Poole: So the city has a work order on it.

Mr Fulcher: The city has a work order on it. It is an order to comply. We have agreed with the inspector that we will occupy only three units and the fourth unit will not be occupied. It has been vacant for over eight months. The landlord is losing approximately $600 a month on it. We are making virtually no progress on the situation.

Ms Harrington: The government, I think you would agree, has recognized in this piece of legislation something that has not been put forward before: that is, the difference between small landlords and their operating costs and their way of operating, and large landlords, the big corporations. I think this is certainly a step forward in trying to deal with people as human beings and their particular needs. I hope you would agree that this is a first step.

The other thing you mentioned is communicating with your tenants. You mentioned the problem of work orders and some of the horror stories they may lead to. You can concoct all kinds of things that might happen, but I think one of your points is important and that is that -- also what Ms Poole was talking about with regard to the air-conditioning problem -- if landlords and tenants could communicate what is happening, there would not be a problem with work orders. The work would be done. The reason we have had to come down with this, trying to make sure that maintenance is there and that work orders are enforced, is because landlords in fact have refused to do the work. Tenants have been taken advantage of in the past.

If you had your particular amendments that you mentioned in writing that you could submit to the committee, would you do that?

Mr Fulcher: I do not have any amendments in writing.

Ms Harrington: You did mention certain parts of the act that you would like looked at.

Ms Poole: I just asked the clerk. He had only one copy and he passed it to me. Perhaps we can make copies.

Ms Harrington: You do have something. Okay.

Mr Duignan: What would you consider the most important amendment to this piece of legislation?

Mr Fulcher: As I said previously, the legislation fails to deal with buildings on an individual basis. This means that no matter where they are in the province, whether it be in this city or in Sudbury or wherever, no matter what condition they are in now or how they got in that condition, how old they are or how much money they need to be repaired and brought up to date, the bill does not distinguish at all beyond the 3% guideline, and 3% is simply not enough money.

Mr Duignan: So you would like us to have a look at starting to distinguish between buildings and also possibly having a look at variations between Metro Toronto and various other parts of the province.

Mr Fulcher: If I had my preference, you would not look at anything. You would let landlords go ahead and work with their tenants like they always did. I do not see that we would have a major problem. I think it should be handled with an entirely different approach. Landlords should not be made to be social service agencies. It is not our purpose. We provide housing.

Ms Harrington: The market needs regulation like anything else.

Mr Duignan: Unfortunately, because of what has happened in the past -- the previous Tory administration, the reason it brought in rent control -- the fact is that we do not live in a perfect world.

The Vice-Chair: That completes the time allotted for this presentation. The committee happens to be running unusually ahead of schedule.

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Mr Tilson: Can I ask one question of the staff as a result of the last presentation? The subject of rooming houses came up. My understanding is that a three-storey rooming house with six rooms would, under this legislation, be considered a large building. If that assumption is correct, it will receive a higher guideline than a six-unit apartment building would receive. My question is whether rooming houses should even be in this legislation because of the definition, as I understand it from the presentation, that a three-storey rooming house with six rooms would be classified as a large building, as opposed to a three-storey apartment with larger units, which would be considered a small building.

The Vice-Chair: Could a representative of the ministry answer Mr Tilson's concern?

Mr Harcourt: Scott Harcourt; I am with the housing policy branch. Just to clarify, a six-unit building, whether it be in a rooming house or a standard apartment building, would be considered a small building. The differentiation falls between six and seven units, whether it applies to a rooming house or an apartment building.

Mr Tilson: Let's use the figure of seven units.

Mr Harcourt: If it is a seven-unit building, where there is a regular apartment building it is a large building. If it is seven units in a rooming house, it will be a large building as well.

Mr Tilson: My understanding would be that there are more units in a rooming house than there would be in an apartment building and that the basis as to what is a large building and what is a small building is based on units.

Mr Harcourt: Correct.

Mr Tilson: I am not familiar with where the grey area is, but because of that, it seems to me that as an apartment building it is a building which would be classified as a small building, whereas because of the smaller units of a rooming house, it would be classified as a large building.

Mr Harcourt: You are correct. Because in a rooming house the rooms tend to be smaller, it is quite feasible that a building of the same size could have a different classification.

Mr Tilson: Is there a way of dealing with that? There is obviously a certain unfairness to those people who own rooming houses as opposed to apartment buildings.

Mr Harcourt: Sure. I guess any time you make a distinction you have to have some objective set of criteria you can use. We have used the differentiation between six and seven at the present time. You could use it by square footage, for example. The number of units is probably easier simply because it is easier to differentiate between the number of units than it is on a square footage basis.

Mr Tilson: Because of that, has the ministry staff considered recommending to the government that perhaps rooming houses should not be in this legislation? Clearly that seems to be unfair, to me at least, to the people who are in rooming houses because they are going to be treated differently. If you were in an apartment building you would be treated differently.

Mr Harcourt: I am not sure what the question is. You are saying you are differentiating between large and small buildings on the one hand and then on the other hand you are saying that rooming houses should not even be included in the legislation.

Mr Tilson: I was following along the line of questioning of Ms Harrington when we started talking about large and small, which got me thinking about the large and small distinction.

Mr Harcourt: You are proposing that all rooming houses should fall in the category of small buildings. Is that what you are saying?

Mr Tilson: I do not even know whether I want to say that, because conceivably you could have an extra large rooming house. I am saying, should rooming houses even be part of this legislation? Should you have separate legislation for rooming houses?

Mr Harcourt: The purpose of including rooming houses in the legislation is so that they have the same protection as other tenants who are in regular apartment buildings.

Mr Tilson: That may be, but they are going to be treated differently because of your definition of what a large and small building is. The rooming house that should normally be a small building will be classified as a large building in the definition --

Mr Harcourt: Sorry; I do not see your reasoning.

Mr Tilson: -- because the percentage increases allowed for small buildings are different from those for large buildings.

Mr Harcourt: So it is feasible that a fairly small building will be classified as a large building as we have defined it, and that it will have a slightly higher guideline increase.

Mr Tilson: That is my point. I guess the question I would like the staff to go away and consider is whether they would be prepared to recommend to the committee whether rooming houses should be taken out of the legislation, or if not that, whether there should be some sort of amendment made to solve that discrepancy.

Mr Harcourt: Okay. Your point is noted.

The Vice-Chair: Before you go, if the Chair might be permitted one question on a matter of clarification, I think there is some confusion. I, at least, have heard, or thought I heard some people making the distinction that a small building is owned by small landlords and a large building is owned by large landlords. I do not think that is a necessarily fair assumption, and from what I have gathered so far, that has nothing to do with the rationale of this legislation, that the reason the government is differentiating between the two is the different costs involved with a small building versus a big one, rather than who owns it.

Mr Harcourt: Certainly there is a tendency for small landlords to own small buildings, but that is not always the case. There are some small landlords who own one larger building and lots of large landlords who own small buildings, but there is a tendency. You can understand that it is very difficult to distinguish between large and small landlords because of the related groups of partners. They tend to be related by corporate structure, etc. It is easier to do the breakdown on the basis of size of building than on the basis of size of landlord.

The Vice-Chair: Yes. The ministry has put forward this proposal and the rationale is based on the size of the building, not who owns the building.

Mr Harcourt: Correct; size of the building, not size of the landlord.

The Vice-Chair: It does not matter whether I and 25 of my friends own a big building, or whether I am a huge corporation and own a six-unit. That is a red herring.

Ms Poole: While we have the ministry here, I had made three requests this morning for information and I have one additional one. This morning the Concrete Restoration Association of Ontario talked about the period from June 6 to the proclamation of the bill and the fact that Bill 121 is silent as to what happens during that period. Could we have a confirmation from the ministry, particularly relating to capital expenditures, of what is going to happen in that period and whether it is necessary to specifically outline this in the bill itself? Your legal department may be able to provide this.

Mr Harcourt: That is one thing we have been looking at. Certainly the intention is to allow for capital expenditures which have been completed since June 6 to be included under the Rent Control Act. If you would like written confirmation of this, we can provide that.

Ms Poole: Yes, and just a legal opinion as to whether it is necessary to include it in the act, because I think it is making the Concrete Restoration Association of Ontario extremely nervous. They are saying they cannot get work because landlords will not commit. That assurance would probably be very helpful.

The Vice-Chair: Mr Duignan, did you have a question?

Mr Duignan: Not on this point, but on another item.

The Vice-Chair: We have a few minutes here. The next presenter is not scheduled until 3:15.

Mr Duignan: Is there some way we could speed up getting a copy of the brief or presentation being made by the witnesses, especially the last one? I would have liked it prior to asking the questions. For example, I was wondering whether occasionally we could ask the next witnesses as they come in to present their briefs to the clerk so that we can begin the process of getting them photocopied.

The Vice-Chair: Mr Duignan, I am informed that we are prepared for the next two presentations.

Mr Duignan: Oh, good.

The Vice-Chair: No, for two future ones, not necessarily the next two. The clerks do their best in terms of getting them --

Mr Duignan: I appreciate it; I know that.

The Vice-Chair: One of the disadvantages of the committee proceeding a little in advance of schedule is that sometimes the committee therefore does not have the material to copy in a timely fashion. But you are right; it is very good for the members to have a copy so they can follow along.

Ms Poole: I just wanted to comment in defence of the clerk, that he had just received it. I was trying to refer back to what the gentleman had said and I asked him if he had a written presentation and he gave it to me to refer to. Otherwise I am sure the clerk would have had it copied sooner.

Mr Duignan: I am not blaming the clerk or anybody.

Ms Poole: We were caught in transition.

Mr Duignan: I was just wondering if there is a way we could get them if we ask them as they come in the door if they are here a half-hour earlier or whatever the case is.

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800 RICHMOND TENANTS ASSOCIATION

The Vice-Chair: We will move on to our next presenter, the 800 Richmond Tenants Association, Ralph Rozema, chair. Good afternoon, sir. Do you have a brief by any chance?

Mr Rozema: No, I do not have a brief prepared for distribution. I am sorry. This is not one of my full-time jobs.

The Vice-Chair: As you know, you have 15 minutes for your presentation, and it would be nice if you left an opportunity for members to question you. You should introduce yourself for the purposes of Hansard.

Mr Rozema: My name is Ralph Rozema. I represent the 800 Richmond Street Tenants Association. Although I have read the outline of Bill 121, I am concerned only with those parts that have had an effect on us as tenants at 800 Richmond Street West. These are one increase per year; maintenance; and work orders and fines. There is a real need for strong and effective legislation that works for tenants.

Bill 121 will give annual increases and capital cost increases to tenants. The present system of review has appeals and delays that have caused a great deal of hardship for many of our tenants. One of the parts of Bill 121 is to have one increase per year, and only one increase. The previous rent review process allowed appeals to extend, in our case, one year to a year and a half after the calendar year in question was over. The result was that in one year the following three legal increases were given the tenants: first, the annual inflationary increase; second, from an application made two years earlier; and third, from an increase from an application made one year previously.

The landlord then proceeded to collect his legal rent, including phase-ins as they became due. When compounded, these increases, when compared to the rent being charged at the beginning of the year, result in an effective increase of 23% for the entire year. The 800 Richmond Street tenants were then immediately liable for the full amount of arrears. Tenants were asked to pay hundreds or thousands of dollars in rent in effect by surprise. We do not know when these decisions are going to come down.

This happened twice in our case. The last time the landlord simply taped form 4 notices of termination on the door of each tenant in the building. Bill 121 would have prevented the havoc this created. To give committee members an idea of what I mean by havoc, I should say our building is a high-rise of 228 units with low-income tenants. Many tenants, if not most, fall into groups of those on fixed incomes, low incomes, disability or social assistance. As well, a large number are new Canadians with a working knowledge of only spoken English.

If I could present this committee with the reactions to these rent increases I have witnessed, I am sure you would be strongly motivated to protect us: the fist-shaking anger, the bitter words and the tearful shame of those unable to raise money for yet another increase. Each of the last two increases resulted in each tenant having to come up with approximately one month's extra rent, when you calculate it or compare it to the rent. Perhaps each committee member would take a moment to apply this to his or her own finances. Could you, in the last year, have paid out twice an extra month's rent or a mortgage payment just like that?

While it is not necessary for landlords to do so today, often they give leases, or they used to before, that assure renters of a year's tenancy at a fixed rate.

I do not know whether I am really conveying this to the committee, but I would like to just say personally that it has really been difficult to do the job of the landlord and of the government in explaining these increases. I find that we are all in the same boat here: landlords, the government and the tenants. We have a long process that we have invented. It protects something. Rent control is here to stay. We have rules in everything and we have to have rules in this. That is obvious. But we can have only one increase per year. We cannot have notices being taped on the doors and three and four increases happening. It is just nonsense. It is just not working out.

That is the one thing I want to say to you today, not the dollar amounts, not work orders and not anything else, not even the percentage of increases. Let's put some stability into this. That goes especially for the carry-forward provisions and the extra above-guideline increases. They have to be done before the year in question comes up.

The focus of this bill is to protect tenants, and I do appreciate that. There are concerns, however. These are with the application of regulations to the rent control act. As you have given it to us, it is policy and not procedure in its regulations. The previous system delayed and continues to delay decisions long after the facts are in. I think our landlord got three months to submit his water and sewer bills, something like that.

Many tenants are still in the position today of being unable to answer precisely what their maximum legal rent was two years ago. Was it the rent they paid? Was it the rent the landlord applied for? Was it the rent that rent review granted? Or was it the rent still being appealed to rent review, as in our case? We would like to get back to the days when tenants knew what they would be paying in the next year, without fear that future rent review decisions could cost them extra for rents paid long ago.

The control of rents has to mean one dollar-amount of rent for each of 12 months. Landlords used to give leases setting one rent for the year. Rent control, landlords and tenants' organizations must do the same. Everyone loses with the delay.

Bill 121 should have as part of its language the actual forms used for notice of increase in rent, notice of early termination and notice of eviction. These are currently difficult for some to follow -- the wording, size -- and information in these documents must be given careful consideration, including the amounts of money to be paid, the time by which they must be paid and the results if they are not paid. Clarity and simplicity are a must. We are talking about someone's home and about rents equalling half their income. Let's make it clear.

