Wednesday, 7 August 2013

Mediate, Settle, or Fight: How do you choose?

In this article I'm going to try to shed a little bit of light on the decision making process as it relates to settlement, mediation, and litigating (i.e. arguing and letting the Adjudicator decide) an application before the Ontario Landlord and Tenant Board.  This article is destined to fail in that it will not be possible to explore all of the factors that go into such a decision in a reasonable number of words.  The reality is that the factors that influence how a case proceeds are innumerable and unique to each and every case.  From case to case, the underlying facts are never identical, the parties are rarely the same and the positions of the parties are unique to that particular time and space (i.e. a willingness to negotiate a particular case (but not the next one) may be motivated by illness, a trip, an appointment, sympathy, empathy, and the converse is also true).


However, notwithstanding the great differences between each case (on the facts and circumstances), the fact is that most cases settle before the Hearing of the actual application.  Settlement happens either between the parties and a private deal is made or a settlement is acheived at the Landlord and Tenant Board with the assistance of a professional mediator supplied by the Board.  Either way, the case does not proceed to be heard on its merits but instead is resolved by a consent order, mediated agreement, or withdrawal of the application.

While the fact that the majority of cases settle is true the issue I'm seeking to address is how do you decide whether your case is one of those cases that should settle or whether it is one of those cases that must go to hearing if the other side doesn't come around and give you what you are seeking.  It is this issue/question that I spend the most time talking to my clients about--prior to the hearing and at the mediation itself if we enter into mediation.  It is difficult because mediation and resolution by negotiation necessarily means that the outcome of the case is a compromise for the client--meaning they are getting less or giving more than what they wanted to give or get out of the process.

To the extent that every settlement is a compromise the question then becomes how much do you compromise (i.e. how much less than what you wanted do you accept or how much more do you give than what you wanted to give)?  Being ever fond of context and examples let me explain a situation that a client of mine recently faced.

FACTS

This client moved into her new apartment on March 1 (6 months ago).  On the move in date, she discovered that the renovated unit she visited and the apartment complex (high-rise) that seemed reasonable when she rented the place was in fact an absolute horror show.  After getting her keys and within 4 days of moving into the new apartment she experienced the following:  solicitation for sexual services in the entrance lobby from males and females, persons high on drugs shoulder surfing to gain entry to the building, people squatting in hallways and common stairwells, people defecating in the hallways, marijuana smoke permeating the building and getting into her unit, intense cooking smells getting into her unit, upstairs neighbour's childrent pounding on the floor repeatedly and endlessly (at least 7 hours per day), the landlord refusing to confront the neighbour, the neighbour threatening the tenant when she begged them to stop, the police advising the tenant that they could do nothing for her after speaking with the neighbour and advising her it was a civil matter, getting stuck in the elevator twice (this continued in the weeks to follow), finding used needles and condoms about the property, and finding that doors to the garage were broken open so anyone could enter at will.

After the first four days, the tenant discovered that the gym and fitness center (which was the big seller) was not going to be open for an indefinite period of time.  Her complaints to the landlord were ignored.  She lost heat for 6 days (when the temperature was still below zero), and received very little help from the landlord who only told her that the furnace technician said it would take a few days for the system to fully catch up.  She also discovered that the landlord, through carelessness, disclosed her personal information to the tenant she was complaining about and thereby suffered retribution from that tenant (i.e. strange liquids being poured on the floor in front of her door and on her balcony). 

These facts, and may other incidences, were all well documented in emails, photographs, advertisements, etc..

The monthly rent was approximatley $1100 and the tenant, as a rental incentive got the first month free on the condition that she finish the one year term of the lease.

The tenant could not get any satisfaction from the landlord.  The landlord refused to move her to a different unit (there were many available as the vacancy rate is high in the complex), she increasingly felt un-safe and threatened.  The upstairs neighbour was driving her crazy and it was affecting her work--and there was no end in sight.

