RENT CONTROL ACT, 1991 / LOI DE 1991 SUR LE CONTRÔLE DES LOYERS

CONTENTS

Monday 20 January 1992

Rent Control Act 1991, Bill 121 / Loi de 1991 sur le contrôle des loyers, projet de loi 121

STANDING COMMITTEE ON GENERAL GOVERNMENT

Chair / Président(e): Brown, Michael A. (Algoma-Manitoulin L)

Acting Chair / Président(e) suppléant(e): Morin, Gilles E. (Carleton East/-Est L)

Vice-Chair / Vice-Président(e): McClelland, Carman (Brampton North/-Nord L)

Abel, Donald (Wentworth North/-Nord ND)

Bisson, Gilles (Cochrane South/-Sud ND)

Harrington, Margaret H. (Niagara Falls ND)

Mammoliti, George (Yorkview ND)

Marchese, Rosario (Fort York ND)

Marland, Margaret (Mississauga South/-Sud PC)

O'Neill, Yvonne (Ottawa-Rideau L)

Poole, Dianne (Eglinton L)

Turnbull, David (York Mills PC)

Winninger, David (London South/-Sud NDP)

Substitution(s) / Membre(s) remplaçant(s):

Jackson, Cameron (Burlington South/-Sud PC) for Mr Turnbull

Jamison, Norm (Norfolk ND) for Mr Marchese

Morin, Gilles E. (Carleton East/-Est L) for Mr McClelland

O'Neil, Hugh (Quinte L) for Mrs Y. O'Neill

Owens, Stephen (Scarborough Centre/-Centre ND) for Mr Bisson

White, Drummond (Durham Centre/-Centre ND) for Mr Winninger

Clerk / Greffier: Deller, Deborah

Staff / Personnel: Baldwin, Elizabeth, Legislative Counsel

The committee met at 1408 in committee room 1.

RENT CONTROL ACT, 1991 / LOI DE 1991 SUR LE CONTRÔLE DES LOYERS

Resuming consideration of Bill 121, An Act to revise the Law related to Residential Rent Regulation / Projet de loi 121, Loi révisant les lois relatives à la réglementation des loyers d'habitation.

The Chair: The standing committee on general government will come to order. The business of the committee is to conduct clause-by-clause review of Bill 121. At the completion of our efforts on Thursday we were about to have a Conservative motion placed on subsection 13(3). I am told by the clerk that the Conservatives are not going to place that motion because it is somewhat similar to the Liberal motion and that we are dealing then directly with subsection 13(3). Questions, comments or further amendments to subsection 13(3)? If not, shall subsection 13(3) carry? Carried.

Section 13, as amended, agreed to.

The Chair: If members will remember, there was a motion put by Mrs Marland that was not deemed to be in the correct spot in the legislation. Legal counsel has now renumbered that as section 18.1. I understand it is presently being typed so it can be circulated to members. With the committee's consent, we will return to that section following the completion of section 19. Is that agreeable?

Ms Poole: Mr Chair, just on a point of clarification: Are we referring to the PC motion that was originally numbered section 17.1?

Ms Baldwin: I am talking about the motion that was probably numbered something like 18(1)(b). It was dealing with equalization.

Ms Poole: The Liberal caucus also had an amendment on equalization that I think legislative counsel had advised us to put in a different section. I wonder if we could consider moving it to the same spot as well.

The Chair: Perhaps we should wait for legal counsel to give us some advice on that.

While legal counsel is having a look at that, Mr Owens raised with the Chair a point on Thursday and I will speak to that. On Thursday 16 January 1992, the member for Scarborough Centre raised a point of order with respect to statements made by the member for Mississauga South. As I stated at the time, I did not hear the remarks in question. However, I have now had an opportunity to review Hansard and wish to make the following comments. There are no specific rules that set out what is or is not parliamentary language. Much depends on the tone and context of what is said and whether such remarks are directed at an individual member or said in a general way.

In addition, consideration must be given to the degree of provocation of such remarks and whether or not they are the cause of disorder. The responsibility of the Chair is to consider each remark in light of these criteria. In this instance I find that the remarks made by the member for Mississauga South were not directed at any one member of this committee. It does seem to me, however, that such remarks are in fact provocative and it may be argued that they could be the cause of disorder. I want to remind the member for Mississauga South, and in fact all members of the committee, that the characteristics of good parliamentary language include moderation and mutual respect.

In the future I would ask all honourable members of this committee to conduct themselves according to the wise counsel found in Beauchesne's Parliamentary Rules and Forms, 6th edition, which says "Language used in this House should be temperate and worthy of the place in which it is spoken."

We are still trying to determine where we are. Perhaps in the interim we could go to section 19 while we are trying to decide exactly where these amendments should go.

Section 19:

Ms Harrington: Section 19 refers to the rent which a landlord may charge and collect when there is a pending application for an above-guideline increase as set out in section 19. Until such time as the rent control order is issued, the landlord may charge and collect an amount up to the lesser of the amount specified in the notice of rent increase to the tenant and the amount that would be charged if the maximum rent, excluding all capital components, were increased by the guideline.

You will note a technical amendment has been made to section 19 to clarify the portion of the maximum rent for which guideline increases apply. This amendment relates to the costs-no-longer-borne provision.

Mrs Marland: We are in favour of this section.

The Chair: Shall section 19 carry? Carried.

Ms Harrington: Mr Chair, I was just looking at section 19. We have a government amendment to change the "may" to "shall."

The Chair: I do not have a copy of that, or if I do, it is new. Are members aware of an amendment to section 19? Perhaps if we can have unanimous consent, we can revert to doing 19 and having the government place this amendment.

Ms Harrington moves that section 19 of the bill, as reprinted to show the amendments proposed by the minister, be amended by striking out "the landlord may charge and collect a rent up to" in the fifth and sixth lines and substituting "the landlord shall not charge or collect a rent that exceeds."

Ms Harrington: In effect, this is changing the word "may" to "shall."

The Chair: Questions or comments on the government amendment to section 19?

Ms Poole: I believe the government has moved to put in this section 19 to clarify a problem that cropped up under the Residential Rent Regulation Act. The problem we encountered was that a landlord would give tenants a copy of an application stating that he was asking for a rent increase of, say, 8%. The tenants would then not know whether they were legally bound to pay this 8% before the landlord's application had been heard or whether they only had to pay the guideline amount. Many of them would phone MPPs' offices and ask what they had to pay.

Our advice to them was always: "You are legally bound to pay only the guideline amount. If you wish to pay the other amount to the landlord, you may do so, but you are not obligated under law to do so." We always also advised tenants that they should put the remaining balance into a savings account so that if the landlord's application was successful, they would have the money available. But it led a great deal of confusion, because tenants really did not know if they only had to pay the guideline or if they had to pay the whole amount the landlord was asking for.

What this amendment and the other amendment put forward by the government really do is clarify that it would be the guideline amount, unless the landlord is asking for less than the guideline amount, if I am not mistaken.

Ms Harrington: That is correct, yes.

Ms Poole: The Liberal caucus will be supporting this particular amendment, because I think it will make it very clear what tenants are obliged to pay and what landlords are able to collect until such time as the application has been dealt with.

Mr Jackson: The provisions in this bill still exist that arrears -- I am going to relate this back to this clause -- that the funds not collected after there has been an order -- in other words, the tenant only pays the guideline and then there is the gap, then they leave a year later, so they do not retroactively pay. They skip out; they are gone. They are liable for that, but the landlord never goes out and gets it. What happens to that money? That is technical. Is the landlord then able to write that off as an expense, as an operating loss? I want to make a point here, because this is the third time this has come up in each of the three acts.

Ms Harrington: I will ask my staff to comment on that particular case.

Ms Parrish: I just want to clarify one thing you said. I suspect you did not mean it. In this case, you said that after the landlord got the order, the individual did not pay. If the landlord has got an order for an above-guideline increase, they can get the money right away. This is only where they have applied; there has been no order. I just wanted to clarify that, because I suspect that is what you meant.

Mr Jackson: That is what I meant. You are right.

Ms Parrish: It would be like any other bad debt. The tenant did not pay for whatever reason. The tenant might also not have paid simply -- there might have been all kinds of orders, and the tenant did not pay.

Mr Jackson: No. I understand functionally what happens.

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Ms Parrish: Yes, it is a bad debt, and it is treated as a bad debt.

Mr Jackson: Therefore, it is a loss of revenue, and therefore it is grounds for a subsequent increase showing the operating losses.

Ms Parrish: No, because operating losses are constrained to certain grounds for operating losses.

Mr Jackson: So that is still constrained to that extent.

Ms Parrish: They may be able to deduct it against their income tax. That is a different issue.

Mr Jackson: Not on a limited company.

Ms Parrish: In terms of what they can apply for in rent increases, there are only four categories of above-guideline increases related to operating, and that is essentially taxes and the three utilities.

Mr Jackson: An unincorporated building, for example, where the sole source of income is six units and you have a retired woman upstairs and it is her building, she would write that off as loss of income, but a corporation would have to treat it differently.

Ms Parrish: The income tax rules in relation to rental income are quite complex. The only real advantage to being a person as opposed to a corporation is that there is always the possibility that the income tax people will allow you to deduct your losses on the building against your earned income. They will only do that within certain parameters and under certain circumstances. That is the one area of advantage for a private person. In your scenario, this individual's sole source of income is a rental building.

Mr Jackson: Can I ask a final question? It is the difference between "may" and "shall." Under the "may" provision, it was possible for a landlord to say, "I'm going to be applying for nine, but if you accept seven we'll waive the fees or we'll waive any charges up to a certain point." When you move to "shall," you virtually eliminate any opportunity for the tenant and the landlord to make any kind of an arrangement which is mutually agreed to. Is that your legal interpretation? I am not talking about the threshold. The difference between "may" and "shall" is it shall be collected, but not greater than a sum. Under "may," they may collect it, but not greater than a sum.

Ms Parrish: You are correct about the effect of the act, but it is actually not this section that does it. The act says very clearly that landlords and tenants cannot agree to overcome the statute. The statute says you must apply for a rent increase and you must justify it. You are right about the effect of the act. It is actually not this section that does it; it is another section. Landlords and tenants cannot just simply agree to increase rents above the guideline. They must go through a process of applying and justifying it and, for example, demonstrating that the tenant has actually agreed and they were not coerced or whatever.

Mr Jackson: The fact that a landlord might give a tenant grace on that amount would be eliminated by this section, because they shall collect it.

Ms Parrish: No. The landlords can always agree not to collect the money if they do not want to. It simply says there is another section in the act which says they cannot agree to overcome the statute.

The Chair: Further questions or comments on the government amendment to section 19? Shall Ms Harrington's amendment to section 19 carry?

Motion agreed to.

Section 19, as amended, agreed to.

The Chair: I might remind members that although the Chair tries to be as helpful as possible, we do have a large number of amendments to this act from all three parties and occasionally, because of that, we get a little bit confused here. We look for all the help we can. If your party has an amendment, we appreciate being told so that an inadvertent mistake is not made.

Section 20:

Ms Harrington: The government does have an amendment to this section as well. Would you like me to place that before I make my remarks about subsection 20(1)?

The Chair: Yes. So we can be clear, is this an amendment to what is printed?

Ms Harrington: Yes. I move that clause 20(1)(c) of the bill, as reprinted to show the amendments proposed by the minister, be struck out and the following substituted.

Mrs Marland: Margaret, my copy of the government motion says 20(1), not subclause (c). Is the one you are reading the new package we got last week?

Ms Harrington: Yes.

Mrs Marland: It is not the one that is in the binding?

The Chair: Let's take a moment to make sure we are all talking about the same thing.

Mrs Marland: It is not this one, is it?

The Chair: This is it.

Interjections.

The Chair: Ms Poole, the long one is the one that is printed, I believe, in the bill. There is a shorter government motion that relates to clause 20(1)(c).