As well, let's have forms in different languages available to all landlords. Surely we now realize it is necessary to provide French-language notices. Why not Chinese, Italian, Portuguese, Spanish and Vietnamese? Simply having such forms available to landlords and tenants would go a long way to helping these tenants. What I mean is that the English-language portion of one of these notices can refer to a foreign language portion, and vice-versa. We are talking about something that is very important. I do not see what the problem is in having these things translated.

How am I doing for time here?

The Chair: Five minutes. You might want to have questions and answers. That gives each party only a minute and 30 seconds.

Mr Rozema: I realize that. I have a lot more to say.

The Chair: It is your choice.

Mr Rozema: That is all right; I will just finish my remarks. The extra things I have to say have to do with the regulations, particularly work orders and getting them done, and the policy of some not to honour these work orders. They should start on the day of inspection and continue from there.

If anyone has any questions, please go ahead.

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Mr Tilson: I have a couple of comments on some of the things you have said, followed by a question. You made the observation about people who own homes and what would happen if they had major increases. Unfortunately, that has already happened with the interest rates. People lost their homes five or six years ago with that very situation, where there were substantial increases in interest rates and people simply could not afford their mortgages and they lost them. That is as unfortunate a situation as the unfortunate situation of the tenant. It does happen.

The comment you made that work needed to be done first -- that is the very situation, of course, that we have had under Bill 51, where work was done first. People did it. Of course, this government changed the rules halfway through, based on one set of rules -- the whole issue of retroactivity under Bill 4, which you may or may not be aware of. That was a system that was being followed. There were landlords across this province that were hurt substantially. Some have gone bankrupt. Some are in very serious financial situations.

As far as the comment with respect to language, it may be an interesting observation for the government to take, but I can tell you that there are a lot of people who speak English who will not be able to understand the legislation and the bureaucracy because they cannot even understand it in English. Even if it was a unilingual issue, those who speak English are going to have to hire business consultants and lawyers to explain to them what in the heck it all means. Whether you are a tenant or whether you are a landlord, it has become that bureaucratic.

Those are my comments, which you may choose to respond to.

The question I have for you, and that has given members in our party considerable difficulty, is the situation with the chronically depressed rent or the low rent, where buildings may need to have work done on them, yet the rent, for various reasons, is low. People have never bothered to make the applications to increase the rent or they have stayed there for whatever reason, and it is lower than the market value. All of a sudden they need major capital expenditures done to their buildings. If you look at the percentage increases that are being allowed by the legislation, it will never happen. Those buildings will never get the capital expenditures that are required, because of this legislation.

In that situation -- and across this province there are a number of situations like that -- what are we going to do with those people?

Mr Rozema: Capital expenditures are a problem and they must be treated in this bill. The key thing I relate to in capital expenditures is, first, that all parties must be able to inspect these capital expenditures. They cannot go on by surprise. Landlords, tenants and the government must all be able to look at these.

The second thing is that when they are calculated, a tenant does not suddenly become liable for all kinds of costs by surprise, that when an appeal is heard -- let's say today, for instance -- they do not suddenly find that their rent increases by $200, even though they moved into such accommodations knowing they could afford such a rent.

My main point today is this one-increase business and the telescoping of the --

Mr Tilson: I do not think you understand my question.

Mr Rozema: You are saying that the 3% guideline does not cover capital costs. What if it goes over nine years?

The Chair: I am sorry, we do not have time. I apologize to committee members.

Ms Poole: I think members were a little bit confused when you talked about three or four rent increases per year, because everybody knows that according to the legislation you can only get one rent increase per year. But having dealt with rent review and tenants' problems for many years, I know exactly what you mean. You are talking about when there are multiple applications at the same time at rent review; there is a backlog. So one month you get your decision. Meanwhile, it is under appeal. Six months later you may get that decision. So right in that one year, you have had three rent increases. I assume that is what you are talking about.

Mr Rozema: That is exactly it. You have hit it right on. I do not find it necessary to expand.

Ms Poole: When you were making your presentation, something just suddenly hit me. Do not say it -- he was just going to say, "Something needs to hit you." If anybody was coming into these hearings as a neutral party -- I am not sure that exists in Ontario, but say we did find this amazing person who did not have a particular vested viewpoint in this issue -- they would say, "Are these two sides from different planets?" I am hearing these different stories and nothing jibes. It is like the old cognitive dissonance that we heard in --

The Chair: The question?

Ms Poole: I am getting to it very quickly.

The Chair: Time is running out. I do not want to have to cut you off.

Ms Poole: The facts do not mesh, and my conclusion is that most of the tenants who are coming to these committee hearings are ones who have had problems. Most of the landlords coming to these hearings are landlords who have run a fairly decent ship and cannot really quite comprehend why the government is stepping on their head. We are not getting many of the landlords who are creating the problems and we are not getting the tenants who are satisfied because they have good landlords. We are getting those two scenarios.

Mr Mammoliti: I just want to get your opinion on something. Actually, it was an observation given yesterday by one of the landlords in reference to the penalties on work orders, that if work orders are not addressed, with this bill there will be a penalty. They said that tenants will purposely break something in their units in order to not get an increase.

I want your opinion on that. Do you think that will happen? If so, what do we do about it?

Mr Rozema: I think we have to separate vandalism from somebody taking the unlikely step of vandalizing their own home. What are they going to do -- go into their bathroom and pull out fixtures and so on? I find it rather slim. The scenario that people have, I think, is where things become so run down that just one more little push will put it over the edge, and that is not vandalism.

Mr Mammoliti: Do you think it is unlikely to happen?

Mr Rozema: It is very unlikely.

Ms Harrington: I thought two points you made were very good and were ones that I would like to take back to our review of this legislation. First of all is the fear in rent review of not knowing. The whole point of this is stability. That is why we have to stick with that top cap. We cannot have fluctuations and the fear of past applications coming down and tenants not understanding.

The other point you made that followed up on that is the idea of education, communication, empowerment of the people and a feeling that they have some rights. As I said a month ago, the balance was not even. If we can get the balance a bit more even and have people communicating, hopefully the system will work. I am very glad you are the president of your tenants' association. Try to give a message to your people that we need their help.

The Chair: Time has expired. Thanks for your presentation.

Mr Mammoliti: I hate it when that happens.

The Chair: George, I have allowed you all kinds of leeway all day long.

GRAYDON HALL MANOR TENANTS GROUP

The Chair: The Graydon Hall Manor Tenants Group. Sir, I think you have been here before. You know the procedure.

Mr Linnell: Oh, you remember. You did not call me Mr Graydon Hall today, though.

The Chair: I did not call you that the last time you were here either.

Mr Linnell: Yes, you did.

The Chair: It must have been the Vice-Chair.

Mr Linnell: Okay, have it your way.

Unfortunately, my time is kind of limited so I am going to have to skip sections that I would rather have put in.

First off, I would like to congratulate Evelyn Gigantes on her new spot. I hope she can stand the pressure she is going to be under with the opposition groups.

Congratulations first. I would like to compliment the people who have put together Bill 121. It is far more readable and intelligible than the infamous RRRA and certainly appears to be even more evenhanded. Tenants appear to be getting a bit more clout, which was badly needed.

On the percentage side, whatever percentage increase is made, one group or the other will always be unhappy. The Graydon Hall Manor Tenants Group prefers to concentrate on constructive criticism and suggestions for improvement based on hard-line experience, so let's get at it.

Definitions: "Substantial completion." This term has been bandied around too long under the RRRA, where it appeared to be interpreted to mean that if a landlord completes work on 25% of the suites in a complex, he can collect money from the tenants, supposedly to equip the whole complex, and then never complete it.

Graydon Hall is a classic example. Dishwashers hit us five years ago. Many suites still do not have them, but the landlord is asking for more money for them again. It is the same with new kitchens, vanities and medicine cabinets. There are a few sprinkled about in two of the towers but none at all in the largest tower.

We propose that "substantial completion" be defined as completion of at least a very minimum of 75%, and preferably 90%, of the project; certainly not 25% as currently allowed. It is an open invitation to fraud.

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Section 19, Rent chargeable before order: We strongly disagree with allowing a landlord to collect anything other than the legal minimum rent. Allowing him to charge any higher amount gets us into providing for interest on the extra, which many landlords seem incapable of calculating correctly. With our landlord's bookkeeping, God alone knows what kind of mess would result. He cannot even keep his bad debt list straight, changing numbers three years after a tenant has left by up to $1,600 or more. I refer you to appendix 1, with samples of bad debt lists submitted to rent review in June this year by our landlord and some other interesting examples.

Subsection 21(7): Payment of orders by instalments: This will cover what the previous presenter was commenting on. It should apply to any order increasing rents at any time so it can be paid over a period of time.

Subsection 23(5): Who may make application: A good name for this would be the "leave and bitch clause." This is an excellent provision, but please add provision for a tenant to be included automatically in any whole-building rent reduction. We will be applying shortly for a whole-building reduction going back at least a year and it is grossly unfair that tenants who have, in many cases, had to leave because of excessive rents or employment should be deprived of their refund.

Section 23 should also be extended to include the ability for tenants to launch a class action for whole-building rent abatement. At present, it is a bureaucratic nightmare with phenomenal paperwork. Simplify it for all our sakes, please.

Subsection 33(1): Application to determine issues: A section should be added to include the determination of the validity of leases obtained under dubious circumstances. We have situations where tenants are told it is Ontario law and they are forced into an additional lease, which is not proper at all.

Subsection 39(1): Rent penalty order: This section needs rework. Currently it is nigh impossible to get a rent penalty order issued due to bureaucratic foot dragging.

Section 44: Definitions: Basic unit rent. It is very gratifying to see one's terms and ideas so firmly entrenched in the bill. Finally, it would appear someone is listening. Now we have it defined, let's continue to the next step and only increase it and not the whole bundle of amortizations annually as well.

Subsection 44(2): Elements of maximum rent: The word "may" in line 3 should be changed to "must" or "will." This has to be a mandatory requirement, not one subject to whim or because so-and-so is such a nice landlord.

Subsection 53(1): Copy of application to parties: This requires a little further clarification and emphasis. I hope I am interpreting it correctly when I believe that it means the landlord must supply a full copy of all the documentation he is relying on in his application to, for example, a tenants' association. At present, we have to pay 20 cents for each page to get a copy of hundreds of pages of documents the landlord submits. If my interpretation is correct, thank you. If not, please ensure this is what this section means.

In my presentation to you on January 16 this year, I proposed that the landlord should provide both rent review and the tenants' association with a copy of all documents, together with a certificate made under oath, that the documents were a full and complete copy of that supplied to the other party. The under oath provision is important due to the fraudulent practices carried on by some landlords -- not all. It would be easy to just omit a few critical pages here and there, knowing that most tenants' groups do not have the time or manpower to go and check each and every page.

Clause 66(2)(a): Additional powers: The rent officer should be empowered to order the production of the originals of any document for examination, not only by the officer but also the opposition parties to the matter.

Section 83: Frivolous or vexatious proceeding: This will be an excellent section if it is improved by an addition after "good faith" so that it reads as follows, "A rent officer may discontinue a proceeding if, in his or her opinion, the matter is trivial, frivolous or vexatious or has not been initiated in good faith or contains fraudulent or improper documentation or claims."

No application should be allowed to proceed, nor any rent increase of any amount be allowed, where any false, fraudulent or similar material is discovered. Furthermore, there should be provision in the act that regardless of when fraudulent documentation is discovered to have been used, any order or orders based on such material shall immediately be rescinded without the necessity of the discoverer having to sue the offending parties. Should it become necessary to invoke legal proceedings, however, the discoverer must have all costs and expenses reimbursed or the said costs borne by the ministry.

I keep harping on fraud for good reason. There is far more of it out there than the ministry or most people realize or want to know about. I have recently caught over $250,000 worth of fraudulent claims for two items alone for one year, and that is just for openers.

Section 93: Miscellaneous: A third subsection should be added here, to the effect that no consultants' fees may be amortized for any period whatever. They are a business expense as are accountants, lawyers, etc, whose fees are not amortized. Why should tenants be stuck with additional charges to amortize a consultant's fees?

On the same matter, the economy of scale should be taken into consideration when establishing the fees allowed to rent review consultants. The larger the building, the lower the fee should be as the less work per suite is involved. The present arbitrary $25 per suite is robbery and is usually more than the entire years' tenants' association dues per suite.

Section 102: Calculation of maximum rent: You nearly have it right. There must be a requirement that only basic unit rent, as defined in subsection 44(1) on page 37, be subjected to increase, whether by order or annual allowable percentage. All other amortizations and/or separate charges in existence must be listed with amounts and starting and ending periods so that any tenant may make an informed assessment and know by how much his or her rent will decrease on the expiry of the amortization.

I cannot buy any argument that it is too difficult to keep track of this. In this age of computers, etc, it is absolute nonsense. When an amortized amount is awarded, the starting and ending dates are known and the amount is fixed. The practice of hiding these amounts in rent, which accounts for enormous illegal profits to the landlord of an ever-increasing amount, has to stop immediately. It is virtually impossible to go back and recalculate rents, removing the added-in amounts over so many years. We must cut our losses and start now and not allow the practice to continue.

There should also be very heavy penalties, which cannot be charged back to tenants, for any infringement, such as loss of a licence to lease rental accommodation. This should be a licensed and regulated industry, especially for the large complexes. The ma-and-pa duplex is not a problem here. It is the avaricious large operation, such as 373041 Ontario Ltd at Graydon Hall, that is the problem.

Sections 113 to 123: Congratulations are in order here for finally putting a set of dentures into the act. Hopefully, they are teeth and not removable. These powers of entry, search and seizure are very much needed, as is a strengthened investigations unit. Having recently met and currently worked with one member of the unit, I can honestly say it is high time we had these powers.

Subsection 124(5): Limitation: I suggest that, as in the Criminal Code, where there is evidence of fraud discovered that all limitation become invalid. At least ministry investigators now have two years, which used to be one, to start to do an investigation. But there should be no such limitation where fraud is established and the Criminal Code provisions should automatically be invoked. In fact, such a matter should automatically become a criminal investigation and not be subject to provincial legislation at all.

