When you can apply, how the LTB process works, and what to expect
Ontario's rent guideline caps most annual increases at 2.5% in 2026. When a landlord's actual costs exceed this — due to major capital work or extraordinary operating cost increases — an above-guideline increase application is possible. Here's how.
Major capital expenditures (MCEs): significant capital replacements benefiting tenants — new roof, elevator modernization, building envelope repairs, boiler replacement, underground parking remediation. Extraordinary increases in municipal taxes or utilities that the landlord pays directly. Security services costs not previously included in rent. Routine repairs and general maintenance do not qualify — the work must be capital in nature, replacing rather than maintaining. The threshold and per-unit cost allocation formulas are set by the LTB.
File an L5 application at the Landlord-Tenant Board (online at ontario.ca/LTB). Include all supporting documentation: contracts and invoices for capital work, property tax statements, utility bills showing extraordinary increases. All affected tenants receive notice of the application and have the right to file a response and attend a hearing. The LTB reviews the application and issues an order specifying the approved increase amount — which may be less than applied for. Approved AGIs are typically amortized over three years.
Tenants frequently challenge AGIs on the basis that: the capital work was not necessary or could have been avoided with proper maintenance, the costs claimed were not reasonable or competitive, the tenants did not sufficiently benefit from the improvement, or the per-unit allocation method was incorrect. Many AGI applications are reduced at hearing when tenants engage. Landlords who proceed without proper documentation and legal advice frequently see significant reductions in the approved amount.
AGI applications are time-consuming, contentious, and expensive — budget $3,000–$8,000 in legal and filing costs including paralegal representation. For large buildings with significant capital work ($500,000+), the per-unit increase often justifies the process. For small landlords with one to four units, major capital expenses may be better managed through purchase price negotiation (if you knew before buying) or direct negotiation with a long-term tenant. Always consult an LTB-experienced paralegal before filing.
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Read All ReviewsThese guides are written for Canadian buyers, sellers, renters, and landlords and are kept current for 2026. They are for informational purposes only — not legal, tax, or financial advice. Rules vary by province; confirm details with your lawyer, accountant, or licensed real estate professional before making decisions.