Ms Harrington: The Liberals have an amendment to 20(1)(b).

Ms Poole: On a point of clarification, Mr Chair: We have the government motion 20(1), which has been reprinted in this act, then we have a Liberal amendment 20(1)(b.1), then we have a government motion, clause 20(1)(c), then a Conservative one under that same clause. Are we dealing with 20(1)(c) before 20(1)?

The Chair: I did not note the Liberal amendment. We should deal with the Liberal amendment first because it relates to clause (b) rather than clause (c).

Ms Harrington: Maybe you would like me to explain the original section.

The Chair: Okay, we are going to have an explanation of the original section.

Ms Harrington: Subsection 20(1) specifies the findings that a rent officer shall make before making an order on an application for an above-guideline increase. Prescribed rules and prescribed periods for making these determinations will be set out in the regulations. The findings are with respect to the guideline amount for each rental unit, the amount of the increase, if any, for each of the grounds that the landlord bases an application on, the amount of the decrease, if any, for extraordinary operating costs, inadequate maintenance and reduced services if these matters are considered by the rent officer, any capital expenditure carry-forward amounts, the maximum rent for each rental unit and the date the maximum rent takes effect, the amount of the capital component for each capital expenditure and the date the component will be reduced.

This is a government amendment to reflect a policy change that the part of the capital expenditure allowance that exceeds the guideline increase will be set out as a capital component and will be later removed from the maximum rent. As well, there are some technical and drafting amendments made to clarify the intention of this section.

Mrs Marland: Could you just repeat the very last sentence?

Ms Harrington: The last sentence says, "As well, there are some technical and drafting amendments made to clarify the intention of this section." You may want to know the one before that, which says, "This is a government amendment to reflect a policy change that the part of the capital expenditure allowance that exceeds the guideline increase will be set out as a capital component and will be later removed from the maximum rent," which is the costs-no-longer-borne consideration.

The Chair: If I might make a suggestion, I think we should deal with 20(1)(a) and go through (b), (c), in order because of the way the amendments are. I will ask at this point if there are questions and comments on clause 20(1)(a).

Mrs Marland: This is the most complicated procedure. I think we all agree on that. When you have a bill with 140 sections and over 220 amendments it is no wonder we are all having such difficulty. To be sure that I know that I am voting on clause 20(1)(a), does it read, "to determine what guideline is to be applied to the rental unit"?

The Chair: That is correct, Mrs Marland.

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Ms Poole: Although my reason for amendment does not exactly match what the parliamentary assistant was reading, I think the text is basically the same, and that deals with the fact that part of the capital expenditure allowance which exceeds the guideline increase will be set out as a capital component and will later be removed from the maximum rent. That particular section, it has been lately brought to my attention, may cause us a lot of grave problems later on, particularly increasing the amount of bureaucracy, the amount of tenant confusion and the amount of complexity when filling out the forms.

I did not realize this myself until I had a submission last week from the Eastern Ontario Landlord Organization, and they may well have sent it to all other members. I was not sure, so I asked the clerk to distribute it. I am bringing up this issue of the capital component here because it relates to all of subsection 20(1), which is referring to the capital component and the fact that it will be separated out on the form. At such time that the capital component is paid off with the costs no longer borne, it is removed from the maximum rent.

If you look at the submission by the Eastern Ontario Landlord Organization, they have given us two appendices. Appendix A, and I believe everybody has this now, points out how this section would be dealt with if the capital component was not separated out. It is fairly simple as you can see. But then on page 2 they go into what happened under this section. What they are saying is that for a very modest amount of increase per month we are creating a huge bureaucracy and a great deal of complexity because every single capital component will have to be set out and the guideline amount will not be given to this capital component.

We are only talking about a fairly minimal amount. We are not talking about paying off the furnace, for instance. We are not talking about that amount. We are talking about that proportion that was allowed for the capital component, that was allowed for the furnace -- that the increase not be added to the guideline amount. I know this is probably making no sense to you because it is not making a whole lot of sense to me, but it made a lot of sense when I read it from the Eastern Ontario Landlord Organization. I think what they are concerned about is the complexity this is going to create, all to save tenants maybe 90 cents a month on their rent by not having the guideline and the capital component separated out.

One thing we certainly do not want is to create more complexity and more confusion on the forms. Perhaps we could ask the parliamentary assistant or her assistant, whoever would like to give us some advice in this regard, whether the fact that the capital component is going to be separated out is going to create a complexity in the forms in that tenants will not really understand what is happening with this particular issue?

Ms Harrington: Thank you for that question. Certainly the landlords seem to have made it quite clear here. As you know, we went through a lot last summer dealing with the issue of costs no longer borne and the complexity that would be involved. With regard to your question about the actual forms, Colleen, could you comment?

Ms Parrish: You can design forms which communicate more clearly what the story is, and as you know, we tried to do some form improvement over the last year. Some of them have been successful and some have not, but we have made some significant improvements.

It is true that in those cases where the landlord has made a capital application, and not all of them have, the tenant is going to get essentially a message that says: "Your base rent last year was $600. That's going to go up 6%." So far, that is pretty straightforward. Then, "You pay $20 for parking," which is another fairly straightforward message, and, "You have to pay $6 extra a month for capital repair which was justified by your landlord."

I cannot do the mathematics quickly enough, but let's say the tenant is now in the situation where the rent is $630 a month. The tenant is going to get a message that says: "Your rent is $630 a month. It will go up another 5%" -- let's say that is the guideline in 1994 -- "and it's $25 for parking, and it's that same $10 that you paid before." Essentially the tenants get told one thing that they would not have been told before; there is one additional piece of information which they did not get before.

The way the act is drafted and the way the forms will be drafted is there will only be one piece of capital-component information. Say the landlord got an extra $6 in 1993, and in 1994 he gets another $4. All he has to do is say, "Plus $10." He does not have to say, "Plus $6, plus $4, plus $2.80." You just add it all up. It is like the parking charge. Landlords have been able to communicate the parking charge quite clearly. They say it is $600 for the base rent, $20 for parking, and then they get another thing: $10. Within that $10 may be the $6 from 1993 and the $4 from 1994, but they only give one number in order to avoid that complexity.

Ms Poole: That has helped clarify it considerably. I have another question. For instance, if you had a new furnace put in, and you also had balcony restoration, and they had different amortization periods -- say the furnace was 15 years and the balcony restoration was 20 years or whatever -- in that case would you have to separate out the different capital components on the form, or is it always boiled down by the ministry to one number?

That was the concern I had. If you have six or eight different items and they all have different amortization periods, and you are going through all of these capital components on the list and saying to tenants, "This is your base rent, this is your parking, and here's the list of all the capital components," it seems to me that they would get extremely confused and wonder what was happening and would not understand exactly what this was all about.

Ms Harrington: They would see the capital amount they are paying. What they would also, I hope, realize is that the percentage increase each year is not based not on the capital, as Colleen has clarified, I think, quite well.

Ms Poole: But it would only be one number?

Ms Harrington: For the capital? Yes.

Ms Poole: Okay. That was one of the concerns I had.

Ms Harrington: It is added on separately, as is the parking. Then the percentage increase each year would be only on the base rent.

Ms Poole: Just one last comment on that particular one. The letter from the Eastern Ontario Landlord Organization expressed concern. They say: "There is to be a capital component for each capital item. Therefore each rent will be shown together with an amount for each item and the date that that capital component is to be removed from the rent." Is that accurate? If you are going to show for each item the date it would be removed from the rent, it would seem to me you would have to itemize each capital component separately, and that is when it might get extremely convoluted.

Ms Harrington: Do we have each date and each item?

Ms Poole: You have a copy of this, don't you?

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Ms Parrish: I do, but I have not had a chance to read it. This issue is actually dealt with in clause 20(1)(g). You may notice clause 20(1)(g) talks about this total capital component for the maximum rent. What would happen is, on the form it would say -- let's take the example of the new furnace and the balcony which are occurring in different amortization periods. We will say it is $4 for the furnace and $6 for the balcony so that for years you simply get $700, plus 5%, plus your parking charges if there is a separate charge for parking, plus $10.

Time passes and the furnace is paid off, so you want to take off $4. Later on in the act you will see that the registrar is directed to send a notice to the tenants and to the landlords that simply says: "This is a reminder that your amortization period of 15 years has expired. Subtract $4." The next year the landlord would simply show $6. For years the capital component would say $10 and at the end of the amortization period it would say $6 because you had taken out $4. But the landlords do not have to give that number to the tenants; they simply give the total.

Ms Poole: And the date these are to be removed will not appear on the notices or the order. Is that correct?

Ms Parrish: It will occur on the order. It definitely occurs on the order because the order is the basis for removing the rent, but the notice to the tenant is a different issue. The rent officer must tell you the capital component for each unit when they issue an order: "Unit 1 furnace: this amount" -- they tell you the total. "You have a previously approved balcony; add $4 and $6 for $10, and the amortization date at which this expires is 1 January, 2010." So in the order that material exists, they will simply give the wrapped-up number and the registrar will run a bring-forward system to take it out and tell the landlords and tenants to remove $4.

Ms Poole: The notice of rent increase would have just one number.

Ms Parrish: That is correct.

Ms Poole: And the order then would be quite specific and would itemize all the capital components for each unit and the date of each individual one.

Ms Parrish: Yes.

Ms Poole: So the order would tend to be more complex?

Ms Parrish: Yes, the order will have more complex material in it. The notice is designed to tell the tenants the bottom line from their viewpoint. Given the long amortization periods, it was felt that it would be more sensible to have this BF system run by the registrar who has to then give notice to the landlords and tenants to take out $4.

The Chair: Further questions or comments on clause 20(1)(a)? Shall clause 20(1)(a) carry?. Carried. Shall clause 20(1)(b) carry? The Liberal amendment if I am correct, Ms Poole, comes after 20(1)(b). Right?

Ms Poole: Actually, Mr Chairman, the Liberal motion 20(1)(b.1) was contingent on our being able to create a separate account for the capital reserve fund. Since the government has denied tenants the right to have capital reserve funds for new buildings and our motion thereby failed, we will withdraw 20(1)(b.1).

The Chair: We will deal then with clause 20(1)(b). Questions, comments or amendments? Shall clause 20(1)(b) carry? Carried.

Ms Harrington moves that clause 20(1)(c) of the bill, as reprinted to show the amendments proposed by the minister, be struck out and the following substituted:

"(c) for each matter the rent officer considers under subsection 13(7), to determine whether a decrease of the increase justified under clause (b) is justified or a reduction of the maximum rent is justified and in what amount."

Ms Harrington: I would like to explain that briefly. This is a technical amendment to reflect the change in subsection 13(7) that on an application for an above-guideline increase for capital, a rent officer must first consider whether there are cost decreases due to inadequate maintenance, discontinued services or extraordinary operating costs.

The Chair: Questions, comments or amendments to government motion, clause 20(1)(c)? Mrs Marland.

Mrs Marland: I hope I am not going to be the person who is going to have to interpret, when this bill is proclaimed, the wording of clause 20(1)(c) the way it is being presented in this motion. Is there not a simpler way to put this?

Do you know what is going to happen with this bill? We are going to make a lot of lawyers in this province very wealthy, because nobody is going to be able to interpret it. It is a serious comment when you know that we have 150,000 landlords in this province and apparently, according to information I have been given, about 11,000 of 150,000 landlords own buildings of more than seven units. So we are looking at 139,000 little landlords in this province, people who have invested in buildings up to seven units, the little two-storey walk-up with six units in it perhaps. We are bringing in this great, big sledgehammer piece of legislation with a clause that reads, "for each matter the rent officer considers under subsection 13(7), to determine whether a decrease of the increase justified under clause (b) is justified or a reduction of the maximum rent is justified and in what amount." Who in heaven's name is going to be able to interpret this stuff? Seriously.