In closing, I sincerely hope you will consider our recommendations seriously. This has the makings of being good legislation and I consider it a privilege to have been allowed to take part in its birth. As president of the tenants' association of one of the largest complexes in North York -- we have 888 suites -- I feel that with our experience we have a lot to offer the ministry, if it will listen. We try to be evenhanded and completely fair. I think you will find that the documents at the back of my presentation will speak for themselves.

The Chair: Mr Mammoliti, any questions?

Mr Mammoliti: I am going to hand it over to Ms Harrington.

The Chair: I knew you were going to do that. As soon as I give you a chance to go first --

Ms Harrington: Thank you very much, Mr Linnell. You had appeared before our committee before and you certainly had lots of suggestions. I see we still have a ways to go. I know you have other concerns about fraud. Are they contained within this document as well?

Mr Linnell: You have some evidence of it supplied there.

Ms Harrington: I think I will see if my colleagues have any further comment on this.

The Chair: There is really not enough time.

Mr Turnbull: I believe Graydon Hall has very high rents on units.

Mr Linnell: Correct.

Mr Turnbull: I would like to differentiate between the building you are in, which is typically in the $1,200 range for rents --

Mr Linnell: I am paying $1,240 for a three-bedroom apartment. They go as high as $1,260, and one-bedrooms are around $800 to $900.

Mr Turnbull: Okay. Taking the difference between your rent and those that under Bill 51 were called chronically depressed rents, where we have heard evidence of people who are getting $50 a month in rent and there are many, many units that are getting $150 or $200 a month, does it seem reasonable to you that those people with the chronically depressed rents, the building owners, should be treated in the same way as the people who own the very large complexes that have very high rents? What I am referring to is the ability of a landlord to repair a roof or an underground garage if he has very low rents, an example being if you apply a 5% rental increase to a $1,200 rent, you have a $100 increase, whereas if you have a $200 rent and you apply a 5% rental increase, you have $16.80. Does it seem reasonable to treat both buildings in the same way?

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Mr Linnell: You are into the old problem of when we -- in fact, in the good old days when we went on strike for 15 cents a week, that was a devil of a difference from 15%, and all of a sudden the unions discovered percentages and the whole darn world went crazy. You talk about replacing garages, etc. You come right back to exactly a point that I raised on January 16 before this committee, that there should be a capital fund for major repairs such as this. There is no getting around it. Condominium corporations have to have it. Why the hell are not rental accommodations forced to have it? It makes business sense. If you are running a plant, you do not go running out to your customers and hit them for an extra $1,000 on the product just because you need a new roof; you take it out of your profits.

Ms Poole: I just wanted to say thank you, John, for your comments. I think I was up to a list of 17 possible amendments I had so far and I think I have added another 10 from your list to that.

Mr Linnell: Any original thinking, Dianne?

Ms Poole: On my part, probably very little, but there will be some creative thinking when we get down to it.

Mr Linnell: Give me a call.

Ms Poole: I do find it very helpful about your brief that you have been so specific and looked at the specific sections of it.

The one that I wanted to ask you a brief question about was the frivolous or vexatious proceedings, if you want to elaborate on that. I felt it was very good because it was what you would have called unbiased. On the one hand, if a tenant makes a trivial, frivolous or vexatious proceeding, then the rent officer has the right to stop it. On the other hand, if the landlord has been indulging in fraud -- I do not know if "indulging" is the right word -- the rent officer has that same right. In your experience, you have mentioned that you have had examples with your own landlord, our beloved Mr Pieckenhagen. Anyway, you have had examples of fraud. Have you also seen examples on the other side where you find that tenants are taking cases that do not have much merit?

Mr Linnell: Frankly, no. I realize it goes on. You just have to listen to people talking, for a start, and you know what is happening, or go and look at rent review files. It is there but, by and large, the standard of tenant I have to deal with is possibly somewhat better educated. They have a few more brains sometimes. Sometimes I wonder, especially some of the questions I get asked.

The Chair: Thank you very much for your presentation.

Mr Mammoliti: Mr Chairman, if I may, on a point of order: Just to perhaps bring something out in the open. I do not really want to criticize you, but --

The Chair: No, but go ahead, George.

Mr Mammoliti: -- Mrs Harrington got about 30 to 45 seconds to talk and to ask questions. She then offered to colleagues to ask and you said no.

The Chair: That is right.

Mr Mammoliti: You then went over to Mr Turnbull, and then to Dianne Poole, who both got about a minute and a half or two minutes. I just thought I would point that out. I think that is a little unfair.

Mr Turnbull: It is a capitalist plot.

Ms Poole: You just have to become his friend, George. Then he would give you extra time.

Mr Mammoliti: I am his friend, Dianne. I am your friend as well. I am everybody's friend.

EL MIRADOR APARTMENTS

The Chair: The next presenter, El Mirador Apartments. Sir, you have 15 minutes to make your presentation.

Mr Janowski: I apologize. My handout was supposed to meet me here and I am here first. This is the first time I am doing anything like this, so please bear with me.

I wish to thank the committee for the opportunity to speak today. I am Israel Janowski, property manager for El Mirador Apartments.

Eighteen years ago this month, my wife and I took up residence in Cincinnati, Ohio, where I entered the field of education as a teacher, and soon afterwards as an elementary school principal, a position I held for 13 years. The night before I was about to step into a classroom for the first time in my life, I had a talk with my mentor, an experienced and perceptive educator. "Please share with me the secret of good teaching," I asked, and instead of a long dissertation, she said only two words, "Be fair." Throughout my career in education, that maxim remained with me constantly. There will always be someone who will not be completely happy. You cannot please everyone, but in all my dealings, students, teachers, parents, board members, community workers and volunteers, everyone knew that if a difficult decision was based on fairness, they could accept it -- swallow hard, perhaps, but accept it -- and I had an exceedingly successful career because of it.

Five years ago, my father called. He had helped build a successful family business over 40 years. During that time, he and his two brothers put up a few small and medium-sized apartment buildings. For the past 20 years, the business has consisted of managing them. My father now wished to retire. Could I come home and take his place? I made that fateful decision and did indeed come home.

My decision was based on the fact that I knew residential property management today meant not simply working with plumbing, roofing and elevator problems, but indeed, and more important, it meant working with people. It meant dealing with tenants, and not only their torn screens or leaky faucets or worse problems, but also with the everyday problems of people out of work, unable to pay this month's rent on time, single mothers needing day care, children out of control, broken relationships between husband and wife and between neighbours living across the hall from each other. We deal with all of these issues.

Residential property management today also means helping create a safe, clean environment where every one of us here today could live comfortably and happily. There is no question that work as an educational professional has helped sensitize me to the needs of our tenants. Indeed, we are proud of the fact that tenants find us approachable and always willing to listen. To excerpt from a recent tenant committee letter to the tenants of one of our buildings:

"The tenant committee members feel that all matters pertaining to our building have been dealt with to the best of our ability, and always with the tenants' best interest in mind. We have even established an amicable tenant-landlord relationship with Mr Israel Janowski, the owner of the building, whose office resides on the main floor and can be reached at" -- our phone number. "He is the individual you should direct any future grievances to."

The only error in that excerpt is that I am not the owner. I wish I were. Otherwise it is quite true we enjoy an excellent tenant-landlord relationship, to the extent that the tenant association felt there was no need for it to continue its formal existence at this time and the tenants officially dissolved the organization.

My success now, as in my previous vocation, has been based on, very simply, fairness. I have always tried to be fair in all my decisions, which at times may require someone to walk away only partially satisfied. But they know they are being treated fairly and that saves the day and the relationship prospers.

Ladies and gentlemen of the committee, I am before you today to plead for only one thing, and that is fairness. I must say the unfairness of Bill 4 and the proposed Bill 121 has left our company quite literally in shock. I do not exaggerate.

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Allow me to share with you three specific areas of very negative impact on our company as they relate to Bill 4 and are not remedied by Bill 121.

We undertook major capital improvements in two 30-year-old buildings, costing over $1 million, work that was caught by Bill 4. The work was completed in July 1990. This work includes replacement of the roof and plumbing risers and major garage repairs. Independent consultants attested to the fact that ongoing repairs have been performed extensively over the years in all these areas in those buildings. The experts determined that complete replacement of the roof and risers and major repair of the garage would now be necessary, as spot repairs would no longer be effective or feasible. In good faith, we performed the work based on existing legislation, fully expecting to recoup the very legitimate extraordinary expenses.

Bill 121 will, based on our conclusions, allow us to recoup only a fraction of those funds already spent. While stranded in this indecisive limbo, it costs over $115,000 a year just to carry those loans, based on today's 11.25% five-year mortgage rates, without repaying a penny of the principal.

Is it fair to retroactively limit the allowance to a 3% cap for only two years, after reducing an additional 2% per year as part of the guideline, when our planning in 1990 took none of this into account? How can a sound business operate under those circumstances, where the rules of the game change retroactively after the game is concluded? At the very least, allow the 3% cap to continue for succeeding years until the bill is paid, and deduct 1% once, as under the old rules upon which the project was based.

Furthermore, how does one pay for new capital repairs during those years the old Bill 4 work is being paid for? Please remember, these are 30-year-old buildings and no amount of ongoing repair and maintenance will prevent the eventual need for new roofs, elevator refurbishings, new boilers and on. Indeed, there is no way the 3% cap will allow for all those necessary repairs as well.

What should one do when the capital repairs are absolutely essential, it is clear there has not been ongoing deliberate neglect or reduction of services, and the 3% will not pay the bill? What does a landlord do? There must be some flexibility. There must be some fairness.

Item 2: We were unable to rent two huge, four-bedroom penthouse apartments for about three years and decided to renovate them and create four smaller three-bedroom apartments. The proposed rents, tentatively approved by the rental housing protection office, would be affordable and the project would add additional rental stock. Our research indicated these apartments would be very desirable. Government officials told us the same thing. With green lights from all necessary agencies, we invested well over $10,000 in planning, engineering, architects and so on.

The proposed new legislation has killed the project because we would now not be able to bring the new rents in line with our constructions costs. The apartments are now sitting empty because three different real estate firms have been unable to rent them at or even below the allowable rents, and we are told the apartments are simply too large.

We have lost over $10,000, spent in good faith, and the community has lost additional housing stock. There must be a mechanism for flexibility. Everything is not simply black and white. Please be fair.

Item 3, my final item: Back in the 1950s and 1960s, it was common to put up apartment buildings surrounded by much excess land. We have received approval and building permits from the city of Scarborough and the city of North York to build 44 rental townhouses at two such sites. These projects are to be models for future infill proposals, which could potentially add significant numbers of affordable housing units throughout the province. An additional 13 units are being proposed for a city of Toronto site. Seven years of planning and many thousands of dollars have gone into these projects thus far.

We are now being counselled by our legal and financial advisers not to proceed with these townhouses due to the new legislation. The financial experts are saying that there is no way such projects can become profitable in five years, as Bill 121 allows, but could actually take at least 10 years for one to recoup the losses. Our legal advisers worry about whether these projects might not be considered new construction, but merely an extension of the adjoining buildings, which are governed by the legislation for previously existing buildings. Conceivably, we could complete the project and find out later there is in fact no moratorium applicable, the five-year moratorium.

As things stand now, there is simply no provision in Bill 121 for advance rulings. It would spell our ruination. Furthermore, the unpredictable danger of some future possibly harmful retroactive legislation has now been firmly planted in our business psyche by Bill 4 and has only been entrenched by Bill 121.

We are not a large company. We have, however, the opportunity to add to the depleted rental housing stock in a way that would benefit the community. It is most unfortunate that the very negative climate brought on by the proposed legislation will definitely cause us to cease our own modest activity in this area. There are so many aspects of Bill 121 which absolutely terrify us. We are truly and sincerely worried for our future viability.

All we ask for is some fairness. Please listen. Hear what landlord advocates have to say and please consider us. We know, realistically, where everyone's politics lie, we are not naïve, but we do ask for some flexibility and some fairness. I thank you for listening, and I have my handout. It is almost like in the movies.

The Chair: We have time for one quick question.

Mr Tilson: The retroactive issue: Obviously, I quite concur on the whole issue of fairness; landlords should be fair, tenants should be fair, the whole relationship. Do you trust this government as a result of the retroactive legislation put forth by Bill 4?

Mr Janowski: I must say we do not.

The Chair: Mr Mahoney and Mrs Poole.

Ms Poole: Mr Chairman, I just want to thank the presenter and I am going to pass my time to George so he does not feel slighted.

Mr Mammoliti: There is no need for that, Dianne.

Ms Poole: We are just making up, George.

Mr Mammoliti: The presenter was asking for fairness. So am I. There is no need for those comments here.

The Chair: George, do not waste Mrs Harrington's time, please.

Ms Harrington: I would like to thank you for this copy I have just received of your submission. You have mentioned the flexibility, that we have to work with you for many reasons, and I agree. One of the reasons is that new rental stock is very obviously needed. I hope when our staff goes over this, we can see where we can join to do this together. Thanks.

The Chair: Sir, thank you for your presentation.

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HIGHMARK PROPERTIES

The Chair: Next is Highmark Properties. I think you have had experience here before also. I will turn the floor over to you. You have 15 minutes and you can reserve some time for questions if you wish.

Mr Every: Mr Chairman, committee members, good afternoon. My name is Allan Every. I am one of the founding principals of Highmark Properties, a partnership formed in 1977 for the purpose of providing property management services to the residential rental industry in Ontario, and my chosen profession is that of chartered accountancy.

Highmark is presently responsible for the day-to-day stewardship of in excess of 25,000 suites across Ontario, which house more than 55,000 residents of this province. In that capacity, we are, to the best of our knowledge, the largest privately owned landlord supplier of such services in the industry.

The principals of Highmark Properties have negotiated, on behalf of clients, the acquisition and financing of 10,000 rental suites during the course of the past 10 years and consider ourselves to be experts in the business of ownership and management as well as valuation of apartment buildings.

Notwithstanding the fact that Highmark is today Ontario's largest non-governmental landlord, we operate only 2% of the rental housing units in Ontario, which highlights the fact that ours, unlike others, is not an industry dominated by corporate giants.

