Invest in Property: Becoming a Landlord

Is buying real estate--such as a condominium, or a duplex, or other small multi-unit building a smart and clever way to invest?  What is it like to be a landlord?  Is the hype true when you hear the refrain that you should let your tenant pay the mortgage?

I have been practicing landlord and tenant law in Ontario for about 17 years now.  I have seen all manner of odd situations and even after all of this time I regularly come across scenarios that you couldn't even conceive to make up.  Being a landlord is a "people" business and where you have people you have unpredictable behaviour.

I thought about writing an article like this as I have so often heard the views and opinions of people who are in the "Landlord" business.  The landlords I've interacted with run the gamut from the person who inherits a house and decides to rent it out, to the condo buyer turned landlord, to the landlord of smaller single, double triple units, to the corporations or partnerships that own and manage large buildings and literally thousands of units.

This article today, concerns itself with only some of the issues facing a new landlord or someone who is considering buying a residential unit and renting it out. Is this a clever way to invest, save for retirement, and to become a real estate tycoon?  If you have your heart set on this kind of investment you may want to stop reading now and put on the rose coloured glasses.  For the reasons discussed below, my personal and entirely unscientific view is that real estate investing for the purpose of renting out residential property is an incredibly risky venture that more often than not leads to sleepless nights and a significant amount of regret.

My bias against becoming a landlord flows from my experience in dealing with landlord and tenant disputes.  While I'm sure that there are "good" landlord and tenant relationships they are something that for obvious reasons don't cross my desk.  That being said, I am fairly certain that even if you are lucky and have good tenants, all of that good fortune can evaporate with one bad rental and one bad tenant.

The biggest regrets seem to come from new landlords who start out with only one, two, or three rental units.  These landlords, especially when they start out, have a business plan that at its core relies on rental income to cover estimated expenses in operating the rental unit.  Typical costs for operating a rental property are the same costs as running a home in the same kind of unit with the additional expenses associated with renting.  Specific costs incurred to rent to tenants include rental commissions, legal fees for document preparation (leases, termination notices, etc,), background check fees (police, credit check), heightened maintenance costs as tenant's do not do their own maintenance, property management fees (unless you do it all yourself and you attribute no value to your time), condominium fees (if it's a condo), banking fees, accounting fees, book-keeping fees (maintain accurate rent ledgers, and expense ledgers for the accountant), utilities, government application fees, and soon licensing fees to have the privilege of being a landlord.

All of these expenses will at some point become part of the monthly carrying cost of the rental property.  From the revenue (i.e. the rent), you need to cover these costs and in addition pay the mortgage.  In my experience, when you start doing the math for the vast majority of rental properties, you will find that the market will bear a certain maximum rent and that rent will be entirely consumed by the expenses and mortgage payments---if everything goes perfectly and to plan.

Unfortunately, I have seen too many examples where the plan to have the tenant pay the mortgage doesn't quite work out that way and the would be landlord ends up having to cover the costs from his/her own pocket.  How does this happen?  The simple fact is that not all rental units are created equally and not all tenants are good tenants.  It can, in fact, be extremely difficult to find a good tenant.  You may own a chic new condo in a wonderful hip and upcoming "green" neighbourhood but if you don't have parking for the prospective tenant's Prius your unit is standing empty.  While it stands empty you will be covering expenses yourself.

Having an empty apartment for rent causes many new landlords to do silly things.  Seeing mounting expenses and no revenue, these landlords will fail to perform the necessary due diligence to ensure that the tenant is decent and credit worthy.  The desperation to generate revenue leads to a tenancy, perhaps even with a discounted rent, that will cause endless stress and even more expense through non-payment of rent, damage, legal fees, and turn-over expenses when the troublesome tenant is finally evicted.

Alternatively, there are some new landlords who suffer from "idealism" and who believe that a relationship built on trust, good will and mutual respect will result in a long standing relationship where the tenant is like a partner in this endeavour.  These new landlords often have an unfortunate naiveté with respect to people.  They take nice looking and sounding people at face value.  They empathize with the prospective tenant's hardships and accept the tenant's stories about why they were previously evicted, or how the tenant is trying really hard to get back to work and only needs a chance, or how the tenant is escaping domestic violence or overcoming an addiction, etc. etc..  The desire to help these prospective tenants is perhaps an admirable quality as a human being but it is a brutal flaw when running a property rental business. 