It is appalling that any government at any level passes legislation with sections that are totally unreadable, which I think this section is. There are other sections that read as badly as that too. Is it really fair that some little landlord somewhere is going to have somebody come to him and say, "Under clause 20(1)(c) I can do this and you can't do that?" He is going to have to pay a very big fee to get somebody to tell him whether he can or cannot under a section that is worded like this, and woe betide the poor tenant who is trying to interpret it as well.

Is there no simpler way to put this? Are we now writing legislation only for lawyers and those people who can interpret legalese? I am very serious about this. I do not think it is fair to write legislation that can only be interpreted by people who understand legalese.

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Ms Harrington: That is certainly a good point. I am sure this government or any government would want to make legislation as simple and readable as possible. I am sure, if you look back in the history of the legislation that has been passed here or anywhere, you will know, as our legislative counsel would tell us, that many of these things have to be written in a certain manner that, as you say, is legalese.

I am not sure if Colleen would like to comment on how this will actually affect the landlord --

Mrs Marland: -- or the tenant.

Ms Harrington: I stand to be corrected, but this section is laying out the procedure, the order in which the rent officer will look at things when making an order. It is a sort of summary. That is why it seems very complex, because it is going through everything that the rent officer will have to consider. This is one step of the process.

Mrs Marland: And you know why that makes it even more interesting? It is because in spite of the fact, as you know, that I have been asking now for three months what the job description is for a rent officer and what his or her qualifications have to be for the job, we still do not know what kind of qualifications the rent officer has to have to be eligible for that position.

With this clause I am sure rent officers will have to be lawyers, especially with that answer from the parliamentary assistant. She said this lays out for rent officers how they are to make a determination. I would say, "Good luck." We are going to expect these rent officers to be some kind of wizards.

Ms Harrington: I do not think that is a true comment.

Mrs Marland: No, of course you do not.

Ms Harrington: But I would ask Colleen if she would like to clarify how the landlords will deal with this particular decrease situation.

Mrs Marland: Then we can send them out the Hansard. That will be helpful.

Mr Jackson: On a point of clarification, Mr Chair: I thought the question was whether the rent review officer is in a position to interpret that, not the landlord. It implies there is going to be a decrease. I thought that was Mrs Marland's point.

Ms Harrington: I understood Mrs Marland to be asking about how landlords would be able to read this and the interaction with lawyers in such cases. I am the one who actually mentioned rent officers, unfortunately.

Mr Jackson: That is the area I want to get into when it comes to my rotation.

The Chair: Thank you. Mrs Marland has the floor.

Mrs Marland: Ms Parrish was going to answer.

Ms Parrish: Speaking entirely in my capacity as a policy person and not of course as a lawyer, this subsection 20(1) essentially goes through a process of saying: "First of all, what is the guideline? Is it the 1992 guideline? Okay, then it is plus 6." Then, "What have you asked for, landlord?" "We have asked for more money for a new roof, for the high heating bill as a result of the weather for the last week." "Under clause 20(1)(c), the tenants in response have said you should actually get less."

In clauses 20(1)(a) and (b) essentially the landlord says, "I want this guideline increased, plus I want more, and these are my reasons." Clause 20(1)(c) says the tenants are responding by saying: "Yes, but the landlord has withdrawn this service. They used to give us parking, they do not any more or there is inadequate maintenance, or there has been an actual decrease in taxes, for example, which should be offset against the amount that the landlord has asked for."

The reason this section has been redrafted from what is in the printed version is, as you may recall, that before Christmas we amended subsection 13(7) in response to a concern I believe the Liberal Party brought forward that subsection 13(7) was very oddly drafted. It had all these references to sections 24 and 26, and nobody really could figure out what it was all about. So essentially what happened was subsection 13(7) was redrafted and now we have to redraft clause 20(1)(c) so that it refers to the same thing.

Clauses 20(1)(a) and 20(1)(b) simply say this is what the landlords want to do, and this is how much they want to increase the rent. Paragraph 20(1)(c) allows tenants to say why landlords should not get as much as they asked for, and essentially does the offset. What the section is trying to do is say, "Let's bring all of those transactions together, let's add on what the landlord is justified in getting, let's subtract what the tenants are right about saying, and then we'll get a number at the end." That will avoid having to have 17 different cases going on at once. Everything will come to the same table. "We'll add all this, we'll subtract all this."

Mrs Marland: Why do we not use simple words? Instead of saying, "to determine whether a decrease of the increase justified under clause (b)," why do we not just say, "to determine whether the increase is justified under clause (b), with all the other pertinent considerations that come under other sections of the bill"? I guess it is just too simple to say, "to determine whether the increase is justified." "To determine whether a decrease of the increase" is the worst example of gobbledegook. You are determining what the increase will be and you are considering all the elements that are available to both sides of the argument under this legislation. So why do we not just determine what the increase is? We are using two words.

Ms Harrington: Maybe I could ask legislative counsel if she feels that is clear in legal terms. Could I ask?

Mrs Marland: Probably, yes.

Ms Baldwin: In legal terms, I think clause 20(1)(c) is clear. I would never argue with a member who says that something is difficult to understand.

In response to what Mrs Marland has said, I would say there are a couple of issues. You mentioned the issue of legalese. When we try to draft things simply, there are a number of issues we have to face. One of them is to try to avoid words that people would not understand and that are, generally speaking, known as legalese. There is certainly an attempt to do that in this legislation. I think most of the words used in that provision are reasonably clear for readers who are not lawyers to understand.

We sometimes get into difficulty trying to put something in as plain language as one might desire when there is a conflict between the need to state things that are technically difficult and the desire for simplicity. This particular provision is drafted in such a way, for various reasons that I need not go into right now, to make it clear that when you are looking at the possibility of reduction, you are either reducing the increase or you are reducing the maximum rent.

It is a question of judgement as to whether or not it is necessary to go into that much detail. There is no question that detail makes things harder to read. Lack of detail has the risk that things will be interpreted wrongly. It is a judgement call. I do not think it would be appropriate for me to make that judgement. I think that is a judgement it is more appropriate for the ministry or the committee to make.

Mrs Marland: I think I have made my point. I do not know how you decrease something that has not even been increased yet. I am just going to let it go. I respect the comments of the legislative counsel and I recognize that the wording has been made as simple as it can be, but in this particular sentence --

Ms Harrington: It is awkward.

Mrs Marland: It is terribly awkward: "a decrease of the increase justified." You just do not give that percentage of increase if it does not qualify, so you are decreasing something that has not happened essentially, the way it is written. Anyway, onward and upward.

The Chair: Thank you, Mrs Marland. Your colleague Mr Jackson has some comments or questions.

Mr Jackson: Questions. Is it our understanding that this is in the process of reaching a final order, or is this the process by which the landlord makes application for an increase above the guideline? What stage are we at? I do not have my act in front of me. Just tell me which one it is.

Ms Harrington: It is my understanding that this is the order in which the rent officer determines what the final order will be. Is that correct?

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Ms Parrish: Yes.

Ms Harrington: The landlord has already made his application. Now the rent officer is making an order.

Mr Jackson: All right. If that is the case, what are the regulations that speak to this section? I have experience with this section, having done a couple of appeals on behalf of tenants, and I have been appalled at the effort of the reviewing officers in terms of pursuing the documentation. They basically say, "If I have a bill here and it shows that these are the bills, then what am I to do?" Whereas the tenants say, "Yes, but we phoned the company and it can't produce original records of these." There are a whole bunch of complications here. Cases depend on the degree to which the hearing officer who makes a ruling is prepared to look into the evidence that is before him.

In my case, I was successful in getting about a 12% rollback simply because we did that work. But I was appalled at the guidelines from the government that said, "If the landlord said those were his costs, those were his costs." What are the regulations and the guidance? I am more concerned about how this is interpreted by the ministry staff, as to how far they are to go in hearing both sides of the argument with the facts presented. They have no right to subpoena, except under appeal, and then it is not really a subpoena.

I am nervous about approving, and I understand why it has to be in there. But if it is only there to pacify tenants because it is now laid out that they should be doing it, but in fact they do not do it, then what have we achieved? That is more a clause to guide the staff, clearly, as to how they approach it. I would like to know what the guidelines are behind that legal requirement in the legislation. That is my question, because my experience is that it has been badly handled and the basis for a lot of appeals.

Ms Harrington: Certainly in the past that has been the problem with the legislation we have had in the last five years or more. It was not clear. The reason we are having new legislation is to make it a system that we believe will work. I think you were asking about the regulations. Maybe you could comment, Colleen.

Ms Parrish: My answer is going to be somewhat complex. I apologize for that. Later on in the act, there are quite a few provisions designed to deal with problems which have occurred in the past, where incomplete applications are made, for example. There are later amendments that would say that if you have not made a complete application, it is not proceeded with, you have to withdraw your application and bring forward a completed application.

The main problem under the Residential Rent Regulation Act is that the initial decision of the administrator is not made under the Statutory Powers Procedure Act, only the appeal. That is changed under this bill. So rent officers, if they are conducting a hearing, and anybody can have a hearing merely by asking, have the ability to subpoena, to request certain kinds of evidence, the parties have the right to cross-examine and so on. That was one of the main reasons the government was of the view that it should bring forward the ability to have an appeal at the first level, because often these issues as to credibility or proof of evidence could not be dealt with until the appeal level.

It was very costly, because you would go through this whole administrative review and then you would have another appeal later on, because the hands of the staff were really tied in administrative review. They could not look at issues of credibility or whatever. That is changed in this act. There are quite a few provisions later on that we will be dealing with that require more rigorous standards and tests and a greater capacity to test evidence and so on in the matter that you did an appeal.

Ms Poole: On a point of clarification, Mr Chair, if Mr Jackson does not mind: I certainly understand the concerns he has been expressing, and have shared them for a number of years. The government has just recently in fact, as of January 14, moved two amendments to the legislation which I think are very helpful: section 52 and section 56. It is probably not in your binder yet, but there would be a package available somewhere where it requires that the application be completed and gives rules for what happens if the application is not complete. It also makes some supporting changes in other sections.

I think this would be very helpful. It would also answer many of the concerns you have, because previously what quite often happened is that administrative review or appeals would be drawn out for inexcusable periods of time because proper documentation was not filed and would be adjourned and put off for months and months and months. I think at least the amendment to section 52 will answer some of the concerns you have just outlined.

Ms Harrington: Thank you very much, Ms Poole, for pointing out that we do hope this legislation is going to work and work well with your help.

Ms Poole: I do not think I said I hoped it works, but some parts of it are better than others.

Ms Harrington: We hope to get to section 52 and 56.

Mr Jackson: There is no question that the original rent review legislation wanted to bring landlord and tenant together with an adjudicator under the Statutory Powers Procedure Act at the earliest opportunity. Under the Liberals we walked away from that under the guise of wanting to avoid confrontation. A lot of de-educating was going on with rent review officers in that process.

But the process certainly comes back closer to the spirit that was in the original rent review documents put forward by our party that said that you avoid much of the acrimony if you bring the parties together early in the process, no question. I did not support the Liberal rent control legislation. I was the only one who did vote against it publicly. But I did for a series of reasons including that one. I have been to appeals under both systems and I am pleased to see at least that is in there, awkwardly worded, but it is still in there.

Ms Poole: I share Mrs Marland's concerns about the complexity of some of the wording in here. But having been married to a lawyer for over 20 years, I also am very aware of the other side of it. I guess the catch-22 situation is if you are not extremely precise, which sometimes can be translated as "convoluted," in the wording, you risk creating loopholes that people will use to their advantage.

Has the ministry considered a sort of a primer that would go with this that would be fairly comprehensive, that for each section would explain what it says and why it says it and what is meant by it? I suppose there might be legal ramifications, because the ministry might not want to put itself on the record clearly as to how it interprets certain sections, but maybe if you put "Without prejudice" at the top it could not be used against you in court.