The vast majority of our clients, like most real estate investors, purchased their properties with the intention of holding them for the long term. We today continue to manage the portfolio of buildings purchased in 1977 by our very first client. The day-to-day operating decisions have therefore been made with the long-term interests of the property in mind, clearly a benefit to all concerned, including the occupants of our buildings.

The private rental housing industry in Ontario has built and presently manages in excess of 1.1 million residences across the province, providing homes to over 40% of the population at a current monthly rent of $550, accounting for less than 18% of the family income of those who occupy them, according to Statistics Canada, and I refer you to appendix 1. In the greater Toronto region, which chronically suffers from one of the lowest vacancy rates in the province, average rents in October 1990 slightly exceeded the $620 level based on the most recent CMHC annual survey taken that month, as referred to in appendix 2.

In contrast, it currently costs $1,800 per month to carry a recently constructed non-profit co-op apartment and $2,100 monthly to carry a 75%-financed starter home. Clearly, the least expensive form of self-contained accommodation in the Toronto area and across Ontario is that currently provided by the private rental housing industry at less than one third of the cost of the aforenoted alternatives.

In view of the fact that it currently costs an average of $325 monthly to operate a rental apartment, excluding the cost of servicing debt, and that the balance of the monthly rent of an average suite is barely adequate to carry a $30,000 mortgage at current interest rates, and in view of the fact that the average rent increase in the province last year, including those that went to rent review, was less than 6%, landlords are clearly not the gougers that some uninformed parties are only too happy to believe to be the case.

A brief review of the significant features of Bill 4 is in order at this point in time to properly focus upon all the salient changes to the previous legislation which the NDP government will have implemented by the time Bill 121 is enacted.

Bill 4 effectively restricted annual rent increases to an amount which at least allowed a landlord's revenues and profits to keep pace with inflation, provided that expenses in any given year did not materially exceed 50% of revenues and, as well, did not significantly increase in excess of the same rate as the revenue guideline. I refer you to appendix 3.

Bill 4 terminated all previously granted decisions which provided for an orderly series of annual increases, capped at an additional 5% over the annual guideline increase, awarded only under those circumstances in which a building was losing money, providing for gradual increases over time until a building reached the break-even point. The termination of the financial loss provisions effectively ensured that all buildings operating at a loss would continue to do so in perpetuity. In terms of cash flow, only buildings purchased within the last five years were directly impacted by this change, since such losses arise in those circumstances where new financing costs are legitimately incurred upon the sale of a property at fair market value, but all buildings were affected value-wise.

Bill 4 also terminated those increases arising from the expenditure of significant amounts of money by the building owner on major repairs and improvements, the cost of which resulted in additional rent increases to the extent necessary for an owner to recover only the cost of the work, including interest charges, over the useful life of the particular building component.

With respect to Bill 121, from a landlord's perspective the only even modestly positive change is that with respect to major repairs. A building owner will now have to spend in a given year an amount equivalent to the cost of replacing the entire roof of a building, which is a significant cost in our industry, without compensation. Only additional expenditures that same year will be eligible for an increase above the guideline level. Effectively, a minimum of 40 cents of every dollar spent annually on capital expenditures will not qualify for recovery from tenants, and those rent increases above the guideline to be granted at that optimum spending level will fall well short of being adequate to cover even interest on the related debt, were such costs to be financed.

Accordingly, the new legislation will not provide the landlord the ability to recover this further investment in the property from the tenants who benefit from the expenditures. Furthermore, lending institutions will not be responsive to financing such costs and, contrary to those who would have you believe otherwise, cash flows from Ontario's apartment buildings, besieged by 15 years of ever-tightening rent legislation, simply cannot fund expenditures of the magnitude required to properly maintain them.

However, a number of changes are distinctly for the worse. The formula utilized to calculate the annual province-wide ceiling on rent increases, formerly one which provided for increases that approximated the general rate of inflation, will be modified for the majority of rental buildings, a change which, had the new rules been put into effect immediately, would have slashed the 1991 ceiling from 5.4% to 4.6%. In reality, when the ever-declining purchasing power of the dollar due to inflation is taken into consideration -- and it must be -- rents will be going down each year for such buildings.

On an even more restrictive basis than was the case with Bill 4, the major operating expenses, redefined as realty taxes and utilities only, would have to increase by in excess of 50% of their guideline component before a landlord could apply for rent increases to offset such escalations in costs.

As well, the new legislation, unlike Bill 4, fails to recognize increases in mortgage rates, a potential disaster for most members of the rental industry should interest rates ever escalate by just a few percentage points, since for most owners debt service represents by far their highest annual cost and is as legitimate a cost of doing business in our industry as it is in any other, whether this government wishes to recognize that or not. The interest costs of financing any business must be built into the selling price of its product or services if it is to earn a profit.

Finally, as with Bill 4, those building owners who are losing money shall continue to do so and indefinitely, particularly in light of the reduction of the annual guideline ceiling. Those who spent millions of dollars in 1990 on legitimate capital expenditures, who became victims of the retroactive provisions of Bill 4, will at best receive only token relief under the proposed legislation.

Many of those who will appear before this committee or submit briefs will undoubtedly provide you with an excellent technical critique of the bill and make numerous recommendations for changes. However, we do not believe that any substantive changes will stem from this consultation process since, on balance, Bill 121 reflects little of the compromise which the former Minister of Housing repeatedly implied could be expected when urging the opposition parties and ourselves to allow Bill 4 to be passed quickly. The fact of the matter is that we were misled.

As a result of this legislation, those landlords who are now losing money will always lose money and, as reflected in appendix 4, the cash flows of those landlords who presently make money will inevitably dwindle and disappear. Some will get there faster than others: those with mortgages that mature whose interest cost increases will never be recognized and those with significant operating cost increases or capital expenditures in a single year which would otherwise have generated increases in excess of the new 3% cap.

But of particular irony is the fate of your model landlords, those who constructed their buildings, say, 25 years ago and held and maintained them for their limited cash flows, having never gone to rent review. Ironic, because these providers of low-cost housing, whose operating expenses have risen in tandem with all other buildings, now suffer from an exceptionally low profit margin because their rents are also very low, similar to the example of building B in appendix 4. Mathematics dictate that their cash flows will deteriorate faster than all others until there are none.

What has the effect of all of this been already on the value of Ontario's buildings? As the Association For Furthering Ontario's Rental Development ad in the Wall Street Journal stated, $20 billion of value has been wiped out on a conservative basis, representing 20% to 30% of the value of each and every apartment building across the province. These decreases have nothing to do with the recession, since ours, until last September, has been an industry of predictable, stable cash flows, and prevailing interest rates have been favourable. Do not take my word for it, though; ask any licensed appraiser familiar with the apartment market, or come to our offices and we will show you numerous comparisons between pre-election and post-election appraisals.

Was all this necessary? The Premier and the former Housing minister have repetitively justified the imposition of strict rent controls on the basis that all tenants need real protection from high rents. They must mean all tenants since this legislation affects all buildings and will drive all landlords as well as all prospective investors in Ontario's rental economy out of the business.

But that more than a minority of tenants require real protection is demonstrably inaccurate. CMHC statistics -- and I refer you again to appendix 1 -- disclose that less than one quarter of the tenants of the province pay more than 30% of their income towards rent, thereby qualifying as truly needy by CMHC standards. Since the average annual income of that group is only $9,500, the problem is clearly an income problem. Blaming their respective landlords for their low income is akin to blaming a victim for a crime. The cost of subsidizing that group's rent, reducing it to the 30% of income level, would be $388 million annually, representing but one third of this government's proposed non-profit solution, which it clearly cannot, nor should want to, afford.

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So why this NDP legislation? Does Bob Rae understand that this new legislation will quickly bankrupt many landlords and eventually drive us all out of business? One has to turn only to page 1002 of the official transcript of the Ontario Legislature of May 2, 1990 -- we will refer you to page 2 of appendix 5 -- to determine the answer to that question, a chilling yes, when the Premier stated:

"There is an alternative. The alternative is a system which says we are going to have a system of rent control in the province which will provide some very real protection. There are those who will say, `Well, if you do that, landlords will stop flipping and you will decrease the value of buildings and landlords will want to get out of the business.' I can say without any hesitation that if that is the case, then I do not see why a building which is 10 or 12 or 15 years old should not be able to be purchased by the tenants as a group and should not be able to be operated on a non-profit basis for the benefit of the tenants who are in that building. If that is the only way and the most effective way to deal with the question of increases, then let's deal with it."

Clearly, the Premier of this province, acting as their agent, intends to reward those who he believes voted him into power by orchestrating a $20-billion or greater reduction in the purchase price of what will become government-subsidized, non-equity co-op housing, an act which represents nothing short of confiscation of private property without compensation, behaviour that we would expect only from the likes of Fidel Castro.

Ontarians must ask themselves, "Is it right that an important industry whose contribution to Ontario society has been to build and presently provide the least expensive form of housing available in the province for more than 40% of the people of Ontario be desecrated for the sake of this Marxian ideology, one that the rest of the world has soundly rejected as unworkable and a dismal failure?"

Our ideology, that of the business community, has built and services the homes of nearly half of the people of this fine province, and we are damn proud of that accomplishment. Your ideology will only destroy them. The rest of the business community must ask itself, "Can this cancer spread?"

The Premier is quoted in this morning's Globe and Mail, Canada's national newspaper, as saying: "We want a closer partnership with business. Indeed, we have to have one. If we don't, the province will certainly suffer, both industry and government." Is this destructive path his idea of a partnership? Do the insurance and day care industries believe this? Ask them.

Rent controls have never worked anywhere in the world. There is no shortage of rental housing in those jurisdictions in North America where there have never been rent controls, since a vibrant, unobstructed rental construction economy has ensured a 5% to 10% vacancy factor at most times, thereby keeping rents in check. That is why Highmark Properties has this week continued its Charter of Rights case by filing its updated factum at the Ontario Court of Appeals level.

The dismantling of controls is the only solution after 15 years of dismal failure here in Ontario. Do that, convincingly, so that we can once again build and get Ontario working again. Thank you.

The Chair: Time has expired. Unfortunately, you will not get any questions, Mr Every. Thank you for your presentation.

MARG KRANJAC

The Chair: The next presenter is Marg Kranjac. Marg, we will be following the same procedure. If you wish some questions and answers after your presentation, you will have to withhold some time.

Ms Kranjac: I would like to thank the members for hearing me. I do not have a written submission. I can type with only two fingers, so it is very difficult for me. I am good at washing washrooms and fridges and stoves, though. I am so upset I need a couple of minutes to pull myself together even just to be able to talk to you people.

Ms Harrington: Why are you upset?

Ms Kranjac: Well, this law. Why else am I upset? I know you do not want to hear some cry story, but there is no other way I know how to get my point across. Three years ago we purchased this 38-unit building. After attending some government seminars, they told us how to pass the costs through, etc. We bought it as a long-term investment, not to flip it. As a matter of fact, the building was never flipped. In 30 years we were the third owners.

My husband is faced with washing two sets of six flights of stairs, after putting over half a million dollars in this property. Now we are in terrible distress, not because of high interest, not because of the recession, but strictly by this government policy. You expropriated us, you took away financial loss and you made it retroactive.

In this proposed new legislation, you are also classifying slum landlords and really good, decent landlords all in the same boat. This particular building has never been to rent review for capital expenditure, yet it is 31 years old. Our rents as of yesterday were $505.49 for a one-bedroom with balcony, super location, and $556.29 for a two-bedroom with balcony.

It is just beyond my belief how the minister did not distinguish guidelines between newer buildings and buildings that are 30 years old. On buildings that have current market rents of $750, $800 -- I am forgetting $1,200 -- and the buildings that have rents like we have, now with 5.4% we will get between $26 and $28 rent increases.

I wish someone could explain to me how we can replace the roof and put in new windows -- tiles are falling off in the washrooms even though it is a solid building, but it is 30 years old and it needs repairs -- with $26 a month per unit. On top of that, 2% is worked in for capital expenditures. I just cannot understand it at all. I am tongue-tied because I do not know where the logic is. Taxes alone are $15.40 per unit. These guidelines are completely inadequate. We have an affordable product and we will be the first ones put out of business by this government. Why does this government want to make a small landlord like us bankrupt? I do not understand it at all.

Anyhow, this Bill 121, as to maintenance, as I mentioned before, all the tiles are loose in the washrooms and my husband has fixed them up and patched them up, but we have to replace them all, put new drywall and new tiles, which is costing a minimum of $1,500 per unit. What is going to happen if this bill goes through in this form? Tenants are going to say, "My tiles are loose." Where are we going to get $60,000 to put these new washrooms in? Or we will get reductions in rent. What I cannot understand is that if it costs the government $1,800 per unit to subsidize government apartments, why do they think we can survive on under $600 and keep the building in top condition too? Where is the logic?

I do not know how many times I called the Ministry of Housing. I wrote two letters, which is very difficult for me to do, about another problem. This particular building is in Scarborough and we were ordered -- we have a work order -- to enclose the garbage, which is costing between $20,000 and $25,000. That means a sprinkler system and steel roof. No other municipality up till now has that. Where are we going to get the money for this? There is nothing in Bill 121 about work orders that are not the landlord's fault, that are just changes in the municipal policy.

I talked to 10 different people and they said, "Yes, yes, yes," and it is all forgotten in file 13; that is where it goes. I realize there are some poor tenants who cannot even afford $200 a month rent and I am all for helping the poor tenants. But when someone starts complaining when they are paying $550 -- an average tenant and they pay $550, under $600 -- in an ordinary little house, $500 a month and without any mortgage payments, then I do not know what this government is thinking. Is there ever going to be a politician born who can say to tenants, "Look, housing is a very expensive commodity and you can't have it for nothing"? I do not think anybody has the guts to say that to anybody. It is the truth, though.

Surely the government realizes that control -- look what is happening in Russia. Does it work? They are beginning to have property rights again and now you are taking it all away from here. That is exactly what NDP government is doing to us now. Like I said before, the government said it wants lots of consultation and this and that, and it seems to me it all goes in file 13. There is no consultation; nobody listens. They say, "We listen," but really no one does. I beg the committee to make some adjustments in rent increases for small landlords, not necessarily small landlords, but older buildings and depressed rents. And I am sorry I spoke in this tone.

