Ending a Tenancy by Mutual Agreement in Prince Edward Island: A Tenant’s Guide

In Prince Edward Island, the rental landscape is governed by the Residential Tenancy Act and overseen by the Island Regulatory and Appeals Commission (IRAC). With a strict rent increase guideline of 2.3% for 2025, tenants in PEI have significant "security of tenure," meaning landlords cannot easily raise the rent or evict them.

However, situations often arise where both the landlord and tenant want to end the lease early. Whether you need to break a fixed-term lease or your landlord wants to sell the property, you can use a Mutual Agreement.

Unlike some other provinces, PEI does not have a single, catch-all "Mutual Agreement Form" for every situation. This guide explains how to navigate this process, when to use the specific Form DR5, and how to protect yourself.

How a Mutual Agreement Works in PEI

A mutual agreement is a voluntary contract to end the tenancy on a specific date. It overrides standard notice periods (like the one-month notice for periodic leases).

• No "Standard" General Form: For a regular mutual agreement (e.g., you just want to move out early), the Rental Office does not provide a specific numbered form. You must draft a written agreement signed by both parties.

• The Exception (Renovations): If the landlord wants you to leave specifically for demolition, repairs, or renovations, and you agree to it, you should use the official Form DR5: Agreement to End Tenancy (Lease) for Demolition, Repairs or Renovations.

• Voluntary: Neither party can be forced to sign a mutual agreement.

When Should You Use It?

1. Breaking a Fixed-Term Lease

In PEI, a fixed-term lease (e.g., May 1 to April 30) is a binding contract. You generally cannot just "give notice" to leave early unless you have a specific legal reason (like domestic violence or admission to a care home).

• The Assignment Option: If you need to leave, you can ask to assign your lease to a new tenant. If the landlord refuses your request to assign the unit, you may have grounds to end the tenancy.

• The Mutual Agreement: If you don't want to find a replacement tenant, you can ask your landlord to sign a mutual agreement. If the vacancy rate is low, they may agree so they can find a new tenant at a higher market rate (provided they follow the strict rent control rules attached to the unit).

2. "Cash for Keys" (Sale or Landlord Use)

Because the 2025 rent increase is capped at 2.3% (or up to 5.3% with special permission), landlords are often eager to have long-term tenants leave so they can reset the rent or sell the property "vacant."

• The Negotiation: If your landlord asks you to leave so they can sell, you are not required to agree. However, you can negotiate a "Cash for Keys" deal. This is a private agreement where the landlord pays you (e.g., moving costs + 1–2 months' rent) to sign a mutual termination agreement.

• Warning: In PEI, rent control is tied to the unit, not just the tenant. Even if you leave voluntarily, the landlord technically cannot raise the rent for the next tenant beyond the allowable limit without IRAC approval.

How to Draft the Agreement

If you are not using Form DR5 (Renovations), you must create a written document. A verbal agreement is risky and hard to prove at the Rental Office.

What to Include:

1. Title: "Agreement to End Tenancy."

2. Parties: Full names of the Landlord and Tenant.

3. Property: The complete rental address.

4. Termination Date: "The tenancy will end on [Date] at [Time]."

5. Release of Liability: A clear statement that the tenant is not responsible for rent after the termination date.

6. Signatures: Signed and dated by all parties.

The Risks for Tenants

1. Loss of Rent Control Protection

If you have lived in your unit for years, your rent is likely much lower than the current market rate. By signing a mutual agreement to leave, you give up this affordable rent. Finding a new apartment in Charlottetown or Summerside will likely cost significantly more.

2. Signing Under Pressure

If your landlord threatens to evict you for renovations unless you sign a mutual agreement, be careful. If they really intend to renovate, they should serve you a proper Notice of Termination or use Form DR5, which ensures you understand your rights.

Frequently Asked Questions (FAQ)

1. Is there an official form I must use?

Only for renovations. If you are agreeing to leave for demolition or repairs, use Form DR5. For all other reasons (like moving for a new job), a simple written letter signed by both parties is sufficient.

2. Can I break my lease early if I find a new tenant?

Yes. You can request to assign (transfer) your lease. The landlord cannot unreasonably refuse. If they do refuse, you may be able to end the tenancy early without penalty.

3. What if I need to leave for medical reasons?

You do not need a mutual agreement. Use Form G (Health) or Form H (Admission to Nursing Home) to end your lease early with one month's notice. You will need a doctor's note or proof of admission.

4. Can my landlord keep my security deposit?

No. The landlord must return your security deposit (plus interest) within 15 days of the tenancy ending, unless they file a claim with the Rental Office to keep it for damages or unpaid rent.

5. What is the rent cap for 2025?

The maximum allowable increase is 2.3%. Landlords can apply for an additional 3% (total 5.3%) if they can prove higher costs, but they cannot go above that.

References:

• Government of PEI: Residential Tenancy Forms (Form DR5, Form G, Form H)

• PEI Rental Office: 2025 Annual Allowable Rent Increase

• Community Legal Information PEI: Renting Guide

• Residential Tenancy Act (PEI)

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