The tenant decided that she needed to get out of this apartment at all costs.  She tried to get the landlord to agree to let her go.  They refused as they advised that she was in a one year lease and hence could only sub-let or assign her tenancy to a new person.  At her wits end, the client came to me.

THE APPLICATION

As I do with all of my clients after getting the outline of the facts, I ask them what it is that they want me to get for them--whether through negotiation, litigation, or a combination of both.  It may seem like an obvious question to ask but you may be surprised at how difficult it is for a client to sometimes answer this question.  I think the reason for the difficulty is that they are sometimes over-whelmed by everything that is happening to them that they can not look at the entire situation objectively or dispassionately.

In this case, the client advised me that all she wanted was to be allowed to leave--to get out of her lease and to never have to go back to this building.  Given this answer from the client, I proceeded to advise her about her right to bring a tenant application in form T2 and that the remedies that she could seek included termination of the tenancy on a date specified by her.  I also informed her of her right to seek an abatement of rent, other compensation, a fine, and various orders requiring the landlord to undertake certain actions.

It was in discussing the nature of the potential remedies and how to prove an entitlement to them that the client began to see the strategy or roadmap of how I intended to take her from the situation she was in to the situation that she wanted to be in.

Notwithstanding the client's expressed desire to simply get out of her lease and application was drafted with the client's full agreement seeking termination of the tenancy, a rent abatement of $25,000, damages for misrepresention, moving costs, and a fine.  The application was issued and served on the landlord.

THE HEARING

The client was very good at preparing a large package of evidence that proved or at least supported her assertions against the landlord.  There were advertisements about the fitness centre, emails from the rental agent confirming that she would enjoy the fitness center, emails about the noise complaints, drug complaints, vagrants complaints, harassment, breach of privacy.  There were photographs of various vile things all around the complex and various work orders and timelines of the crazy things that happened.  All of these things were served on the landlord in advance of the hearing.
The landlord served no responding documentation.  At the hearing, the landlord showed up with three witnesses who would testify in response to the tenant's case.

MEDIATION BEFORE HEARING

As is the norm at Landlord and Tenant Board proceedings in Ottawa, there was an opportunity before the commencement of the hearing for the parties to mediate.  In this case, mediation was helped along by the fact that both sides of the case were represented.

In this case, prior to the clients showing up, the landlord's lawyer and I had a chance to talk about our clients' respective positions.  Since the commencement of the application, my client had moved out (June 30) and based on legal advice she had also not paid her June rent.  Therefore, the length of the tenancy was a maximum of 4 months (March to June) with a total of three months having been paid for (there was a last month's rent deposit).

The landlord's lawyer took an interesting position with respect to the residential complex.  He indicated that his client had purchased the property from a rather notorious company that allowed the condition of the units to deteriorate significantly and who also filled the buildings with tenants who passed no kind of reference check.  He advised that the landlord was doing everything it could to deal with undesirable tenants, was investigating all complaints, and taking legal action against anyone who was in breach of the Residential Tenancies Act.  He asserted that signficant repairs were being done, that my client's apartment had been completely renovated prior to her moving in, and he highlighted the fact that my client, in her own emails even mentioned some of the great maintenance and repairs that were completed as well as upgrades to security via electonic key fobs and cameras.  He took the position that the vast majority of what my client was complaining about was indeed out of the landlord's control but that the landlord was responding to complaints and dealing with them in accordance with the Residential Tenancies Act.

The Fitness Centre deserved a special explanation as my client asserted that the rental agent never mentioned that the Fitness Centre was closed.  On this point, the lawyer had little to say, except to baldly assert in the face of contradictory emails and flyers that the tenant was not promised what she claims was promised to her.

The lawyer then openly alluded to the secret that everyone who attends the Board regularly knows.  This particular property is extremely troubled.  It has been in the news for a couple of years, protest groups have formed because of it, and this property is regularly before the Board facing tenant applications that are similar to in nature to my client's application.  He then acknowledged that the typical tenant application is resulting in a rent abatement of 10%

The lawyer asked whether my client was employed and whether I would accept service of a Statement of Claim issued against my client in the small claims court.  He mused that his client would be seeking to issue a claim against the tenant for the lost months of rent (balance of the one year term) as well as for payment of the "free" first month's rent.

