CAMH says it is locked in a dispute with the landowner, Brookfield Asset Management, over the rent hike.
City councillor Joe Cressy accuses Brookfield of "bully tactics" that could jeopardize the hospital's future on College Street.
"Brookfield … is trying to force out a mental health hospital to make way for condos," Cressy said.
The dispute centres on the value of the property, formerly known as the Clark Institute, on a large swath of land on the north side of College Street, just east of Spadina Avenue.
CAMH says it has invested millions in research at the hospital. It also operates the province's only 24-hour emergency psychiatric care facility there, which it says served about 9,000 people last year.
"Here we are trying to overcome the stigma of mental illness, meanwhile a conversation is happening about potentially forcing one of those hospitals out," Cressy said.
CAMH says it's doubtful the work of the hospital could be absorbed at its Queen Street West building.
The hospital is nearing the end of a 20-year lease, with the option for two additional 20-year terms. The next term is based on the present market value.
Brookfield declined a CBC request for an interview, saying it doesn't comment on relationships with tenants.
Cressy and the hospital maintain the land, which used to be owned by the province, can only be used as a hospital. CAMH has valued the property at $26 million.
"An acceptable rate is one that takes into account this is a hospital … it's used for hospital purposes and should remain as so," Cressy said.
CAMH's Executive Vice President of Corporate Service and Redevelopment Dev Chopra says Brookfield has pegged the property's value at well over $100 million.
"Brookfield's interpretation is that the free market means the highest and best use of the property as if they were vacant lands, " Chopra said.
Cressy points out Brookfield's valuation is based on a condo proposal that currently wouldn't be permitted at the site.
Under this scenario, CAMH says that would be a nearly 300 per cent rent increase, with rent growing from about $1.2 million this term to about $4 million annually in 2018.
CAMH must decide whether to re-sign the lease by next year.
According to CAMH, the two sides are at at impasse and can't even agree on a process to begin finding a resolution. A court date later this month should help that.