DON'T become a LANDLORD in BC | Surrey REALTOR® breaks his silence

So you're either a landlord in British Columbia or you're thinking of becoming an investor and you're worried because you maybe don't know a lot about being a landlord or you're worried more so about the rules of Residential Tenancy Act. This video today is all about a caution to anybody looking to become a landlord and get involved in the game of renting properties out to people. It's going to be less about what happens if you find a bad tenant, but more about how Tenancy works in BC and how it is absolutely 100% completely lopsided in favor of the tenant.

If you want to know all about the Gong Show that is being a landlord in British Columbia, this is definitely the video for you. What's going on, everybody? It is Darin Germyn with the Germyn Group, where we know you've only got one chance to either buy or sell your next home. So we're here to help you get it right. I probably got you very interested because being a landlord in British Columbia is pretty lopsided.

There is a definite pendulum swing that has happened over the years, over the course of the last few years, where tenants really got the law and the Tenancy Act completely on their side. Many of our clients that are investors are becoming less and less interested in being a landlord because of the Tenancy rules and how much they favor the rights of tenants over the rights of landlords. The Residential Tenancy Office looks at a landlord a lot like a business and they treat the landlord as such. However, they don't really seem to think that the tenant is in a business relationship with the landlord. Thus, they have given them far more rights than the landlords to help what they think is protecting them. 

While it may be protecting the tenants, it is leaving landlords exposed, out of money, and completely frustrated with the system. So without further Ado, here is all the reasons of why it is absolutely terrible to be a landlord in British Columbia. So we mentioned tenant rights generally and the tenants have a lot of rights and none of them think they do, but they do. Tenants have a ton of rights when it comes to being a tenant in British Columbia. As a landlord, one of the biggest problems is there is no such thing as a central tenant registry.

This means you're really kind of going in blind with whoever you're trusting your property or your home to rent it out, that they're good people. They're going to be paying their rent on time, and they're also going to take good care of the property, generally. There is absolutely no way for you to do research on the rental history of these people outside of maybe calling some of the references that they provide you on their own accord, who you really hope that their previous landlords to begin with and really checking their credit if they will allow you to do so. During the tenancy, you're going to take a 1/2 months rent for damages. And I think we all are completely aware of exactly how much a 1/2 months rent will cover in actual damages. But for those of you watching that or not, let's say the tenancy was anywhere between $2,000 - $3,000. 

This means your damage deposit is only half of that. So let's say anywhere between $1,000 to $1,500, which I think you and I both know in this day and age covers barely anything. $1,000 won't even replace a wrecked or stained carpet, or barely make a dent in junk left over after a tenancy if that problem was to occur. So a 1/2 months damage deposit is really problematic. Not only that, but during the tenancy, you likely will want to periodically give your tenants a rent increase because hey, your prices go up and really so should theirs. 

Now, whenever you're providing a notice to the tenants regarding rate increases, you have to deliver that on paper. That's right, people like it's the 1980s. We have to deliver that notice on paper, and it also has to be given 3 months in advance of the rate increase. Here's an even bigger problem for landlords. You are only allowed to raise the rent based on what the BC Government deems allowable each year. 

This is kind of crazy because in the current environment we're in filming this video in March of 2022, inflation is measuring in at an average of 5.1% as of the end of January. Looking on the BC Government Tenancy website, you can see that the allowable rent increase for the year of 2022 is only 1.5%. So your expenses are all going up as well as the mortgage rates. However, the expenses of the tenants are only going up at 1.5%, which is a 1/3 less than what the inflation currently is. This also gets into rents not matching what the market dictates. 

So as an example, as someone who helps someone sell homes and buy homes all day in Surrey and surrounding areas, we buy and sell homes based on what the market rates are at the time. If the market goes up, the home is worth more money, and if the market goes down, it'll sell for less money. But when you're renting a property, if you're in a current tenancy agreement, that's not how it works for both the tenant and the landlord. Once you put someone into a tenancy agreement, you are stuck with that rental amount except for the allowable increase set by the BC government. Now, if they choose to move out, you can re-rent that unit at any time for whatever you choose.

However, during the period of the time that tenant is in the property, you're kind of stuck where you initially put them in. This means you're no longer necessarily charging market rent for the property. The tenant has the full right, if the market was to offer cheaper rent elsewhere, to just cancel the tenancy agreement and go elsewhere. However, if we see real estate values increase just like they did in 2020 and 2021, you're stuck at the current value. So your property may have doubled in value, thus allowing you to double your rent, essentially. 

