N.S. housing crisis: How the fixed-term lease ‘loophole’ can be ‘easily abused’

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Advocates are raising concerns about the use of fixed-term leases in Nova Scotia as the province continues to grapple with an ongoing housing crisis and rock-bottom vacancy rates.

Unlike periodic leases – such as month-to-month or year-to-year – fixed-term leases have fixed start and end dates, meaning they are not automatically renewed.

While fixed-term leases are useful in some situations, Mark Culligan, a community legal worker with the Dalhousie Legal Aid Service, said they can be “easily abused by bad landlords.”

“Because the landlord can simply elect not to enter into a new fixed-term lease at the end of the old one, they don’t have to explain why they don’t want to continue renting to a tenant,” Culligan said in an interview.

“Unfortunately, tenants don’t have much recourse in those situations because the landlord is under no legal obligation to enter into a new lease.”

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Fixed-term leases can be one way for landlords to skirt the temporary two per cent rent cap imposed by the Nova Scotia government in 2020, since the cap does not apply to new tenants.

While he didn’t have exact numbers, Culligan said anecdotally, he has seen a “sharp” increase in the use of these leases since the pandemic began.

Culligan said Dal Legal Aid has also seen “numerous situations” in which tenants have been pressured to switch their periodic lease to a fixed-term lease, often when the ownership of a building is changing hands.

“Landlords are not allowed to change the type of lease,” he noted. “They have no right to request that you alter or change the terms of the contract.”

Mark Culligan is a community legal worker with the Dalhousie Legal Aid Service. Elizabeth McSheffrey/Global News

He said Nova Scotia is one of the only provinces with rent control that does not also have extra protections around fixed-term leases.

In B.C., for instance, landlords are required to offer tenants a new lease at the end of their fixed-term lease, unless the landlord or a close family member plans to move into the unit.

“I would advocate for Nova Scotia to adopt this model,” he said.

Culligan said fixed-term leases have been an issue for a long time, but they’ve become a “particular problem” since the rent cap was introduced.

“Really, landlords have every incentive in the world to jack up people’s rent, and trying any trick that they can find to increase those rents,” he said.

“This is a very clear loophole in the law, and we have repeatedly brought forward this problem to (the government), and to earlier governments, and there’s simply been a lack of action on this issue.”

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Suzy Hansen, MLA for Halifax Needham and the NDP housing spokesperson, says she gets at least one or two calls a week from constituents who are concerned about their fixed-term leases.

“It’s really, really disheartening because people were really panicked about this particular type of a lease, because there was no guarantee. It was stressful for them,” she said.

With 15 months left in Nova Scotia’s temporary rent cap, Hansen said many tenants are feeling fear and uncertainty over their living situations.

“As we know right now, things are really expensive, people are struggling, so there’s a concern about whether or not they can afford to live where they’re living,” she said.

Halifax Needham MLA Suzy Hansen says she regularly hears from constituents worried about their fixed-term leases. Alexa MacLean / Global News

While the NDP is pushing for the temporary rent cap to be made permanent, Hansen said further measures are needed to close loopholes.

During the fall 2021 sitting of the legislature, the party introduced the Rental Fairness and Affordability Act, which, among other things, would have tied rent increases to units rather than tenants, so there would no longer be an incentive to get rid of older tenants.

The bill would have also tied allowable rent increases to the consumer price index, and would require the landlord to undertake a specified capital expenditure, or add new services, in exchange for further rent increases.

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Hansen said this bill would have helped level the playing field between landlords and tenants.

“I think it has to be a balance, because you can’t just have protections for one and not for the other, or not have enough for each,” she said. “And it has to be something that’s substantial for all renters and landlords.”

Ultimately, the bill didn’t pass in the legislature, but Hansen hopes to revisit it, along with similar legislation.

“We will continue to propose some more bills, especially the ones on permanent rent control,” she said.

Fixed-term leases have ‘always been an option’

Kevin Russell is the executive director of the Investment Property Owners Association of Nova Scotia (IPOANS), which represents the interests of residential investment property owners.

In an interview, Russell declined to comment on the prevalence of fixed-term leases in Nova Scotia and on landlords allegedly using them to get around the rent cap, saying he doesn’t think it would be responsible to do so without further data on the issue.

“Fixed-term leases have always been an option available to rental housing providers, and there’s no data available to support comments that there’s an increase in the use of fixed-term leases,” he said.

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Such data would be difficult to come by, as Dal Legal Aid doesn’t have a sufficiently sophisticated tracking system, and there is no official registry of rental units in Nova Scotia. While IPOANS runs its own landlord registry, it does not state what type of leases are being offered.

Russell said fixed-term leases make rental housing more accessible for those without rental and credit history, such as refugees, new Canadians, students and new renters.

“If it weren’t for fixed-term leases, it would be very difficult for tenants without a good credit history to get a home,” he said.

He said there are multiple reasons why a fixed-term lease would end, and said the “use of anecdotal evidence” is unhelpful.

‘There should be more balance’

In an interview, Lydia Houck, the executive director of Students Nova Scotia, agreed that fixed-term leases can be useful, especially for post-secondary students who might not want to stay in the province long-term.

“Having that option for a short-term commitment … I think that’s an excellent resource, and why particularly we do see students on fixed-term leases more frequently,” she said.

“But we have seen a number of cases, especially within the context of the current rental cap in the province, where that fixed-term lease might not be used appropriately, or might be used at the detriment of students.”

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Houck said fixed-term leases can perpetuate the imbalance of power between landlords and renters.

For instance, she said there have been cases where students on fixed-term leases felt they couldn’t contact their landlord with things like complaints or requests for repairs, “for fear of how it might impact their security of tenure, or their ability to re-sign their lease in the future.”

She also noted that many students are from outside of the province, and they might not be overly familiar with Nova Scotia’s Residential Tenancies Act, but she added that tenancy education is important for everyone.

“A lot of Nova Scotians, particularly young people such as students, are already under-informed when it comes to their tenancy rights,” she said.

“They may not be aware of the type of lease they’re signing, or even the implications of that.”

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In April, Students Nova Scotia released a paper with a number of recommendations for a sustainable student housing strategy. Among other things, the report called for the expansion of housing supply, more regulations around damage deposits, and improved housing data collection.

“One of the most critical barriers to the creation of evidence-based housing recommendations is the current dearth of data on housing in the province, especially within smaller geographies and across specific subgroups such as postsecondary students,” the report noted.

“This lack of readily accessible data on students’ living arrangements presents a serious obstacle to informed analysis and policy-making in the private and public affordable housing sectors.”

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For the fixed-term lease issue, the report recommended that those who wish to renew their fixed-term lease should be offered either a new fixed-term lease or a month-to-month lease option, similar to the B.C. model. It also recommended that rental increases be tied to units rather than tenants.

Houck said it’s important that landlords still have some level of protection in being able to deny a tenant’s request to renew a lease “if there is a negative situation.”

“But there should be more balance in decision-making across the two parties, which we didn’t see in the current legislation,” she said.

In a statement, Blaise Theriault, spokesperson for the Department of Service Nova Scotia and Internal Services, said the department is “always looking at ways to strengthen the Residential Tenancies Program while balancing the needs and interests of both tenants and landlords.”

“It’s why we meet regularly with our stakeholders to discuss many different topics including fixed-term leases,” said Theriault.

“Fixed-term leases are intended to give tenants an option if they need short-term accommodations and don’t want to sign into a long-term lease. It is very important tenants understand what they are signing when they enter into a lease.”

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