We then proceeded to discuss the fact that the landlord had served a Notice of Termination for Non-Payment of Rent (Form N4) and the legal significance of the landlord terminating the tenancy for non-payment of rent.  Is a landlord entitlted to seek compensation for lost rent when a tenant moves out of a unit before the end of term?    We debated the recent caselaw (Small Claims level) that says once the tenancy is terminated by N4 the landlord's rights cease with the old caselaw that says the obligation continues even if an N4 was served.

We also debated whether the facts described by the tenant would be severe enough---and have enough unmpf (power) to convince the adjudicator that s/he should terminate the tenancy.  Effectively, the adjudicator would have to find that termination of the tenancy was necessary to effect justice as an abatement of rent would not be sufficient in the circumstances.

MEETING WITH THE CLIENT/TENANT

My client was nervous about the hearing process, about testifying, about winning, about losing, and about everything about what appearing at the Landlord and Tenant Board entailed.  This, in my experience, is perfectly normal---some lawyers refer to these feelings as litigation stress.

Because the Landlord and Tenant Board does not require the exchange of pleadings nor the exchange of documentary evidence, nor does it allow for examinations for discovery, my client learned the thrust of the landlord's defence in the minutes before the hearing was to commence.  And in fact, she only learned it then because I took the time to speak with the landlord's lawyer to try to find out what the landlord's position was.  I had in fact tried to get the landlord's position in the weeks leading up to the hearing but the landlord's lawyer was not in a position to advise me of anything until the hearing.

So, imagine that you are my client and that you have lived the experience that I've described for you in the early parts of this article.  Clearly you are upset, feel that you deserve something for having gone through this ordeal.

Now, with your case ready to be called at any moment, I've pulled you aside to tell you the things that the landlord's lawyer has told me.  I'm telling you this because you 1) have a right to know, 2) I have a duty to tell you, and 3) I need to have your reaction to some of the things said to gauge whether the statements are true, how we will counter them in your evidence, and what evidence you could lead to counteract the landlord's evidence.

My description to you of the landlord's view of the facts raises with specificity, for the first time, the landlord's strategy.  Hence, we now find that the landlord will not deny many of your allegations about the conduct of other tenants.  Instead, the landlord will focus on the fact that they are aware of the problems, that they are taking every legal step they can to evict the problem tenants.  All of a sudden, the email from the property manager--wherein she invited you to "fill her in-box" with complaints takes on a new meaning.

The landlord's strategy--of not denying--but acknowledging and saying they are dealing with the complaints turns out to be a clever defence.  As I explain to you, rent abatements in Residential Landlord and Tenant law fall within a relatively narrow band of 10 to 30% of the monthly rent (for no real reason other than they just "do".  Also, the RTA contemplates that rent abatements are more significant if the landlord was made aware of an issue but did nothing about the problem (in fact the RTA directs the Board to consider whether the Landlord was given notice in repair applications s.30(2)---and it is my opinion that this consideration carries through in all applications).

The comment about whether you are employed and whether I would accept service is a comment that puzzles you.  I explain to you that the landlord does not have the legal right to commence an application at the Landlord and Tenant Board when you are out of possession.  Hence, any claim the landlord has would have to be adjudicated in the Small Claims Court.  What claim could they have?  Well, the free first month rent that you received was written into your lease with a condition that they discount would only apply if the entire term of the lease were completed and you (the tenant) did not terminate the lease early.  The landlord could sue you for the first month of "free" rent.  The landlord could also sue you for the balance of the term of the lease.  I advise you that it is unlikely that the landlord would get 8 months of rent from you, that the landlord has a duty to mitigate its losses and that it needs to try to re-rent your unit.  At this stage, we recognize that the landlord's false statement that vacancy stands at 10% is not helpful as from your own observations you think the vacancy rate in the building is closer to 40%.  This matters because the landlord has no obligation to re-rent your unit in priority to other available units.