I think that would be extremely helpful, particularly to tenants and to small landlords who all have the same difficulty in interpreting this. It would certainly be very helpful to MPPs' offices, where we have staff who are constantly being phoned to interpret various sections of various acts. If we could have something like that, I think it would go a long way to dispelling the impression out there that this legislation is extremely complex and extremely difficult to understand. Unless that kind of grass-roots assistance is available, I think you are going to get a lot of people who are saying: "Hey, 130 clauses. The RRRA had 131. The wording all seems to be the same. I thought they were going to make it better." You are going to have a lot of people who are going to be extremely disappointed with the complexity of the legislation unless we give them some very basic, simple assistance.

Ms Harrington: It certainly sounds like a good idea. I will ask Colleen to comment on whether or not we can do it. If not, maybe we can get some other group at an arm's-length distance to do that.

Ms Poole: This is the politician speaking. We come down to the reality of the ministry saying: "Put our own opinions on the line? Are you kidding?"

Ms Parrish: We are looking at a number of things for implementation. One of the things we are looking at is a guide for people. I am just expressing my own opinion. I will bring this back to the ranch and see what other folks think about it. I think what is really helpful to people is a guide. You have an order and you are wondering what the heck it says. You have little examples and you say, "This tells you this, that and the other thing," a series of examples rather than just essentially an annotation of the statute. We are working on a guide to an application by a landlord or tenant, a guide to a rebate application, for example, or a guide to your forms and what they mean. We would like to do some work and we are doing some work.

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We are also discussing whether we should have a special outreach perhaps to MPPs' offices so there is a designated person to accept questions for MPPs -- often people phone their MPP's office and say, "What is this?" -- to try to do a better job, to answer questions that come up from the public through the people they often identify as helpers, which are the members of the Legislature. We are looking at a number of things like that.

We had not really thought of doing an annotation of the statute, because I think it would be used mostly by lawyers, who do not need help. What we want to get at is people who need our help, like small landlords or tenants.

Ms Poole: In response to that, I know it would be very helpful to have a guide that basically asks tenants and small landlords, "What the heck is happening here?" and answers that question. Certainly those types of guides were available under the Liberal government and they were helpful.

I am talking about the scenario where many tenant associations do not hire a lawyer because they cannot afford to hire one, or a small landlord who cannot afford to hire a lawyer. While the "What the heck is happening?" guide can be a little bit helpful to them, they really need help in interpreting some of the sections. I have seen tenant associations with the legislation saying, "What does this mean?" If they are going without legal counsel, they really do not have too many places to turn to. Landlords can go to the landlords' self-help centre and tenants can go to the Metro Tenants Legal Services, but the amount of help they are able to provide is fairly limited because their resources are limited. That is why I thought an annotation of just saying in laypersons' language what each of the sections means might be quite helpful to many people.

I am not sure I agree that every organization or landlord that goes before rent review has a lawyer. I have known many instances where they have not and I have known some instances where they have. But in trying to deal with it on their own, they need something more substantial than just a "What the heck is going on?" type of primer. They need some fairly specific help.

It probably would not be a bad idea to help out your rent review officers as well. They might not think it a bad thing to have the ministry giving them something in writing that says in laypeople's terms exactly what every section is. It may help rent review officers to explain it to landlords and tenants when they come before them.

Ms Harrington: We will certainly take that back directly.

Ms Poole: Then it gets lost in the morass of the Ministry of Housing, never to be heard from again.

Ms Harrington: No, it will be in my office.

Ms Poole: A great relief was expressed by the member for Eglinton.

The Chair: Mrs Marland, did you have some further comments?

Mrs Marland: I just wanted to be sure to place on the record not only the concerns I have about the wording but also that I am totally opposed to this section.

The Chair: I should note at this time that your party has an amendment which says that clause 20(1)(c) should be struck out. I will allow you to signify that by voting against it.

Shall the government amendment to clause 20(1)(c) carry?

Motion agreed to.

The Chair: Now we are moving to clause 20(1)(d). I believe there is a Liberal amendment to this section. I would suggest, since we are dealing with these individually, the part that says clause (e) should be struck out is not necessary.

Ms Poole: The reason the Liberal caucus has moved these amendments is because they refer to an amendment we have later on to subsection 21(5). I do not know whether you would like to stand down these particular sections till after we have dealt with subsection 21(5) or how you would like to deal with this.

Ms Harrington: We would agree to stand that down.

The Chair: Until subsection 21(5) is dealt with? Do we have agreement we will stand down clauses 20(1)(d) and 20(1)(e)? Moving on then to clause 20(1)(f), questions or comments?

Ms Poole: If I am not mistaken, and I am trying to find my copy of the original act here, clause 20(1)(f) is as it was in the original legislation, is it not?

Ms Harrington: Yes, it is.

The Chair: Further questions or comments? Shall clause 20(1)(f) carry? Carried. Questions or comments on clause 20(1)(g)?

Mrs Marland: Rather than subject everybody to a recorded vote, I will again just place on the record that our caucus is totally opposed to all the clauses under section 20, those being from clause 20(1)(a) right through to 20(1)(g).

Ms Poole: Since clause 20(1)(g) was not in the original legislation and it is now an amendment in the revised copy as printed, is the main reason clause 20(1)(g) was put into the revised copy as printed the fact that the government has accepted the costs no longer borne?

Ms Harrington: Yes, exactly.

Ms Poole: Does this separate out the capital components so that they can be reduced from the tenant's rent at such time as the amortization period is over?

Ms Harrington: Yes, and in this part of the legislation we are then instructing a rent officer to take that into account as well.

The Chair: Further questions or comments? Shall clause 20(1)(g) carry? Carried. We will move on to subsection 20(2).

Ms Harrington: The amount of the guideline to be applied when a rent officer makes findings with respect to an application for an above-guideline increase is set out in subsections 20(2), 20(3) and 20(4). Subsection 20(2) specifies that the guideline applied is the guideline which is in effect as of the first intended rent increase in the application. This is the same as found in the previous rent review system.

Ms Poole: If I could just ask for a moment's indulgence, I do not have subsection 20(2) in my binder.

The Chair: I believe it is printed, is it not, Ms Harrington?

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Ms Poole: It is as printed. Thank you.

The Chair: Actually, I think it is part of the original bill.

Mrs Marland: It is the original bill.

The Chair: Further questions or comments on subsection 20(2)? Shall subsection 20(2) carry? Carried. We have a government amendment to subsections (3) and (4).

Ms Harrington moves that subsections 20(3) and (4) of the bill, as reprinted to show the amendments proposed by the minister, be struck out and the following substituted:

"(3) The part of the guideline allocated to capital expenditure shall not be included in determining the maximum rents for any of the rental units in the residential complex if,

"(a) a capital expenditure is claimed and allowed for the residential complex or a rental unit in it and that capital expenditure is claimed under section 15 or 16; or

"(b) an amount to be carried forward is allowed for the residential complex or a rental unit in it and that amount relates to a capital expenditure originally claimed under section 15 or 16.

"(4) The part of the guideline allocated to capital expenditures shall not be included in determining the maximum rent for a rental unit in the residential complex if subsection (3) does not apply and if,

"(a) a capital expenditure is claimed and allowed for the rental unit and that capital expenditure is claimed under section 17; or

"(b) an amount to be carried forward is allowed for the rental unit and that amount relates to a capital expenditure originally claimed under section 17."

Ms Harrington: I would like to explain that amendment, or try to.

The Chair: Of course. Ms Harrington has an opportunity to explain it.

Mrs Marland: Mr Chairman, can I just ask what you are reading from? Are you reading from the printed page 23?

The Chair: No.

Ms Harrington: I am substituting subsections (3) and (4).

The Chair: I believe the clerk will help you out, Mrs Marland. An explanation, Ms Harrington?

Mrs Marland: We have government amendments to the bill which are printed in the bill and we have three sets of further amendments sometimes to the same sections. In order to be able to follow whoever is reading these amendments, it might be helpful to know -- I did not want to interrupt the parliamentary assistant once she started reading, but since I did not know what she was reading from I had to wait until she was finished. If you could tell us that you are reading from one of the most recent handouts, this one being as of today's date, correct? Was this one handed out today?

The Chair: I appreciate your concern, Mrs Marland, and this is a difficult process to go through; I think we will all agree with that. If members could indicate as soon as possible to the Chair that they are not exactly certain what we are dealing with, we will stop and start again so that everybody is singing from the same hymn-book, so to speak.

Ms Poole: Does it have to be a "him" book? Can it not be a "her" book or a "person" book?

The Chair: Careful, Ms Poole.

Ms Harrington: I hope to clarify this. These amendments clarify that the 2% in the guideline allocated for capital expenditures is not included in the calculation of maximum rent for all units in the complex if there is an application and order for an above-guideline increase for capital. This provision also applies if there is an amount carried forward for capital expenditures from a previous order.

In years when capital expenditure allowances are allocated, the 2% in the guideline allocated for capital must be justified for all units in the complex before an above-guideline increase is allowed for any of the units. The above-guideline amount can be apportioned to the specific rental units affected by capital expenditures.

Mrs Marland: This is what we were talking about last Thursday.

Ms Harrington: I do not think I remember back that far.

Mrs Marland: Was it not what we were talking about last Thursday?

The Chair: Please allow the parliamentary assistant to complete her comments, and then Ms Poole has the floor.

Ms Harrington: I want to try and sum it up in the shortest phrases possible, and this section is explaining that the 2% within the guideline has to be justified before an order can be issued for above-guideline capital increases.

Mrs Marland: Do you understand that, George?

Mr Mammoliti: I understand every bit of it, Margaret.

Mr Owens: Do not tease the bears, Margaret.

Ms Poole: George understands it all, but I am not quite as clear-headed. It must be my cold. I need some help. I would like some clarification. The first line says: "These amendments clarify that the 2% in the guideline allocated for capital expenditures is not included in the calculation of maximum rent for all units in the complex if there is an application and order for an above-guideline increase for capital." That is relatively self-explanatory even though it is long and convoluted.

Basically, that says if the landlord applies for capital expenditure and applies for above-guideline increase, then the 2% in the guideline is not used as part of the calculation of the maximum rent. How is that dealt with in the case where the landlord gets the 2% in the guideline automatically and does not apply for capital? Is the 2% included in the maximum rent in that particular case?

Ms Harrington: You would automatically get the guideline, which includes 2% for capital.

Ms Poole: If a landlord does extra capital repairs and applies for an above-guideline increase, then the landlord cannot include the 2% as maximum rent. But if a landlord does nothing and makes no capital repairs whatsoever and automatically gets the 2% in the guideline, then the landlord is allowed to have that 2% added on to his maximum rent.

Ms Harrington: Part of the guideline in this year would be the 6%, and automatically 2% of that is for capital expenditures. He does not have to tell the rent office what he has spent that 2% on.

Ms Poole: What I am trying to come to grips with is the fact that you have two different situations and I am already very concerned that because of the way this legislation is set up landlords will not do capital repairs. They are saying, "Yes, I can claim 3% but you are going to deduct the 2%." You may not use these words or this terminology, but that is exactly how landlords explain it. They say, "I do 3% in repairs and you are deducting 2%, so I am really only getting 1% more than if I did nothing." If landlords do absolutely nothing, then they get the guideline amount which includes 2% for capital.

Ms Harrington: Yes.

Ms Poole: However, if landlords want to go for an above-guideline increase and get an additional 3%, they must first justify that 2%. So for landlords who have done 3% worth of repairs in a year, in their way of thinking, the landlord who has done nothing automatically gets 2%, but those who have spent 3% only get 1%. That is how they look at it.

Ms Harrington: I think you understand.

Ms Poole: I do, but I also understand that is what it means in real terms to people. This is saying that for landlords who do capital repairs, the 2% is not included in the maximum rent. That means the next year when they get the guideline amount on it, they will not get it on that 2% included in the guideline. Yet landlords who do absolutely nothing and do not spend a penny on repairs in their building get the 2% included. They automatically get that 2% in the guidelines plus the next year when they get their maximum rent set, the guideline is on the 2% section.

