Monday, 7 July 2014

DAMAGED APARTMENT: Suing your tenants for damages!



Making Ontario Small Claims Court work for you


Often enough I get calls from Landlords who are very upset about the condition of the rental unit that they get back from a tenant who has moved out.  Landlords describe apartments where there is writing on the walls, holes punched through drywall, appliances that have been so severely neglected that they are

Surprise!  It's hard to imagine how ...
effectively beyond repair, missing or damaged screens, damaged doors and locks, flooring, ceilings, etc. etc. etc..  Sometimes it is difficult to conceive how a rental unit can become so utterly damaged in so short a period of time.   In addition to damage or sometimes instead of it, the rental unit contains an inordinate amount of garbage that has to be collected and carted off to a dump or the unit is so utterly filthy that the work needed to clean the unit is excessive.

Repairs to property, replacing damaged things, cleaning and carting off garbage from a rental unit, after the tenant has vacated, can quickly add up to several thousands of dollars.  Can a landlord recover these repair costs?

In short, the only answer to this question is "maybe".   Whether or not these costs may be recovered requires consideration of the effort required to get the costs back and the "issues" typically associated with proving the loss.

Typically, by the time landlords are calling me about damage caused by a tenant who has already vacated, they have already tried to get the tenant to pay the damages voluntarily.  Not having success in this regard, and having determined that there is no insurance coverage for the loss (note: sometimes there is, so call your broker), the only remaining option is to commence legal proceedings and sue the tenant and any guarantor to the lease.

The legal proceeding to be contemplated is typically a claim in the Ontario Small Claims Court.  The small claims court has a financial jurisdiction of $25,000.00.  For claims that are over $25,000 but "close" it is possible to waive the excess above $25,000 to fit into the jurisdiction of the Small Claims Court.  The alternative, is to sue the tenant in the Superior Court of Justice under the Rules of Civil Procedure under either the simplified or regular Rules.

WHAT IS THE SMALL CLAIMS COURT LIKE?

The small claims court is much more formal than the Landlord and Tenant Board and there is a greater authority to deal with a broader range of claims.  Almost the entire scope of the common law, including equity, and all types of damages and remedies are available in the small claims court.  The Ontario Small Claims Court has contempt powers and in this sense is a Court of Record that can make orders and judgments that may lead to incarceration of people appearing before it.   Proceeding in the Small Claims Court is a serious matter that can give rise to serious judgments involving substantial sums of money by the measure of most people.

Whereas the Landlord and Tenant Board is fill in the blanks "Form" focused), the Small Claims Court allows for more original drafting and requires people to more actively understand and communicate the nature of their claims.  While there are still "forms" to fill out, the overall process of the Court is governed by the Small Claims Court Rules which every party before the Court should really be familiar with.  While it is possible to go through the process without detailed knowledge of the procedures I think it is a fair comment to say that a litigant who is experienced and who knows the Rules and how the Court works is more likely to have success with the claim.

While the Small Claims Court is more formal than the Landlord and Tenant Board the procedures are still intended to allow for people to represent themselves.  It is perfectly allowable for a person to explain the nature of their claim in regular English (or French) and leave the "law" out of it and instead rely on the Small Claims Court Judge to apply the law to the facts as presented to them.  When proceeding in this way a plaintiff (person making the claim) is relying on the Judge to know the particular law that applies to the claim and for the Judge to quickly conceive the nuance and different perspectives that a consideration of all of the facts call for.  This can be a very tall order for Judges who have multiple cases on their dockets, have to learn complex facts that are not being presented in a the "best" way, while still ensuring that the trial process is procedurally fair.  So, while it is entirely acceptable to rely on the Judge to do the "legal" work in a case, it is advantageous to retain a lawyer to represent you.


A lawyer, in representing you in Court, has a few different functions.  The function that is not often spoken about is that a lawyer is an "officer of the Court".  This function imposes duties on the lawyer that the Court often relies upon in deciding a case.  When a party is represented by a lawyer the Judge can focus more on the evidence being presented and worry less about whether the party is leading all of the evidence that they want to lead.  A represented party will have the benefit of their lawyer's skill in presenting the essential elements and facts of the case.  Aside from the facts, a represented party can take comfort in knowing that their lawyer will have considered the law before the trial and that the evidence presented in Court is the evidence that the Judge needs to apply the law to.  Further, where the law is fairly nuances a lawyer can make sure that the Judge understands the law to be applied to the particular facts of the case.  Another significant benefit of having a lawyer is that the lawyer will do all the talking, structure the case, decide what witnesses to call,  dross examine witnesses, challenge the position of the other side and speak for the party during the course of the hearing---in a way that is helpful to the party's case. 