I ask you whether the landlord would actually sue you in the Small Claims Court or whether this is more likely a bluff.  You don't know (obviously you can't know), but you're inclined to think that they would---especially if you won money in the Board hearing.

You then ask what the chances are in a small claims case if you win termination at the Board.  The answer is that winning a termination of the tenancy at the Board certainly absolves you from ongoing liability for rent--and your risk in Small Claims Court is zero for ongoing rent.  However, the wording of the "free rent" clause makes a claim in small claims court something to be concerned about.

You then get stressed at the thought of being sued in the small claims court as the "litigation stress" rekindles and you think about the fact that a small claims court action will mean days off of work, the expense of defending, a need to think about the very horrible things that happened--along with a potential financial risk of the landlord winning back a month of rent or perhaps more months if the Landlord and Tenant Board does not terminate the tenancy.  You can only conclude that if this is a bluff---it is a good one.

Aside from the specific information conveyed by the landlord's lawyer, we now consider the three witnesses that the landlord has brought to testify.  We discuss what they might say, how faithful to the truth some or all of them might be.  Would any of them be sympathetic to you--you think not--except that you bought two of the maintenance guys a case of beer as a thank you for their work before you left (one of them is here to testify).  You wouldn't have mentioned this to me except that the landlord's lawyer told me about it in passing.

At this stage you are wondering what this all means.  Does it mean anything?  The reason why you are at the Landlord and Tenant Board has not changed.  The things you went through--still happened and you still suffered for having moved into this property.  Won't the Judge understand that you ask.  On that topic we discuss the personality of the adjudicator and how this particular adjudicator has ruled in similar cases in the past.  I inform you of whether you have a "good" draw for your case--reminding you that it is only my opinion and much will depend on how the evidence comes out.

RE-CAP

In the vast majority of cases where I have been counsel for the landlord or tenant--there is some sort of discussion that touches on the kinds of things that I have recounted above.  The discussion arises because it is human nature to gauge one's chance of success and to re-analyze the chance of success in light of new information.  "New information" includes all of the last minute bits of information and it even includes intangible factors such as the weather, the length of the list, the mood of the Adjudictor.  All of the actors in a case are human--and even ascribing only the best intentions to all of them the fact remains that external factors do influence how a case unfolds.

What I haven't written about yet--but which you should presume---is that while the landlord's lawyer was advising me of "new facts" (with his spin), I was of course also advising him of new facts and my interpretation of those facts (my spin).  While we were having our conversation the landlord and its lawyer were having the same kind of discussion--re-weighing, assessing and balancing the risks of the case.

Once we have assimilated the "new information" the inevitable question that every client asks is whether my view of the case has changed.  I will get "what are my chances now?", "should we try to settle?".  Alternatively, for the client who is refusing to see the forest for the trees----I will ask them, perhaps rhetorically, whether anything they have heard has raised any concerns for them.

My goal at this stage of the process is not to encourage the client to settle or to proceed with the hearing.  Instead, it is my goal to ensure that the client has all of the facts at hand, is aware of the risks, and knows the range of possible outcomes as reasonably foreseeable if the case goes to hearing.  Sometimes, the client asks me "what would you do?" to which I can't provide a helpful answer for the simple reason that what is acceptable to me, my risk tolerance, my willingness to deal with or accept a negative outcome is necessarily different than the clients.  That being said, this question usually results in a cost benefit analysis that takes into account all of the known circumstances.  On the facts of the case recited as an example above they include:

