Monday, 22 June 2015

My Tenant hasn't paid rent--what do I do?

This article is for landlords who are renting apartments to residential tenants in Ontario. The goal of this article is to provide a guide to the steps to take to protect one's interest while at the same time recognizing the difficulties that tenants might face and the impact of those difficulties on running the business of being a landlord.


Generally speaking, first time landlords and landlords with few rental properties are the people who are most likely to lose the most when it comes to tenants not paying their rent.  In the case of first time landlords the losses from tenants not paying their rent mount steeply because of a natural inclination to give the tenants a chance and a desire to help the tenants.  That inclination leads to a significant delay in taking the mandatory legal steps that must be taken to get an Order for rent arrears and eviction for non-payment of rent.  The inclination to be kind, understanding, and patient with a tenant in arrears of rent may result in time creeping by and before you know it the tenant is several months in arrears of rent.  It is only then, that the kind, understanding and patient landlord begins to suspect that they have been taken advantage of, or worse, realizes that the tenant's personal circumstances are such that they will never be able to recover from the debt hole of rent arrears that they are in.  With the dawning of this reality, the new landlord then learns that the actual legal process required under the Residential Tenancies Act will take several more months before anything concrete can be done to stem the losses and regain vacant possession of the rental unit.


The other kind of landlord who is more likely to suffer rental losses is the landlord with very few rental units.  Why is this?  In my experience this tends to happen because this kind of landlord is easily distracted from the business of being a landlord.  With only a few rental units this kind of landlord is often employed elsewhere or runs another business elsewhere which work provides the actual income on which the landlord lives.  The cash-flow of only a few rental units is nice for building equity in the properties but the fact is that after expenses the net profit from the rental income on a few rental units (say 10 or less) is not anywhere near enough to live on.


The landlord with only a few rental units often relies on the integrity of the tenants to pay the rent.  When a tenant is in arrears, these landlords often don't notice right away that a cheque has bounced or that they didn't receive a cheque that month.  These landlords are often distracted from the problem of non-payment by tenants who say the cheque was mailed, dropped in the drop-box or by some other plausible excuse that buys the tenant more time.  These landlords tend not to get around to the paperwork because of the distractions of their other jobs and as a result their losses from non-payment of rent tend to be higher than for landlords who are focused on their business of being landlords.


The solution for both types of landlords (kind, new, & patient and the small landlord), is the same.  You have to use the tools that the law provides and you must use them immediately upon being entitled to use these tools.  Using the tools that the law provides does not in fact prevent a landlord from being kind, patient or understanding.  It is still possible to give a tenant a chance to pay even if the full force of the law is used.  It needs to be understood that using the law as it is intended to be used does not make a landlord a bad person.


I recommend to all of my landlord clients that there should not, as a matter of practice be any grace period for non-payment of rent.  If rent is due on the first of the month then it is important to require consistent payment of rent on the first.    Requiring delivery of rent on or before the first of the month allows for greater efficiency and tracking of how the "landlord business" is going.  By getting all of the rent on or before the first a landlord can sit down on the second of every month and do the deposit, update the rent ledgers, and get a good picture of where the business is at.  If a landlord allows rent to be paid in dribs and drabs over the first couple of days of every month by numerous tenants then along with the reduced cash-flow the landlord has increased administrative burdens in receiving, recording, and crediting rent payments that are made late.


The administrative efficiencies that come with rent that is paid in a timely manner are so great that a few of my larger landlord clients provide tenants with an on-time rent discount if rent is paid in full and on time on or before the first of every month for a period of one year.


THE STEPS THAT SHOULD BE TAKEN


A tenant has the right to pay rent all the way up to midnight of the day that rent is due.  This is regardless of office hours or other preferences of the landlord. 


On the second day of the month or the day after that rent is due if the rent term runs on anything other than the calendar month; landlords should immediately determine who has paid rent and who hasn't.  For the tenants who have not paid rent the landlord should immediately issue an N4 Form (Notice of Termination for Non-Payment of Rent).  That form is available here  . 


