Landlord-tenant disputes in Canada are on the rise, with over 20% of tenants facing issues in their rental agreements. Many of these conflicts stem from poor record-keeping practices. Proper documentation can prevent misunderstandings and legal problems.
Keeping accurate records is essential for Canadian landlords to effectively manage their rental properties and comply with the Canada Revenue Agency (CRA) requirements. Here’s a guide to record-keeping best practices tailored for landlords:
Why Record-Keeping is Important
- Tax Compliance: Ensures accurate reporting of rental income and expenses on your tax return.
- CRA Audits: Provides evidence to support claims in case of a CRA audit.
- Financial Management: Helps monitor the profitability of your rental property.
What to Keep Records Of
1. Income Records
- Rent payments: Bank deposit slips, e-transfers, or receipts.
- Security deposits: Details of collection, return, or use for damages.
- Additional income: Payments for utilities, parking, or laundry services.
2. Expense Records
- Mortgage statements showing interest paid.
- Property tax bills.
- Insurance premiums for the rental property.
- Repair and maintenance invoices or receipts.
- Utility bills (if paid by you).
- Advertising costs for finding tenants.
- Professional fees: Legal and accounting costs.
3. Legal Documents
- Lease agreements with tenants.
- Eviction notices or other tenant correspondence.
4. Capital Expenses
- Receipts and invoices for improvements that increase the property’s value (e.g., renovations).
5. Travel and Vehicle Expenses
- Records of travel to inspect or manage the property.
- Mileage logs for vehicle use related to the property, including dates, distances, and purpose of trips
Best Practices for Canadian Landlords
1. Tenant Screening and Selection
Application and Background Checks
Start with a thorough application process. Keep detailed records of each application and background check. Securely store this information to protect tenant privacy.
- Use a standardized application form.
- Keep notes on each applicant's background check.
- Shred documents you no longer need to ensure data security.
Rental Agreements
Creating a solid rental agreement is key. Ensure all key clauses are included, such as rent amount, security deposit terms, and lease duration.
- Have both parties sign the document.
- Store agreements in a digital or physical format where they can be easily retrieved.
Reference Checks
Reference checks help verify potential tenants. Document the methods you use for these checks. It’s wise to keep records of everything discussed.
- Use templates for phone or email references.
- Note the date and content of each conversation.
2. Rent Collection and Payment
Rent Receipts
Issuing rent receipts is not just courteous; it's a legal requirement in many provinces. Make sure to provide these for every payment received.
- Include the date, amount, and the rental period covered.
- Store copies electronically for easy access.
Late Rent Procedures
Keep a clear documentation trail for late rent issues. Record when you contact tenants about late payments and maintain a log of all communications.
- Send written notices via email or letter.
- Keep copies of all correspondence for your records.
Payment Methods
Tracking how rent is paid is crucial. Whether using cash, checks, or online payments, keep accurate records.
- Record each payment type clearly.
- Note any fees or charges associated with late payments.
3. Property Maintenance and Repairs
Repair Requests
When tenants submit repair requests, document everything. Note the date received, response times, and actions taken.
- Use a repair request form to standardize submissions.
- Keep a log of all completed repairs.
Maintenance Records
Maintain a comprehensive record of property maintenance. Track all repairs, the costs incurred, and which contractors were used.
- Store invoices and receipts for future reference.
- Create a summary document for each unit's maintenance history.
Inspections
Regular property inspections help identify issues early. Schedule inspections and document everything that is discussed or discovered.
- Notify tenants in writing about upcoming inspections.
- Keep records of inspection dates and findings.
4. Security Deposits
Deposit Handling
Know the legal requirements for handling security deposits in your province. This includes how much you can collect, when it needs to be returned, and any deductions.
- Use a standard form for collecting deposits.
- Store these records along with the rental agreements.
Documentation
Keep detailed records related to security deposits. This includes receipts, deductions made, and proof of return.
- Document the condition of the property when the tenant moves in and out.
- Provide a breakdown of any deductions taken from the deposit.
Dispute Resolution
Should disputes arise over deposits, document all communications and attempts to resolve the issue. This will provide a clear record of any potential legal matter.
- Keep copies of all correspondence related to the dispute.
- Document the outcomes of any discussions.
5. Legal Compliance and Record Retention
Provincial and Territorial Laws
Each province has its own rules about record-keeping. Familiarize yourself with these requirements to ensure compliance.
- Check local regulations frequently for updates.
- Consult legal resources specific to your province.
Record Retention Policies
Establish a clear record retention policy. Decide how long to keep documents and how they'll be stored—physically or digitally.
- Store important documents for a minimum of 5-7 years.
- Use cloud storage for easy access and backup.
Data Privacy
Be mindful of privacy legislation, including PIPEDA (Personal Information Protection and Electronic Documents Act). Ensure you're protecting tenant information.
- Use encrypted storage for sensitive files.
- Train staff on data privacy measures.
6. How Long to Keep Records
- Minimum Requirement: Six years from the end of the tax year they relate to.
- Exceptions: If the CRA reviews your return, keep records until the matter is resolved.
7. Preparing for Tax Filing or Audits
- Reconcile Regularly: Ensure your records match bank and credit card statements.
- Summarize Annually: Create an income and expense summary for quick reference during tax filing.
- Respond Promptly: If audited, provide requested records quickly to avoid penalties or delays.
Wrap Up
By maintaining thorough and organized records, you’ll not only meet CRA requirements but also gain better insight into your rental property’s financial performance.
Seeking Professional Tax Advice: When is it Necessary?
If your situation is complex—like owning multiple properties or navigating shared ownership—consider seeking tax advice from a professional accountant. A qualified tax accountant can clarify your obligations and help prevent costly errors. Accurate reporting is key to avoiding problems with the CRA.
If you need help with any specific aspect of your taxes, feel free to ask! Connect with Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.