Losing Money on Rent? Why Understanding Assignment Rights Matters

Reading Time: 4 minutes

This week, I received a call about a rental unit with two tenants on the lease. The landlord had allowed one tenant at a time to assign the lease to someone else over the last few years.

While this seemed like a reasonable arrangement, the landlord unknowingly locked themselves into a situation where the rent could only increase by the maximum allowed under the Ontario Guidelines—not by market rent.

This issue stemmed from a misunderstanding of assignment rights, which I’ve noticed is common among landlords.

So, let's clear this up.

Under section 95 of the Residential Tenancies Act (RTA), assignment occurs when a tenant transfers their rights under a lease to another person. Once the assignment is complete, the original tenant is no longer liable, and the new person becomes the tenant.

The key point is that landlords have two (2) stages of consent when it comes to assignment:

1. General Consent – When a tenant requests the option to assign their lease, the landlord can either consent or refuse the assignment.
2. Consent to the Specific Assignee – If the landlord grants general consent, the tenant can propose a specific person (the potential assignee). At this point, the landlord cannot "arbitrarily or unreasonably" refuse that person.

However, landlords are often confused by section 95(5) of the RTA, which states:

A landlord shall not arbitrarily or unreasonably refuse consent to an assignment of a rental unit to a potential assignee under clause (3) (b)

This provision only applies if the landlord has already given general consent. If the landlord hasn’t agreed to the assignment at all, they can refuse for any reason.

Even after giving general consent, the landlord can still reject the proposed assignee, as long as the rejection is not arbitrary or unreasonable. In other words, you don’t have to accept just anyone.

Remember though, There are consequences for refusing general consent of an Assignment.

If the landlord denies the tenant's request for assignment, the tenant gains the right to terminate the tenancy - but this may ultimately be the favorable outcome anyways.

As Realtors, understanding assignment rules gives you a solid footing for advising both landlord and tenant clients, avoiding costly misunderstandings down the road.