The N4 Form is the form that a landlord completes to advise a tenant that their rent is late and that the landlord is seeking to terminate the lease for non-payment of rent.  The form requires the tenant to pay the rent by a specified date that is called the termination date.  That termination date must always be a minimum of 14 days after the N4 Form is properly served on the tenant.  This means the service of the Form N4 will give the tenant 2 weeks to pay the rent.  If they do pay the rent within that time then the N4 form is void and the tenancy continues without any interruption.


If the tenant does not pay the rent within the 14 days provided in the N4 form then, and only then, may a landlord proceed to the next step which is filing an application to the landlord and tenant board to terminate and evict the tenant and get an Order for the rent arrears and ongoing rent that may accrue with the passage of time.


It should be apparent to the new landlord from looking at the requirements of the N4 that the law already builds in a grace period for delinquent tenants.  Providing the tenant with a grace period before serving the N4 (Notice of Termination for Non-Payment of Rent), extends a two week grace/notice period to an even longer period of time.  If a landlord chooses to give the tenant a few more days, a week or two, or whatever other time period, this does not shorten the legally required notice in the N4 of 14 days.  Regardless of the kindness extended to the tenant, the RTA requires that the minimum notice periods be provided to the tenant in the proper Forms.  In my view, an N4 that is served immediately upon the rent being late starts a clock ticking that protects a landlord's interests.   While nothing technically stops a landlord from granting the tenant more time, or delaying eviction, that "kindness" in my view should not come at the expense of having the legal right to terminate and evict the tenant should the kindness extended to the tenant be abused or the rent not ultimately be forthcoming.


During the two week period after the service of the Form N4 there is nothing that the landlord can do (no legal action to regain possession of the rental unit is possible during this time).  It is fine to speak with the tenant and make whatever arrangements you wish with respect to getting payment of the rent.  However, I strongly urge landlords to not make deals that include waiving or delaying the legal rights you have to get an Order terminating the tenancy for non-payment of rent.  While the tenant's promises to pay may be very sincere and the plans to raise the money entirely plausible, the risk that the rent arrears are not paid should not be compounded with an extended period of non-payment of rent for subsequent months.  What I mean by this is that you can make a payment plan with a tenant and agree on terms that are satisfactory to you.  However, any deal that you reach should include the fact that you will apply to the Landlord and Tenant Board for an order terminating the tenancy and evicting the tenant.  If the tenant has paid the rent arrears (and $170 filing fee) by the time of the hearing then no harm has come.  If the payment plan extends past the time of the hearing then you can make the payment plan a condition of the Eviction Order--meaning the eviction will not be enforced unless the tenant fails to meet the terms of the payment plan agreed to.   The effect is that you are still being flexible, patient, and understanding with a tenant who may be facing a tough time for a myriad of reasons, but you are protecting yourself with an eviction Order in case the non-payment of the rent arrears and future rents gets out of hand.


After you have served the N4 and have waited the required 14 days, you may apply to the Ontario Landlord and Tenant Board for a Hearing.  You use the Form L1 to apply to the Board.  You will need a copy of the N4 that you served on the tenant along with a Certificate of Service proving that you delivered a copy of the N4 to the tenant.  The L1 application when filed with the Landlord and Tenant Board will result in a Notice of Hearing being issued.  That hearing will in most cases be scheduled within a few weeks of filing the application.  You will receive instructions with the issued application for serving the tenant and filing a Certificate of Service with the Board.