  1. legal costs to date and to the end of the hearing;
  2. will this hearing end it all today;
  3. will the landlord proceed to small claims court; and what are the risks and costs of proceeding there;
  4. if you win money from the landlord will this make the landlord more likely to sue you in small claims court? (you said "yes");
  5. the attitude of this adjudicator (how does he deal with tenant claims)---(this adjudicator is balanced);
  6. that the percentage range of rent abatement is 10 to 30% (this landlord has been ordered to pay 10% abatements for recent similar cases for people from your building);
  7. that the financial part of the claim for rent abatement is now limited in range to $300 to $900 because the tenancy was ended after 4 months (i.e. 10% to 30% of $1000 per month--first month free);
  8. that the caselaw involving N4's terminating tenancies is not settled;
  9. that getting a rent abatement is likely--whether your experience is enough to have the adjudicator terminate the tenancy is more a 50/50 question 
  10. that your entitlement to the "free" first month is a question without an obvious legal answer even if you win an abatement and a termination of the tenancy--and in any event this claim can be pursued in small claims court.
  11. You can't be sure of finality unless you make a deal--and litigation stress has been bothering you.
  12. On the first day that you met me, all you wanted was out of the premises and be free to go--how committed are you to pursuing financial damages and risking future litigation.

The foregoing twelve points went into my clients consideration of whether she wanted to try to mediate a resolution or whether she wanted to proceed straight to the hearing.  Both were a choice as she was not required to mediation or negotiate.

The framework for getting to the point of deciding to mediate is interesting and I proceed in this way purposely.  Note that I didn't just say to the client---let's go to mediation and see what happens.  Playing it "by ear" is not something that I encourage in the Landlord and Tenant environment unless my client is very steady and experienced in litigation.  In an adversarial environment that provides no disclosure, no examinations, no pleadings, going into a mediation without having done the serious analysis of the pros and cons is, in my view, inviting a rash decision that will lead to regrets--based on information that is presented on the fly.

Having done the analysis of whether to mediate, which necessarily entails a review of the strengths and weaknesses of the case, the client can be ready to consider compromises to their position.  What does this mean?

For anyone who hasn't been through a mediation you will find that most sessions start in the same way.  There is an introduction, general statements by each party, sometimes a statement by the lawyers, all of which is intended to get the interests on the table.  The positions in relation to the interests follow--and depending on how the parties are interacting the mediator may take the parties into separate rooms and conduct the mediation on a shuttle basis.  Inevitably, the opening positions of each party are reflective of the best possible outcome for that party at the end of a hearing.

The opening positions get challenged by the evidence, the comments, the posturing, the innuendo, the willingness to litigate, the willingness to continue the proceeding after today (i.e. appeal, review).  It is pure negotiation, pure advocacy, it is the flea market, the swap meet.  There are countless books on negotiation and all of those strategies come into play.  Threaten to "walk away", spend lots of time and get the other side invested, break the claim down into pieces, etc. etc. etc..  Everyone has a strategy and it is rare that anything is actually what it seems to be.

The mediation process results in offers going back and forth.  I've found that it is at this stage that some clients get disappointed because they go into a mediation hoping or expecting that the other side will come to the table offering a big number.  It's like they are hoping for a lottery win.  Unfortunately this rarely happens and therefore it is simply wrong to rely on "hope" to get a favourable resolution.  In fact, the opposite is true and I have found that a client who has a clear appreciation of all of the facts, knows the risks, and has a good sense of the pros and cons is in a position to negotiate a better outcome because they know what they need.  In effect, they put a price on their case--in the face of all the factors--and aim for it.  Clients who negotiate with this kind of conviction will normally get very close to what they need to settle--either a little more or sometimes a little less.

Knowing the value of your case to "you", knowing the consequences of settling, the risks of trial, and the possible outcomes, makes for a fairly savvy negotiator who is likely to more often have success than failure at the Landlord and Tenant Board.

FACT SCENARIO OUTCOME

If you've read this far you are likely wondering what happened in the case that I have recounted above.  It wouldn't be fair to not disclose the outcome, but before I do that I would like you to take a moment and think about what you would do (mediate or not) and if you did mediate--what would you aim for (what's your bottom line).  I promise you that the facts of this case are real and were actually faced by a client of mine.  Your answer of course reflects your personal circumstances and you haven't had the stress of the tenant in this scenario.  Still--what are you aiming for?




