Do You Need a Licence to Rent Out Property in Ontario Cities?

If you are about to rent out a house, a basement or a condo for the first time, you may wonder whether you need a licence from the city. The honest answer is that it depends on where the property is.

This article explains where licensing rules come from, how to find out what your municipality requires, and which other rules apply to a landlord whether or not a licence is needed.

Why the answer depends on your municipality

Under Municipal Act, 2001 s. 151(1), a municipality may set up a licensing system for a business. Whether a rental unit needs a licence or registration depends on the local municipality's own by-law.

That means two neighbouring cities can have different rules. One may require nothing, while another may ask landlords to register units, pay a fee or pass an inspection. Some cities set rules only for certain types of rental, such as units with several tenants, and others do not. Do not assume that what a friend did in another city applies to you.

How to find out what applies to you

Ontario's guide on adding a second unit tells homeowners to ask their municipality whether a second unit must be licensed or registered. The same advice is sensible for any rental.

• Contact your municipality's licensing or by-law office and ask whether rentals need a licence or registration.
• Ask whether the rule depends on the number of units, the number of tenants or the type of building.
• Ask whether an inspection, fee or renewal is required.
• Ask the building department and fire department about their requirements as well.
• Write down who you spoke to and the date, and keep any written reply.

Building, zoning and fire safety rules

A licence is only one piece. Adding a second unit in a house requires a building permit from the local building department, and the electrical work needs a separate permit and an inspection by the Electrical Safety Authority (ESA).

The Building Code requires a 30-minute fire separation between units and between units and common areas. This can drop to 15 minutes if the whole house has interconnected smoke alarms. Smoke alarms must meet CAN/ULC S531, and carbon monoxide alarms are required where the house has a fuel-burning furnace or an attached garage.

There is also a newer Fire Code amendment, O. Reg. 87/25, which adds new smoke alarm requirements for existing two-unit residential occupancies and takes effect January 1, 2026, with a few exceptions. The details depend on your building, so ask your local fire department what applies.

On zoning, Planning Act s. 16(3) requires municipalities to adopt official plan policies that allow additional residential units, both in the main home and in another building on the same property. Local zoning by-laws may still add conditions, so confirm with your municipality.

Tenancy rules apply with or without a licence

Having no licence requirement does not mean having no rules. The Residential Tenancies Act, 2006 (RTA) applies to rental units despite any agreement or waiver to the contrary, and any lease term that conflicts with the Act is void.

• For most private rentals, you must use the Ontario standard lease for new leases. If a tenant asks in writing and does not receive it within 21 days, the tenant may withhold one month's rent.
• The only security deposit you may collect is a rent deposit, no more than one rent period or one month's rent, whichever is less, and it earns annual interest at the rent increase guideline rate.
• You cannot require post-dated cheques or other negotiable instruments for rent.
• A notice to end the tenancy does not end it by itself, and you cannot remove the tenant or change the locks.

Where the occupant must share a bathroom or kitchen with the owner, or with the owner's spouse, child or parent who lives in the same building, the RTA does not apply. A self-contained basement apartment does not fall under this exemption.

What to do next

Before you advertise the unit, take a short list of steps to avoid surprises later.

• Confirm licensing or registration with your municipality in writing if you can.
• Check that the unit has the permits and fire safety features your building needs.
• Prepare the Ontario standard lease and check any deposit against the RTA limits.
• Check your insurance and mortgage terms for rental use.
• If anything is unclear, ask a lawyer to review your situation before you rent.

Frequently asked questions