You should take note again of how the tenant is afforded opportunities to pay the rent arrears.  The N4 provided 14 days notice and now the filing of the L1 results in a few weeks of delay again before a hearing is scheduled.  While waiting for the hearing date nothing can be legally done to regain possession of the rental unit without the tenant's consent.  During this entire time the tenant has the right to pay off the full rent and maintain the tenancy or alternatively the tenant can use this time to find a new apartment and get ready to move.  Granting the tenant indulgences and not enforcing your legal rights as a landlord when those rights accrue gives the tenant a whole lot more time to not pay future months of rent (as it becomes due), to the detriment of the landlord who thought that it was harmless to grant a few more days, weeks, month, etc..


When the Hearing date finally arrives a Landlord needs to be prepared to attend the hearing to prove the case against the tenant.  It is imperative that a landlord attend the hearing with an up to date rent ledger that clearly shows the rent being charged, the rents received, and the amounts owing.  On the day of the Hearing the Landlord and Tenant Board will request the Landlord to provide an update as to the status of the rent arrears on an L1/L9 update sheet.  This form, available at the Landlord and Tenant Board, is designed to show the adjudicator exactly how much the tenant owes, what the legal rents are, whether any rent has been paid (full or partial payments) since the filing of the application, whether rent has increased, and whether there are any NSF charges.  The Form also queries whether there are any extenuating circumstances that the Landlord and Tenant Board should be aware of.


The extenuating circumstances are essentially things that may be considered legitimate excuses or explanations for the rent arrears.  Sometimes, the rent arrears arise from things beyond the tenant's control.  Where there is a job loss, injury, illness, delay of payments, family emergency, theft, and any other unfortunate occurrence that the Board accepts, an adjudicator may grant the tenant more time to pay the rent arrears while still maintaining the tenancy.  The authority to grant the tenant a further opportunity is found in section 83 of the RTA. This discretion section can be quite maddening to landlords who have delayed pursuing their tenants because they felt badly and wanted to give the tenants a chance.  The rent arrears by the time the tardy landlord gets to the Landlord and Tenant Board can be many many months.  Then, in defence of the application, the tenant can ask the Board to grant a payment plan or in some circumstances delay eviction because of the tenant's circumstances.  Landlords who are relying the rent to meet mortgage obligations or other financial commitments can become quite upset at this "discretion" being exercise under section 83 in favour of tenants who they feel have abused the kindnesses already extended to them.


My point in this article is not to complain about the RTA or to suggest that the statute is in any way unfair.  In fact, I find that the RTA is fairly balanced given the competing interests of landlords and tenants.  The trick to maintaining the "balance" in non payment of rent cases is for landlords to make use of the rights that are granted to them under the RTA as soon as possible.  By delaying the exercise of these rights it does ultimately appear that the RTA is unfair to landlords especially when the rent arrears have extended over a great many months.  The landlords that I have heard complaining the loudest are generally the ones who do not know their rights under the RTA (and have never read the RTA) and they are generally the ones who just assumed because they own the property that the tenants have to do what they say and that the Landlord and Tenant Board will back them up.  It is these landlords that complain the loudest when they realize that their delay in issuing the proper paperwork, added to the minimum statutory notice periods and the delay that comes with the hearing process, will result not only in present rent arrears not being paid but that future rent arrears will accrue and there will be nothing that can be done to regain vacant possession of the rental unit quickly.


In an application to the Landlord and Tenant Board, where there are no extenuating circumstances or any reason to extend time to pay, a tenant can still use procedural methods to delay the ultimate hearing of their case--which will delay the termination and eviction.  After any procedural delays, and assuming that the tenant has not filed a counter application (usually for maintenance problems and rent abatements), the case will eventually be heard on its merits.


In a typical case, where there is no exercise of discretion under section 83, the Landlord and Tenant Board will issue an Order terminating the tenancy and evicting the tenant 11 days after the date that the Order is written.  During this 11 day period the tenant is permitted to pay off the rent arrears to void the eviction Order and remain in the rental unit.  It is only on the 12th day (as set out in the Order) that the landlord is permitted to file the Order with the Court Enforcement Office to get the Sheriff to attend at the rental unit to evict the tenant.  Note that after filing the Order with the Court Enforcement Office that the Sheriff will attend at the tenant's rental unit to post a Notice to Vacate on the door.  That Notice to Vacate will give the tenant warning that the Sheriff will be coming on a specified date to enforce the eviction--that date rarely less than 7 days after the service of the Notice to Vacate.  In very busy jurisdictions the enforcement date can be much longer than 7 days.


