HOW DID I GET THIS FAR BEHIND?
Often enough, I have landlord clients who find themselves with a tenant who is many months in arrears of rent. The rent arrears amount to several thousands of dollars and the landlord, when speaking to me, is only slowly overcoming their denial of the huge financial loss they are about to experience. I've looked at this often enough and have asked many landlords how they got to the position of their tenant owing them so much in rent arrears. The explanations are always the same.
These landlords describe a situation where the tenant falls behind in rent. Often just part of the rent. The tenant pays the late rent but it is nevertheless late. In subequent months the entirety of the rent is not paid but the tenant describes a tragedy of some kind---a lost job, a death in the family, unexpected expenses, a spouse leaving, not receiving spousal or child support---and asks for a little time to pay. The landlord, feeling compassion agrees to extend credit and the tenant is very thankful. Time passes and the tenant fails to pay the entire arrears, or only makes a small additional payment. The excuses compound and the landlord describes feeling like a villain if they pile on financial worry to the recent hardship experienced by the tenant. At this point, the arrears are starting to be meaningful.
When the promised money does not materialize the landlord begins to finally suspect that there is a serious problem. That feeling however, is tempered with denial as the landlord finally does the math and realizes that these rent arrears are significant and that not getting this rent will have a real impact on the landlord's personal finances. That realization sometimes stuns the landlord into further inaction as they choose to believe that the tenant will come up with the money if just given a little more time. Of course the money never comes.
Eventually, the landlord realizes that legal steps need to be taken. Often, small landlords who haven't had this kind of problem ever before only now begin to learn of the procedure provided under the Residential Tenancies Act. Being finally ready to evict the tenant because they are losing their shirt the landlord is stunned to learn that the Residential Tenancies Act (RTA) provides an entire method/structure/rules for terminating a tenancy for non-payment of rent and that the process provided for under the RTA could easily take another 2 to 3 months from serving the Notice of Termination to getting an eviction order. What many landlords find profoundly frustrating is that the Landlord and Tenant Board refuses to deal with their matter in an expeditious way (i.e. faster then the system allows) even though the landlord knows he won't be paid and he has given the tenant numuerous chances.
SO WHAT SHOULD A LANDLORD DO?
The very first thing that a landlord needs to recognize is that they are running a business. In order for the business to be profitable the customers must pay and they must pay on time. You should not allow the customer to consume the product without paying for it. Accordingly, I recommend to all of my landlord clients that as soon as the rent is late--which is the day after it is due--that the landlord prepare and serve a Form N4--Notice of Termination for Non-Payment of Rent. No waiting, no excuses, no delays---the only exception being if you believe the tenant is trying to escape from a fixed term lease.
The service of a Form N4 starts a termination procedure. That procedure is long and drawn out. The N4 gives the tenant 14 days to pay the rent from the date that the N4 is served. The tenant gets 14 days whether you serve the Notice the day after rent is due or 6 months after the rent is due. The point is that the law always gives the tenant 14 days to pay.
After the 14 days expires, and presuming that the tenant has not paid the rent owing, paid only part of the rent owing, or hasn't paid all of the rent owing and any rent that became due after the service of the N4, then the Landlord may apply to the Landlord and Tenant Board to evict the tenant for non-payment of rent and further to get an Order for the rent owing. The form that the landlord uses is Form L1 (available online and from the Landlord and Tenant Board). Filing the L1 form will result in the Landlord and Tenant Board issuing a Notice of Hearing. That hearing date could be a couple of weeks after filing or sometimes even a little longer after filing.
During this entire period of time, a landlord is not allowed to take any action against the tenant. It is illegal to simply change the locks, interfere with services, harass or intimidate the tenant in any way. If the landlord does do something illegal and contrary to the RTA the Board may refuse to terminate the tenancy, it may fine the landlord, grant damages to the tenant, and possibly even refer the landlord for prosecution under the Provincial Offences Act.
Having waited for the hearing date, the landlord and tenant will attend. The tenant may seek an adjournment and it is not necessarily guaranteed that the case will proceed on the scheduled date. The tenant may be ill or have some other explanation for why they are not reasonably able to participate in the hearing. Any of these things could lead to an adjournment. Further, the tenant could indicate an intention to file their own case, or that they have filed their own case and that they have a separate hearing date and want the cases joined to the later date, or there could even be an issue with language and needing a bi-lingual hearing block.
Presuming that the case proceeds and is not adjourned, and further presuming that the case is straightforward without the tenant claiming against the landlord for anything, and presuming also that the tenant admits the amounts owing; the landlord and tenant board, absent any special considerations will make an order requiring the tenant to pay the rent in the next 11 days (from the date of the order). If the tenant pays--the tenant gets to stay and the order is void.
If the tenant does not pay, then on the 12th day, the landlord may attend on the Court Enforcement Office (aka Sheriff) and ask the sheriff to enforce the eviction Order after paying a fee in the range of $350. Depending on where you are in the province, the timing for enforcement can be a week or longer. During this entire period of time it is possible that the tenant is not paying rent.
While the time-line described is long enough, it is also possible that the tenant will ask for an extension of the 11 day period or ask for a payment plan to allow the rent to be paid off over time. All of these possibilities arise from the adjudicator's power to exercise discretion under section 83 of the Residential Tenancies Act.
If you have been adding up the blocks of time that the Residential Tenancies Act allows to tenants to void the eviction and pay the rent, you will have discovered that from the date of service of the N4 to the date of eviction is a minimum of one month (if you are extremely lucky) and is more likely in the range of 2 to 4 months. This can be a very long time to go without getting rent if you are relying on the rent for your own expenses.
In strictly following the rules provided for in the law you will recognize that the tenant will have plenty of opportunities to pay the rent arrears and keep their tenancy. The law makes any step that you take to terminate and evict the tenant void if the tenant pays the rent. Even after the Landlord and Tenant Board has given the tenant the final 11 days to pay the tenant can still pay the rent (once during a tenancy) after the sheriff has been instructed to attend and evict and thereby void the eviction order.
So the point of this article then, and to answer the question posed in the title the thing that a landlord should do, when the rent is late, is to immediately start the legal process to terminate and evict the tenant. Starting early will get you through the mandatory blocks of time that a tenant is granted to pay the rent before the rent arrears become ridiculously large. From the time line set out above you can see that it is virtually guaranteed that you will lose rent--even after applying the Last Month's Rent deposit to the rents owing.
Michael K. E. Thiele
Friday, 6 June 2014
Small Landlords: What to do when the rent is late.
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