You added two units in the attic, converted a former commercial space, or finished a small six-unit building. Then comes the step nobody modelled in the pro forma: leasing it up. That's where a decisive share of the project's return is settled, and where mistakes are hardest to undo — because the first lease signed locks things in for five years.
This article covers the three things a developer must settle before publishing a first ad: the legal regime of the 5 years, the disclosure obligation added in 2024, and the lease-up schedule that drives the carrying cost.
What the 5-year rule gives you
A dwelling in a newly built building, or one whose residential use results from a change of destination, escapes rent fixing by the Administrative Housing Tribunal for five years from the date the building was ready for habitation.
In practice, during that period a tenant cannot refuse an increase and have the tribunal decide it. If they refuse the proposed modification, they must leave at the end of the lease. That is pricing freedom the existing rental stock does not offer.
| Situation | 5-year exemption? |
|---|---|
| New building, section F completed on the first lease | Yes, up to 5 years after the ready-for-habitation date |
| Commercial space converted to dwellings, section F completed | Yes, 5 years from the change of destination |
| New building, section F forgotten on the first lease | No — normal regime, fixing possible |
| Existing dwelling renovated, however heavily | No — renovation is not a change of destination |
| Unit added inside an existing building | To be validated case by case depending on the work |
The obligation added in February 2024
Since February 21, 2024, the exemption is no longer just a box to tick. For a building built — or whose destination was changed — less than five years ago, the landlord must indicate in the lease the maximum rent they may charge during the five years following the date the building was ready for habitation.
The obligation covers leases concluded from February 21, 2024, for a building ready for habitation as of that same date. The rule and its scope are set out by the Administrative Housing Tribunal.
That declaration should therefore be prepared as a modelling exercise, not filled in at the last minute at the notary's office. It requires an explicit assumption about inflation, about how the sector evolves, and about the positioning you are targeting at the end of the period.
Setting the 5-year ceiling without trapping yourself
The starting rent and the five-year ceiling answer two different questions. The first must be signable today; the second must cover an unfavourable scenario five years out.
- 1Establish the current market rent on real neighbourhood comparables, unit by unit — floor, outdoor space and inclusions create gaps the area average hides.
- 2Project a high trajectory, not a median one: the ceiling is a limit, not a forecast. Underestimating is expensive; overestimating costs nothing but lease readability.
- 3Include the items that drift fastest on a new building: municipal taxes after the first assessment, insurance, energy if you include heating.
- 4Document your assumptions in writing and keep them. They will serve to explain your trajectory, in negotiation and at renewal.
- 5Have the section F wording validated before the first signature — that is the moment the error is still reversible.
The project's real cost: the lease-up schedule
A developer models construction cost to the dollar, then treats lease-up as an instantaneous event. Yet several units hit the market at the same time, in the same building, often with the same layout — you are your own competitor.
Take a new six-unit building at $1,900 a month. The number of lost rent months depends entirely on the pace at which you sign.
| Signing pace | Months to fill the building | Unit-months lost | Rent lost |
|---|---|---|---|
| 1 unit per month | 6 months | 21 | $39,900 |
| 2 units per month | 3 months | 12 | $22,800 |
| 3 units per month | 2 months | 9 | $17,100 |
It is also why cutting the first rents to 'launch' the building is doubly costly for a developer: the discount is written into the five-year ceiling you just declared, and it becomes the reference for the remaining units.
The 5 lease-up mistakes of a small developer
- 1Waiting for the work to finish before starting to market, when the delivery date has been known for months.
- 2Publishing six identical ads: you put your own units in competition and make the comparison unfavourable.
- 3Forgetting section F on the first lease, and losing the five-year exemption across the whole building.
- 4Declaring a maximum rent copied from the starting rent, with no margin for tax and energy drift.
- 5Loosening selection criteria on the last units to finish the lease-up — a bad tenant costs more than the vacant month avoided.