An above-guideline increase (AGI) is the only way a landlord can lawfully exceed the guideline without your agreement — and only with an order from the Landlord and Tenant Board, on a Form L5 application, on three grounds and no others: an extraordinary increase in municipal taxes and charges, eligible capital expenditures, or the cost of security services provided by people not employed by the landlord.
The capital-expenditure and security portion is capped at 3% above the guideline in any 12-month period, with any excess spread over up to two further years at up to 3% each. The municipal tax ground is not capped at all.
You still get an N1, you still get 90 days, and until the order takes effect you only pay the lower of the noticed rent and what the landlord could charge without applying. Do not start paying the AGI amount before there is an order.
What are the grounds for an above-guideline increase?
Section 126(1) permits an application “for any or all of the following”:
- An extraordinary increase in the cost for municipal taxes and charges for the residential complex or any building in which the units are located.
- Eligible capital expenditures incurred respecting the complex or one or more of the units in it.
- Operating costs related to security services provided in respect of the complex by persons not employed by the landlord.
That is the complete list. A fourth ground — extraordinary increases in utility costs — was removed by the Rental Fairness Act, 2017 effective 1 January 2018, and survives only for applications made before that date. Rising insurance premiums, higher mortgage costs, general inflation and a landlord’s own labour are not grounds.
What counts as an “extraordinary” tax increase?
It is defined by regulation, not by impression. O. Reg. 516/06, s.28(1): an increase in the cost for municipal taxes and charges “is extraordinary if it is greater than the guideline plus 50 per cent of the guideline.”
So the threshold moves with the guideline each year:
| Year | Guideline | Threshold (guideline + 50% of guideline) |
|---|---|---|
| 2026 | 2.1% | 3.15% |
| 2027 | 1.9% | 2.85% |
A tax increase below the threshold is not extraordinary and cannot found an application. Where the guideline is zero, s.28(3) deems any increase extraordinary.
The 3% cap, and the one ground it does not apply to
Section 126(11) does two things at once, and they are usually reported as one.
(a) The cap. Where the percentage justified by security services and eligible capital expenditures is more than 3%, the amount taken in the first year “shall not be more than 3 per cent.”
(b) The carry-forward. The order must then specify a percentage that may be taken “in each of the two 12-month periods following” — and again, no more than 3% in each. Guideline 14 states the effect plainly: 3% in the first year, with any remainder over “a maximum of two additional years at 3% each year.” Three years total, 3% above guideline each year, and then it stops.
The municipal tax ground is different. O. Reg. 516/06, s.33(4) says the section “does not prevent a landlord from increasing the rent charged by more than 3 per cent… with respect to an extraordinary increase in the cost for municipal taxes and charges.” Guideline 14 confirms: on that ground “the landlord may take the entire increase in the first year.”
| Ground | Annual cap above guideline | Spread over |
|---|---|---|
| Eligible capital expenditures | 3% | Up to 3 years |
| Security services (external providers) | 3% | Up to 3 years |
| Extraordinary municipal taxes and charges | No cap | Taken in full in year one |
One more rule that cuts the landlord’s way and is easy to miss: s.33(2) and (3) of the regulation make the staged increases use-it-or-lose-it. A landlord who fails to take an increase in a period when they were entitled to it, or takes less than the entitlement, “may not take that rent increase in any subsequent time period.”
What do I pay while the application is pending?
This is the single most useful thing on this page for a tenant, and almost nobody knows it.
Section 126(5): where the landlord has given the required notice, “until an order authorizing the rent increase for the rental unit takes effect, the landlord shall not require the tenant to pay a rent that exceeds the lesser of (a) the new rent specified in the notice; and (b) the greatest amount that the landlord could charge without applying for a rent increase.”
In practice: pay the guideline increase, not the AGI amount, until there is an order. Section 126(6) lets you voluntarily pay the noticed amount if you prefer, and if you do, the landlord owes you back anything above what the order eventually allows.
How do I fight an above-guideline increase?
You attend the hearing, and you attack the claim on its own terms. Five arguments actually work, and all five are statutory.
