In 1995 334 Seaton looked a lot different than it does today. There was no fence and no gate. The front yard was mud and four broken trash bins permanently decorated the front sidewalk. The front door was an uninviting solid wood slab, as was the door from the foyer to the front hall. The apartments had cheap commercial carpeting (all of them damaged by multiple cigarette burns) and the hallway carpeting was worn through to the subfloor. The basement was a dungeon and the laundry machines had been repossessed.
Sadly, it was not unlike most Toronto apartment buildings in the early 1990's. Ontario had introduced strict rent controls 20 years earlier and the rules at the time prohibited rent increases higher than the "guideline amount" even between tenancies. This meant that there was little incentive for landlords to upgrade... or even maintain... their buildings, particularly when a growing population of tenants and a shrinking number of apartments resulted in a vacancy rate of 0.6 per cent. By 1994 most Toronto apartments could legitimately be described as "substandard", but they could nonetheless be easily rented.
Notwithstanding that there was tremendous demand for apartments, few responsible investors wanted to be landlords in the early 1990s. In addition to strict rent controls the government had enacted the Landlord-Tenant Act in order to protect vulnerable tenants from summary evictions. But the court system was so overburdened that evictions could take a year, and many tenants realized that if they stopped paying their rent they could live for a year or more ("rent-free") before they could be legally evicted. My real estate lawyer... whose parents had owned several rental properties... cautioned me that I ought to expect to lose 15% to 20% of my potential income to defaulted rents and the cost of evictions. In the case of 334 Seaton the previous owner... who had bought the property five years previously... had so many non-paying tenants that he couldn't make his mortgage payments and the bank had foreclosed. By the time I saw 334 Seaton the bank had been trying to sell the property for more than a year and by December of '94 had lowered the price significantly. Still, notwithstanding that apartment properties were relatively inexpensive I was not at all sure that I wanted to be a landlord. In any case, after inspecting 334 Seaton for the first time late one December afternoon in '94 my realtor suggested that we go to a nearby wine bar to share our thoughts.
To be candid I did not think that a self-respecting tenant could live in a bachelor apartment with a bar fridge and a hotplate and my realtor did not disagree. Moreover, the building needed a lot of work, and it did not make sense to invest in capital improvements if I were not able to legally increase the rents. That might have been the end of my interest in 334 Seaton... and perhaps the end of my interest in being a landlord... had another customer sitting a few bar stools away not interrupted us. It seems that she and her friend had been eavesdropping on our conversation. They were both young professionals with student debt to pay down, and they told me that they would happily accept a tiny apartment if it was attractive, and if the building was clean and safe and owned by a responsible landlord. The problem was that in 1994 those apartments... and those landlords... were virtually impossible to find.
By the time we finished our wine Grace's Places had a business plan and a mission. Like most landlords I'd assumed that defaulted rents and evictions were inevitable, and it had not occurred to me that so long as I could offer tenants affordable apartments that met their needs they would not want to risk eviction and the landlord-tenant relationship would be very different from what had by then become the norm. So long as I could eliminate the risk of defaulted rents I could justify the capital costs needed to renovate inasmuch as I would effectively increase the rental income... without increasing the rents... by ensuring that tenants enjoyed attractive apartments, affordable rents and respectful service. When I advertised the first renovated bachelor in April of 1995 it was possibly the first time in twenty years that the words "newly renovated" and "apartment for rent" had appeared in the same sentence, and the response was overwhelming.
A few years later the government would change the rent control legislation to permit landlords to charge "market rents" to new tenants, and would change the tenant protection legislation to permit more timely resolution of disputes. New investors recognized that there was a market for quality apartments and the landlords who had become accustomed to prospective tenants lining up for substandard apartments found themselves with vacant units. A few big landlords such as Concert and Minto built new rental highrises and small landlords helped fuel the condo boom by investing in units to be used as rentals. Initially rents increased, of course, but as new rental stock hit the market competition for tenants increased and market forces came into play, and (adjusted for inflation) rents today are about the same as they were twenty years ago. Nonetheless, while Grace's Places is not as unique today as it was two decades ago there is still enormous demand for these apartments.
"You will get the tenants you deserve".
Those were the parting words of my real estate lawyer when I left his office twenty years ago with my Offer of Purchase and Sale for 334 Seaton. If it is true that landlords get the tenants they deserve then I am truly flattered, as I had never expected to have so many wonderful tenants. You have given me much over the years, including a belief that landlords and tenants need not have conflicting interests, but can share a common interest in creating communities which we all can enjoy.
So thank you for twenty great years.