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Can Landlords Pass the Cost of Water Heaters and Other Service Rentals to Tenants in Ontario?

The Residential Tenancies Act (RTA) is a comprehensive piece of legislation that establishes a detailed framework for the rights and responsibilities of both landlords and tenants. One of the key provisions under the Act is the definition of 'utilities' and 'vital services'. This article will explore how landlords can pass on the cost of water heater and other service rentals to the tenant under the RTA's definition of 'utilities' and 'vital services'.

According to the RTA, 'utilities' are defined as heat, electricity, and water, while 'vital services' refer to hot or cold water, fuel, electricity, gas, and heat during specific periods of the year as prescribed by regulations. These definitions inherently make it permissible for landlords to transfer the costs of certain utilities, such as water heaters, to tenants, subject to specific conditions and restrictions.

To legally transfer the cost of utilities like water heaters to tenants, landlords must first have a clear, written agreement specifying such terms at the commencement of the lease agreement. This could be a standalone agreement or clauses within the rental lease agreement. It must clearly outline that the tenant is responsible for paying the costs of specific utilities or services.

It is crucial to note that for new tenancies, the landlord must inform the prospective tenant before they enter into a lease agreement if the tenant will be responsible for paying for utilities. This should be explicitly stated in the lease agreement. Failure to do so could result in the landlord being held responsible for such costs.

When passing on the cost of a water heater rental, the landlord must ensure that the rental charge is directly related to the actual cost of the service. Landlords cannot mark up the cost or charge additional fees. The rental charge should reflect the actual amount the landlord pays to the service provider.

It is also essential to remember that the transfer of these costs to the tenant does not absolve the landlord from their responsibility to maintain and repair such equipment. Landlords are still required to ensure that the equipment is in good working order and meets any applicable safety standards.

Moreover, the RTA stipulates that landlords cannot withhold or interfere with the reasonable supply of any vital service, even if the tenant is responsible for its cost. If a dispute arises between the landlord and the tenant regarding the payment of utility costs, the landlord cannot disrupt the service as a retaliatory measure.

Indeed, a lease agreement is more than just a document; it is a legally binding contract that can have significant implications for your financial future as a landlord. It's crucial to consider every clause and condition, as misinterpretations or ambiguities can lead to disputes or unforeseen costs.

One notable example of this is the case of Mailes v Pennfund Corp, 2020 CanLII 117946 (ON LTB). In this case, the tenants were paying the water heater rental charges as part of their gas bill since the start of their tenancy in October 2016. The water heater was a fixed asset that existed before the tenancy began and would remain a fixed asset after the tenancy ended.

Due to ambiguities in the tenancy agreement, the decision fell in favour of the tenants, and the responsibility for the water heater charge was deemed to rest with the landlord. The landlords' failure to reimburse the tenants for the rental charge was considered a substantial interference with the tenant's rights.

This case underscores the importance of clarity in lease agreements. Each clause's definition and implications can vary significantly based on the circumstances and the precise language used. Ambiguity can often be interpreted in favour of the tenant, which could potentially result in additional costs for the landlord.

Given these potential implications, it is highly recommended to seek professional legal advice when drafting or revising a lease agreement. This is where Dean's Paralegal Services & Lawyers can be an invaluable resource. Their team of experts can provide you with the guidance and insight needed to navigate the complexities of the Residential Tenancies Act and lease agreements, ensuring your interests as a landlord are well protected.

In conclusion, while it is possible under the RTA for landlords to pass the cost of a water heater and other service rentals onto tenants, it must be done in a transparent, fair, and legal manner. It involves clear communication, written agreement, and adherence to the Act's provisions. As always, both landlords and tenants are encouraged to familiarize themselves with the RTA to understand their respective rights and responsibilities fully.

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