The advantages of having a lawyer should be apparent from the foregoing paragraph.  As you may imagine, if the "other side" has a lawyer who is providing this kind of service to the party opposite it would be incumbent on the other side to get a lawyer to balance out the advantage of being represented.  That being said, no one is required to be represented by counsel in a Small Claims Court case and you may certainly defend yourself even if the other side has a lawyer.


SETTLEMENT CONFERENCES & TRIALS


An advantage of the Small Claims Court over regular litigation in the Superior Court of Justice is that the process is simplified and that case proceeds more quickly than regular procedure cases.  After the exchange of a Claim and Defence the next step in the process (normally) is that a case is scheduled for a settlement conference.   The Court will order the parties to disclose their evidence and a witness list along with will say statements (there is a Form) in advance of the Settlement Conference.  At the Settlement Conference the Judge will consider both sides, get both sides to explain their positions, and try to mediate a resolution of the claim by pointing out legal issues, problems with the case, and things that might not be obvious to the parties.  Settlement Conferences often result in judicially supervised settlements that get the parties out of Court without the needs for a trial.


If a Settlement Conference does not result in a settlement, the Judge at the Settlement Conference may make additional procedural orders and then order that the case may be set down for trial.  Sometimes, if there are major procedural issues or evidentiary problems the parties may make a motion to the Court for remedies/relief that are required before the case can go to trial.


TRIALS


Trials in the Small Claims Court are definitely "real".  They are adversarial and the parties are most certainly expected to try to "win" their case.  It is not a session of getting together to have a discussion, nor is it a time when the Judge will hold your hand through the process doing the work for you.  If you are the plaintiff (person bringing the claim), you will be expected to be ready to present your case by making an opening statement, calling and examining witnesses, entering evidence, cross examining witnesses, arguing law, while at the same time staying within the Rules and complying with the Rules of Evidence.  It is a mistake to think that the Judge will elicit the evidence by asking questions, making inquiries, calling witnesses, or wait for you to get the evidence that you "left at home".  A trial is not a tea party--even in the small claims court.  If you fail to discharge your burden (as a plaintiff you have the burden of proof on a balance of probabilities), you might find that after you finish presenting your case that the Judge invites the Defendant to ask for a dismissal of your case without requiring the defendant to lead any evidence at all.  A defendant has no obligation to help you get all the facts before the Court nor to assist you in any way.  A defendant has the right to make you prove your case before the defendant starts to present his/her defence to your case.


PROPERTY DAMAGE CLAIMS in small claims court


When I am representing landlords in claims for damages to rental units there is a checklist of things that I would ideally love to have ready and available to tender into evidence.  This is the list:


  1. A copy of the tenant's rental application;
  2. A copy of the tenant's identification (for proper legal spelling of their names);
  3. A copy of the lease;
  4. A copy of the rent ledger from the commencement of the tenancy to the end of the tenancy;
  5. A copy of any Notices of Termination served during the course of the tenancy;
  6. A copy of any Orders from the Landlord and Tenant Board that were made during the course of the tenancy;
  7. A copy of any Property Standards Orders or any other orders by any governmental agency affecting the rental unit during the course of the tenancy;
  8. Pictures of the condition of the rental unit at the time of the tenant moving into the rental unit;
  9. A Move In Inspection report (with photos is tremendous), that goes through each room of the rental unit that identifies all of the elements of each room (floor, walls, ceiling, doors, baseboards, switches, lights, appliances, etc. etc.).  The report should have room for check marks indicating the condition of the individual elements--leave room for written comments---and be initialed by the tenant on at least each page--but even better beside each room.  The Move In Inspection report should also mention the condition of the common areas of the building on move in and get the tenant to agree with the description (photos are great).
  10. A copy of any Notice of Termination, Eviction Order, Sheriff's Notice to Vacate
  11. A copy of a move out inspection along with photographs of the damage to the unit.  Signed off by the tenant if possible.  If the tenant is not signing off on the move out inspection then a written statement from a neutral third party who was present at the time that the landlord recovered the unit describing the condition of the unit;
  12. Three estimates for repair work to the rental unit or to the appliances and systems in the unit;
  13. A copy of cheques and invoices for the work done in the unit;
  14. A copy of invoices for replacement appliances etc..
  15. A copy of a demand letter to the tenant asking the tenant to pay the damages prior to commencing litigation.
If a Landlord client is able to provide me with the above checklist of documents then the claim is as close to being a sure thing as is possible in law.  Having all of these documents also makes the trial much shorter and results in a very efficient use of time.  Legal fees are lower simply because we don't have to prove the evidence through indirect means (i.e. call witnesses to testify as to their recollection of the condition of the rental unit when it was rented--as opposed to having the Move In Inspection and photographs).  Also, having these documents handy will encourage the Settlement Conference Judge to urge the defendant to pay your claim (and avoid a trial) as the Judge will tell the defendant that the plaintiff is likely to win and also get Legal Fees added to the amount of the claim.