Once during a tenancy, a tenant is permitted even after the expiry of the 11 day period in the Order to pay the rent in full and bring a motion to void the eviction Order.  So long as the tenant is still in possession the motion may be brought.  If the landlord has already paid the Sheriff fees the tenant does not have to pay the fees, only the rent, to bring the motion to void the eviction Order.  Dealing with payment of the Sheriff fees is a matter for the motion to the Board where the landlord can argue that the Sheriff's fees also need to be paid to void the eviction Order.


SUMMARY


The point of this article is to suggest a balanced approach to dealing with tenants who are having rent payment problems.  The reasons for late rent or non payment of rent are beyond enumeration as there are simply too many of them.  Some of the reasons are legitimate, some are foolish, some arise from hardship and others from human frailty.  My suggestion to landlords is that being a good businessperson landlord does not require you to turn a blind eye to these problems.  Heartlessness is not a prerequisite to being landlord.  However, it needs to be recognized that the processes under the RTA already build in an awful lot of chances, delays, and opportunities to ask for the exercise of discretion.  It is prudent for all landlords to exercise all of their RTA rights and get the eviction order as quickly as possible for non-payment of rent.  As "quickly as possible" will be a minimum of 5 weeks and likely longer.  If at the end of that process a landlord is convinced that the rent arrears are forthcoming then you can wait to file the eviction order with the Sheriff for a few days. 


In all my years of doing this I have never had a Landlord client who was sorry that they had an eviction Order in hand and that they enforced their rights as soon as they became available.  On the other hand, I have had numerous landlord clients who were very sorry that they let their rent collection processes get out of hand and unstructured.  Getting tenants to pay the rent on time, doing the deposits, rent ledger paperwork and enforcement paperwork on a regular schedule makes the business of being a landlord much less stressful and in fact profitable.


Michael K. E. Thiele
www.ottawalawyers.com    

15 comments:

  1. Please pardon my long comment Vol. II — I would like you to understand my situation and get your advice. Basically what do I do at this point?

    Mr Thiele,
    - I want to vacate my condo for sale — I am through being a landlord
    - I have a tenant, who has manipulated me expertly into tolerating 6 months of arrears — totalling 3700$
    - I just want her to leave ( I suspect it’s impossible to collect the arrears)— she seems to be unable or unwilling
    - I do NOT have a written lease agreement, because she never satisfied the terms we had agreed on, paying a deposit, or even once, the full rent
    - I do have extensive email records of our communicated agreement, rents owed and promised throughout the period
    - I live in Edmonton, and I’m a student with little means to manage the property or the eviction process, which is in Ottawa
    - This tenant is a “charity case” who I rented to out of pity, she transferred 900$ of ODSP each month, but not the remaining 500$ of rent
    - She has ample assistance, and an income, but by her own recent admission, a gambling addiction that comes before rent
    - I suspect she is defrauding ODSP along with her employer via “under the table” pay
    - I do NOT have a written lease agreement, because she never satisfied the terms we had agreed on, paying a deposit, or ever the full rent
    - There is a bizarre promise that her (relatively new) employer will forward me the arrears and she will leave by July 1st, if I don’t take legal action
    - I have had this exact promise for June 1st, as well as many others that failed — but i’m to talk to her boss tomorrow, supposedly
    - I have held off filing the L1 until tomorrow — as it really is my last credible threat, beyond reporting her to ODSP
    - I need to move her out as soon as possible to list the property for sale — which as I understand is another acceptable reason to end a tenancy — but not to order an eviction??
    - Ideally — I convince her to leave by July 1st, file for collection of arrears before she does and pursue payment (or not, and move on) after my property is safely vacant and hopefully sold. However, I cannot trust a word she says, or any arrangement we make.
    - I am worried that by going through the official process, she will stay for the full time allotted and effectively prevent the sale of the property. For me, it’s better to threaten official eviction and have her leave next week, on her own accord (take the money and run)
    - Given I do not live in Ottawa, and would likely lose my job if I had to come there, what is my best option for representation in the hearing?

