Ontario rent increase rules: N1 notices, guidelines & rent control

The annual guideline: the headline number

For rent-controlled units, a landlord may increase the rent once every 12 months, by no more than the provincial guideline — 2.1% for 2026 (down from 2.5% in 2025; always confirm the current year's figure on Ontario.ca). The 2027 guideline has already been announced at 1.9% — the figure that applies to any increase taking effect on or after January 1, 2027.

Three hard rules apply to every increase, controlled or not: at least 90 days' written notice, no more than one increase per 12-month period, and the increase takes effect on the proper date. The standard way to give notice is the N1 form (Notice of Rent Increase).

The 2026 guideline in numbers: a worked example

Percentages are abstract until they hit your bank account. Take a tenant paying $2,000 per month in a rent-controlled unit: 2.1% of $2,000 is $42, so the maximum lawful new rent for 2026 is $2,042 per month. On a $1,500 rent, the cap is $31.50, for a new rent of $1,531.50. The landlord rounds to the nearest dollar or cent — what matters is that the percentage increase doesn't exceed the guideline.

The guideline is tied to the Ontario Consumer Price Index and can never exceed 2.5% by law, which is why it moves a little each year. A new figure is typically announced in the summer for the following calendar year, so landlords planning a January increase should check Ontario.ca in the fall rather than assuming last year's number.

Timing matters as much as math: the 90-day notice must be given at least 90 days before the increase takes effect, and the effective date can't be earlier than 12 months after the last increase (or the start of the tenancy). Serve the N1 late and the whole increase shifts forward — you can't backdate it.

Which units are rent-controlled?

Rent control in Ontario applies to most residential units first occupied for residential purposes before November 15, 2018. Units first occupied after that date — including new condos, new basement apartments, and most new builds — are exempt from the guideline cap.

Exempt does not mean unregulated: the 90-day notice rule and the 12-month frequency rule still apply to newer units. A landlord of an exempt unit can raise rent by any amount, but must still do it properly — and tenants can still dispute bad-faith or retaliatory increases at the LTB.

Exempt units: the N2 notice and what “any amount” really means

For units outside rent control, landlords use the N2 form (Notice of Rent Increase — Unit Partially Exempt) instead of the N1. The mechanics are identical — 90 days' written notice, once per 12 months — but the percentage line has no cap.

“Any amount” doesn't mean “any behaviour.” An increase given because the tenant complained to the city about repairs, joined a tenant association, or exercised another legal right can be challenged as retaliatory at the Landlord and Tenant Board. And the economics still apply: a 25% jump on a good tenant often costs more in turnover and vacancy than it gains, so negotiation works both ways — tenants in exempt units should always counter-offer in writing before accepting a steep increase.

One more check: “first occupied after November 15, 2018” is about the unit, not the building. A newly finished basement apartment in a 1970s house is exempt; a unit in that same house rented since 2010 is covered — even if you're a new tenant. When in doubt, the tenancy agreement and the unit's rental history decide.

Above-guideline increases (AGIs)

A landlord of a rent-controlled unit who wants more than the guideline must apply to the Landlord and Tenant Board for approval (Form L5) — and can only do so on specific grounds:

• An extraordinary increase in municipal taxes or charges.
• Eligible capital expenditures — major repairs, renovations, or additions (not routine maintenance).
• Costs of providing security services.

Two things tenants should know: the landlord must apply before charging the higher rent, and the increase is not lawful until the Board orders it. If your landlord simply starts collecting above-guideline rent without an LTB order, treat it as an illegal increase (see below) — the AGI application is the landlord's burden, not yours.

Rent increases and your rent deposit

Rent increases have a lesser-known side effect: the last month's rent deposit. When the guideline pushes your rent up, the landlord is entitled to ask you to top up the deposit by the same amount — so a $42 increase can come with a $42 top-up request, keeping the deposit equal to one month's current rent.

In the other direction, the landlord owes you interest on the deposit every year at the guideline rate — 2.1% for 2026. In practice the interest and the top-up often roughly cancel out, which is why many tenancies settle it with a simple written acknowledgment rather than money changing hands. Whatever you agree, get it in writing: deposit disputes are among the most common files at the LTB, and they turn entirely on paperwork.

How to deliver a valid N1 notice

A surprising number of increases fail on delivery technicalities. The N1 must state the current rent, the new rent, the percentage increase, and the effective date — at least 90 days after the tenant receives it. Count carefully: if the notice is mailed, add mailing days; personal delivery and the tenant's written acknowledgment are safest.

The effective date cannot be earlier than 12 months after the last increase (or the start of the tenancy). An N1 with the wrong effective date is void, and the landlord has to start over — another 90 days.

Landlord checklist: raise rent without it backfiring

Before serving the notice, run through these five checks — each one is a common reason increases get thrown out:

• Has it been at least 12 months since the last increase (or the tenancy began)?
• Is the unit rent-controlled? Use the N1 for covered units, the N2 for exempt ones.
• Is the percentage at or under the current guideline (2.1% for 2026) — or do you have an LTB order for an above-guideline increase?
• Is the effective date at least 90 days after the tenant will receive the notice?
• Does the notice show the current rent, new rent, percentage, and effective date — and can you prove service?

If any answer is no, fix it before serving. A void increase doesn't just delay the money — it resets the 90-day clock and tells the tenant (and any future adjudicator) that the paperwork wasn't taken seriously.

Tenant options if the increase is wrong

If you receive an increase above the guideline without LTB approval, or with short notice, you don't have to just accept it. Common approaches: pay the lawful amount and apply to the LTB for a rebate of the overcharge (Form T1), or dispute it if the landlord files. Keep the N1, your lease, and rent receipts — adjudicators decide these cases on paperwork.

Tenants in newer, exempt units: you can't cap the increase, but you can negotiate, and you can challenge increases given in retaliation for asserting your rights.