But you can't do that now. That might be good, that might be bad, that's all okay. But that is problematic for a landlord that they're not able to get market rent. This goes into another issue. That was something the BC government took away in about 2018, and that is the ability for a landlord to put a tenant into a fixed term contract for a rent. What a fixed term contract is saying that you essentially as a tenant can rent this home for, let's say, a period of one year. And after that time, you can either choose to move out or we can try and renegotiate the contract. Folks. That no longer exists.

And that is very problematic for a landlord because again, it takes away your ability to capture market rent, and it takes away your ability to get rid of tenants that aren't so great. Sure, they might pay their rent on time, but they might not be the type of people that you want living in your home because they maybe don't take care of it. Maybe they're always late on their rent or any other problems that landlords generally have with their tenants. You can't remove them because the fixed term doesn't exist. There is no ending it unless for a couple of specific reasons. 

But typically it's because either the home has sold or the tenant has decided to move out. Now, when it comes time to end the tenancy, whether it's for good reasons or bad reasons, there can be some major challenges there for a landlord as well. Let's say you've sold the property and you are required to give that tenants two months notice, two full months notice for them to vacate the property, which is fair on its own. They've got to go find a new place because somebody else is going to go occupy the property. However, you, as the landlord, are responsible to pay them one month of free rent because of the inconvenience and the moving costs associated with them having to leave the property. 

I'm not saying that's not fair. I'm just saying that's an expense that landlords have to incur, which they probably would prefer not to. Selling a home with a tenant in it can be very challenging as well. Because of course, they probably don't show the home in the same regard that a home seller that lives in that home, they might not clean it up as nicely. When people come, they might not be as flexible with showing times and there's all these other things that can really impact the sale. 

What happens though, if you're removing somebody for not so great reasons, like maybe they're not paying the rent or they're damaging the property, or they're contravening terms of the tenancy agreement that you set with them? This can be incredibly difficult and very financially painful for you as a landlord. While the Tenancy branch says that you as a landlord can recover your cost of having to remove someone from your property for reasons of unpaid rent or just generally the cost of having them removed, this is a lot easier said than done. I myself had a terrible tenant years ago in one of my properties that I had to have removed because they were simply not paying the rent again and again and again, month after month. And by the time that I went to every residential Tenancy office and tried to have this person removed after meeting with the office and going to different levels of government to have this done, it was costing me more money than it was worth that I was missing.

Not only that, it was such a painful experience, I decided just to move on with my life. I'd rather be happy than try and recover the money that I was still owed. An even bigger problem comes into play when you cannot remove the tenant or the tenant chooses not to leave. This can get very expensive and cost you a lot of headache. If the tenant stopped paying rent and you gave notice to them to vacate the property and unfortunately they choose not to you're in a pretty tough scenario, if the tenant doesn't leave, you as a landlord have to apply to the Supreme Court of British Columbia to get something called a Writ of Possession.

Once you have that Writ of Possession, you have to serve it to the tenant and give them the appropriate notice to have deemed be receiving of the document. Lastly, you are also responsible to hire your own bailiff company to come and remove the tenant from the property, as well as any junk that may be left behind, as well as any cleaning and repairs that may need to be done. As you can imagine, this can get incredibly expensive and is incredibly frustrating. Again, it's said that you can go back after the tenant to collect all the money owed for all the headaches and problems of removing them, but in reality, you probably know as well as I do it's a lot easier sounding than it really is. So there you have it, everybody. 

Those are some of the main challenges that I see all the time for people entering tenancy agreements as landlords and the challenges they face all the time. There, of course, is a lot of rewards to being a landlord as well. You get to meet some great people, you get to have an investment property and hopefully experience incredible equity growth as well as have the property essentially pay for itself from some really great tenants. The majority of tenants out there are really great people and they are such an asset to have in our community because these are people who maybe have no intention to purchase but want to live in the community or someone that does want to purchase and they're just waiting to save their money up so they're able to do so and you're able to help them out a little bit. I think in watching this video and hearing about all the detriments that the BC government has built in to being a landlord over the last few years, though, certainly serves its purpose in letting you know exactly what you could be getting into when you decide to become a landlord in BC.

Let me know in the comments section below what your concerns about being a landlord or even being a tenant might be in this current environment or any horror stories that you might be able to share about being a landlord in the Lower Mainland. I'm Darin Germyn from the Germyn Group. You've only got one chance to buy or sell your next home, so we're here to help you get it right.

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