1. It was not a capital expenditure at all. O. Reg. 516/06, s.18(1) defines a capital expenditure as one “for an extraordinary or significant renovation, repair, replacement or new addition, the expected benefit of which extends for at least five years” — and expressly excludes “routine or ordinary work undertaken on a regular basis or undertaken to maintain a capital asset in its operating state, such as cleaning and janitorial services, elevator servicing, general building maintenance, grounds-keeping and appliance repairs,” and “work that is substantially cosmetic in nature or is designed to enhance the level of prestige or luxury offered by a unit or residential complex.”
That second exclusion is the one to reach for when a lobby is redone in marble and the bill arrives as an AGI.
2. The thing did not need replacing. Section 126(8): a capital expenditure to replace a system or thing “is not an eligible capital expenditure… if the system or thing that was replaced did not require major repair or replacement” — unless the replacement promotes accessibility for persons with disabilities, energy or water conservation, or security of the complex.
3. You moved in after the work was finished. Section 126(9): a capital expenditure is not eligible with respect to a unit if a new tenant entered into a new tenancy agreement that took effect after the expenditure was completed. If you signed after the windows went in, you do not pay for the windows.
4. There are outstanding work orders or a serious maintenance breach. This is the strongest one where it applies. Section 126(12) is triggered where the landlord has not completed items in work orders whose compliance period has expired and which relate to “a serious breach of a health, safety, housing or maintenance standard,” has not completed repairs the Board ordered, or “is in serious breach of the landlord’s obligations under subsection 20(1)” — and the unit is affected.
Where that applies, s.126(13) gives the Board two options and only two: dismiss the application with respect to the unit, or provide in the order that the rent “shall not be increased pursuant to the order until the Board is satisfied” that the outstanding work has been done. It is not a discretion to grant the increase anyway.
5. The disclosure was inadequate. Section 126(4) requires a landlord claiming capital expenditures to make the supporting information available to the tenants of the complex in accordance with the prescribed rules. You are entitled to look at what they filed, and to bring your own evidence — photographs, dates, invoices for work you paid for, maintenance complaints.
The takeaway
An AGI hearing is a document fight, and tenants lose it by not showing up rather than by being wrong. If the building has open work orders, or the work was ordinary maintenance dressed up as capital, or you moved in after it was done, those are not sympathy arguments. They are sections of the Act.
Two things that limit an AGI afterwards
It dies on turnover. Section 126(14): an AGI order “ceases to be of any effect on and after the day a new tenant enters into a new tenancy agreement” for that unit, where the agreement takes effect on or after the day 90 days before the first effective date in the order. A new tenant does not inherit someone else’s AGI.
It comes back off. Where an AGI is granted for capital expenditures, s.129 requires the order to specify the percentage attributable to them and a date on which the rent must be reduced by that percentage — at the end of the weighted useful life of the work. Diarise that date; it is the landlord’s obligation, not the Board’s reminder.
And if you reach a mediated agreement at a case management hearing rather than a hearing, Guideline 14 notes the ceiling: “the rent increase in a mediated agreement is limited to an amount equal to the guideline plus 3% of the previous year’s lawful rent.”
Do AGIs apply to rent-control-exempt units?
No, and they cannot. Section 6.1 switches off s.126 along with s.120 for units first occupied for residential purposes after 15 November 2018. There is no guideline to exceed, so there is nothing to apply for. A landlord of an exempt unit does not need an L5 — they need an N1 and 90 days. See the rent control exemption guide.
Two recent procedural changes
- 1 November 2025. The Board revised the L5. Applications can now be filed by email, and a Rental Unit Information (RUI) Excel file is mandatory with every L5.
- 1 July 2026. The time to request a review of an LTB order dropped from 30 days to 15 days, with service due within 7 days of issuance and a certificate of service within 5 days of service. That applies to AGI orders like any other, and it is a short clock.
One thing that did not change: Bill 82, the Protecting Renters from Unfair Above Guideline Rent Increases Act, 2026, would have tightened the AGI rules substantially. It was defeated on second reading on 26 March 2026 and is not law. The rules on this page are the current ones.
Facing an AGI on an Etobicoke building?
If you are a tenant, tell me the building and what has been claimed and I will point you at the right sections and the right questions. If you are an owner weighing an AGI against selling, I will give you the honest arithmetic on both. No pitch, no obligation.
connect@jatindua.com · 437-987-1925 · Book a free consultation
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Frequently asked questions
What is an above guideline rent increase in Ontario?