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Mr Tilson: I remember you phoned my office and asked me an interesting question about where a municipality orders you to do something -- the garbage container and if you have them, if you do not have the money they will do it. Out of the blue they will do it and they will add it on to your taxes.

Ms Kranjac: Yes, and it is double cost. They do not care, you know.

Mr Tilson: Of course. The cost will be greater and you will not be able to add that on under this legislation because it is kept, with respect to your basic question. Let's say it went for taxes; it would be kept. Why is this government putting small landlords into bankruptcy? Why is it affecting lifelong savings? I think I am simply going to ask Ms Harrington to answer that question.

Ms Poole: I want to thank you for coming forward today. I also talked to you on the phone the other day and I find the points you are making are coming from the heart and have much more impact than somebody coming in --

Ms Kranjac: I told you I was not a speaker so I was really reluctant to come.

Ms Poole: But you have put across your ideas very well. You raised one point which I think should be emphasized: the plight of the small landlord who has an older building. Right now the government has differentiated between what they call the small landlord and the large landlord, although under that definition you would be a large landlord.

Ms Kranjac: Oh, I am filthy rich, yes.

Ms Poole: You have seven units or more, so you are a large landlord, but it seems that it makes a lot more sense to look at old buildings versus new buildings. A lot of the older buildings tend to be the smaller buildings like yours and they need so much more work. Instead of going by the size of the building, between six and seven units, would it help if they put their capital repairs depending on whether it was an old building or a new building?

Ms Kranjac: Yes, that would definitely help. But not only that, how about people who are renting for $800 and people who are renting like us for $506? How much is 5% out of $504 and how much is 5% out of $800? Another thing is that our building has never been to rent review, so tenants had basically a free ride and a really good deal for the last so many years. If they had 10% or 15% rent increase, especially for Toronto where taxes are so high, the rent would be still dirt cheap. But all I hear is: "We can't have tenants having increases of 10% or 15%. That can't happen." It does not matter if the rent is $1,200 or $500 or $200, as the honourable member said, but that does not make any difference. No one cares. All you see is headlines. This family is getting a 20% rent increase. There was a little building on St Clair where the landlord asked for a 50% rent increase. The rent was $95 but all they looked at was 50% rent increase.

Ms Harrington: I would like to explain to you that the idea of the government being involved in rent control is really what we call consumer protection. We have that in the environmental field, of course, and we license cars, all kinds of areas where the government is involved in making sure that the consumer is protected. The government is involved in this because in the past people have not been protected. If we can get to a place where the consumers, that is, the tenants, have a fair deal and a fair deal for landlords, that is the place we want to get to.

In your particular situation, I understand you had a lot of various costs. You have a building where you have low rent and you bought that just a few years ago. I believe you have put in $50,000 in upgrading and in painting and that has not been passed through in costs, and also you have this problem with enclosing the garbage. We want to keep these rents affordable and make sure your building is viable. I am wondering if you have any suggestions for amendments to the act.

Ms Kranjac: We cannot stay in business with rents being this low. What is affordable in your book I do not know. In my book, I think a two-bedroom apartment in Toronto at $650, $630 or $670, is affordable and it is not out of line. We would be able to survive, not make a huge profit, maybe a tiny bit. Maybe my husband will get paid for some of the sweat he puts into this property. But I do not know what is affordable in your book. It seems to me everything is for the tenant. It does not matter who goes broke or what.

Ms Harrington: I would just like to point out to you that the situation this government is facing now is that the rents are at various levels. We are trying to have some stability so there will not be great rent increases. But as you know, there is the diversity. Some buildings have taken advantage of the pass-throughs in the past and others have not, so we do have the wide range.

Ms Kranjac: But is it fair? We have someone who lives in our building and he sold his condo. One day my husband was mopping the stairs. He was just a new tenant so he thought my husband was the superintendent and he opened his mailbox and he was laughing. My husband said to him, "Jack, how come you're so happy?" He said: "You know, John, I have it made. I sold my condo. I bought a new car. I'm getting $12,000 a year interest. My maintenance on my condo and taxes were over $400." He got his interest cheque; that is why he was so happy, and he said, "I have a big two-bedroom apartment here for $500-something." How do you think my husband felt when he told him that? That is the honest-to-goodness truth.

Then you tell me you have to protect everybody. I am all for poor people. I truly have a big heart and if they need help, they need help. But when someone is just abusing the system and you are a tenant, that is it. You are God. Sorry my English is bad. I am not educated so I am not phrasing this very well. Thank you.

Mr Mahoney: You are doing just fine.

The Chair: Very good, Marg, thank you for your presentation and for coming today.

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47 THORNCLIFFE PARK DRIVE TENANTS' ASSOCIATION

The Chair: The next presenter is 47 Thorncliffe Park Drive Tenants' Association. You have 15 minutes for your presentation and you can withhold some time for questions and answers after. I will let you know when you have about four or five minutes left.

Ms McCleave: Thank you. My name is Janet McCleave and I am the president of the 47 Thorncliffe Park Drive Tenants' Association.

We followed along with a lot of this legislation, which is much needed, so these are some of our comments. Time did not permit a full examination of Bill 121. A more complete analysis with our suggestions for change will follow.

Initial reading of this document does not give me much security that it will provide rent control. Although there is some mention of penalty to landlords who do not comply, I am left with the feeling that there are many holes that some landlords, with the help of lawyers, accountants, seminars and various consultants, will use to increase rents.

Decency, good business ethics and moral values are not something easily legislated. Perhaps this is the difficulty with this document.

Tenants over the last several years have undergone excessive stress as a result of the RRRA 1986. It was the hope of many of these people that this stress be ended. This bill does not do this. Tenants will still have to spend considerable time and effort fighting some landlords who will opt to take advantage of every loophole and ambiguity.

I realize the government is making an attempt to appease the landlords, particularly some who have been caught in the squeeze. Good fair business practices by these landlords would not have put them in this position. Those who bought buildings at a price too high should suffer the loss, not the tenants who live in them.

Much of what is in this proposed legislation will continue to allow landlords to increase rents as a result of neglect, if tenants do not continually monitor the situation and put considerable time and effort, as well as money, into their fight for fair treatment by landlords.

The result is that there is virtually no end to the rent increases. An accused criminal gets more justice than this. Recently criminal trials were tossed out of court because they were not tried in what was considered a sufficiently speedy time. Tenants should not have to suffer these extended periods of not knowing how high the rent will go.

More onus should be placed on landlords to abide by the legislation. There should be stiff penalties for landlords who do not conduct their business in keeping with the legislation. The onus should not be on the tenants to monitor the landlord. We just want to live in the building, not to continually have to monitor the landlord's business practices.

I do not see enough mention of a maximum rent increase that can be charged in any year. With enough effort, a lawyer and an accountant, working together, could plan and get excessive rent increases over a good many years. In fact, some are already laying the groundwork.

I thought the intent of this bill was to control rents. For landlords who conduct their business using good ethics and fair business practices, there is little need for control. However, for landlords who do not, much tougher legislation is required. Fair landlords who look after their business as a long-term investment will be able to work within it. People's homes are not the place to make short-term profits.

With the time I have left I will address some particular points in the legislation.

I do not see any protection for people who are living in illegal apartments.

Part l, page l: Any discussion of money should clearly state whether it is expressed in actual dollars or per cent. Mathematical examples should be given.

All decreases and savings a landlord realizes should be accounted for before any consideration is given to extraordinary increases. The intent is to promote actual protection of resources and ensure efficiency of operation. This would result in minimal extraordinary charges to tenants.

Capital expenditures: Where the work was completed between January 1, 1990, and June 6, 1991, these are covered under the RRRA 1986. Landlords should have applied by now for any increases they might want to be getting.

It is not clear here when these increases should start. This needs to be very clear. Some landlords operate under the assumption that they are entitled to retroactive rent increases if they have given the tenants the 90-day notice prior to the time the retroactive rent increase should start. If this hole is not plugged, tenants could be paying retroactive increases for up to or exceeding a two-year period. Surely this is not the intent of this bill.

On page 2, number 4: The tenants must be made aware of the effect on their rent if they consent to an application for a capital expenditure. The tenant must be informed in writing of the amount the rent would increase and for what time period. This would constitute informed consent. The term "capital expenditure" does not necessarily mean to a tenant that his rent could go up. When I was presented with a new fridge that I did not need, I did not realize that my rent was going up. To me capital expenditure meant simply that the landlord was going to spend some money for fridges and a lot of other delayed maintenance. It must be a requirement that the effect of any capital expenditures be made very clear to tenants. To assume they know the meaning of these terms, which are used differently in many different contexts, is a serious omission.

Number 5: New and additional services. The effect on rent must be explained fully in writing to every tenant affected. "An increase awarded cannot exceed the guideline by more than 3% in any year."

That wording, combined with the many statements made regarding methods of applying for amounts above the guideline, does not give me the comfort that in any year rent could increase by only the guideline plus 3%.

In order to prevent guideline plus 3% increases for many years in a row, it should state that the application by the landlord can be made a limit of, say, six months after the work was completed and the invoice for the work received. This would affix a specific date for completion of the work and thus a limit on the time period over which the landlord could make an application.

There should also be a specific period by which the landlord could expect an application to be considered by the government, say three, months. All of this would reduce uncertainty for tenants and free up some of the money to be spent in other areas of the economy and, I cannot help but add, perhaps in other countries.

I believe the intent of the government is to provide a system of fair rent control for both tenants and landlords. This proposed legislation must be examined with a fine-tooth comb for ambiguities and loopholes. If it is not done prior to passage, it certainly will be done after. Unfortunately, at that time it will not be done in the nature of fair play. I do hope all omissions and ambiguities will be cleared up by the government before passage.

Ms Poole: Thank you for your presentation today. There was one item that was not mentioned in your brief, and I wonder if I could have your comments on it. Would you, as a tenant leader, like to see a right of appeal in the legislation?

Ms McCleave: I believe that under this legislation there is the right of going to the law courts for appeal under a question of law.

Ms Poole: Question of law only, that is right.

Ms McCleave: What I like to see is that it be a short period. This thing of going on for years and years not knowing what your rent is going to be -- I do not even care. Find out what your rent is going to be and know about it. If you do not like it go live on the street. Do anything, but do not have to live under the situation for years that you do not know what your rent is going to be or where you can go.

You have to know what your rent is going to be, and I do not know if putting in an appeal procedure would help that any. Unfortunately, I just think that the business practices of some landlords are unethical and it is very difficult to play ball with somebody who plays by some of the rules. You have to legislate it. I do not know if an appeal procedure would help.

We already had an appeal procedure. It did not help. The legislation has to be very sound in the beginning. An appeal procedure is not the solution to unsound legislation that is not clear in the first place.

Ms Poole: I certainly agree with you in that regard, and that is the job of our committee to try to make it just and fair. At the same time, right now, the way the legislation is drafted, there will be an enormous amount of discretion placed in the hands of bureaucrats and I do not know if I have a great respect many times for what bureaucrats do and the work they provide. But I am also quite leery of putting that amount of discretion in their hands and then having tenants or even landlords not be able to question their decision.

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Ms McCleave: I think maybe another way would be to have a government body that would be like an ombudsman for tenants where tenants could become educated and have questions answered. To have all these different tenants' associations running around trying to appeal things without lawyers, with people who do not have the time or the knowledge to do this work, I think something put in place that would protect the tenants might be a solution.

In the process, they are talking here about tenants giving consent to extraordinary expenses or certain improvements that are made to the building. I think part of the problem is that there is not a complete understanding. If there was a place where tenants could find that out and have sort of an ombudsman to help them or a committee of that sort, I do not really know if an appeal would be needed. I recognize the government is trying very hard to make a fair deal for tenants.

Mr Duignan: If I could expand on that a little bit more, would you be in agreement with establishing an advisory committee that would help out landlords and tenants? I know it was mentioned in the green paper.

Ms McCleave: I think there needs to be some kind of an education process where people could ask questions and get answers from a person who would be impartial or be on the side of the tenants and maybe have someone else who is on the side of the landlords. But there has to be a way tenants can learn what their rights are without each individual tenants' association or person running around. I have better things to do in my life than what I have been doing the last six months. My time and a lot of other people's time could be a lot more productively spent than spinning our wheels trying to do rent review.

If there was a government body or committee or whatever that could provide this expertise and protect the tenants so we would not have to spend so much time, I am sure we could have a little bit more productive economy and it would probably cut down on some of your health care costs too.

Mr Duignan: You would also like to see a fixed time for processing applications, say, no more than six months or three months, whatever the case may be?

Ms McCleave: Yes, because it is very, very stressful living like this. It is just awful, just terrible.

The Chair: One more short question.

Mr Duignan: The particular apartment you are living in is what, about 474 units? It is one of three complexes in that region?

Ms McCleave: There are several more.

Mr Duignan: Have you had a lot of problems regarding maintenance?

Ms McCleave: We have not had problems, except the maintenance was put off for years and the money probably was taken out of the building. I do not have access to the landlord's books, but they have built other buildings in that neighbourhood and there was no money put into repairs. Now the tenants are expected to pay for the repairs in the building, which were perfectly predictable and the landlord should have set money aside for that. He should not have taken the money and put it into other buildings. That is just bad business ethics. It is sort of immoral to do that type of thing to people who are renting in your building for many years. Why should the people pay for the whole building and then pay for it to be repaired all over again? It just is not fair.

Mr Tilson: I gather you have read Bill 121, or perused it?

Ms McCleave: Yes, perused it is more like it.

Mr Tilson: I know what you mean. Having heard perhaps some of the comments that have been made, are you, as a tenant, concerned about the effect of this legislation, that it might diminish the standard of maintenance or repair in your building?

Ms McCleave: No. My thought is that if people are not able to look after their buildings under this type of legislation, then they will have to sell their buildings at a loss to somebody who will be able to do it.

Mr Tilson: We are having landlords come to me at least, and my colleague Mr Turnbull, and saying to us, "We simply can't sell our buildings" because the value had depreciated.

Ms McCleave: If they put the price low enough they will be able to sell them.

Mr Tilson: That is the problem; are they to sell at a loss?