I have seen far too often how the naive or compassionate landlord rents to the wrong tenant or doesn't pursue legal remedies in a timely manner for non-payment of rent because they wanted to give the tenant a chance to get a new job, get their tax refund, get their spousal support, child support, loan from parent, etc. etc. etc..  Certainly, for the financial independent new landlord who is getting into the business for fun or for something to do then being generous is within their prerogative.  However, if the reason for charging rent is that you actually need it to pay expenses and the mortgage and perhaps to generate some income, then the inclination to be compassionate can become very expensive indeed.

THE RISK

The next thing worth thinking about is the over-all risk that you, as a new residential landlord, are taking in buying a unit to rent out.  Think of the capital that you are required to pay to acquire the property.  The down payment and the acquisition costs (legal, land transfer taxes, downpayment etc.) are significant expenditures that are tied up in the property.  Imagine for a moment the down payment that you've made--likely 25% of the purchase price.  How much could you earn with that money in a different kind of investment?  Does your business plan show you earning at least the same rate of return on your capital that you could earn in a high interest savings account (around 1%)?  If not, why not?  Shouldn't your capital be earning you something if it is deployed in an investment?  

Perhaps you are thinking that the return on your invested capital is the increase in value of the rental property over time and that you will get your return when you sell the property.  Perhaps that is true, but in the mean time you make very little to no money and you are sitting on a fairly expensive and risky asset.

What is so risky?  When you are a new landlord with a single, duplex or triplex rental unit your success is directly proportional to the good fortune and ability of your only tenant (or 2 or 3 tenants) to continue to earn income so that they can pay your rent.  Having a single tenant or very few tenants can be analogized to having all of your eggs in one basket.  And to finish the analogy,  if that basket breaks, or falls, everything is broken.

The risk then is a lack of diversity in the investment.  The investment is a significant commitment of hundreds of thousands of dollars to acquire the property and the assumption of a significant responsibility to maintain the property in accordance with law and to deal with the tenant in accordance with the Residential Tenancies Act which has a bias towards maintaining tenancies (security of tenure) even at the expense of a landlord's interest.   Time and again you will hear landlords asking an adjudicator at the Landlord and Tenant Board for help to get rid of a tenant because the tenant isn't paying the rent and the mortgage is going into arrears and the whole situation is ruining the landlord.  Instead of getting the help they need, the Landlord then in astonishment sees the Board concerning itself with granting relief to the tenant with payment plans, delayed evictions, or other remedies that function to preserve the tenancy.  When these landlords object, you will from time to time hear an adjudicator speak candidly to the landlord and say that "if you can't afford to be a landlord get out of the business".

WHAT IS GOOD ABOUT BEING A LANDLORD

For the small, new landlord, with only a unit or two, I do believe that it is an extremely risky enterprise.  The risk is only taken out of the equation by getting bigger and having many units and lots of tenants.  In those circumstances, the risk of one or two tenants doing you excessive damage are ameliorated.  

Aside from that, I do think that a benefit of buying a property and renting it out is that it functions like a forced savings plan.  Much like a buying a house, the mandatory nature of the mortgage payment means that one way or another you will make the payment and hence build equity in the property.  That equity is a savings plan that most people are unlikely to accumulate without the forced nature of the mortgage expense (i.e. pay it or lose the property to the bank).

For now, those are my two cents on this topic.  I'd be interested to hear different viewpoints in the comments and I'll publish the interesting ones.

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

What if Children are the Problem?! The noises of children.

Those pesky kids!  How much does a neighbour have to put up with in relation to noisy children in another tenants unit?  Is the sound of a baby's cry grounds for eviction? Is the distinctive thump of a toddler's walk unbearable?  What about fighting siblings, shouts and screams?  What about all of those noises that children make, at inopportune times?  Are these sounds that neighbours must learn to tolerate?

The fact is that under the provisions of the Residential Tenancies Act a tenant can be evicted for the actions and noises of children as the children are occupants and hence the tenants are responsible for the noises that they make.   That being said, are children held to the same noise making (or silence) standard as other adult tenants or occupants?  The answer to this question is both yes, and no.

