Ontario's rent increase guideline sets the maximum percentage a landlord can raise rent each year without approval from the Landlord and Tenant Board. For 2025, the guideline is 2.5%. However, when landlords face significant capital expenditures — such as replacing a roof, modernizing elevators, or upgrading building systems — the guideline increase is often insufficient to cover the actual costs. The gap between permitted rent increases and real building maintenance costs is a persistent challenge for Ontario landlords.
An Above Guideline Increase (AGI) allows landlords to apply to the LTB for permission to raise rent beyond the annual guideline. This process is governed by sections 126 and 127 of the Residential Tenancies Act, 2006 and requires a formal A1 application, comprehensive supporting documentation, and an LTB hearing.
Grounds for an Above Guideline Rent Increase
The RTA allows landlords to apply for an AGI based on three specific grounds:
1. Eligible Capital Expenditures
This is the most common reason landlords apply for an AGI. Capital expenditures are major repairs, renovations, or replacements that extend the useful life of the building or its systems. To qualify, the expenditure must have been incurred within the 18 months prior to the date of the AGI application, and it must not be routine maintenance or a cosmetic improvement.
2. Extraordinary Increases in Municipal Taxes and Charges
If the property has experienced a significant increase in municipal taxes or charges (such as a property tax reassessment, water rate increase, or sewer surcharge), the landlord may apply for an AGI to offset the increased costs. The increase must exceed the normal year-over-year change to be considered extraordinary.
3. Increases in Security Services Costs
Landlords who have contracted security services that have increased in cost — or who have newly implemented security services in response to safety concerns — may apply for an AGI to cover these additional expenses.
Eligible Capital Expenditures and Cap Percentages
The following table outlines common eligible capital expenditures, their typical useful life as assessed by the LTB, and the maximum AGI percentage that can be applied per year:
| Capital Expenditure | Typical Useful Life | Max AGI Per Year | Eligible? | Key Documentation |
|---|---|---|---|---|
| Roof replacement | 15-25 years | Up to 3% | Yes | Contractor invoice, building permit, before/after photos |
| Window and door replacement | 20-25 years | Up to 3% | Yes | Contractor invoice, energy audit, unit-by-unit breakdown |
| Elevator modernization | 15-25 years | Up to 3% | Yes | Engineering report, elevator inspection certificate, invoice |
| Boiler/furnace/HVAC replacement | 15-20 years | Up to 3% | Yes | Equipment specifications, invoice, HVAC permit |
| Plumbing system overhaul | 20-30 years | Up to 3% | Yes | Plumber invoice, engineering assessment, permit |
| Electrical system upgrade | 20-30 years | Up to 3% | Yes | Electrical contractor invoice, ESA certificate, permit |
| Parking structure repair | 10-20 years | Up to 3% | Yes | Structural engineer report, contractor invoice |
| Balcony restoration | 10-20 years | Up to 3% | Yes | Engineer report, invoice, building permit |
| Fire safety system upgrade | 15-20 years | Up to 3% | Yes | Fire marshal report, invoice, inspection certificate |
| Lobby renovation (cosmetic) | N/A | N/A | No | Cosmetic improvements do not qualify |
| Landscaping | N/A | N/A | No | Routine maintenance, not a capital expenditure |
| Painting (routine) | N/A | N/A | No | Routine maintenance |
AGI Limits and Phase-In Rules
The LTB limits above guideline increases to a maximum of 3% above the guideline per year. If the calculated AGI exceeds 3%, the increase is phased in over multiple years (up to three years). This means the total increase is spread across annual installments rather than applied all at once.
AGI Calculation Example
A landlord replaces the roof on a 50-unit building for $500,000. The LTB calculates that this represents a 7.2% increase spread across all units. Since the maximum per year is 3% above guideline, the increase is phased: Year 1 = 3%, Year 2 = 3%, Year 3 = 1.2%. Each year, the AGI increase is applied on top of the regular guideline increase. After the useful life period expires, the AGI portion is removed and the rent decreases by that percentage.
How to Apply for an Above Guideline Increase
The process for applying for an AGI involves several steps and requires meticulous documentation:
- Gather documentation — Collect all invoices, contracts, proof of payment, engineering reports, permits, and correspondence related to the capital expenditure or cost increase. The LTB requires comprehensive proof that the work was completed, paid for, and qualifies as a capital expenditure.
- Complete the A1 application — The A1 form is the landlord's application for an above guideline rent increase. It requires detailed financial information, a breakdown of costs per unit, and identification of the specific ground (capital expenditure, tax increase, or security cost increase).
- File with the LTB — Submit the A1 application to the Landlord and Tenant Board with the $208 filing fee.
- Serve tenants — All affected tenants must be served with a copy of the application and the Notice of Hearing. For multi-unit buildings, this means serving every tenant in the building.
- Attend the hearing — Present evidence supporting the AGI at the LTB hearing. Be prepared to answer questions from the adjudicator and respond to any objections from tenants.
- Implement the increase — If approved, serve a proper N1 (Notice of Rent Increase) with at least 90 days' notice before the increase takes effect.
What Documentation Is Required?
The LTB requires comprehensive documentation to evaluate an AGI application. Insufficient documentation is one of the most common reasons AGI applications are denied. Required documents include:
- Detailed invoices and receipts for all work completed, showing the date, scope, and cost
- Signed contracts with contractors or suppliers
- Proof of payment — cancelled cheques, bank statements, or credit card statements
- Before and after photographs documenting the condition of the building component before and after the work
- Engineering or inspection reports confirming the work was necessary and extends the useful life of the building
- Building permits from the municipality, if applicable
- Municipal tax assessments showing the increase (for tax-based AGIs)
- Security service contracts and invoices (for security-based AGIs)
- A cost allocation spreadsheet showing how the expenditure is distributed across units
Common Reasons AGI Applications Are Denied
- Routine maintenance — The LTB classified the work as routine maintenance rather than a capital expenditure. For example, patching a roof versus replacing it.
- Insufficient documentation — Missing invoices, contracts, proof of payment, or engineering reports.
- 18-month deadline missed — The expenditure was incurred more than 18 months before the application date.
- Work benefits vacant units only — The expenditure primarily benefits only vacant units or new tenants, not existing tenants.
- Outstanding maintenance issues — The landlord has unresolved maintenance complaints from tenants, which the LTB may consider when evaluating the application.
- Incorrect cost allocation — The costs are not properly allocated across units based on size or usage.
AGI for Property Management Companies
Property management companies managing multi-unit residential buildings frequently file AGI applications on behalf of their clients. The process requires coordination between the property manager, the building owner, and the contractors who performed the work. Ontario Eviction Services handles AGI application preparation and filing for property managers in Toronto, Mississauga, Ottawa, and across Ontario.
For general LTB filing support, help with tenant disputes related to rent increases, or full eviction services, contact us today.