An AGI is an increase above the annual rent increase guideline, granted by order of the Landlord and Tenant Board on a Form L5 application under section 126 of the Residential Tenancies Act. There are only three grounds: an extraordinary increase in municipal taxes and charges, eligible capital expenditures, and operating costs for security services provided by people not employed by the landlord.
How much above the guideline can a landlord charge in Ontario?
For capital expenditures and security services, no more than 3% above the guideline in any 12-month period under section 126(11). Any excess can be carried into up to two further 12-month periods at no more than 3% each, so three years in total. The extraordinary municipal tax ground is not subject to the 3% cap and can be taken in full in the first year.
Do I have to pay the AGI amount while the application is pending?
No. Section 126(5) says that until an order takes effect the landlord cannot require you to pay more than the lesser of the rent in the notice and the greatest amount they could charge without applying. In practice you pay the guideline increase. You may choose to pay the higher amount under section 126(6), in which case the landlord owes you back anything above what the order allows.
How do I fight an above guideline rent increase in Ontario?
Attend the hearing and challenge the claim on the statute. The main arguments are that the work was routine maintenance or substantially cosmetic and so not a capital expenditure under O. Reg. 516/06 section 18(1); that the thing replaced did not require replacement under section 126(8); that you moved in after the work was completed under section 126(9); and that there are outstanding work orders or a serious maintenance breach under sections 126(12) and 126(13), which requires the Board to dismiss or defer the increase.
What is an extraordinary increase in municipal taxes in Ontario?
O. Reg. 516/06 section 28(1) defines it as an increase greater than the guideline plus 50 per cent of the guideline. For 2026 that threshold is 3.15% and for 2027 it is 2.85%. Anything below the threshold cannot found an application.
Does an AGI stay with the unit when a new tenant moves in?
No. Section 126(14) provides that an AGI order ceases to be of any effect on and after the day a new tenant enters into a new tenancy agreement for the unit, where that agreement takes effect on or after the day 90 days before the first effective date in the order.
Does an AGI rent increase ever come back off?
Yes, for capital expenditures. Section 129 requires an order granting an AGI for capital expenditures to specify the percentage attributable to them and a date on which the rent must be reduced by that percentage, at the end of the weighted useful life of the work.
Can a landlord apply for an AGI on a rent-control-exempt unit?
No. Section 6.1 switches off both section 120 and section 126 for units first occupied for residential purposes after 15 November 2018. There is no guideline to exceed, so there is nothing to apply for. The landlord still needs to give 90 days written notice on a Board form.
Sources
- Residential Tenancies Act, 2006, S.O. 2006, c. 17 (e-Laws). Sections 6.1, 116, 120, 126, 127, 129 and 194(3). Consolidation current from 1 July 2026; accessed 10 August 2026.
- O. Reg. 516/06 (e-Laws). Section 18(1), the definition of capital expenditure and its exclusions; section 28, the extraordinary increase threshold; section 33, the 3% rule, the use-it-or-lose-it rule and the municipal tax carve-out.
- LTB Interpretation Guideline 14 — Applications for Rent Increases above the Guideline. The 3% limitation, the two additional years, the municipal tax exception and the mediation cap.
- LTB Form L5 instructions (November 2025). The 90-day filing deadline.
- Tribunals Ontario — L5 operational update, 31 October 2025. Email filing and the mandatory Rental Unit Information file.
- Tribunals Ontario — LTB Operational Update, 30 June 2026. The reduction of the review request period from 30 days to 15.
- Legislative Assembly of Ontario — Bill 82 (2026). Confirms the proposed AGI reforms were defeated on second reading, 26 March 2026.
Related reading
- Ontario’s 2027 rent increase guideline is 1.9% — N1 dates and the math
- Is your Etobicoke rental actually rent-controlled?
- The T6 maintenance application, explained
- The Ontario LTB forms guide — which form does what
- Condo special assessments and how to see them coming
About the author — Jatin Dua, Etobicoke real estate agent
I am Jatin Dua, a Realtor with RE/MAX Quantum Realty, working out of 799 The Queensway in Etobicoke. AGIs come up constantly in older rental stock along Lake Shore and in central Etobicoke, and the pattern is consistent: landlords over-claim, tenants under-attend, and the cases that turn are the ones where someone read section 126 first.
Reach me at connect@jatindua.com or 437-987-1925.