Mr Owens: So what is your point?

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Ms Harrington: I think we all have to realize that landlords are business people who are in there to provide a good service to their tenants, that certainly the buildings have to be kept up. They realize now that they will not be able to have increases if there are work orders outstanding on those buildings. There has to be maintenance on these buildings and they obviously have to have money put into them every year. I think landlords will catch on very quickly that that is the way the system operates.

Ms Poole: With due respect, I think you will find this is one more section that when landlords understand what it means they will say: "Why should I do anything? I'm just not going to do anything till this government's gone and I get a government that is going to let me operate my building and make a reasonable profit." They are not going to go out and buy Manhattan with what they make but --

Mr Abel: They are going to have a long wait.

Mr Mammoliti: They do not care about the tenants, do they?

Ms Harrington: Without a political comment, maybe I could ask my staff person to explain how this will work in a technical way?

Ms Poole: Colleen, if you want to make a political comment, go right ahead, we do not mind.

Ms Harrington: We have made enough of those.

Ms Parrish: I rarely am very decisive. I know I do not want to make a political comment. The way this applies is that the landlord can get 3% above guideline. When they get 3% above guideline, they justify 5% worth of capital. They do not get 1% more than they would otherwise get, they get 3% more. But the principle of the bill is essentially, if you do not apply for more than the guideline, you simply get the guideline amount. It is a simple system for both landlords and tenants. If you want to get more than the guideline amount, you have to justify and give more information. If you want to get this 3% above guideline and it is for capital, you have to demonstrate that you spent the 2% you had already been given plus an additional 3%. You must justify a total of 5%. That is what the act says.

There has been some confusion about whether or not it said that. Later on we have some amendments we brought forward as a result of representations by landlord groups that make that very clear. But the way the act works is that you can justify up to 5%. In the case of capital, you can carry it forward for two more years. You can justify 5% and then you can justify another 5% and you can justify as much as 15% over three years. It is not 1% more that they get, it is 3% above guideline, but they have to justify the 2% they have already gotten. They do not have to justify it if all they are taking is guideline, in the interests of having a simpler system for those kinds of situations.

Ms Poole: But the bottom line is that whether they have to justify 5% depends on whether they applied for the full gamut of what they would be entitled to. If a landlord, for instance, does major repairs in a year, for which a 3% increase would be justified, in that particular scenario, because the landlord has to justify 2% coming out of the guideline, the landlord would get 1%. In the scenario where landlords have done repairs that would amount to a 5% increase, then by the time they have justified the 2% in the guideline they would get a 3% increase.

In the latter case you are talking about 60-cent dollars and, as Ms Harrington pointed out, landlords are business people. They look at the bottom line. If they do absolutely nothing and put not a penny into major repairs in that particular year, they are still entitled to 2% in the allowance. What motivation is there for a landlord to do anything? If you had said to all landlords, "We're putting 2% in but you have to justify it," then if you have other things that attach, that makes sense. But you are putting penalty after penalty on to a landlord who does the repairs.

Ms Harrington: No, we are not penalizing landlords who do repairs. Let me try to explain this.

Mr Mammoliti: That is kind of a strange logic, Dianne, coming from a tenant advocate.

Ms Poole: It is not.

Ms Harrington: First of all, you made the point that it would be fairer if every landlord had to justify the 2%. I think you understand that we are trying to go for a system that will work. As you said, it is not simple but it is workable and we do not want to have to get into justifying every single little capital. We understand that every landlord has to do some capital every year and that is what the 2% is.

I would like to go to one other bottom line I think you are almost getting to, that if landlords you are referring to do not want to do any work, eventually they will not get the guideline increase at all -- not the 2% but the whole guideline. Maybe I could ask Colleen how that will work into this.

Ms Parrish: Certainly if landlords do not do capital repairs over a long period of time, it is quite likely they will end up with a work order or that there will be an application from the tenants which will be justified that there is inadequate maintenance in the building. Then landlords are at risk that they will not get the guideline increase, or even that their rent will be decreased if the conditions are bad enough.

There is an incentive in the system for the landlords to do it, although there is also the incentive that they themselves want to maintain their buildings in reasonable repair, and many landlords have said that.

Ms Harrington: I think we have to give the landlords some credit that they are good business people, certainly the majority.

Ms Poole: This sounds like a fine theory but all I am saying in reality is that you have not provided an incentive, but a disincentive. I remember very clearly when the Stormont, Dundas, Glengarry Legal Clinic presented before us twice, one on Bill 4 and one on Bill 121, and talked about the whole issue of capital repairs and maintenance. They said they felt it is extremely important that there be both a carrot and a stick, that if you just try to come in with the stick it is not going to work. They gave specific examples where only the stick was applied and that they are having horrendous problems because of it. When other people say there is an incentive in here to do repairs, there is not much of an incentive. We are talking 60-cent dollars to do the repairs. It is not an incentive.

We come back to my original question, which I do not think I have received a conclusive answer to. Am I correct that if a landlord does not do any repairs, then the 2% is included in the maximum rent and, therefore, the next year the landlord's guideline amount would be calculated on the full amount of the previous rent including the guideline, including the maximum?

Ms Parrish: Yes.

Ms Poole: If a landlord has done repairs, however, the landlord's maximum rent the following year would be based on the previous rent but not including that portion of the guideline that dealt with capital repairs.

Ms Parrish: No. First of all, maximum rent is always based on an order, so when you go to the rent officers they will give you an order that says this is your maximum rent. That is the first thing that will happen. The capital component does not include -- remember our discussion about the $6 and the $4 and the $10 -- that 2% which you have justified. It is only this other amount. The 2% would be treated differently than the 3%; however, the landlord must have justified it. That is the difference.

The only real difference between those two landlords we have talked about -- the one that did not apply for anything and the one that did -- is the element of proof: One landlord has had to prove more than the other landlord. The reason one had to prove more than the other is because he got more than the guideline. So the financial position is the same but the burden of proof is greater on the landlord who got more money.

Ms Poole: I am glad you clarified that because very early on when I asked the question of the landlord who did repairs and the landlord who did not do repairs, my understanding was that the answer was, yes, in the one case it is part of the maximum rent and in the other it is not. But what you have now said is that 2% is not included in the maximum rent in either case scenario if it is part of the guideline.

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Ms Parrish: It is actually the other way around. In both cases, the 2% is included in the maximum rent. But that assumes that the landlord --

Ms Poole: They are treated identically then.

Ms Parrish: But in the second case where the landlord got an above-guideline increase -- and he must justify that 2%, and there is always a risk to the landlord that he will not be able to do that -- at the end of all this he ends up in the same position but he has a higher burden of proof, if he has to do more justification than the landlord that did not ask for more money above guideline. Essentially we have a simpler system and a system that involves more proof if you want more money.

Ms Poole: My head cold is getting to me. I want to be very clear on this. In both cases, the 2% is not included in the calculation of maximum rent, or is it?

Ms Harrington: It is.

Ms Parrish: It is.

Ms Poole: Right here it says very carefully in the reason for the amendment, "These amendments clarify that the 2% in the guideline allocated for capital expenditures is not included in the calculation of maximum rent for all units in the complex if there is an application and order for an above-guideline increase."

Ms Parrish: Can I explain to you what that explanation means? It is obviously not a very good explanation since we have to spend so much time explaining it.

Let us suppose you have a building and it has 100 units and you are replacing half the windows in the building. People say, "Are you supposed to consider that 2% for capital only in those 50 units that are having their windows replaced or for the entire building?" All the 2% for all the units. What this clarifies is that you have to take in that 2% from the entire building and say, "How much money is that?" Let's pretend in my calculation I figure out how much that is and I say it is $10,000. The cost of doing this window is $50,000. What would happen is that you would first of all say: "Justify the $10,000, which is your 2%. You did not have to justify that before but now you want more money. Then you have to justify the remaining $30,000 and then you allocate it. You can allocate it only to those units that have the windows replaced."

You could have a situation where half the units in the building have their rents go up by guideline plus 3%, and the other units in the building actually have their rents go down or stay the same. That is what that section says. Sections later on deal with how you do the calculation for maximum rent.

Mr Owens: On a point of clarification, Mr Chair: I hope the minister is going to provide my constituency office and the offices of the other members in this committee hearing with the types of questions that I will have to ask tenants when they contact me to find out about rent increases, such as: "Did you get your windows done? Are you in the top half of the building or the bottom half of the building?" It just seems to be a bit of an onerous formula to try to work out.

Mr Jackson: You ain't seen nothing yet. Wait until they ask you whether they open left or right. That is really going to shake up you people.

Mr Mammoliti: You are so funny.

Mr Jackson: Do you want anger or do you want humour?

Mr Mammoliti: That is not called for.

Mr Jackson: Which do you prefer?

The Chair: Order, please.

Mr Mammoliti: In this particular piece of legislation, I am glad for one very specific point: that this piece of legislation is different than Bill 51. I think we can all agree, even the Liberals, that with Bill 51 the onus was put on the tenants to justify. I think we have all experienced that. With this piece of legislation and with this particular clause, I am glad to say, finally, that the onus will be put on the landlord, the one who is spending the money, the one who is doing the work. It has taken a long time for this to happen, so I am glad this particular piece of legislation has changed that.

I would also like to touch on something Mrs Poole said earlier. It is really frustrating to hear this. She said she has heard from landlords that if they have to justify this -- tell me if I am wrong -- they will stop doing the work and they will leave it until another government comes into play.

Ms Poole: May I respond since Mr Mammoliti asked me to correct him? Very briefly, no. What I said is, if landlords cannot get the full value of what they have put into the buildings as cost pass-through, if they are only going to get 60-cent dollars on it, then they said they will wait for another government which will treat them more fairly. That is their attitude.

Mr Mammoliti: All right, that is fine. What this tells me is that all those landlords who came in front of us during our tour across the province who have said time and time again that they care for tenants, that there is a moral aspect to being a landlord, and that they are not doing it solely for the profit, they are doing it for the care of the tenants as well, that does not come into play then, if that is the case.

The moral issue here bothers me as well. They came in front of this committee, almost every one of them, and said they care about the tenants and they will do whatever they can for them, at times even spend money out of their own pockets. I have heard that as well. Now what I am hearing is, that is not going to be the case, that because there is not as much profit in this bill to them and their colleagues they are going to stop doing work in the units. That scares me.

It scares me for two reasons. It scares me because I am afraid places will turn into slums and it scares me to know that is already being done, even with Bill 51. I can give you a number of apartment buildings, and I have given you a few examples in my riding already where that has happened. They have not taken advantage even of Bill 51, that great system the Liberals put in place for landlords. I am concerned for the tenants. I also get the impression that Ms Poole, the one who was a tenant advocate earlier in her political career, has now turned and has said that they do not have to and she believes they do not have to justify the 2%.

Ms Poole: That is not what I said.

Mr Mammoliti: That is what I am hearing and that scares me because you were a tenant advocate at one time. If you are saying that landlords should not have to justify that 2%, that scares me as well.

The Acting Chair (Mr Morin): I would like to interrupt you here. As you know, we are dealing with subsection 23(4) so let's maintain it to that. I will give you two minutes to reply and after that we will continue with Mr Owens.

Mr Owens: This is a very generous committee.

The Acting Chair (Mr Morin): Do you want to reply?

Ms Poole: Yes, I do. What Mr Mammoliti has not taken into account is how very angry, frustrated and hostile the landlord community is right now. They are not the same people who came here even a year ago. They are just beside themselves with anger.

I will tell you another thing, I find it just fascinating that I have taken exactly the same stand in government as I do in opposition and yet under government I was told I was a tenant advocate because there are things I wanted to change in Bill 51, and now I am being told because there are things I want to change in Bill 121 I am a landlord advocate. My stand on things such as necessary repairs, costs no longer borne, luxury renovations and certain protections for tenants have not wavered and not changed. Many of the Liberal amendments have been introduced into this legislation for that reason.

