Ontario landlords who own older buildings know the problem: costs keep climbing — new roof, new boiler, upgraded electrical — but the annual rent increase guideline only allows a small percentage bump. If you've invested significantly in your property, the regular guideline may not come close to covering your increased costs.
That's where above-guideline rent increases (AGIs) come in.
An AGI is an application to the Landlord and Tenant Board to raise rent beyond the standard annual guideline. It's not easy, it takes time, and it's not available for every type of expense — but for landlords who qualify, it can meaningfully improve the financial sustainability of a rental property.
The Baseline: What the Guideline Covers
Ontario sets a rent increase guideline each year, tied to inflation. For most years it sits between 2% and 3%, though it can vary. Landlords can apply this increase to any existing tenancy with 90 days written notice using an N1 form — no LTB approval required.
The guideline applies to most private residential tenancies. (Note: units first occupied after November 15, 2018 are exempt from rent control entirely, so AGIs aren't relevant for those.)
If you want to increase rent above the guideline for a rent-controlled unit, you need an AGI.
What Qualifies for an Above-Guideline Increase?
The LTB will consider an AGI application under three categories:
1. Extraordinary Increases in Municipal Taxes or Utilities
If your property taxes or utilities costs have increased sharply — beyond what the guideline accounts for — you may be eligible. This category is straightforward but less common, since it requires demonstrating an increase well above normal.
2. Capital Expenditures
This is the most common AGI path for landlords. A capital expenditure is a major improvement or replacement that extends the useful life of the building. Think:
- Roof replacement
- New boiler, furnace, or HVAC system
- New plumbing or electrical work (major, not routine repairs)
- Foundation repairs
- Window replacements (building-wide)
- Elevator upgrades
Important distinction: Routine repairs and maintenance do not qualify. Fixing a leaky faucet, painting a unit, or patching drywall — these are maintenance expenses, not capital expenditures. The LTB distinguishes carefully between the two.
3. Operating Costs for Security Services
If you've added new security services to the property (like a staffed security guard or new access system), these costs may support an AGI.
How to Apply: The L5 Application
To apply for an AGI, you file an L5 application with the Landlord and Tenant Board.
The application requires you to provide:
- A detailed list of the capital expenditures or cost increases
- Invoices, contracts, and proof of payment for all claimed costs
- The date each expense was incurred
- The number of units in the building (costs are allocated across all units)
The LTB will schedule a hearing. Tenants will be notified and have the right to participate, challenge your evidence, or argue that the expenses were actually maintenance (not capital).
Filing fee: Currently $201 per building.
How the Increase Is Calculated
The LTB doesn't just let you pass all costs to tenants. They use a formula that:
- Calculates the allowable capital expenditure amount
- Spreads it across the number of units in the building
- Amortizes it over the useful life of the improvement (usually 5–15 years depending on what it is)
- Expresses it as a percentage of current rent
The result is an approved percentage increase that gets added on top of the regular guideline increase.
For example, a new roof on a 10-unit building might result in an additional 3–5% increase per unit, applied over several years.
What Tenants Can Do
Tenants have real procedural rights in an AGI hearing. They can:
- Attend and present evidence
- Challenge whether an expense was capital vs. maintenance
- Argue that the work was required due to lack of ordinary maintenance (and therefore shouldn't qualify)
- Raise the fact that they weren't notified of the work
This last point matters: if the LTB finds that capital work was done primarily because you neglected routine maintenance, they may reduce or deny the AGI. The bar is higher than it looks.
Come to the hearing prepared with organized invoices, contracts with licensed contractors, proof of payment, and photos of the work.
The Timeline: Plan Ahead
AGI applications are not fast. From the time you file to the time you receive an order:
- Filing to hearing: 6–12 months is common, given current LTB backlogs
- Hearing to written order: Several additional weeks
- Retroactive increases: In some cases, the LTB can make increases retroactive to the filing date — meaning tenants owe back payments for the time between filing and the order
Because of the timeline, landlords often continue the regular guideline increase while the AGI is pending and collect any retroactive amounts after the order is issued.
Practical Advice for London, Sarnia, and St. Thomas Landlords
In the London and Sarnia rental markets, older housing stock is common — many pre-1990 properties need significant capital investment just to maintain habitability. AGIs are one tool that can make those investments more financially viable.
A few tips:
- Document capital work from day one. Get licensed contractors, keep invoices, and photograph before and after. You can't reconstruct this documentation after the fact.
- Don't confuse capital with maintenance. When you're budgeting, track which expenses are capital-eligible separately.
- Talk to a paralegal before filing. LTB hearings for AGIs can be complex, and a paralegal who specializes in landlord-tenant matters is usually worth the cost.
- Notify tenants early. While not legally required before filing, informing tenants that you've done major capital work — and that you may be applying for an AGI — tends to reduce conflict at the hearing.
Is It Worth It?
For small landlords with a single rental property, the time and cost of an AGI application may outweigh the benefit unless the capital expenditure was very significant. For multi-unit buildings where costs are spread across many tenants, the math usually makes more sense.
If you're managing multiple properties in the London, St. Thomas, or Sarnia area and you're unsure whether an AGI application is right for your situation, a property manager like Prospera Properties can help you assess whether your recent capital work qualifies and whether the process is worth pursuing. Get in touch with us if you'd like to talk through your options.