    Andrew

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    1. Hi Andrew: In my view, any "deal" respecting a termination date in the future--when there are rent arrears--must be viewed with a high level of skepticism. The way to do this is to confirm the agreement that she is leaving--by the fixed date---by signing an Agreement to Termination with the tenant. That Agreement to Terminate is in a Form N11 and can be found, in blank, on the Landlord and Tenant Board website. If the tenant is sincere then she will have no problem signing the N11 form. You can then immediately take the N11 (as signed) and apply to the Landlord and Tenant Board for an eviction Order based on the N11. There would not be a hearing, you would simply get an Order in the mail. If the tenant did not move out for July 1 (or any other date that you put in the N11 form) then you could file the Order with the Sheriff.

      In my view, if the tenant refuses to sign the N11 notwithstanding her "promise" to move out by the specified date you are simply being played for a fool.

      Proceed with the N4 and L1 application and get the eviction Order for non-payment of rent. It seems very likely that you will never see this rent money as you indicate that the tenant is in receipt of ODSP. ODSP income is low and you can't execute against this money. Unless you can find employment income to garnish it seems unlikely that you will ever see a dime.

      You mention some strategies about applying or not applying and taking the money and running--all of that sounds complicated. I think to keep it simple you need to have in place a proper Notice of Termination correctly filled out and served and a pending application in the Ontario Landlord and Tenant Board as soon as possible (i.e. one the time period of the N4 allows the L1 to be filed with the Board). If the tenant wishes, in the mean time, to move out sooner with a forgiveness of the rent or she signs an N11 with an agreement to waive arrears that's great. But waiting and hoping that she moves out tends to lead to disappointment and increased rental arrears when you get even more excuses and are even further behind.

      For rent arrears cases you would not have to be present in Ottawa for the hearing. You could hire a paralegal or lawyer (like myself) to represent you at the Board. The person you hire must be licensed by the Law Society of Upper Canada (hence paralegal or lawyer).

      Good luck

      Michael K. E. Thiele
      www.ottawalawyers.com

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  2. I realize an error on my N4 means i have to restart the whole process if I want to file an L1 --- I rather not until the first, because I don't want to tell her she has yet another 20 days not to worry.

    The N11 would be great -- but how do I motivate her to sign? Do I draw up a contract promising rent forgiveness? I almost might as well given i'm unlikely to see a dime (she does have job, not sure if she'll hold it long enough to garnish wages).

    Another option would be to seek arrears in civil court -- it seems like short cut, because even after getting an order from the LTB you'd have to take it to civil court for enforcement anyway. BTW my every interaction with the LTB in Ottawa as a landlord has been excessively hostile from their end, actually shocking to be talked to like that by a representative of a government organization -- any organization frankly.

    Thanks again for the great advice and blog --- and I'll keep you in mind if end up needing legal services.

    A

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  3. Hello!

    I have a situation that I can't seem to find a clear answer on anywhere, and was hoping you could help.

    At New Years, my partner of 8 years left me. We've remained close (better friends than lovers), and he was happy to let me keep the house we purchased together 2.5 years ago. Since the mortgage/property tax is 2/3rds of my income, I am forced to rent out the second bedroom. All other parts of the house are shared, so the person is not legally a "tenant".