I have always believed there has to be a balance. When I was in government, I felt the balance had swung too far on the one side. Now I see it swinging very dramatically on the other side. Neither is helpful to the housing industry.

The Acting Chair (Mr Morin): Mr Owens, it is now your turn. No? Mr O'Neil.

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Mr H. O'Neil: I am sitting in as a substitute today, and it may not refer to this particular section of the bill, but I would like a little bit of advice, if I may, either from some of the members or from the ministry staff. On many occasions I have had people approach me, and I want to give you a concrete example: An elderly lady may own an apartment building that is worth $300,000. Over the years she has kept the building up, but has paid it down where the mortgage is maybe only about $50,000, so she has a cash equity of approximately $250,000 in it. How does she get a fair return on that $250,000 that she has invested in that building, because if she had that $250,000 invested somewhere else, she would be able to draw off approximately 8% on it today. Where does she get her return in this whole structure of the 5% or the 8%?

Ms Harrington: Well, certainly you have to look at the whole financial picture.

Mr Mammoliti: On a point of order, Mr Chair: Just for the member's information, this question came up time and time again during the tour, and we asked a number of times what a fair return would be to landlords, and they could not come up with a figure. I mean, if we do not know what a fair return is, how can we possibly answer that question?

Mr H. O'Neil: I guess what I would look at as being a fair return is if that particular lady, that elderly lady, had $250,000 -- her life savings are actually in that building -- if she were to invest it in Canada savings bonds or someplace else, I think that you can strike a rate. Today it has dropped considerably, but it might be somewhere in the vicinity of 7% to 8%. You can establish that.

I can understand some feelings where there are large landlords, but you have a lot of people who own smaller buildings, too, who have them paid for and with the expenses they have to look after with heat, lights, water, repairs and everything else today, they should have some type of a guarantee on what they have invested in that building. I wonder if I could have an answer.

Ms Harrington: Well, it certainly is not a guaranteed investment. While it is really difficult for me to go from just the information you have given me, if you are saying this person has a $50,000 mortgage that she is paying, and then the number of units with the rent that is incoming, plus of course the expenses, the taxes and the heating and whatever else, over many years probably the profit is much more than 8%. I mean, it is going to fluctuate depending on many variables.

Mr H. O'Neil: But, you see, in a case like this, 8% of $250,000, how much is that, $20,000, she could be getting as a return. There is also the problem with the rent control that over a number of years a lot of people, rather than going over the maximum allowed under rent control and rather than getting into hearings and everything else, have taken what the maximum is, yet their costs have been over that. So this particular person I am talking about has lost money over the years because she did not want to go to a rent control hearing and now is not getting a return on the equity or investment that she has in it. Our government was at fault with this too, I feel, and the previous government, under rent controls. How do you guarantee a small business person, in this case an elderly lady, is going to get a fair return on what she has her life savings in?

Ms Harrington: I would say there are some landlords with buildings similar to that with similar types of mortgages who would be making, over the past many years, much more than a rate they would get from a bank, and others who would make less, depending on the other variables.

Mr H. O'Neil: If she has made less, how does this bill propose to protect somebody like that? I guess that is what I am asking.

The Acting Chair (Mr Morin): Are you through, Mr O'Neil?

Mr H. O'Neil: I would like an answer.

Mr Jackson: He asked a question, in all fairness, and the parliamentary assistant was in the process of answering until you interrupted her. He asked the question which section of the bill --

The Acting Chair (Mr Morin): Yes, she did answer. I beg your pardon, if you have any comments to make to the Chair. If you do not, you could pass --

Mr Jackson: I was looking right at you when I said that.

The Acting Chair (Mr Morin): Yes. At the same time, I do not have to give you any reason. Mr Mammoliti wanted the floor. I asked Mr O'Neil if he was satisfied. What did he answer? He said it was okay. You are not satisfied?

Mr H. O'Neil: No, I am not.

The Acting Chair (Mr Morin): Okay.

Mr H. O'Neil: If that lady were to go to a rent review hearing, to approach rent review, how would you protect in that case?

Ms Harrington: We do not offer guarantees, as I said in my very first comment. This is a business; these people have to make investment decisions. Usually, if that building was bought some years ago and the mortgage at this point is very much reduced, the person would be in a good financial position. If there are capital expenditures and above-guideline extraordinary operating costs, then certainly she should apply above the guideline.

Mr H. O'Neil: Where I see the unfairness of this is that if, rather than investing $250,000 in that building, she went out and got a mortgage for $250,000 and only had $50,000 equity in it, she would be able to pass down a certain percentage of that mortgage interest. Or if she sold the building to a new purchaser, took her money out of it and put it into a savings certificate or something like that, she would be a heck of a lot better off. That is one of the weaknesses I see in this bill, where you are not affording protection to some of the small owners of apartment buildings.

Ms Harrington: We have had extensive discussion about whether the financing costs of buildings should be passed through to tenants, and the decision of this government is no, those people who buy the buildings are responsible for financing them.

Mr H. O'Neil: But that is not the case in this issue. This is the equity this elderly lady has, approximately $250,000, and she is getting no return on that $250,000. That is her life savings, something she would have been better to have had sit in a bank account somewhere or a certificate to draw interest on. She has invested in property and you are not giving that type of person -- I know there is a problem.

Mr Mammoliti: But it is a long-term investment. This is something that --

The Acting Chair (Mr Morin): Just a minute, please. Do you have any more to add, Ms Harrington?

Ms Harrington: I do not think I can, because you are talking about a particular case.

Mr H. O'Neil: There are a lot of cases like that out there.

Mr Mammoliti: This is interesting because this is a question that came out time and time again. I asked in particular, "Are you looking for a short-term investment or a long-term investment?" I believe our legislation deals with this particular area. It relates to it as a long-term investment. The difference between our bill and Bill 51 is that Bill 51 gave the impression that you could get a short-term investment out of that piece of legislation. This piece of legislation, I think and agree, will motivate individuals, landlords, business people into a long-term investment.

Mr H. O'Neil: But again, you have to have a return when it is a long-term investment too.

Mr Mammoliti: I think the return will be there. If you are looking at a 25-year return, then I think you will get that 7% or 8%, even more, in 25 years. But the problem is that we got too spoiled. The landlords out there got too spoiled with Bill 51 and were able to turn around and make a profit in a couple of years, in some cases even six months. When legislation allows that to happen, that is why everybody is ranting and raving now, because that is not going to be able to happen with this piece of legislation. They know they are going to make their profit in 20 years as opposed to six months, and they are a little upset at that.

Mr Jackson: I do not wish to participate in this debate, but it is interesting that no government has the political will to reduce rents for tenants, because it gets 50% of the profits of the sale of any apartment building in this province. It goes immediately into the coffers. Second, the land transfer tax is ungodly high in this province. Whether you want to admit it or not, if you really wanted to allow the purchasers to move in and out of their investments and to insulate the tenant from those costs, you would be looking at the capital gains and the land transfer tax, all expenses that contribute to the condition which does not allow rents to drop.

Let's not dwell too long on this, because I am being encouraged to participate. There is a lot of information that should hit the table if we are going to debate this issue. I thought, Mr Chairman, your instructions were that we were going to proceed vigorously with that section after the previous three speakers.

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Mr Jamison: I just have to comment briefly that certainly most landlords I know buy buildings for long-term investment purposes. If you follow the history of prices, you will find that there is an increase in the value of property at that point. The increases in rents -- we cannot singularly focus -- in a number of cases have been absolutely dramatic, for poor reasons at times.

The whole question is not just equity as far as income to pay the mortgage is concerned, because certainly they are going to have to be able to pay the mortgage in the beginning or be able to be seen as paying the mortgage in the beginning to purchase a building, just as you would a mortgage on a home. I think it is singularly minded to look at profits and so forth in the one singular vein. A person who owns the building for a lengthy period of time is certainly in a much better position to make a profit through the rents garnered, as long as he has been paying his mortgage through the years. People who own buildings longer than others make a better profit. To me, you have to look at both sides of the equation.

Just as a last point, it is funny that we are talking about this when inflation is dropping; it is supposed to be 2.5% next year. We are talking about figures that are much higher than that. Much of the argument becomes moot at this point and we will find it will happen that way. On the same hand, around one third of living expenses for renters is rent. If their rents are allowed to increase dramatically, especially at this point, that will affect the wage demands people have. Certainly those things all have to be taken into consideration when we talk about how we level off the peaks and the valleys, because that is what has happened in the past. A number of things have directly fuelled those peaks and caused the valleys to happen later on in the economy itself. I think when you speak about equity, there is more than one form of equity in property. There certainly is and always has been.

The Acting Chair (Mr Morin): Are there any further questions or comments on Ms Harrington's amendment?

Mr H. O'Neil: Just a very short one. I understand the rent increases over the years and I also understand the escalation of the value of properties as something that has accumulated. I am looking at a true return over the number of years. This person I am talking about and others have held on to property. If they had invested in something else, the return would have been higher.

Also you must understand, and I know you have touched on this, that although you have a few bad landlords who always seem to come to the top -- I look back in some of our own ridings, some of the smaller areas and even the city here. There are people who are good landlords who have plowed all their profits back into buildings by proper upkeep where their buildings are top-rate and have neglected to have a proper return because in a way it contributes to the value of the asset. The majority are good people who have poured that money back and are not getting a proper return on their investment. They would have been better to invest it someplace else. Now they cannot really.

The Acting Chair (Mr Morin): Are there any further questions or comments on Ms Harrington's motion?

Mr Mammoliti: Can I have five minutes, please?

The Acting Chair (Mr Morin): There will not be a vote on this immediately, because there is an amendment to the amendment. Is it agreeable that we should proceed with that? Ms Poole, I believe you have an amendment on the amendment.

Ms Poole: That is right, Mr Chair, I have an amendment to the amendment.

The Acting Chair (Mr Morin): Ms Poole moves that the government's amendment to subsection 20(3) of the bill be struck out and the following substituted:

"(3) If a capital expenditure is claimed and allowed for the whole residential complex or an amount to be carried forward is allowed for the whole residential complex, the amount allowed in respect of the guideline for all of the rental units in the residential complex shall be reduced by 1 per cent."

Ms Poole: I also have one to subsection 20(4), but I believe the procedure we are following is to vote on them individually and deal with them individually.

The Acting Chair (Mr Morin): That is correct.

Ms Poole: The substance of this amendment to the government amendment would say that instead of the reduction being 2%, it would be a 1% reduction. I am extremely concerned that because of the way this legislation is laid out, many landlords will not do the major capital repairs. It is all well and good to say there is a 2% allowance in the guideline, but if the guideline is the almost identical total amount it was under the old legislation and if the old legislation had allowance for profit built into it, then landlords are looking at the bottom line and saying, "When I look at this guideline amount, I'm not getting any more today than I did yesterday and yet I'm expected to do 2% worth of capital repairs with it."

We have to give landlords an incentive instead of a disincentive to do those capital repairs. I completely agree with the tenant argument that if a certain proportion of the guideline amount is to go to capital repairs, then landlords should be using it for that amount. However, when you arbitrarily just declare that the amount is 2% and that landlords who do capital repairs will not get full cost pass-through for those capital repairs, then you have set up a scenario where there is no incentive for a landlord to go and do those capital repairs.

Let me put it to you this way: If you are sitting there and you are going to get a 6% guideline regardless of whether you do capital repairs or not, and if there previously was a guideline amount for profit and that is taken away, and if landlords are being squeezed right now and looking at the bottom line, then why would they take their money and put it into capital repairs? That is the problem.

We have all heard expert testimony, and also lots of speeches, about our aging housing stock, but it truly is a reality. No, they are not going to fall down in three years, but if the expenditures are made three or four years from now as opposed to today, they will cost more and will certainly have to be done on a more expansive and extensive scale than if they were done today. We are not saying they will not do them at all. I am saying they are going to delay doing them unless you give them some incentive and reason to go and do those repairs.