Ms McCleave: That is okay. Why should I have to pay to redo their building?

Mr Tilson: I have no further questions.

The Chair: The time has expired. Thank you for your presentation.

HARRY TAYLOR

The Chair: The next presenter is Harry Taylor. Mr Taylor, you have 15 minutes for your presentation and you can withhold some of that time for questions and answers if you wish.

Mr Taylor: I am not a big-shot landlord. I am just an ordinary working guy. I have worked as a carpenter all my life. I was construction superintendent for the city of Toronto for 30 years. I retired four years ago. Thirteen years ago my wife and I bought a 26-suite building in East York. It was 40 years old.

It was in need of lots of minor repairs at the time, but after going through with the purchase I was not in any position to spend a lot of money on it. Being a carpenter and having two healthy, able sons to help me, we were able to do all the work ourselves. We did not pay anyone to do anything over the first 11 years we had the building. We did everything ourselves, even the electrical work, plastering, plumbing. You name it, we did it. I was capable, I could do it and I did it. So my costs were very low. We were able to keep the building and make all the payments on it.

When I retired, I realized that the building had got to the state where, being 40 years old, it needed extensive refurbishing. The fridges, stoves, all the appliances, windows, kitchens, the whole thing, everything was original, it was all 40 years old. Some people say it should be up to the tenants whether or not you throw out a 40-year-old fridge. The tenant will not agree to do anything if it is going to increase the rent.

I am speaking as an ordinary working guy. Asking a tenant to do something that is going to increase his rent is equivalent to asking people who work at Queen's Park how many of them do not want an increase in wages. You will not need a very big piece of paper to get all their names. Let's face it. People are not stupid. Nobody is going to agree to a rent increase. But the work has to be done.

When a tenant moves out and the fridge and stove are ruined and you want to rent to another tenant, to somebody decent -- you do not want to rent to some clown who is going to give you all kinds of trouble -- you are going to have to replace that fridge and stove. Mine all being 40 years old, I replaced the whole lot. In March 1990, I started $180,000 worth of capital cost improvements and I finished them all in August. All the paperwork was filed with the government in August.

I am not reading from my brief. You have a copy of it and you can verify what I am saying, but this is most of what it is all about.

I did all this work and I was persuaded by the rules that the government had in place to do this work. I was convinced that I should do this work because the money I was going to spend on it was going to get returned either to me or to my family through monthly increments in the way of a rent increase.

As far as fair play is concerned, there was one guy before me who very eloquently explained how fair play works. I have copied what it says in the dictionary and put it in my submission. To pass legislation like this, your government has no idea how fair play works at all. You have absolutely ruined me and my wife after 30 years' service with the city of Toronto.

Marg Ward, who is one of your MPPs, said, "We had to do this to stop offshore investors coming to Toronto, buying buildings and flipping them." How can you class me, a guy who has been in this city for 40 years and has worked for the city for 30 years and had a building for 13 years, with an offshore investor who comes in and flips a building? You have ruined me. You have absolutely ruined me.

I could come up with $150,000 -- I did come up with $150,000, being a retired man with a grown family -- and I borrowed another $30,000 from the bank. Now I have lost my $150,000 and I owe the bank $30,000 at 11%. I am in a real damn mess. I was in good shape, because I was one of those guys you have heard of, a workaholic. I worked and worked and worked, and everybody said how crazy I was. I have only just realized I was crazy. I have done it all for nothing because of you guys coming in and pulling a stunt like this.

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How can you justify ruining somebody like myself? All I did was follow the rules that were laid down by the provincial government. I did not cheat anybody. I did not commit any crime, and you fined me $180,000. I have paid the money up front. Now you are saying, with your new legislation, Bill 121, I can reapply. What you do not realize is, to a guy like me, reapplying is a big deal. I am not making any excuses. I am not a paper man. I am hopeless at paper work. I could replace that set of doors over there, and I am probably the only guy in the room who can do it. So I am not ashamed, but I am not a paper guy.

One guy talked earlier about allowing consultants $25. I had to pay the guy $2,000, and the cheapest guy I could get before him was $3,500. You cannot get these guys cheap, and I cannot do the work myself. My wife cannot do the work. But now, in your new legislation, you are saying I can go through it all again. I can apply again, and when I have applied, I can possibly get a fraction of what I was justified in getting under the old legislation.

I spent all my money, my life savings, under the old legislation. Now you say I can start again and work under the new legislation. Where is the fair play in this?

What you are telling me is that I cannot do the work. What am I going to do about that? I have already done it. Why did you not tell us we could not do it? Nobody told us we could not do it when I was doing it. Not only that, they said, "You've got to have all the work done." It is only if you manage to get 25% of the work done that you can put in your application. I was never told that. When I phoned, I was told I had to do 100% of the work. It had to be substantially complete and all the bills paid. Mine was done, complete, all paid for when I put the application in.

Another mess you have made: You said that if any of the rents came due before you came into power, the October deadline, the whole thing would be passed through. Not being a paper man, as I say, my rents went up in this building in every month of the year. They were all over the place. So to simplify things, and to the tenants' financial advantage, the rents that were due for an increase in January, I could not put those to December; so I put everything to December. I gave everybody a break and put all the rents back to December.

Because I did that, you people have cheated me out of $180,000. I honestly do not think you realize what you have done. That is about it.

Mr Turnbull: All I can say, Mr Taylor, is I think you have said it very eloquently. I commend you for coming down and explaining in very straightforward terms what the crux of this problem is. I have said this over and over again, I am concerned that there are many, many people throughout the province who are going to have their whole pension funds wiped out by this kind of legislation.

Mr Taylor: Exactly.

Mr Turnbull: We have got to find a way of protecting tenants from being disadvantaged, but this is not the way to do it. Thank you very much for your excellent presentation.

Mr Brown: We appreciate your coming, sir. The same questions you have asked we have been asking over the last nine months or so. We as a party are going to pass our time, because we want to hear the government's answers to your questions.

Ms Harrington: I would like you to explain what you meant by a $100,000 loss. Was this accumulated over several years?

Mr Taylor: I spent $180,000, and I had to spend all the money up front before I could make the application for a rent increase. The rules of the day were, if I spent this amount of money, the money would be returned to me and my family in monthly increments in the form of a rent increase. Now I have already spent all the money. I cannot not do it; it is done. The money is gone, and it is all the money I had, plus $30,000 I did not have.

Ms Harrington: I understood you to say at the very end that by putting your rents back to December you had lost a certain amount.

Mr Taylor: Let me explain that to you.

Ms Harrington: Yes, that is what I wanted to ask.

Mr Taylor: The way it works, with this legislation, is that if the increase date was after October 1, then the capital cost improvements that you had done would not be recognized. So mine were not recognized because my increase date was December, although the work was done and finished in August, before that date. But you see, as I say, I am not a paper-type guy. I have got to give the guy in apartment 102 his increase in November. The guy next door is the month after. I had them every month of the year. I could not make them all January, because I could not bring forward the guy whose rent increase was due in December, so I put everybody back.

Ms Harrington: You did that several years ago?

Mr Taylor: When I got the building.

Ms Harrington: Okay. How much did you say you lost by doing that?

Mr Taylor: Oh, I have no idea. I lost some money by it, but I made it easier for myself. In effect I lost $180,000 by it. If I had not done it, it would have gone through. How can you make fairness out of that? If I had not done that to make it easier for the tenants, your government would have recognized my costs and given me back my $180,000. But because I made it easier for the tenants at my expense, you shafted me -- $180,000 down the drain, all the money I have. I have worked all my life in this city; I am no offshore investor buying a building last year and flipping it next year.

Ms Harrington: I know.

Mr Taylor: Thirteen years I have had the building, the only one I have.

Ms Harrington: I understand.

The Chair: Mr Mammoliti, any questions.

Mr Mammoliti: No, thank you.

Ms Poole: How about some answers?

Mr Abel: Just as a brief comment, I would like to thank you for taking time out to come in and share your concerns with us. Most of your concerns, I guess, result from Bill 4, and we are trying to deal with Bill 121. Because of your experiences, could you offer this committee anything that you think would help?

Mr Taylor: Yes. In Bill 121, you should recognize anyone who did the work before you passed this legislation, anybody who did the work and paid for the work before you came into power. It should be worked out under the old rules, not some new rules that you have come up with. I worked under the old rules when the government of the day said, "If you do this, we'll give you the money back."

I did it, and now you say, "We'll not give it to you." What you have done is a kind of sting operation. One party has persuaded me to put my money into the building, then has gone out of power. One party says, "We'll give you the money back," and as soon as I get the money in, another party comes in and says: "Gotcha. You're not getting the money back." Now, that just ain't cricket.

Mr Abel: It certainly was not the intent to say, "We gotcha." We are trying to deal with a very delicate issue. We are trying to find a happy medium between landlords and tenants, and, believe me, it is very difficult. Any suggestions you would like to make, I would suggest you put them in writing and send them to the minister. We would be more than happy to give them some consideration.

Mr Taylor: I wrote several times. I never got an answer.

Mr Tilson: On a point of order, Mr Chair: Mr Abel made the comment that Mr Taylor is not really dealing with Bill 121. He is dealing with Bill 4. That is not quite true, because there is a transitional section.

Mr Abel: I said some of his concerns were focused on Bill 4 and then we got back on to Bill 121.

Mr Tilson: I submit that the impression being left is that his comments deal with Bill 4, when in fact Mr Taylor has asked what this government is going to do. In other words, is the transitional section that is being referred to in Bill 121 going to adequately address the Mr Taylors of this province? Mr Taylor is saying no, so I submit that Mr Abel is not quite correct in his comments, that in fact the witness is right on topic.

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The Chair: It is an interesting point.

Mr Mammoliti: Can I ask Mr Taylor to send us a copy of the letters that he did send to the ministry?

The Chair: You will have to ask Mr Taylor.

Mr Taylor: The minister has got them.

Mr Mammoliti: I am asking you if you can perhaps give us a copy.

Mr Taylor: I have not got them with me, but I can get you a copy, sure. Can I say one more thing?

The Chair: Certainly, Mr Taylor, quickly.

Mr Taylor: Do you realize now, with your Bill 121, somebody in my position, I have got a building that is in perfect shape, because I retired as a construction man four years ago and now I have got it all fixed up. It is 100%. We have got a security system. We have got everything. Everything is just perfect. I can reapply and I can possibly get 6%, 3% in one year and 3% in the other year, but then I cannot do anything, because it is all done. I do not need any new fridges. I do not need stoves. I do not need kitchens. I do not need windows. I have got them all. I have paid for them all myself, so now I cannot go and do it. If I had not done it, I could get the money.

Ms Harrington: You can use the work you have already done.

Mr Taylor: To get 6%, which is nowhere near what I was going to get.

The Chair: Mr Taylor, thank you very much for your presentation.

TOM FURR

The Chair: The next presenter is Tom Furr. Tom, we will be using the same procedure. You have 15 minutes and you can withhold some of your time for questions and answers from the committee if you wish.

Mr Furr: I want to thank you for affording me this time. I am tenant at 2265 Victoria Park. I am on the tenants' association there. I am also one of the organizers of the Scarborough Tenants Alliance and I am primarily here to endorse the paper they delivered to you yesterday.

I have been sitting here for some time for the last two days and I have heard some comments that are very upsetting and I wanted to address those. There are so many things to address that it is difficult.

My first comment on the legislation is a similar comment that I have heard. I think it is trash, and that is the same comment we got from our MPP about our blue paper.

I sit here and I listen to Mr Taylor and I listen to the lady who was before him, I guess it was Marg Kranjac, and I can sympathize with them in their position. We did have concerns that some of the older buildings require a great deal of work and that this would not allow them the funds to pay for that.

One of our suggestions was, rather than giving all landlords an additional 2% a year on top of the inflation component, to put that into a province-wide capital reserve fund so that those smaller landlords or the older buildings that need a lot of work will get that work done. It is senseless to keep tossing all landlords 2% extra each year if they do not need it. A newer building does not necessarily need it. We found that out in 1986, and you are making the same mistake twice.

In 1986 you gave them their inflation component plus 2% plus 2% plus 2% plus 2%. It has been compounding every single year. That 2% is now somewhere about 7%. That 7% on average rents is between $60 and $70 a month. That was not spent in my building. That was not spent in most other buildings in Scarborough. It is tossed away, and yet every single month, even when that bill is scrapped, we are still going to be paying that $70 a month, and any increases on top compound that.

If that had been put into a capital reserve fund in 1986, there would be plenty of money available. Now you are making the same mistake twice. You are giving all landlords 2%, 2%, 2%, regardless of whether they need it or not. If that was put into a capital reserve fund, the smaller landlords with older buildings would have the money to spend.

I live in a 35-year-old building with 69 units. We were inquiring about converting it to a co-op and we were told by the Ministry of Housing that it requires $2 million of work and it probably would not be worth while doing it.

This does not allow my landlord to get $2 million to do the capital expenditures. If there was a province-wide capital reserve fund, all of these landlords with older buildings would have access to the funds to do the repairs. Fine. A newer building will be paying it into the capital reserve fund now, but there will be money 15 years down the road when the newer building needs the money. I think that is the fairest way, so that tenants' rents do not keep going up above inflation.

I know Mr Tilson has thrown out some figures from the CMHC saying that was not the case, but they have. The CMHC figures do not include the 150,000 units that are still in a backlog in the rent review system. When you factor them in, they do go up beyond inflation, and we also have to recognize that the inflation for property management is not the same as the standard inflation rate because their costs are slightly different. It is a little bit less than the inflation rate. So I think that before you start tossing figures out into the committee, you should at least take the trouble to get the right figures and include the 150,000 units that are still in a backlog.

The 800 tenants at Tuxedo Court who have just gone through three rent increases over 20% in the last three months because they were backlogged are not in those CMHC figures. For every landlord you can drag up here crying, "I'm losing money," I can bring you 1,000 tenants who are crying. They are not only losing their pension funds; they cannot put food on their tables and they cannot find a place to live.

When I met with Michael Harris about two weeks ago, his idea to supplement these tenants' incomes is just ludicrous. It is too expensive, and that is a Conservative's answer to the problem.