If you have the evidence that is represented by the checklist you will find that the need to be represented by a lawyer or paralegal is less important as the flow of these documents tells the story of the tenancy in a chronological way and further demonstrate that the damages claimed result from the actions--negligent or willful conduct of the tenant.  However, before deciding to do this yourself, consider the fact that having these documents handy will likely allow a lawyer to quote a block fee for representation that may indeed be substantially contributed to by an award of costs at the end of trial.


IF YOU DON'T HAVE THE CHECKLIST DOCUMENTS


The checklist for me represents the ideal case.  Almost no cases are ideal and many of the documents in the checklist are often missing or non-existent.  Where the documents do not exist you need to think about how you will get the evidence that is represented by the document on the checklist.  Usually this means calling a witness and having the evidence of the "fact" presented orally.  With respect to non-contentious issues such evidence is usually not a problem (for example--testifying that there was an oral lease).  However, sometimes the oral evidence is highly contentious--for example stating that the rental unit was in perfect condition at the start of the tenancy.  When the evidence is disputed, contentious, and pertinent to the ultimate issues in the trial the Judge may have to judge the credibility of witnesses and choose who to believe.  Hence, on some points, it may be necessary to call much more evidence in support of your position if the tenant is denying the fact you are asserting as true.


JUDGMENT


The conclusion of the trial will result in Judgment.  If you are successful the Court will order that the defendant owes you money, with interest and costs.  If you have lost your case it is entirely possible that the Court will order you to pay costs to the defendant.


Sometimes Judgments are paid voluntarily and the case is settled.  Sometimes Judgments are appealed and the litigation saga will continue. When the Judgment is neither paid nor appealed then the next step will be to enforce the Judgment through the enforcement provisions in the Rules of the Small Claims Court.  These enforcement provisions will include things like garnishment, writ of seizure and sale and debtor's examination.


Whether you have any success in enforcing the Judgment often turns on whether the defendant has any assets.  If the tenant has no job, no assets, and no decent prospects, then sometimes, regardless of the "justice" of it all, your judgment will remain unsatisfied and you will get nothing.  Sometimes, the result of pursuing the claim to its conclusion is that the defendant will make an assignment in bankruptcy and as a result your claim is wiped out.  Whether or not a defendant will have an ability to pay is something that you need to take into consideration before starting out with a lawsuit.




CONCLUSION


Proper vetting of prospective tenants, regular inspections, and active enforcement of your rights under the RTA should keep the number of significant damage claims against former tenants to a minimum.  However, it will be impossible to have a perfect record and hence you should take steps to document each tenancy in such a way that proceeding with a damage claim is made easier.  The checklist outlined in this article is something that you should turn your mind to at the beginning of every tenancy.  It is not a lot of work to gather the evidence in a timely way and certainly it pays off many times over if you have a tenant who does cause problems in the rental unit.


Michael K. E. Thiele
Ottawalawyers.com






Monday, 23 June 2014

Co-op housing: Evicting Co-op Members at the Landlord and Tenant Board

The Residential Tenancies Act was recently amended (June 1, 2014) to include provisions that allow Co-operative Corporations to proceed to the Ontario Landlord and Tenant Board to enforce the termination of membership rights and eviction of Co-op members.  For many people involved in Residential Co-ops this is a significant change to the legal process that has been in place for as long as I can remember.