    A friend of a friend was looking to move into London to be closer to her friends and to the new guy she'd been seeing. She signed a rental agreement for a month-to-month lease with 30 days notice if she wished to leave. That was mid-May. It is now July, and she has slept at the house only 3 times. Her only groceries in the kitchen are a stale loaf of bread, lunch meat, and a box of sandwich bags. She has never showered, nor done her laundry here.

    She paid her June 15th rent via eTransfer, and I have not had a word of communication from her since, except when I asked what she wanted done with the lunch meat that was expired in the fridge.

    Her significant other--whom she's been spending all her time in the apartment of--works with me, and in the last week or so, has made reference to how it seems silly for her to pay rent for a room she's not using. Which is fair. Then a few days ago, he took it further and said they were just trying to track down a friend with a truck to move her bed and desk to his place. But I still haven't heard anything from her. When I referenced the 30 days notice to him, he brushed it off as being not binding since she's a boarder, not a tenant, which sounds like she may not be intending to pay rent on July 15th.

    I intend to send her a message requesting confirmation of her plans from her, rather than him, but I want to make sure I know what my rights and her rights are in this situation before doing so. My main spots of confusion are:

    1) Is the 30-days notice on the rental agreement binding enough to require that she pay the July 15th rent (or even just the prorated amount from the date of her notice)?

    2) If she refuses to give notice, do I have the right to then insist that she have her belongings out of the room by the end of the day on the 15th, as that is when she has paid up to?

    I can't afford a long wait between rent payments, and if she is leaving, I would like to have a new person in the room ASAP to keep the wait as short as possible. Any advice you may have would be very helpful.

    Thanks!

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    1. Hi: As you seem to acknowledge, your relationship with this Boarder is not covered by the Residential Tenancies Act. Your relationship is covered by contract which is the rental agreement you refer to. It may be that parts of that contract are void or wrong or unenforceable. That likely does not matter. The usefulness of the contract is that it contains certain basic agreements including the amount of notice that either of you need to provide to each other. Until you receive notice of termination you can not really look for another boarder as you have no right to re-rent the room until your relationship is properly terminated and you have regained possession of the Boarder's room.

      It is odd that you have not heard from your Boarder. She should have the courtesy of letting you know what is going on. Maybe she doesn't know that her boyfriend is speaking to you? While it makes sense to give up the room it also makes sense to keep the room as a place to go to if the relationship does not work out. Maybe she isn't so sure and the boyfriend is now trying to end the boarding relationship with you because he senses that things are so good? It is far to easy to engage in pop psychology!

      Your board is indeed required to pay the rent as she has not provided proper notice to terminate. If she does not do so you could end up suing her in the Small Claims Court.

      If she does not pay for July 15 to August 14, then you should likely not insist that she vacate. As you are charging her for July 15 to August 14 regardless then she should be able to use the room. You could use that period of time to give her Notice yourself. Alternatively, you could say to her that you will try to find a new boarder very quickly and that you will fill her room and refund that portion of the July 15 to August 14 that you recover from a new boarder (if she agrees).

      Good luck

      Michael K. E. Thiele
      www.ottawalawyers.com

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  4. Hi Michael - I have an interesting situation going on.

    My tenant moved in June 2015 and had some repair requests which in my view were completed in a timely manner. There was a plumbing emergency and I had a plumber in the next morning to fix. Tenant requested I not allow the handyman in over the weekend as he had a death in the family and I acquiesced to this request. The handyman visited the unit twice to complete and finish repairs. Overall this took approximately 19 days from the date of the request for all repairs to be completed.

    Tenant advised in June that he would like to terminate the lease. I told tenant I would be willing to assign the lease if he could find a suitable assignment. Tenant wanted me to take total responsibility for finding an assignment for August 1. I told tenant that it was his responsibility to find a new tenant but that as long as they pass credit checks and can afford the rent it was unlikely to be an issue.

    Tenant found someone interested but at $400 less than tenant pays now.

    July 1 - tenant put a stop payment on rent cheque.

    I believe tenant is planning to move out July 31.