There is a fair solution, and it is one of the best solutions I can think of and the Scarborough Tenants Alliance can think of, and it is in use today. Any co-op, any condominium corporation, has to have a reserve fund. If the reserve fund was there and the money was only used for necessary capital expenditures, we would have the money to do the repairs. This legislation is just a retooled RRRA and it does not give the tenants any real protection from above-increase costs. It does not protect them in any that we have been asking for for years on end. That is the one idea.

The other thing we are looking at is costs no longer borne. We keep paying these increases for these capital expenditures, and we are paying some of these 10 times over. They never come out of the rent, and these are for expenditures done 10 years ago.

It also does not afford us protection against landlords who commit fraud, and landlords do commit fraud. You had better start admitting it now. I can demonstrate to you that landlords -- as a matter of fact, I have complained to the Ministry of Housing, and it is almost impossible to get anything done. For normal civil proceedings, a person would have eight years to prosecute somebody or to go to court. Under this legislation and the old legislation, it was cut off at one year. That gives you no time for anything.

We are just being shafted by the same legislation again, and the older buildings are not going to be kept up. The repairs are not going to be done. You know, this is the same trash we had before, and we all know it is trash. The Liberal government knows it is trash. They introduced it, and it has caused nothing but headaches since.

The common complaint we get from tenants is, "Who do we trust?" Bob Rae got up in front of us last September and said when he won the election: "We've got to earn their trust. We've got to demonstrate some integrity." Well, this is not what you promised us. The comments I am getting from tenants are general: "Who do we trust? Do we trust these guys over here? Do we trust you people over here?" There is no one to trust. You have all betrayed us and you have left the whole housing market in a shambles.

There are simple things that you could have brought in and you did not. There were studies done on it. The best one was the capital reserve fund. Those tenants who have had problems and had their rents go up should have a chance to go after costs no longer borne, not just operating costs and property taxes, but costs for painting done 10 years ago that have been paid for -- more than paid for -- costs for repairs that were never done, and I can demonstrate several to you. But right now, we have no recourse to go back and say, "This was garbage," because the recourse ends at one year after the increase date.

The whole system is screwed up, and this is not going to work. There is no protection for tenants when a building is flipped. The building I live in was sold in December 1989. The purchaser went bankrupt before the NDP even took power, and he owes us a lot of money. He owes tenants at 1617 Victoria Park a lot of money, he owes tenants at 1827 Victoria Park a lot of money, and we cannot get it. We have not been paid interest in two years. We have not been paid our rental overpayments that he owed us, because he went to rent review, got an increase, and we appealed it and our rent was reduced. That money is lost.

There is no protection whatsoever. You are going to use the same bureaucrats who ignored the RRRA and refused to enforce the RRRA to enforce this trash, and we are going to be just as far behind. We have been telling you time and time and time again that the bureaucrats are not even enforcing the legislation that we have. They are refusing to. If you go to the investigations branch and try to lay a complaint, they make it impossible. They turn you away. You have to go to your MPP screaming and shouting and threatening to go to the press before they will even investigate.

The landlord at 3434 Eglinton Avenue East is charging key money. He is giving people notices for rent that is above guideline, and if you complain about it, "Well, it's not in our mandate, and if you didn't pay it, it's not an illegal rent." You are in a catch-22 situation.

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You have got to revamp the whole system. The easiest way is one increase based on inflation, a capital reserve fund and get rid of the bureaucrats, because they are the worst thing in the system.

In my building, we have had work orders that have been outstanding since February 1990. We had a hearing just recently to suspend our landlord's increase because the repairs have not been done and the city of Scarborough dropped the work order. The repairs are still not done. They say it is substantially completed, and you know they do not want to cost the landlords an increase, but now we have no way to see that the repairs are done.

The whole system is just screwed up, and this is not the answer. It is not the answer to Mr Taylor's problem, it is not the answer to Mrs Kranjac's problem, and it is not the answer to the tenants' problems. You have not addressed any of those problems.

You are talking about hearings. The old hearings were a waste. There were no transcripts of them, so you had no records and you could not go to a judge and appeal them. You could not get somebody charged with perjury because there were no transcripts. Now you are taking even the hearing away, and the notice period for a hearing is so short that no tenant is going to have time to file. Tenants work. We do not work full-time at rent review. That is what we have had to do in the past and we do not want to continue to do.

Everything I read in this is RRRA all over again. I do not want to spend another two years of my life butting my head against the system so that I can get the repairs done. I am tired of tenants coming to me saying, "I can't get these repairs done." A friend of mine had a wall collapse on him in his apartment last year, a wall we had been trying to get fixed for nine months. I am tired of that. Tenants are being hurt by the thousands, either physically or financially, and you have not addressed that in any way, shape or form.

That is all I really have to say. If you have questions, I will be glad to answer them for you.

The Chair: We have time for one short question from each party.

Mr Mahoney: How would you feel about taking certain costs, such as either property taxes or utilities, items that are generated by public policy -- they could be hydro; they could be water costs; they could be municipal taxes -- right out of the formula for determining rents and having them billed, in some fashion, directly to the tenant?

Mr Furr: They are already in the rents now.

Mr Mahoney: I know. I am asking about taking them out.

Mr Furr: The billing would be too impossible, and it is already built into the system, so as the costs go up, the landlord can recoup those costs. I understand the biggest problem is in property taxes, because they do jump in large jumps and cannot be totally recouped in the current system.

But the whole idea of property taxes for apartments -- my unit is taxed almost the same as a house in Scarborough. They are overtaxed as it is now. If they were taxed proportionately to the services that they give, it would not be a problem. I still think they should be in the fixed guideline. As they increase, the guideline reflects that on the three-year sliding average, and it would be less complex than billing tenants individually.

Mr Duignan: Just very quickly, would you like to see a capital reserve established as a province-wide fund or a fund directed at a particular building?

Mr Furr: It has got to be a province-wide fund, because as Mr Taylor mentioned, a 40-year-old building requires more repairs than a 5-year-old building. If they are all kicking into the province-wide fund, the funds are there so the 40-year-old buildings get repaired. As it goes on, 15 years from now, when the newer buildings require repairs, the older buildings that have been rebuilt will still be kicking in.

The province-wide fund is the only way. A capital reserve fund for a 69-unit apartment that requires $2 million of repairs -- you would have to raise the rents to $1,800 to finance that, but if you had a pool, it would even out and the money would be there.

Mr Tilson: I have spoken out against the reserve fund. I am always interested to hear people who are in favour of it, but I would just like you to respond some more. You talked about condominiums. Of course, the reserve funds with condominiums start when they are legally created and they are continually built up and then they are replenished.

In the situation in Ontario, we have buildings that are 20 or more years old, large percentages of them. If you start now with reserve funds and asking landlords to completely set it up, they would be nickel-and-diming. There would simply not be enough money to do that, whether they are large buildings or small buildings. Certainly when you start talking about roofs and garages and boilers and parking lots and concrete restoration, it is simply an impractical issue.

There is the legal and the income tax issue that has been talked about in the past. It is simply going to create too many nightmares. Time does not permit --

Mr Furr: Too many nightmares for you, but --

Mr Tilson: No, not for me, sir, but with respect to our law, the whole issue of deducting things and not deducting things; the whole income tax and legal aspect of it. I agree that the reserve fund has worked with the condominium situation, and if there was a way of implementing it in the same way, it is possible, but it is not possible the way you are putting it forward.

The Chair: Thanks for your presentation.

DAVID HURST

The Chair: The next presenter is David Hurst.

Mr Hurst: Mr Chairman, I have asked Debbie Deller to hand out a letter I received from Bob Rae back on January 11, and also a letter that I sent to the same committee dated February 7. I have asked her to withhold the letter that I am reading from in order that I can have the attention of the committee. It will be distributed after it has been read. I like attentiveness. I spent a long time composing these letters.

"Dear Mr Chairman:

"I have reconstructed a 19-unit apartment building that was originally built in 1876. The building now is virtually brand-new. The property has been declared a historical site and has been designated a `protected property' by the Ontario Heritage Foundation," which is under the Ministry of Culture and Communications. "I have recently invested over $650,000 in the renovation-restoration of the interior, and I attach with this submission a letter dated February 7, 1991, which was presented to this same committee during the public hearings on Bill 4 and was subsequently published in Hansard a few months ago." I believe it was read in the House by Mr Tilson, as I did not have an opportunity to present to the committee that letter. "I also submit to you a letter from the Premier, dated January 11, 1991, which states, `For long-term rent control legislation, options will have to be considered for some mechanisms to recognize legitimate capital expenditure.'

"Virtually nothing has been considered by this NDP government to recognize legitimate capital expenditure and I have been betrayed by the new government -- I have lost control of my property rights. I have been denied the right to earn a reasonable return on my investment in this great land of opportunity and democratic province of Ontario. Yes, I am cynical and bitter.

"A measly 3% per annum increase for two years only on the existing rental. What impact does this have on my $650,000 investment? Virtually nothing, and from a logical standpoint, what relationship is there between the $650,000 capital expenditure and the existing rental income? None whatsoever. You may ask, `Why did you invest so much money on the interior of this building?'

"The answer is very simple -- the last interior renovation was completed in 1929, long before most of us here today were born. What is the answer to my predicament?

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"I believe it is fair and reasonable that a historically designated heritage property, which has undergone total restoration and renovation, should be exempted from rent control for 5 years from the date of completion of the work. Currently the building is totally vacant" -- we are just completing the renovation-restoration -- "and as previously stated, virtually brand-new construction. Due to the fact the building is empty, there are no existing tenants who would be subjected to any rental increases as with new buildings, and the five-year `rent-control free' period would coincide with the new government's position on new construction. Do you not believe that we should be encouraged to preserve our historical heritage properties?

"I should also like to add that although I received provincial grants for the exterior restoration, my total investment in this building is in excess of 100% of the building value. Therefore, I again emphasize the point this is virtually a new building.

"Perhaps I should have taken the advice of my lawyer in the latter part of 1990 in that I cease and terminate all construction, but I had no choice. The building was in poor condition and a number of units were empty and no new tenants would move in because of the condition.

"I realize my case is extreme but I could be typical for a historical property and I strongly urge this committee to convince the government to enact further amendments to the legislation for reasonable and fair treatment of rental on the restoration and reconstruction of historically designated properties.

"This amendment to the legislation could prove to be extremely positive as the owners of properties with `historical significance' and in need of major restoration and repair would be encouraged to seek designation with their respective LACAC group and the Heritage Foundation which, obviously, would preserve our heritage properties such as the Bellevue Terrace" -- my property.

"Thank you for the time allotment on this submission."

I have also carboned our new Minister of Housing, Evelyn Gigantes, Karen Haslam, the new Minister of Culture and Communications, and Bob Rae and Richard Alway, who is the chairman of the Ontario Heritage Foundation.

Mr Turnbull: I noted in the Globe and Mail that the Premier, in reshuffling his cabinet, said he wanted to make sure that he got the co-operation of private business and that it be a partnership between them. Is there anything in this legislation which would induce private investors to want to invest in this province in residential property?

Mr Hurst: Nothing that I can see, but I look at my property as my problem. I have really concentrated my submission on what my problem is. I have not looked at the overall impact of Bill 4 and Bill 121. I am really concentrating on my problem.

Mr Turnbull: You said that your investment was more than 100% of the value.

Mr Hurst: Absolutely.

Mr Turnbull: So I presume you are basing that on the value based upon the rents that are now legally obtainable.

Mr Hurst: Absolutely.

Mr Turnbull: So, in other words, you have just thrown your money out of the window in some respects.

Mr Hurst: I feel that the NDP government has stolen $650,000 out of my pocket, and I could lose my house because that is the only area I could finance to put the money in the building. That is what has happened to me.

Mr Turnbull: Earlier today, we had a witness who suggested that if any private individual owns a property and cannot make money on it, it is just fine if he goes bankrupt or has to sell it as a loss. How do you respond to that?

Mr Hurst: I really think that is the underlying intent of the NDP, quite frankly. I do not think they give a damn about me or any individual. I think they would like to get a lot of these properties back with a dollar down.

Mr Turnbull: Of course Bob Rae actually said prior to the election, but we were not paying enough attention to it, that he really felt they should control rents and drive them down, and if the private sector squawked, that was fine.

Mr Hurst: I think Mr Rae should have come out and stated that if he got in, there should be no more rents paid in Ontario. I think he would have got more of a majority. If all tenants in Ontario were told they did not have to pay any rents, do you think they all would have voted for him? Of course they would have. He would have got more of a majority.

Mr Turnbull: Practically, how would you proceed from here? We have this bill before us and realistically, I have to tell you, while we on this side of the House may shout that this is unjust, the bill is going to go through.

Mr Hurst: Oh, absolutely. They have a majority. What can you do about it?

Mr Turnbull: What would you suggest we concentrate on by way of items that could help?

Mr Hurst: I certainly would like to see them concentrate on preserving historical properties.

Mr Mahoney: Mr Hurst, can you give me some indication of what kind of homework you did when you bought the building and you looked at $650,000 in renovation requirements? The building would have to stay empty for a certain period of time. I assume you did a cash-flow projection. You looked at what market rent you would be able to obtain for each unit at the end of the day when the work was done. Did you do a projection of what your maximum rents could be, what percentage increase you would get each year, and therefore how many years it would take you to amortize the $650,000 debt -- I assume it is a debt --

Mr Hurst: It is a debt.

Mr Mahoney: -- that you are carrying and how long it was going to take you? You had a business plan. Can you tell us a bit about all that?

Mr Hurst: When I received my letter from Bob Rae I thought that major restorations and renovations were going to be covered in the legislation, but the 3% per annum does not cover even a fee for a rent review consultant going in and getting a rental increase. My existing rental is $180,000 and if you multiply that by 3%, that is a $5,400 increase. That might cover a rent review consultant's fee for going to apply for the increase.

To answer your question, I bought this building in 1977 or 1978. I have tried my best to keep the building in a good state of repair virtually ever since I have owned it and it has been extremely difficult. Along with the provincial grant from the Ontario Heritage Foundation, we did restore the outside and it has been an ongoing restoration project for about eight years since it was historically designated.

Mr Mahoney: How much was the grant?