Before the legislative changes, the legal system for dealing with membership rights and eviction from a residential co-op could be summarized as follows (using "conduct" as the basis for termination as an example).  If the "office" became aware of a complaint against a co-op member the "office" could try to resolve the issue informally, perhaps send a letter, or take other steps that solve the problem.  If the steps taken by the "office" are ineffective, the complaint and the surrounding problems are elevated to the Co-op Board for discussion at a meeting.  At that meeting the Board could direct some other less formal ways of dealing with the problem.  If that too is ineffective, the Board could decide to ask the member complained about to attend a meeting with the Board to discuss the problem.  There are formal notice requirements etc..  At that meeting the Board could, after hearing from the member, make a variety of decisions and one of those decisions might be to terminate membership rights in the co-op and occupancy rights and evict the member from their housing unit. 

The termination and eviction decision of the Board is subsequently communicated to the member and the member is further advised of a right to appeal the termination decision to the membership of the Co-op.  If the member elects to appeal to the membership, the member has rights to distribute materials to the membership and a meeting of the Co-op is called to review the decision by the Board to terminate and evict the member.  There are technical procedural requirements for such meetings that are designed to grant procedural fairness to all concerned. 

The manner of proceeding at the meeting is often a matter for the Chairperson of the meeting to decide along with the direction provided by the By-laws of the Co-op and the general requirement to conduct a "fair" meeting.  It is not unusual for Chairpersons to adopt the procedures as set out in Robert's Rules of Order which provides a commonly accepted method of conducting a fair and respectful meeting while maintaining Order and ensuring that the meeting does not devolve into chaos.  The meeting will normally have representations from the Board as to why the decision to terminate and evict was made.  The member whose membership was terminated has the right to make their own statement.  The floor is then opened to questions, discussion, clarification.  These meetings may become incredibly tense as there are often very strongly held views amongst different factions from within the community.

At the conclusion of the members meeting (presuming that there was quorum), the members will vote (usually by secret ballot).  The exact nature of the question on which they vote is sometimes a pre-determined question--such as vote to uphold the Board decision or vote to overturn the Board decision, or sometimes the exact nature of the question to be voted upon is determined by motion from the floor.  How the meeting evolves, how the question to be voted on is determined, who speaks, and frankly how good or how badly the meeting goes depends on the Chairperson of the meeting and the manner in which the members of the Co-op participate.

If the membership vote to uphold the termination and eviction, the member must move out of the unit.  If the former member refuses to vacate the unit, the Co-op must then apply to the Superior Court of Justice for a writ of possession which will result in the Sheriff attending the members unit and forcibly removing the person if necessary.  After enforcement, the member has no legal right to be on the property and can then be arrested and charged for break and enter or trespassing if they are found in the unit without permission.

The application to the Superior Court of Justice is tremendously expensive as the entire application process is by way of affidavit, application record, and factum.


THE CHANGE IN THE LAW

The foregoing procedure remains more or less in place and Co-ops continue to have the option to proceed to the Superior Court if section V.1 (i.e. 5.1) of the Residential Tenancies Act (RTA)does not require the Co-op to proceed through the Landlord and Tenant Board as opposed to the Superior Court of Justice.  At this point, on my reading of section V.1 of the RTA, there is no procedure under the Co-operative Corporations Act that must proceed through the Landlord and Tenant Board on a mandatory basis.  Meaning, a Co-op has the option to proceed to the Landlord and Tenant Board if it wishes but the Co-op may still proceed with the "old" system if that is preferable.

So what does this "new" system look like.  Given that the law was just proclaimed on June 1, 2014, it is all still fairly new.  Hence, my comments are based on a first look.  From what I see, I think there will be a need for a great many amendments to the statute to make the contemplated new process make sense and there will likely be a need for adjudicators to make procedural rulings that help make section V.1 make sense and be useful.


SO HOW DOES IT WORK?


The new provisions applicable to Co-op's, in essence apply the same rules and procedures to Co-op's that apply to regular tenants in Landlord and Tenant relationships.  Unfortunately, they only apply after the Board does all of the things it had to do under the old rules.  Meaning, the Board must still meet, terminate by resolution, provide appeal rights, and follow the strictures that it has always followed.  The direction that this is the case is set out in section 171.8 of the Co-operative Corporations Act.

What the new law allows--but requires Co-op's to do--is to decide whether they still want to allow members the right to appeal to the membership if the Board terminates the Membership and Occupancy Rights.   The new law contemplates that Co-op's will pass a by-law that removes the right to appeal to the membership in the face of a termination decision.