We will obviously have numbers that will track over the next few years how many capital repairs are being done, but I am willing to place my money on it right now, at this very moment, that if we do not give some incentive to landlords to do those repairs, and more particularly if we provide a disincentive for them to do the repairs, then they are not going to do them. They are going to delay them. They are going to play the roulette wheel and hope that another government will recognize full cost pass-through, not just part of it.

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Whether or not you agree with what landlords are saying when they say, "We're only going to get part of our money back," landlords who do nothing get 6%. If, say, we go and do 3% worth of repairs over and above the amount allowed in the guideline, 3% total repairs in the building, 2% is allowed in the guideline. They would have to justify 2%, so they get 1%. The way they are thinking -- and I know this, because this is what they are telling me, and a lot of them are small landlords who cannot understand what is happening -- all they know is if they do major repairs they are not going to be able to get all their money back.

This also gets into the whole issue of what is going to happen when a landlord goes to the bank to get money for major capital repairs and the revenues are not there to support it. Certainly the financial institutions have told us this is not a fantasy. This is reality.

What this amendment attempts to do -- it certainly would have a chance of doing it if it were passed -- is to at least provide some incentive for those landlords by saying, "Yes, you'll still have a reduction, because we do feel that part of the guideline should be going to capital, but instead of penalizing you by 2%, we will penalize you by 1%."

The bottom line is you might have some more landlords who are going to do those capital repairs -- which I think has to be our bottom line, because our housing stock is not in great shape, and it is getting worse by the day. I do not want to see projects delayed for three, four or five years, while landlords find out how the dust is going to settle.

With the amount of hostility, anger and frustration out there right now, I do not even know if this amendment is going to help, because some of them are just pulling in their horns and saying: "No way. I'm not going to have anything to do with it." This is an attempt, which I hope the government will accept, which would hopefully make sure that more repairs are done, because if a landlord can get more of the cost recouped, then there is more of a chance that he will do the repairs.

Oh, our real Chair is back.

The Chair: Thank you, Mrs Poole.

Ms Poole: Nice to see you back, although Mr Morin did an exceptional job while you were away.

The Chair: Are there further questions or comments on Mrs Poole's amendment? Shall Mrs Poole's amendment to subsection 20(3) carry? All in favour will raise their hands. Opposed?

Motion negatived.

The Chair: Mrs Poole, you have an amendment to subsection 20(4), amending the government amendment to subsection 20(4).

Ms Poole: Just on a point of procedure, Mr Chair: I wonder if we should vote on the government amendment to subsection 20(3) first.

The Chair: The way the government amendment is printed and the way Ms Harrington read it in is both subsections 20(3) and (4), so we will deal with your amendment to subsection 20(4), and then we will vote on the government amendment.

Ms Poole: Since subsection 20(4), the Liberal amendment, related to our subsection 20(3), there does not seem to be a lot of point in pursuing it since our other motion failed. I withdraw it.

The Chair: So you will not place it. Thank you.

Then we will deal with the government amendment to subsections 20(3) and (4). Shall Ms Harrington's amendment to subsection 20(3) and (4) carry? All in favour of the government's amendment to subsections 20(3) and (4)? Opposed?

Motion agreed to.

Mrs Marland: Did we vote on subsection 20(7)?

The Chair: No, we have not gotten that far, Mrs Marland.

Mrs Poole, you have an amendment to add subsection 20(4.1).

Ms Poole: Yes, Mr Chair. Indeed, I do.

The Chair: Ms Poole moves that section 20 of the bill be amended by adding the following subsection:

"(4.1) Subsections (3) and (4) do not apply in respect of a capital expenditure that relates to substantial restoration of concrete if that restoration is necessary to protect the safety of the tenants or the building."

Do you wish to speak to your amendment?

Ms Poole: Yes. I feel this is a very important amendment because it deals with an issue that is vital to buildings' safety, and vital to tenants' safety, when it comes right down to it.

I think all of you will remember the expert testimony we received, not only from the Concrete Restoration Association of Ontario but from other parties as well, concerning restoration of concrete and how it is extremely vital to the integrity of the building.

What we have with concrete restoration deals primarily with underground parking garages, but it can also deal with things such as balconies. The reason these are vital is that if this work is not done, the building tends to fall down. That may seem like quite a dramatic statement, but it is indeed true, because it goes to the very foundation of the building, when you are talking about underground parking garages.

These expenditures are extremely expensive. Depending on the size, they could cost $200,000, they could cost $1 million, they could cost $1.5 million, they could cost $2 million. As you can see, this is a substantial amount which must be done if the integrity of the building is to be protected. Many of these particular concrete restoration projects have already been done in Metropolitan Toronto, but there are still an outstanding number that remain to be done.

There is a very real concern on the part of the concrete restoration association that with the projects costing so much, and therefore it being absolutely essential that landlords be able to receive financing for them, if there is not some relief to the 2% rule, they indeed will not be able to get financing.

You can put as many work orders on as you want, but you cannot get blood out of a turnip, as the old saying goes, and if you have something very substantial, such as a $2-million or even a $1-million concrete restoration, it is absolutely imperative that it be done. To put roadblocks in the way of it being done, I think, is unconscionable. The very safety of the tenants will certainly depend on that.

It is a very, very specific capital expenditure that this particular motion refers to, only restoration of concrete, and specifically we have said a number of things. One is that it has to be substantial. We are not talking about every time that a landlord has to do some concrete restoration to a garden wall; we are talking substantial. Second, we said that it has to be necessary to protect the safety of the tenants or the building, so this is vital concrete restoration. Obviously the government could feel free to put in specific tests of what "necessary" and "substantial" and these items are in its regulations.

I think if the government deems, in its wisdom, that it is not willing to accept this amendment, then the government should also take the responsibility for the scenario where a portion of a building does collapse because the underground parking has not been restored, because it was the technology of the mid-1960s, when many of these buildings were built. At that time they did not know the technology they were using was faulty.

Most of these underground parking garages should have been restored within the last five years or so. Certainly, many of them are in the planning stages right now, so a number of them are at that crucial point where if that concrete restoration is not done within the next few years, it very much could put the building and the tenants in jeopardy.

Those are my comments at this time.

Mrs Marland: We support this amendment by the official opposition. Even with the wording with regard to protection of the safety of tenants in the building, the government members would be hard pressed to vote against this, I would suggest with respect.

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Ms Harrington: Certainly concrete restoration is a vital and important part of the upkeep of a building. As you have noted, for the buildings that were built in the 1960s and early 1970s, this is something many are looking at at this particular point in time with the new technology.

To get directly to your amendment, first of all, it would be inconsistent to have this one particular type of capital expenditure treated differently. The real heart of this is that, with this large expenditure, it would certainly be easy to justify an above-guideline increase. In essence, this particular amendment is not going to make a difference. If they are going to do concrete restoration, they are going to be using their 2% plus their 3% cap. It certainly could be easily justified. I do not see that there is going to be any problem with that.

Ms Poole: I do not think there would be any doubt that it could be justified, but the parliamentary assistant also has to consider the fact that other capital repairs have to go on at the same time. You are saying the full amount of the 2% would have to go to the concrete restoration. Let's put it this way: In the case where we are talking about $1 million and the landlord wants to put that through as a rent increase, that would be a substantial amount over the years. Whatever you allow as the carry-forward, the landlord would be using up the full amount for the concrete restoration and there would still be a substantial amount which the landlord could not claim. That would be your typical scenario. Even allowing the full 3% cap, even allowing the 2% which the landlord might put to something else but does not --

Ms Harrington: Going to capital expenditure or other?

Ms Poole: That is right. I am saying even if the landlord does this, concrete restoration is such an expensive procedure that in many cases it would not be sufficient to cover the landlord's expenses. Then you put on an extra burden of saying that the 2% has to go to the concrete restoration and not to something else.

Ms Harrington: No, we are not saying that. It is up to the landlord. In his long-term planning, this is a major expense. It is something he has probably seen coming for years. In this kind of economy, landlords have to do long-term planning to make sure their buildings are safe and well maintained.

Ms Poole: The parliamentary assistant says they are not saying this, but the reality is that is the intent and that is what will happen. If the landlord has only X amount of dollars and he has to do concrete restoration, there will be no money for anything else for as long as carry-forward is allowed. Even then, as I say, it is most likely not going to fully cover the landlord's expenses. That raises the problem of whether the landlord can get financing if he cannot recoup it through the rents.

This is only part of it. In subsection 21(5), if I am not mistaken, which is many amendments later from here, we have an amendment that would extend the carry-forward period for concrete restoration, because it is vital work and we want to ensure it is done. Yes, it is treating it differently than other matters, but I think this is something that could be life-threatening. It is certainly something that could affect the safety of tenants. So for that very reason it should be treated differently than other capital expenditures.

Ms Harrington: There are many other capital expenditures which one could categorize. If we exempted this one or made a different set of rules to apply to this, then I am sure we would be opening the door to many other problems in the building which could be categorized as life-threatening.

Ms Poole: Although you could certainly say if the wiring, elevators or that type of thing was not redone it could be very dangerous, I do not think there is anything as dangerous as the effects of what would happen if proper restoration of concrete is not done. My feeling is that it should be a priority of this government to ensure that anything which could be life-threatening to tenants gets done, exception or not.

You say you want to protect tenants, but tenants are concerned about more than rent increases. Tenants are also concerned about their safety in the building. They are also concerned that they do not live in slums, so there has to be some accommodation and compromise somewhere along the way where you say this is a different scenario than landscaping.

Ms Harrington: I would just like to make one final comment. What you are suggesting here would have the effect of having the 2% go to non-necessary capital repairs, landscaping or whatever the landlord decided, and then only 3% above guideline would go to this particularly vital thing. We disagree with that and feel that all of the money for capital should go to this vital area. If you exempted it, that scenario could take place.

Ms Poole: Then I am really looking forward, in my later amendments on carry-forward, to your granting the fact that concrete restoration is an area which deserves further carry-forward, because you are saying on the one hand that you do not want to give them any benefit in this particular section, but I think you have said earlier in your remarks that it was vital. When we get to subsection 21(5), I will look forward to your granting them a longer carry-forward so that we can make sure this vital work gets done.

The Chair: Thank you, Mrs Poole. Further questions or comments? Mrs Marland has requested a recorded vote.

The committee divided on Ms Poole's motion, which was negatived on the following vote:

Ayes -- 3

Marland, O'Neil, H., Poole.

Nays -- 6

Abel, Harrington, Jamison, Mammoliti, Owens, White.

The Chair: We then have a Liberal amendment to subsection 20(4.2).

Ms Poole: Mr Chair, since the Liberal amendment to 20(4.2) related to having a capital reserve fund for tenants for new buildings and since the government has seen fit to deny tenants that capital reserve fund for new buildings, we will withdraw 20(4.2) since our main motion failed.

The Chair: Thank you, Mrs Poole. We are then looking at subsection 20(5) as printed. Am I correct?

Ms Harrington: Yes, I believe that is correct.

The Chair: Is there an explanation?

Ms Harrington: Yes. Subsection 20(5) provides elements used in calculating the capital expenditure allowance which are the costs of the capital expenditure, interest at prescribed rates, the value of the landlord's own labour and useful life of the work done or the thing purchased. There will be prescribed rules setting out time periods, the interest rate amount and the useful life periods etc.

The Chair: Thank you, Mrs Harrington. Questions, comments or amendments. Shall subsection 20(5) carry? Carried.

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Ms Poole: I said opposed and she said opposed.

The Chair: If the sense is that it is carried, it is carried. But I can hear wrong if someone suggests that.

We are on subsection 20(6).