Mr Hurst: There was a $55,000 Ontario Heritage Foundation grant and $20,000 was another grant from one of the provincial -- I just cannot recall what it was.

Mr Mahoney: That is part of the $650,000?

Mr Hurst: Oh, no. That is money long gone. The $650,000 is all my dough.

Mr Mahoney: All your dough.

Mr Hurst: It is all my money.

Mr Mahoney: What I am trying to get a handle on here, somebody might say: "Well, the place is empty and you're going to rent it out. You can set your rents at a higher rate and therefore recover your money." I am trying to anticipate what the reaction might be. Obviously you can only set your rates at what the market will bear.

Mr Hurst: Right.

Mr Mahoney: So you must have looked at what your market rent would be and how many years it would take you, under reasonable circumstances, to --

Mr Hurst: Absolutely. I think I know your question. My property management people told me that I probably could get between $1,000 and $1,100 per month rent for these restored apartments in this elegant, old, glamorous building in downtown Belleville. There seems to be quite a demand for people getting back to 11.5-foot ceilings and we have basically restored the building, but at this point in time all I am entitled to charge is what was charged previously.

Mr Mahoney: Oh, I see.

Ms Poole: They had been previously rented.

Mr Mahoney: Because they were previously rented and they have just been moved out for renovations.

Mr Hurst: Yes, absolutely. That is what has happened.

Mr Mahoney: Any other buildings you know like this?

Mr Hurst: Not that I am familiar with.

Ms Harrington: Yours is certainly not an ordinary case.

Mr Hurst: No, it is an extreme case.

Ms Harrington: Yes, and I do agree with you that this legislation is not meant to fit this particular situation, although it is obviously a place to live and that is why this legislation at this point covers it.

I would like to see -- because you have a designation as an historical place -- if, working with the other ministry, there is any other way to deal with this. I do feel this is an extreme situation, because this legislation was not meant to deal with complete renovations changing the whole nature of the building. Our legislation is trying to keep the buildings the same. You are just entirely the opposite and that is why it is hitting you so hard. Following up from what Mr Mahoney was asking, what were the rents the last time you rented?

Mr Hurst: The rents were in the range of $625 to $650, and because of the rental increase from last year to this year, I am entitled to charge in the range of $780 to $790 per month, and that is what we are going to get when we go to market with the building.

Ms Harrington: Has it sat idle with no one in it for longer than you had hoped?

Mr Hurst: No, we are just completing. We had an open house about three weeks ago at which I invited Mr David Cooke and Mr Bob Rae, but they could not make it. We had our open house presentation of the building to the local community. We had the mayor there with a ribbon-cutting ceremony and we have two furnished model suites. It is quite glamorous; it is quite nice. We have 11 applications in right now for occupants. It is only 19 suites, so we should have it totally rented out by September 1.

The Chair: Mr Hurst, thank you for your presentation.

Mr Hurst: Thank you for your time.

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STEVE MUNRO

The Chair: The last presenter of the day is Steve Munro.

Mr Munro: In contrast probably to several of the previous speakers, I want to speak about some of the nuts and bolts of the rent control bill, rather than railing against it or just gushing on against it or for it.

I appear as a tenant of the Rosedale East apartments which, despite their name, are actually located near Broadview and Danforth avenues in the city of Toronto. My experience with the rent review system stems from my role as president of the tenants' association in those buildings during the period following Cadillac Fairview's sale of our complex to the present landlord. I have since retired from the association's board and speak today on my own behalf.

In general, I support Bill 121, which is a long-overdue simplification and tightening of the rent review process. This will protect tenants both by limiting the grounds for rent increases above the guideline and by reducing the complexity of the rules governing applications.

Although the implementation of this act is some months away, I urge the government to carry the same clarity of purpose into the regulations and administrative procedures so that the philosophy behind the bill is preserved. Many of our problems with rent review arose from poorly drafted regulations or from conflicts between the meaning of the act, the regulations and the administrative guidelines.

There are certain aspects of the bill which I particularly applaud. These are the denial of financial loss as a justification for rent increase; subsection 13(3), which prevents the awarding of an increase on grounds for which a landlord did not apply, and section 19, which prevents a landlord from collecting an increase above the guideline until it is actually approved.

I wish to address in detail three issues where I feel amendments may be in order. The first appears to be a small inconsistency, while the others have substantial implications.

The first is the calendar effect on rent increases. When a landlord takes the guideline increase, the percentage which applies to each tenant's rent is the guideline value as of the renewal date. However, if a landlord applies for an increase above the guideline, subsections 20(2) and 22(4) provide that the guideline applicable to all units will be that in effect as of the earliest applied-for increase.

This means, for example, that an application covering the period from July 1992 to June 1993 will use the July 1992 guideline as its basis for renewals up to June 1993, even though the guideline may have changed by that time. Therefore, the guideline used for the increase will be different depending on whether or not a landlord applies for an increase and whether or not a specific unit's renewal date falls in the same calendar year as the earliest date in the application. In this example, a lease renewing in March 1993 would use the 1992 guideline if the landlord applied, but the 1993 guideline otherwise.

Was this the intent of the legislation? The existing rent review process uses the guideline in effect at each unit's renewal date rather than the one in effect at the earliest renewal for the complex.

The major thing I want to talk about is the charges for separate services. Subsection 45(1) provides that separate charges may be added or dropped by agreement of the landlord and tenant. By contrast, section 18 requires that a tenant give consent to a new or additional service. Charging for additional services which may not actually be required or wanted, and in particular for parking, has been a common abuse under the old act.

I believe subsection 45(1) should be amended to give a tenant the right to discontinue an additional service without requiring the landlord's consent. Similarly, section 31 should be amended to prohibit landlords from requiring tenants to contract for separate services as a condition of tenancy. Such changes will eliminate the possibility of artificial rent inflation by the creation of separate charges to which new tenants would be made subject even though existing tenants are protected by section 18.

A related issue is the need to define what constitutes a "separate service," and whether a tenant can request that it be severed from the basic services provided with a unit. For example, if a building includes parking with the base rent rather than as a separate charge, should a tenant have the right to discontinue an unneeded parking space, and how would a value be placed on this service? This issue is particularly applicable to new buildings because there may be a temptation for landlords to bundle as many services as possible into the basic unit rent to preclude the tenants' opportunity to avoid those services which they do not require.

There are two fundamentally different types of services for which separate charges may be paid. One, such as parking, is a service of the complex as a whole whose cost can reasonably be expected to rise in proportion to the building's overall costs. Such charges can reasonably be inflated each year by the guideline plus awarded increases, if any.

The other type of cost is a direct pass-through to the tenant of a service purchased in bulk by the landlord, such as cable television. Why should the charge for such a service be tied to the building's overall operating and capital costs rather than to the landlord's actual cost? This can be argued equally cogently from the landlord's point of view, because a separate service such as cable is not among the costs listed in section 14 as being eligible for "extraordinary" increases.

In dealing with "extraordinary" changes in cost, sections 14 and 24 permit applications by landlords or tenants for increases or decreases in rents when the costs of municipal taxes, hydro, water or heating rise or fall by more than one and a half times the corresponding operating cost index. Further, section 105 allows a municipality to make application for rent reduction following a reassessment of property.

While the intent of section 24, which is the section dealing with reductions, is clear, the wording is not. The section speaks of a "decrease" in a cost such as hydro, when the real intent of the section may be to deal with cases where a cost has not risen as much as the provincially determined rate for that category. In other words, the cost may go down in inflated dollars while it still goes up in real dollars. The wording of this section should be clarified so that it does not require an absolute decline in cost to trigger a rent reduction.

It would be difficult, if not impossible, for a tenant to learn how much a landlord paid for some utilities, as they are not all a matter of public record. The information should be available to tenants by their landlords on request.

Section 105 provides for an application by a municipality following reassessment, but there is no guarantee that such an application would actually be made. As long as the percentage change in the cost index for property tax is positive, any reduction in property tax should automatically qualify for an application by a tenant under section 24. In the unlikely event that the average tax rates fall, this may not be the case as the reduction due to a reassessment may be within the limits imposed by the 50% rule. Therefore, a tenant could be denied the benefit of a tax reduction if the municipality failed to apply under section 105.

While widespread tax cuts may seem farfetched, the situation could arise if separate indices were used for different parts of the province and several municipalities in the same region implemented reassessment plans in the same year. In any event, notification of the registrar by municipalities where tax reductions occur should be mandatory rather than optional so that the onus of ensuring that rent reductions occur does not fall on the tenants.

An alternative scheme for dealing with property taxes may be to treat them as separate charges which rise or fall, as a pass-through cost such as cable television. This approach has the advantage of making the impact of municipal government policies directly obvious to tenants and avoiding the need for applications under sections 14 or 24 simply to deal with property tax changes. A fair mechanism would be needed for apportioning a complex's taxes to each unit based on both its floor space and its share of common facility taxes.

In conclusion, I believe that, overall, Bill 121 will work well in protecting tenants, giving landlords a reasonable income and simplifying the rent review process. I hope the matters I have raised here will be considered and incorporated in the final version of the legislation.

Mr Duignan: Thank you for coming here and making an excellent presentation and giving a couple of good, clear examples of how to tidy up the legislation a little bit. I quite like your idea of section 24 in relation to the property taxes. Hopefully, we could take a look at some amendments that way. I think it is really a good, clear and excellent example. Again, thank you for your presentation.

Mr Abel: I too would like to thank you for your well-thought-out presentation. It is just unfortunate that Mr Turnbull and Mr Mahoney were not here to benefit from your presentation. I certainly hope they will take time to read the written document. Certainly, you gave us all food for thought and I would like to thank you for that.

Mr Tilson: The issue with respect to separate charges, looking specifically at subsection 44(2): Should there be factors or guidelines in the legislation to assist a rent officer to declare what the maximum should or should not be? I guess I am looking for your comments as to how he or she is going to do that.

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Mr Munro: This has always been a problem, even in the old legislation, unless it was a clearly identified cost where the landlord bought newspapers or whatever and sold them to the tenants at a pass-through cost. We went through the same problem with our complex on parking charges, because the parking charges had got all out of whack over the years and then the new landlord started just basically picking figures out of the air. We had to go back to the oldest rent roll we could find, which was about eight years old, to get a historically valid parking charge.

Mr Tilson: Have you got any suggestions as examples -- and I am sure the government will study this; hopefully it will -- of what types of guidelines one should have?

Mr Munro: You have two different situations. One is in an existing building where, first of all, there will be an existing level of charges for whatever the existing separate service may be. It depends on how complicated you want to make the legislation, and of course, the whole intent is to try to simplify the process.

Mr Tilson: Surely we do not want to give the rent officer an unfettered right, which is what this legislation is doing.

Mr Munro: Yes, I will agree with you there, but the flip side of that is, say for example you were to attempt to tie the cost of a parking space to the cost of providing a parking space. That gets rather messy, figuring out what charges are parking-specific and what are the general costs of superintendents and that sort of thing. If you had to rebuild the parking garage because the concrete was falling, that is a parking charge, yet it could be argued that merely having a parking garage is a benefit to all tenants, even those who do not necessarily have a parking space. So I do not have a clear answer. It is definitely a question worth pursuing.

Mr Brown: I thought it was an intriguing presentation. One of the things that interested me in particular was your comments on municipal taxes. I see no reason that could not be applied to some other charges, such as hydro or water and a number of other charges. What would you think of that concept? I think it has several advantages; it probably has several disadvantages also. What it does do, though, is it makes the consumer very aware of the real charge, and that is what we are talking about, the real cost. It would not be subject to anything other than real cost.

Mr Munro: In the case of hydro, many buildings -- certainly the one I live in -- have individual unit metering. So the only hydro that appears as part of the rent is the common cost for lighting the building, running the elevators, the ventilation, that sort of thing, and that really has to just be spread through everybody, because you cannot tie it on a unit basis. Water there really is no way of individually metering. I suppose the distinction I am making is that it is very hard to tie it to how much one unit uses.

Mr Brown: But the landlord does that.

Mr Munro: The landlord does that through the rent. I suppose it is doable. Do you then replace the existing lease, which basically says, "Here's how much you pay for rent and here's how much you pay for parking," and maybe a couple of other things, with one that has about 10 different subcategories for each of the separately charged-for services?

Mr Brown: Would tenants find that worse or better? I mean the exact costs, the real costs. One of the complaints we have heard a lot is that we cannot get access to the actual numbers. These would be the actual numbers and they would be right there in front of everybody every month or at least once a year.

Mr Munro: I think probably if you were going to want to do something like that, the way to do it would be to set a cutoff in terms of percentage of total cost. In other words, you do not want pass-through costs of trivial amounts just because someone has come along and said, "We want to add this, we want to add that," because you are going to have a lease that is a mile long and it is going to be very onerous for the landlords to figure out how much they should charge each tenant.

The Chair: Time has expired. Thank you. That concludes our hearings for today, unless there are any motions.

Mr Tilson: I do not have a motion; it is a question with respect to the staff. Ms Poole and I have both indicated that we would have further questions of staff. That presentation really was not completed. I guess it is a question to the clerk.

The Chair: I have spoken to the clerk about it, and at the first available opportunity we are going to work through a lunch hour, I believe, or work through a dinner hour, but it will not be in this room.

Mr Tilson: And it will not be on a plane, I hope.

The Chair: It will not be on a plane and it will not be in this room.

Ms Poole: Might I suggest for your consideration -- it does not have to be decided now -- on Tuesday we are starting at 2 o'clock because of the fact that --

The Chair: I cannot come in any earlier than 2 o'clock on Tuesday.

Mr Brown: Just something for the committee to think about is that I also would like to have Ontario Hydro and people from its energy conservation and efficiency branch appear before us at some point. I do not know when. I am just flinging that out as a suggestion that members might find useful at this point, because I would like to understand what their program is in regard to residential buildings, what they can do, how this bill would affect them, just directly from what Ontario Hydro is doing today.

The Chair: Is there a consensus for that?

Mr Abel: Mr Brown did bring that up in the subcommittee meeting and I intended to speak to the committee members on Tuesday morning about that issue.

The Chair: The committee stands adjourned until Tuesday at 2 pm.

The committee adjourned at 1747.