In my view, the only way that proceeding to the Landlord and Tenant Board will ever make sense is by passing a by-law removing the appeal to the membership as a right (the reason will become clear).  Though, if a by-law is passed to remove the appeal right a Co-op should consider passing a by-law directing the Board to presumptively proceed by application to the Landlord and Tenant Board as opposed to the Superior Court of Justice unless there is good reason to proceed instead to the Superior Court of Justice.

Once the Board of Directors terminates a members occupancy and membership rights by resolution the Co-op may then decide to serve the member with a Notice of Termination under the Residential Tenancies Act.  These Notices of Termination are "Special" Notices specifically designed for Co-ops.  The Form Numbering, for those people familiar with regular Landlord and Tenant Board forms will be very familiar as the numbering remains the same.  So, whereas a Notice of Termination for Non-Payment of Rent in a landlord and tenant case uses form N4 and Notice of Termination for Non-Payment of Occupancy Fees and charges for a Co-op uses Form N4C.  Note that these forms look completely different from each other and you CAN NOT use one in substitution for the other.  The other forms are numbered similarly for everything from substantial interference (Form N5 is Form N5C0 to illegal act, impaired safety, misrepresentation etc. etc..


WHY IT'S OKAY TO REVOKE THE MEMBERSHIP APPEAL

If the Co-op proceeds to serve any of these Forms you will see that the same voiding provisions apply that arise in landlord and tenant cases.  So, as an example, if a member is behind in housing charges and the Board of Directors decides to terminate they could serve a Form N4C.   That Form, provides in its terms, that the member who receives this Form N4C can void the termination by paying the housing charges.  In effect, the Form N4C will operate to over-ride the decision of the Board of Directors if the member does or does not do certain things.  The same is true for conduct related Notices of Termination---hence if the Board of Directors chooses to terminate for behavior and then serves a Form N5C--that form, if it is complied with will result in the decision of the Board of Directors being over-ridden and the Landlord and Tenant Board will not evict the member (or put another way, it will lack the jurisdiction to evict the member).

At the moment, what is not entirely clear to me is whether the voiding of a Notice of Termination served under the Residential Tenancies Act automatically reinstates the membership rights of a member.  Is there anything explicitly stopping a Co-op from applying to the Superior Court of Justice for a Writ of Possession if the member manages to void a Notice of Termination by complying with the provisions of the Notice.  I don't see such a prohibition explicitly but certainly I think it would be foolhardy for a Co-op to engage the Residential Tenancies Act process and then abandon it when it doesn't work out as they expected.  I imagine a Superior Court judge would deliver a rather damaging Judgment against the Co-op in such circumstances.

What about non-voidable Notices of Termination for things like: Illegal Act (drug dealing and other criminal activity), impaired safety, subsidy misrepresentations, subsequent breaches of a lawful right interest or privilege of the Co-op, or subsequent behavior problems.  Such Notices of Termination are not voidable--does this meant that eviction is a foregone conclusion?

Not at all in fact.  The Co-op still needs to prove to the adjudicator at the Landlord and Tenant Board that the alleged transgressions did happen and that the Board of Directors by resolution did terminate the membership and occupancy rights of the member.  The adjudicator at the Landlord and Tenant Board is then given explicit power to exercise discretion and refuse to grant the application.  That discretion is found at section 94.12 of section V.1 of the RTA.   It is similar in nature to the discretion afforded to adjudicators under section 83 of the RTA in landlord and tenant applications.   Given that the wording of the two sections are the same, I would expect that section 94.12 will be interpreted in the same way as section 83 which means that the Adjudicators will feel free to make such orders as they consider fair.  In effect, the traditional view that Co-operatives regulate their own affairs through their Boards and members meetings is over-ridden by this new legislative structure that leaves the final say in the hands of adjudicators at the Landlord and Tenant Board.

What is appealing about discretionary relief in the hands of adjudicators as opposed to members' meetings is that the adjudicator is charged to make a decision in a judicious manner.  Having attended a great number of members appeals--on both sides--I think it is fair to say that the decision making in Co-ops is not necessarily confined to pertinent facts. 


CONCLUSION

I do believe that proceeding to the Landlord and Tenant Board is the "way to go" for Co-operatives. The learning curve is of course in applying new rules in the context of what has always been done.  However, I do see a certain efficiency in using the LTB forms and I think Co-operatives will be able to save significant costs in legal fees by going through the administrative process of the Landlord and Tenant Board.

As this legislation is new and I myself have not yet been through an application I would be pleased to receive comments from anyone reading this blog about their experiences.


Michael K. E. Thiele
Ottawalawyers.com