    I believe tenant is actually trying to get me to evict him.

    I am filing an L9 with the board today.

    My question is, if tenant moves out July 31, I understand I have a duty to mitigate my losses. However, if I hire a realtor they take 1 month's rent as commission. Furthermore, am I obligated to accept a new tenant at a rent rate less than what my current tenant is paying or will I be considered to not have mitigated losses if I don't accept someone who can't afford the same amount of rent?

    Thanks so much!

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    1. Hi: Interesting question! The thing about mitigation and the actions that a landlord takes is something that I always thought is unfairly judged with hindsight. It is easy to say that you should have accepted a lower rent to mitigate when months have gone by without renting at the same amount. Had you managed to find a tenant within a month or two at the same rent it would have seemed reasonable to wait to get those tenants. Maybe part of the solution is to get an "expert" opinion of what the fair market rent presently is on the unit (likely from a real estate agent) and list the apartment for that amount. The loss of rent over the term that the tenant left is then a fixed loss. How reasonable it is to rent at a lower amount depends on how compelling your evidence is. If you can explain with objective evidence that the market has softened since the tenant signed a lease it will seem reasonable to rent the unit out at a lower amount. Refusing to lower the rent would potentially lead to much greater losses for the tenant.

      Good luck

      Michael K. E. Thiele

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    2. Hi Michael - I really appreciate the response.

      My biggest concern with lowering the rent is not necessarily recovering the difference from the current tenant. Apart from the duty to mitigate, lowering the rent could potentially have a long term financial impact as, after the first year, I am limited to increasing the lower amount of rent by the guidelines.

      As such, for example, if I knock off $100 off rent just to get it rented out, I can recover that $100 from the current tennat for the first year. However, after that first year, I now have a tenant who, if they become a long term tenant, is paying significantly less all because would have had to lease at a lower rate. This significantly affects long term financials.

      Thoughts?

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    3. Hi: You make a fair point. I think that the first thing to realize and accept is that no Court or Board is going to give you perfect indemnity against the tenant who left. Frankly there is no such thing. While you point out the ways that a discount now may harm you, it is equally possible that the economy tanks, fair market value for the rental depreciates further, but your reduced rent now makes the rent affordable enough that your new tenant decides to stay and pay the reduced rent. Yes, it is a loss relative to the first tenant, but it is likely that the first tenant would have demanded a significant rent reduction or moved leaving you with a vacant unit in a depressed economy.

      My point is that there are countless scenarios of conjecture. Some positive, some negative, all depending on one's perspective. In measuring damages for a breach a Court has to draw a line somewhere and it is entirely possible that the damages calculated will be imperfect. In some scenarios you will be ahead and in others behind.

      I think the way these issues are looked at (like it or not), is that the maximum liability of the tenant is determined by a valid Notice of Termination to the end of term. That represents the maximum possible liability regardless of any mitigation scenario that imposes losses though reduced rent. In light of the maximum liability you start to whittle away at that sum based on reasonable behavior and reasonable expectations. And that frankly is the number regardless of other losses manifesting themselves later on.

      OTHER OPTIONS

      To speak to your scenario of knocking $100 off the rent to get a tenant and suffering losses in the future you must be assuming that the fair market rent will be higher or equal to the original rent you charged to the first tenant. The replacement tenant is only getting a deal if the market rent for that unit is higher than what the tenant is paying. The original tenant, at the end of term, would have terminated and your rent would fall to market rent for a replacement tenant. If at that time the market rent was the same as the rent for the fist tenant then I can see the notional loss you are describing. On the assumption that the reduced rent for the replacement tenant should be a temporary reduction perhaps you offer the rental unit now by maintaining the amount of the rent being charged but offer a rent discount.

