Quebec Rent Increase Capital Expense Amortization: The 5% Rule for Major Repairs

If you replaced the roof, installed new windows, or did structural work on your Quebec rental property in 2025, those costs can be added to your rent increase. The TAL's 2026 formula uses a fixed 5% annual amortization rate for capital expenditures — here's how it works and what counts.

What Qualifies as a Capital Expense

The TAL's criteria identify major repairs and capital improvements as eligible work. Examples in the 2026 criteria include:

• Roof replacement
• Window installation
• Structural masonry
• Unit overhauls

Keep itemized invoices and payment records so you can document the work claimed.

How the 5% Rate Works

Under the 2026 formula, you take the net cost of qualifying capital work completed during the reference calendar year and amortize it at 5% per year. This effectively spreads the recovery over 20 years (5% × 20 = 100%).

Step 1: Determine net cost. Total cost of the work, minus any government grants, subsidies, or insurance reimbursements. If the province gave you a $2,000 grant toward a $10,000 roof, your net cost is $8,000.

Step 2: Calculate the unit share. If you own a multiplex, the expense must be proportioned to the target unit's share of total building revenue. For a triplex with three equal-rent units, each unit's share is one-third.

Step 3: Apply the 5% rate. Multiply the unit's share of net cost by 5%.

Example:

That $13.89 gets added on top of the 3.1% base rate and any tax or insurance variances. It recurs annually for 20 years, meaning you recover the full $3,333 over time.

What Changed from the Legacy Rate

Before January 2026, the capital expense rate varied by year. The 2025 legacy rate was 4.7%, and the 2026 legacy rate (for notices served before January 1) was 4.0%. The new fixed 5.0% rate applies to notices served on or after January 1, 2026 for renewal periods starting between April 2, 2026 and April 1, 2027.

The higher rate benefits landlords who did major work, but the new formula also requires cleaner documentation because the "excess above 3.1%" rule for taxes and insurance means every number gets scrutinized.

Documentation Requirements

For a TAL hearing, you need to prove every dollar of claimed capital expense. Bring:

• Contractor invoices itemizing the work, materials, and labour
• Proof of payment — cancelled cheques, bank statements, or payment receipts
• Before and after photos can support the claim, though invoices are the primary evidence
• Subsidy letters or insurance claim settlements showing any amounts deducted

The TAL adjudicator can reject expense entries that lack supporting documentation. Without supporting documents, the TAL may reject the expense entry.

Multiple Projects in One Year

If you did several capital projects in the same reference year (roof in March, windows in October), each qualifies separately. Add them up, subtract subsidies, proportion to the unit, and apply 5% to the total.

For each calculation, check which reference calendar year the applicable TAL form requests. The 2026 criteria described here apply the 5% rate to eligible work completed during the preceding calendar year.

The Quebec Rent Increase Guide includes an expense allocation worksheet that walks you through each component — base CPI, tax variance, insurance variance, and capital expense — with space for your own numbers and documentation notes.

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