What actually happened in this case is that my client decided to mediate.  She put a high value on finality and wanting to be finished with the case once and for all.  She wanted to mediate for the certainty of finishing everything in relation to her tenancy on the hearing date (i.e. no small claims court, no appeals, no reviews).  She decided that money was less important but that she still deserved something for the lack of the fitness center.  She could appreciate the landlord's position in relation to the nuisance tenants.  She accepted that the law is generally cheap when it comes to damages for tenants and that the principle method of damages calculation is by applying a percentage reduction to monthly rent (i.e. rent abatement).  She felt that she would be in the high end of the 10 to 30% range while I assessed her at 20% of rent paid (i.e. $600).  On the premise that foregiveness is easier to get than permission and the fact that the tenancy was de facto terminated and given who the adjudicator was, it was my view that it was more likely than not that the adjudicator would indeed terminate the tenancy.

THE DEAL

The matter was indeed settled in mediation.  It resolved on the basis that the tenant would withdraw her application in consideration of the landlord not pursuing any claims against her and that this was in full and final satisfaction of all issues arising from the tenancy.  This was entered as an Order of the Landlord and Tenant Board.  The tenant got: 1) termination of the tenancy, 2) she kept her one month of free rent ($1000), 3) she got finality and a mutual release for anything to do with this tenancy.

There are always reasons to second guess and think of other options, but at the end of this process I was very happy for the client because she has an outcome that meets with her primary objectives.  She controlled the process and had a substantial say in the outcome.

Michael K. E. Thiele
Lawyer
Ottawa, Ontario
www.ottawalawyers.com




















2 comments:

  1. can mediated agreements or consent orders be appealed in divisional court without leave to appeal?

    ReplyDelete
    Replies
    1. Hi: This is a rather informed question--are you a lawyer or someone needing a sleep aid who reads the Courts of Justice Act (CJA)? The answer I think is in section 133 of the CJA. While the Residential Tenancies Act provides an appeal route to the Divisional Court (s. 210) you might think that the trumping provision of the RTA might over-ride the leave requirement. Assuming there is no case law on point (I haven't looked), my first impression is that the engagement of the Divisional Court's jurisdiction under the Rules of Civil procedure also engages the CJA provisions. There is at least one Div Crt case (not on the same specific point) that considers the voiding of an underlying Landlord and Tenant Board decision while an appeal of that same decision is pending in the Divisional Court. The Divisional Court came out with what I characterize as an attornment analysis in that matter. I think the same idea would apply in relation to your question--hence, if you try to argue that leave is not required I think the Court would be inclined to rely on the argument that an engagement of its process under the rules requires compliance with its Rules notwithstanding what the RTA says.

      Michael K. E. Thiele
      www.ottawalawyers.com

      Delete

IMPORTANT NOTICE

Any answers provided are intended to reflect the Law of Ontario, Canada. The answers are not legal advice and no one should rely on the answers provided as legal advice. The answers are intended to be general information about Ontario Law and are the personal view of the author based on the limited facts provided to the author. The answers may not be legally accurate and may indeed be contrary to the law of Ontario. Answers and conclusions drawn may have been different if facts had been shared that have not been disclosed in the comment/question. This blog is intended to assist people in learning about Ontario Landlord and Tenant Law. However, if you have actual legal problems this blog should under no circumstances replace proper legal advice obtained by retaining a lawyer or licensed paralegal to advise you. Nothing in this blog, comments submitted or answers provided, gives rise to a solicitor and client relationship. Comments are published as submitted and commenters should be aware that if they identify themselves in a comment that their identity will become public upon the comment being published. Comments that have been published may be deleted upon request to the author.

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About Michael Thiele

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Ottawa lawyer and partner at Quinn Thiele Mineault Grodzki LLP.  Graduate of Queen's University in Kingston, Ontario.  Called to the bar in Ontario in 1997.  Undergraduate degree at Colby College, Waterville Maine, U.S.A.