      By using "discounts" you can maintain the lawful rent at the higher level while giving a tenant a benefit of a reduced rent for a period of time. The "math" of rent discounts is complicated and highly regulated in the RTA. Take a look at section 111(2.1) RTA for general rent discounts. You can also see other types of discounts for prompt payment (section 111(2)). These discounts can be used to create renting incentives that provide the tenants with a lower rent while giving the landlord some performance assurances which also have a value. When you review these sections you will see the word "prescribed". This means that there are further requirements set out in the regulations. For discounts, take a look at Regulation 516/06 s. 10, 11, 12, 13, 14. All are available on www.canlii.org .

      Cheers

      Michael K. E. Thiele
      www.ottawalawyers.com

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  5. Hi Michael. My tenant lost his job in March. He asked if it was ok if I held back for a month on the rent until he could get another job and catch up. He had paid a rent deposit equivalent to a full month rent at the beginning of the lease and I offered to use that for the month of March and he could catch up in installments later. He got another job in April and the regular April rent cheque went through but after asking for installments to make up for the rent deposit, I have still not received any. Regular rent cheques are going through. It is now July.
    Can I submit an N4 and deliver it to my tenants for a missing deposit? Thanks.

    ReplyDelete
    Replies
    1. Hi: Yes you may serve an N4 but it is not for the deposit as you think. The Board will advise you at the hearing that the LMR (last month's rent) may only be applied to the last month's rent. Hence, when you applied it before the end of the tenancy you were doing something that you were not permitted to do. Hence the month to which LMR was applied is still in arrears. Given that subsequent months have been paid you would apply those payments to the oldest debt first unless those payments were specifically allocated to specific months (usually on the re line on cheques). So, you may serve an N4 for the missing month of rent and simply acknowledge that you are still holding the LMR. The tenant will allege that the month was paid with the LMR and you can agree that you thought you could allow that payment to be applied in that manner but that you were wrong and hence he is in arrears for that month.

      Perhaps when you serve the N4 (and presuming he doesn't use it as an excuse to move), you should suggest that he see a lawyer or paralegal with respect to the use of the LMR. If he forces you to issue an L1 application he will be stuck with the costs of that application in the amount of $170. It is a needlessly incurred expense if he gets legal advice before you file.

      Good luck

      Michael K. E. Thiele
      www.ottawalawyers.com

      Delete
  6. Hi Michael,

    Great article. I'm searching for information about my particular situation. I rent a house, and at the beginning of the lease the landlord and I agreed that I'd pay a flat rate of $350 a month for utilities, and we would meet after 6 months to go over the bills. If I paid more she pay me back the amount, and if I underpaid I would owe her. The utilities are in her name.

    Unfortunately this has not happened at all. I've met with her twice to go over all of the bills, and she never seems to have them all. She claims that some have been misplaced, and asks if I can just estimate the costs and we'd both go our separate way. I've asked her to meet again but this time she needs to have all of the bills as we originally agreed. From the bills I have seen there are quite a few missing ones, and it's a lot of money.

    I'm coming down to the end of my lease, and I am worried that she'll push the meeting off until then. What are my options? The lease was written, but this extra utility agreement was oral.

    I'd appreciate any help!

    Thanks.

    ReplyDelete
  7. Hi Michael,
    I am a tenent. In July my landlord and I signed a new year lease, in which rent went from 1200 to 1300. I agreed to the amount, signed the lease and have been paying it. But now they are asking me to end my lease at the end ao they can move in, and I think they owe me for the money from past rent because it is above the guidlines for rent increase.
    Can I ask for that money back?

    ReplyDelete
  8. I had a tenant 8 years ago that still owes us a months rent, is there a stature of limitations for small claims court?

    ReplyDelete
    Replies
    1. Hi: Typically the limitation period (statute of limitations) for suing on a debt is two years. There are exceptions and extensions and debts can be revived and certainly in fiduciary relationships the limitation periods are not what one might assume. However, if you have a regular landlord and tenant relationship the timeline to sue is most likely two years from the date the debt was due.

      Michael K. E. Thiele

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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.