A proposed class-action lawsuit alleges more than a dozen landlords and property managers have conspired to artificially inflate rents across Canada.
The suit claims landlords and property managers did it by using software called YieldStar.
The move comes after the U.S. Department of Justice (DOJ) filed a similar lawsuit in August against RealPage Inc., the Texas-based company that created YieldStar.
The Canadian suit alleges the software essentially allows landlords and property managers to share proprietary data on their rental pricing — information that wouldn’t normally be shared with competitors — and that this could potentially allow companies to fix prices.
“It is important to note that all of this still needs to be proven in court,” Adam Tanel, the main litigator on the Canadian case, told CBC’s The National. “But if these allegations are proven in court, it is absolutely horrendous behaviour.”
RealPage, which is also named in the proposed Canadian suit, has told CBC its software is designed to be “legally compliant” and that it will “vigorously defend itself” in court.
In August, the U.S Department of Justice sued Realpage Inc., alleging its software YieldStar allowed landlords to artificially inflate rents.
In response to the proposed suit, the company told CBC in an email that “RealPage revenue management software has never served more than 1% of the rental market in Canada.”
RealPage has not responded to specific questions about how many Canadian companies or rental units have been affected by its software.
Seeking financial compensation
The proposed class action is seeking financial compensation for any current and past tenants who have lived in any of the properties owned or operated by the 14 companies named, going back to 2009. The allegation is they may have overpaid rent as part of this scheme.
This issued claim is the first step before a class action is certified in court, which Tanel says is still months away.
CBC found evidence YieldStar has been used in Canada since at least 2017.
The 15 companies named in the proposed suit are:
- RealPage Inc.
- Quadreal Property Group
- Westcorp Property Management Inc.
- FirstService Residential Management Canada Inc.
- GWL Realty Advisors Residential Inc.
- M&R Property Management
- Rhapsody Property Management Services Limited Partnership
- Hollyburn Properties Limited
- Canadian Apartment Properties Real Estate Investment Trust (CAPREIT)
- Dream Unlimited Corp.
- Woodbourne Capital Management International LP
- RIOCAN Real Estate Investment Trust
- Choice Properties Real Estate Investment Trust
- Tricon Residential Canada ULC
- Associated Property Management (2001) Ltd.
CBC has reached out to the companies named in the suit, but has not heard back from all of them.
During a CBC investigation in October into the use of YieldStar in Canada, GWL Realty Advisors — a division of Canada Life — said they had used the software but that “after an internal review” decided to “terminate the use of YieldStar.”
Tricon told CBC they stopped using YieldStar this past summer, and that it never impacted rents.
Neither company has commented on the proposed class action.
In a previous CBC investigation, Dream Unlimited told CBC they have never subscribed to YieldStar, but had a property manager who did, and that they had asked him to stop. They also said the software never impacted their rents.
Choice Property Real Estate Inc. also told CBC they have never subscribed to YieldStar, but had worked with a third-party property manager who did, and have asked them to stop.
A proposed class-action lawsuit alleges over a dozen Canadian landlords and property managers have been part of a price-fixing scheme involving YieldStar, a controversial AI software that’s also at the heart of a U.S. Department of Justice case.
Tanel says this distinction is irrelevant.
“From our perspective, a property owner who hires a property manager that uses YieldStar [means] the property owner is also liable, because they are one of the beneficiaries of the use of the product that we say is illegal,” Tanel said.
Several other companies — including Associated Property Management and M&R Property Management — have denied any use of the software.
Canadian Apartments Property REIT (CAPREIT) told CBC in an email, “We have not, are not, and will never use” Yieldstar, and that it will be seeking to have this “action dismissed.”
Quadreal told CBC it could not comment on a matter before the courts.
Tanel said as the investigation moves forward, some companies will likely be added, while others will be taken off the list.
“This is a lawsuit about damages suffered by real people and money that folks were deprived of if they paid above-market rent as a result of a non-competitive landlord atmosphere,” Tanel said.
‘I want justice for renters’
Cynthia Black, the main plaintiff in the proposed class action, lives in a building in Toronto owned by GWLRA. When she discovered earlier this year that GWLRA was using YieldStar, she thought little of it.
But that changed when she heard about the FBI investigation of RealPage, which alleged the company was involved in collusion, price-fixing and artificially inflating rents across the U.S., and led to the DOJ lawsuit.
“I want justice for renters. I want this software and other software like it to be banned in Canada, and I want retribution for what has already been lost,” Black said.
Tanel said beyond financial compensation, he hopes the suit will deter landlords from using this or similar software in the Canadian rental market.
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Black, along with dozens of other tenants, has also been pushing for a Competition Bureau investigation into the use of YieldStar since the summer.
The Competition Bureau has not confirmed if an investigation is underway.
“I think use of this software is illegal and should not be allowed in Canada, and I hope we are able to make a difference,” said Cameron Clark, another GWLRA tenant.
“It feels like it has become impossible to live in Toronto and across Canada, and the rising rents don’t make sense and they aren’t fair.”