Impacts of The Adoption of Bill 31

On February 21, 2024, the National Assembly adopted Bill 31: An Act to amend various legislative provisions with respect to housing (the “Act“). According to the legislator, these amendments – made for the purpose of increasing Québec’s housing supply – provide for stricter regulation of rent increases in new constructions, introduce initiatives to expedite the delivery of housing projects and strengthen tenants’ rights regarding eviction and lease assignment.

These measures include, namely, a more generous compensation for evicted tenants, the possibility of claiming punitive damages for false declarations made by landlord, and a relaxation of lease assignment rules. Furthermore, these changes aim to adapt the intervention policies of the Administrative Housing Tribunal (“AHT“), to make the process fairer and more efficient.

It is important to consider these developments to understand their implications on your rights and obligations as a tenant or landlord.

Stricter Regulation of Rent Increases in New Constructions

The amendments brought under the Act primarily address the procedures surrounding rent increases in newly constructed buildings or those whose use for rental purposes results from a recent change in destination.

Essentially, the landlord of a new construction seeking to increase the rent in the five-year period following the date on which the dwelling is ready to be leased must indicate in clause F of the standardized lease agreement the maximum rent it could demand for such period. Therefore, even though the landlord must specify in the lease the maximum rent that can be charged during the first five years, it has no obligation to indicate the exact amount of increase the tenant will incur each year. Therefore, owners and tenants will need to agree on the maximum rent applicable to their new lease, as the previously agreed rent cannot be invoked by the tenant against the owner in this situation of a new lease.

When sending the renewal notice, the landlord will have to specify the amount of increase for the upcoming year, which must adhere to the maximum rent set forth in the lease. It will therefore be very important to pay particular attention to this new mandatory inclusion when landlords draft leases or send rent increase notices.

Increased Municipal Initiative to Expedite Delivery of Housing Projects

The Act now allows municipalities to authorize social, affordable or student housing projects that deviate from zoning regulations for a specific period, renewable under certain conditions. This is designed to expedite construction permits, simplify planning requirements and provide financial support to accelerate construction. It grants municipalities the power to authorize housing projects that do not comply with current zoning regulations, namely regarding size, density or other design criteria, and aims to allow the construction of social, affordable or student housing in areas where zoning regulations might otherwise restrict or prohibit such projects.

The government anticipates that waivers will be granted for a period of three (3) years, renewable for two (2) years by ministerial order, to give developers the necessary time to complete their projects. Additionally, municipalities with populations of 10,000 inhabitants or more, with a vacancy rate of less than 3%, are authorized to approve other residential projects of three units or more, also contrary to zoning regulations, for an initial period of three years, renewable for two years by ministerial order.

Furthermore, accessory dwellings, such as apartments in garages or additional units in existing houses, also benefit from a new exception. For a period of five years, these accessory dwellings will be automatically allowed, and as such, owners will not need to obtain special permits or navigate through complex approval processes. This legislative adaptation aims to encourage the creation of additional housing without requiring major new constructions, thereby increasing the supply of available housing.

However, because of the very recent adoption of the Act, the terms of these new waivers and their implementation within municipal authorities have not yet been specified. We will update this article with any further developments.

Measures to Regulate Eviction and Apply Sanctions

The main objective of these legislative changes is to improve tenant conditions, which involves several measures. As such, a landlord wishing to evict a tenant or repossess a dwelling will have to compensate the tenant for reasonable moving expenses as well as pay an indemnity in an amount ranging from a minimum of three months to a maximum of 24 months’ rent. This amendment applies to Article 1685, paragraph 1 of the Civil Code of Québec and significantly increases the compensation to be paid by the landlord. In fact, whereas the previous legislation required the payment of three months’ rent only, the landlord could now be required to pay an additional compensation of one month’s rent per year of occupancy, which obviously represents a much higher amount.

Additionally, these new legislative measures now authorize the tenant to claim damages for any repossession or eviction unless the landlord is able to demonstrate it acted in good faith. This represents a significant departure from the usual presumption of good faith applicable in civil law. This amendment applies to Article 1968 of the Civil Code of Québec and adds an additional burden on the landlord, who must now prove it acted in good faith when repossessing a dwelling or evicting a tenant, thereby deviating from the principle of presumption of good faith well known in civil law.

Special Attention to the Lowest Rent Paid Notice

By its amendments to Article 1988 of the Civil Code of Québec, the legislator further enhances tenants’ rights by enabling them to demand punitive damages when the landlord intentionally fails to notify the new tenant of the lowest previously paid rent or the last rent should the dwelling have been vacant for more than 12 months (clause G of the lease), or if the landlord makes a false statement in this regard. We assume that the burden of proof will be on the tenant as to the landlord’s “intentional” omission of this practice, but we will, however, remain attentive to developments or interpretations on this subject.

New Measures Aiming to Facilitate Lease Assignments

New measures have been introduced in the Act for the purpose of making lease assignments more flexible and to counter subletting and lease assignments for profit. Under the amended provision, the tenant still has the right to request the landlord’s consent to a lease assignment, but the latter now benefits from an expanded right to refuse consent for any reason whatsoever. As such, should the landlord refuse to consent to the lease assignment, the tenant would be released from its contractual obligations and the lease may be terminated at the landlord’s discretion. Although the landlord previously had the right to refuse its consent to a lease assignment on serious grounds, this notion is now expanded by no longer requiring the landlord to justify its refusal in the same manner.

Requirements regarding the notice of assignment of lease given by a tenant have also been specified to provide that the tenant must now indicate the projected date of assignment, thereby allowing the lease to be terminated on such date should the landlord refuse its consent.

Relaxation of Intervention Measures of the Administrative Housing Tribunal

Finally, the amendments adopted in the Act aim to make the rules governing representation before the Administrative Housing Tribunal (AHT) more flexible. They specifically include the possibility for an AHT member, on its own initiative, to raise the exception resulting from prescription by allowing the parties to respond to it. Furthermore, the AHT would be authorized to issue enforcement orders even if the costs exceed its monetary competence ceiling, i.e., an amount not exceeding $100,000.

However, this upper monetary limit will not apply in certain cases expressly provided under the Act. In fact, the AHT will now be able to hear cases where the value involved exceeds the said amount of $100,000 in any of the following situations: recourse in case of non-performance causing damages, recourse for landlord’s failure to carry out works required under the lease, recourse to determine the habitability of the dwelling, and recourse to compel the landlord to make the dwelling fit for habitation.

Conclusion

In summary, the adoption of the Act entails significant revisions to the customs, obligations and rights regarding rental for all parties involved. Our team remains available to discuss this with you and to analyze any impact on your internal practices.

By Selma Adam