Ms Harrington: Subsection 20(6) sets out a rule for capital expenditures allowed in an order made under earlier legislation. If such a capital expenditure is replaced, the allowance given for the initial capital expenditure will be subtracted from the allowance which is given for the replacement capital expenditure. This is similar to the replacement rule under the RRRA; however, the test for determining whether this rule should apply will now depend on whether the order which allowed the initial capital expenditure had a first effective date on or before August 1, 1985.

Note that this government amendment clarifies rules for capital expenditures allowed on an order made under previous legislation being replaced under the Rent Control Act and the capital is being replaced.

Ms Poole: As the parliamentary assistant mentioned, this section was based on a section in the RRRA. Basically it just makes a lot of common sense. If a landlord buys a furnace and the cost of it is amortized and put through in rent increases, once that amortization period is up, say 20 years, and the furnace is paid off, if the landlord buys a new furnace the only difference a tenant would pay would be the difference between the old furnace and the new furnace. The landlord could not put a whole new furnace through. He would have to take into account he had been getting rent increases for the old furnace. It would seem to me to make a great deal of sense to continue this with some improvements to it.

The Chair: Shall subsection 20(6) carry? All in favour of subsection 20(6)? Opposed? Carried.

We will pause for a couple of moments while consultation takes place.

Ms Poole: The Liberal caucus has an amendment which we had labelled subsection 20(7). Then the government had the act reprinted with the new subsection 20(7) in. I have just talked to legislative counsel and we would like to propose the Liberal motion as subsection 20(6.1) instead of subsection 20(7).

The Chair: Ms Poole moves that section 20 of the bill be amended by adding the following subsection:

"(6.1) If a rent officer intends to permit an amount for capital expenditure, the rent officer shall include in the findings a schedule of approved increases for capital expenditures, their related amortization periods and the dates when the costs of these expenditures will no longer be borne."

Mrs Poole, you might want to explain that.

Ms Poole: Yes, I would be happy to. This was a new section we put in to specify that the amortization schedule on approved, above-guideline capital expenditures would include a date when capital costs would no longer be borne and to have that included in the tenant's rent.

This marches with a section we had tabled as an amendment to have a cost-no-longer-borne provision in the legislation. The government in the meantime, when it tabled its amendments, had a very similar provision, so I am hoping this particular section, subsection 20(6.1), will meet with the government's approval and will help it in its cost-no-longer-borne issue.

Ms Harrington: As Ms Poole has stated, the government has brought forward clause 20(1)(g) which deals with a similar thing. The government amendment already has been proposed. In fact, we have passed it. It goes further by eliminating the compound effective guidelines on capital expenditures, so in effect this particular section is not needed.

Ms Poole: I am so delighted that the ideas of the Liberal Party were taken to heart by the government and that it in fact adopted the idea as its own, particularly after a year of my ranting and raving over it. If this has been helpful to them, then I am very glad we could be of service.

Ms Harrington: I have been through a lot over the last year. It has been most helpful.

Ms Poole: I wore them down. It was called persistence. You just bring it up every day.

The Chair: Shall Ms Poole's amendment to subsection 20(6.1) carry? All in favour? Opposed?

Motion negatived.

Ms Harrington: Subsection 20(7) provides that where a capital expenditure has been allowed under a prior order under Bill 121 and has been replaced before its useful life has expired, the capital component for that prior capital expenditure will be removed from the maximum rent on the application. This is a government amendment that provides a different replacement rule for capital expenditures allowed under Bill 121 which are replaced before the amortization period has expired.

The Chair: Questions or comments? We will pause for a moment.

Mrs Marland: I cannot find the one that the parliamentary assistant is reading from.

Ms Harrington: That may sound very similar to what we just did.

Mrs Marland: But it does not indicate this.

Ms Harrington: This is under Bill 121. The other was responding to an order that was issued under the RRRA, so really they are the same intention.

The Chair: Has everyone found the place?

Mrs Marland: This section is related to the amendment we have on subsection 22(3). Am I correct?

Ms Parrish: If I may assist, I think it is related to subsection 20(8). You have two amendments, one to subsection 20(8) and one to subsection 22(3). I think those are related, and we are only on subsection 20(7).

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Mrs Marland: I guess what I need then, before I speak on it, is whether the government is going to accept our amendment to subsection 20(8).

Ms Parrish: If I may speak to that, I am sorry I did not have the opportunity to speak to you just a little earlier. I think, in principle, we are not opposed to the amendment to subsection 20(8). We would like to request that we be given a little bit more time and perhaps have some discussions with you. We are not opposed to the principle in subsection 20(8), but we think there are some technical problems. For example, the section does not indicate whether, when you do the calculation for extraordinary operating cost increases, you do it at the beginning or at the end. It also does not set out what you do if you are calculating an increase only for an individual unit.

There are a few little technical things about it that I think do not quite work. We could try, if it is agreeable, to work with our staff and with you, Mrs Marland, whoever is advising you, to make it work from a technical viewpoint. Most of these kinds of rules would be what we would normally set out in regulation, but if it gives people a higher comfort level to set it out in the statute, we could set it out in the statute. As I said, the only objections we have are that some of the rules technically just do not fit, because we have forgotten about the individual units, or it does not include when you take the fuel bill out, first or at the end. So it is mostly a technical discussion we would like to have, if we could have just a little bit more time.

Mrs Marland: Maybe I will read the comments I have here into the record.

The Chair: On subsection 20(7), Mrs Marland?

Mrs Marland: On subsection 20(7). We can do it both ways. If the government is about to accept our amendment, which follows this section, then I gather that subsection 20(7) would have to be deleted.

The Chair: Just one minute, Mrs Marland. We will find out about that.

Ms Parrish: Subsection 20(7) is essentially very similar to section 20(6). All it says is that, to take the analogy used by Mrs Poole, if there has been an order under the act to replace the furnace, and normally that would have a 15-year amortization period or whatever, and the landlord decides to replace the furnace after 10 years or 12 years, when you do the calculation, you take out the amount he already got, and then you add on the new cost. Otherwise the landlord would get the same amount of money twice. That has been in the Residential Rent Regulation Act, and that rule was carried forward in subsection 20(6). All subsection 20(7) says is that the same rule applies if the order was obtained under the Rent Control Act or under the RRRA.

Ms Harrington: Mrs Marland, it is my understanding that if we could deal with subsection 20(7), a request has been made that we stand down subsection 20(8) because we are still dealing with your amendment, if that would be satisfactory.

Mrs Marland: Okay. If we are going to deal with subsection 20(7), I am going to read some comments into the record.

Interjection.

The Chair: Mrs Marland has every right to speak to subsection 20(7). Go ahead.

Mrs Marland: There is obviously a great deal of concern about a lot of the sections of this bill, but apparently the amount of concern and opposition to the principle of cost-no-longer-borne is relative to this section.

In order to deal with subsection 20(7), I have to give you a little preamble. Apparently the government officials have assured the people concerned that when the capital component is removed from rents once the amortized life of an item expires, the intention is that only the above-guideline increment should be removed. That is, for an item which generated an increase above guideline of 3%, only the equivalent dollar amount would be removed at a later date, not the 2% guideline component as well. This is not set out in the legislation.

Subsection 20(8) refers to the capital component as "the prescribed part of the allowance," with all of the details of the calculation to follow in the regulations. This is a substantial concern because the people have not yet had public assurance from the minister that she agrees with her officials as to how this will be calculated. Also, there is no guarantee that in the end the regulations will reflect this position or that they will not be amended later with no opportunity for public debate.

In addition, the suggestion is that subsection 20(7) of the bill should be deleted altogether. This subsection says that if a capital item is replaced before its capital component has been removed from the rent base, for example, before its amortized life is complete, the original component must be removed before the new one is calculated.

To understand why this is a problem, it must be remembered that the amortization periods set out in the useful life tables are rough averages. There will always be components which wear out before their designated life through no fault of the landlord, and others which last longer than the tables say they should.

Bill 121 proposes that if a component last longer than specified, there is no benefit to the landlord since the capital component is removed from the rent as soon as the amortization period is complete. Yet if a component must be replaced early for any reason, the landlord will never receive the full amortization payments for the first installation.

Take the example of a balcony railing which should last 10 years. If in year five the municipality passes a new standard requiring a different type or size of railing, the landlord will have no choice but to comply even though the existing railings will have faced only half of their useful life. Rent review will disallow the remaining years of cost recovery for the first railing before making allowance for the second, meaning the landlord will be out of pocket for half the original cost because of a change in policy by the local government.

Removing subsection 20(7) will not allow landlords to gain any untoward advantage; it will simply ensure that they are not further penalized. Since the tests in subsection 15(2) will still apply, the capital work will have to be necessary for one of the enumerated reasons. There can be no question of components being replaced unnecessarily, and since with the 2% dilution a landlord is always in a worse position if he does capital than not, there is an active disincentive to such behaviour even if it were allowed.

I think actually that is quite clear, even though you were not listening.

The Chair: Every word, Mrs Marland. Are there further questions, comments?

Ms Harrington: I believe, Mrs Marland, some of your comments did refer to subsection 20(8), which we ourselves have asked to look at. Perhaps we could deal with that -- I am not sure if tomorrow would be suitable.

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Mrs Marland: You did not think they referred to why we do not need subsection 20(7)?

Ms Harrington: Yes. Would you like to clarify that?

Ms Parrish: I guess since subsection 20(6) has already been passed and it is the same principle, it would be inconsistent not to have subsection 20(7). Subsection 20(6) says that if the order was given under the RRRA and it is prematurely replaced, then there is an offset. Subsection 20(7) is exactly the same rule, only the order is given under the Rent Control Act. If we did not have subsection 20(7) and had subsection 20(6), then you would have substantially different treatment, depending on when the order was given.

Some of the other points you have raised are in subsection 20(8), which is whether there should be greater clarity as to how the calculation is made; for example, the rule about what comes out at the end of the amortization period and what is the maximum rent.

As I said, at a staff level we have looked at that and, except for some technical problems, we would be prepared to look at it. We would like to have that opportunity. On subsection 20(7), my understanding is this is the government's policy and it is the same policy which exists under the current act as well.

Mrs Marland: Where does subsection 20(6) refer to the RRRA?

Ms Parrish: It says an order given under a previous act. It refers to the date, the statute in place on August 1, 1985. That essentially is the period in which the RRRA was in effect.

Ms Poole: I think the government is going to ask to stand down subsection 20(8) so it can take a look at it. Just so I can reflect on this during the period it is stood down, my understanding is that this particular section came about because of conversations between the Fair Rental Policy Organization of Ontario and the government. The FRPO expressed concern that the calculations, if they were in the regulations, could be changed at any time without appropriate consultation and feedback.

They were quite concerned about this, and members from the Ministry of Housing had expressed the opinion that they were not really opposed to putting it directly in the legislation so that it could not be changed without some process. Is it correct that the substance of subsection 20(8) is really to put into the legislation what previously had been planned to be put into the regulations, or is there more to it that I should be considering?

Ms Harrington: I will ask staff to answer your question.

Ms Parrish: Essentially you are right. There was a sense that the act was insufficiently detailed as to the kinds of calculations and that it could make a big difference, so we put in subsection 20(8) to clarify certain things.

I do not want to speak for Mrs Marland's amendment, but it appears that her amendment goes further along in terms of setting out all the calculations. There is always a judgement as to when you should have something in a statute and when in regulations. The only concern we have about Mrs Marland's more detailed motion is that I think there are a few technical errors, but we could fix them. It comes down to the committee's deciding whether or not it really wants all this detail in the statute, with no flexibility in regulations.

The Chair: Further questions, comments on subsection 20(7)? Shall subsection 20(7) carry? All those in favour? Opposed? Carried.

On subsection 20(8), I take it there is unanimous agreement to stand this section down. Do we have unanimous consent?

Agreed to.

Ms Harrington: We would ask Mrs Marland to be able to meet with some of our staff.

The Chair: Given the hour, this might be an appropriate time to adjourn. I do not think we will get through a section in three minutes.

The committee adjourned at 1656.