The Landlord and Tenant Board has held that the "ordinary" noise caused by the normal activities of children is not a basis for eviction.  The problem with this statement, of course, is that "ordinary" and "normal" are subjective  and what might be normal and ordinary to one person is utterly outrageous to another.   So, some examples of "ordinary" and "normal" may be in order.  The Board has held that a tenant's children using a swing set for chin-ups, riding a dirt bike, and using some obscenities was not grounds for termination.  Nor was it held to be substantial interference for teenage children to be hanging out in a lobby and spending time.  In an even more extreme example, a tenant's adult son who harassed and intimidated other tenants did not result in the eviction of the tenant so long as the behaviour was rectified and apologies given.

Over the years I have had some extreme examples of misconduct by children that did not result in the eviction of the tenants.  In one case, a pre-teen got in a fight with another child in the park.  The parent of the child who was hurt at the park came to the apartment to speak with the child's parents who happened to not be home.  The child answered the door and in doing so pointed and threatened the person with a lighter that looked like a handgun.  The police responded rather forcefully and the weapon was seized.  The family was not evicted as the family was a good family, the parents responded with all the discipline that is deemed appropriate today, they apologized to the person who was threatened and their history within the building was shown to be unremarkable.   The Board maintained the tenancy on the condition that no illegal act occur for the following year.

Another example is that of a child who gained access to the roof of a tall apartment building and at the instigation of a friend joined him in throwing rocks from the roof (16 stories up).  One rock hit a person who was slightly injured.  Again, in this case the tenancy was maintained as the parent disciplined the child appropriately and was doing all that she good to control the behaviour.  The tenancy was again preserved conditionally.

The examples above should not lead to the conclusion that it is impossible to evict a tenant for the actions of their children.  In fact, tenants are regularly evicted for the actions of their children and the context of those actions is quite important.  In a case from several years ago an adjudicator in hearing a case involving the actions of children stated as follows:

Taken in isolation, each singular incident or classes of complaints testified to by the landlord and her witnesses might not suffice.  But taken cumulatively, they unfortunatley establish that the tenant's children are by their loud and abusive language, by their fights and rowdiness, by their littering, by their damage to property are [sic] beyond what the landlord and other tenants are by law compelled to endure before the remedy of eviction is granted."

So when it comes to children and their behaviour, I think it is fair to say that context is everything.  One off incidents in an otherwise unremarkable tenancy, where parents are clearly disciplining their children and doing what they can, are regarded sympathetically by the Landlord and Tenant Board and tenancies will be preserved where the conduct can be controlled.    The opposite also seems to be the case, that where children are wild and parents are wilfully blind to the aggravation caused by the behaviour, then the tenancy will indeed be terminated.

Carbon Monoxide Detectors: New Law & Better Protection For Tenants

Carbon Monoxide is a silent and deadly killer.  Odourless, colourless, it can kill entire families overnight.  Where does carbon monoxide in homes typically come from?  From fuel burning appliances such as a gas furnace, ovens, or stoves.  It can enter the home from the garage from running vehicles, from blocked chimneys (think nests) or from other appliances due to failure.  See the illustration for more sources.  Given that the gas is silent, colourless, and odourless, it is very dangerous, particularly to people who are sleeping in the home.

Perhaps you are aware, or have heard of deaths in Ontario caused by carbon monoxide poisoning.  Most notorious is the story of Hawkins and Gignac.  Ms. Hawkins was an OPP officer and she and her husband and two children died in an accidental exposure to carbon monoxide in their own home.  This was a normal family, living normally, and tragically, they died.

In response to the tragedy (five years ago) and the risk that accidental carbon monoxide exposure presents to all Ontarians, the Ontario government, along with the unanimous approval of all the opposition parties, has now passed Bill 77,  the Hawkins Gignac Act 2013.  So what does this law require?  In short, it requires that carbon monoxide detectors be installed in residential buildings which includes buildings in which rental units are located.

Given the context of this article in a blog on Ontario Landlord and Tenant Law, I'm trying to make the point to tenants that they have the legal right to demand a carbon monoxide detector and to landlords that they have an obligation to provide tenants with a carbon monoxide detector.  The failure to provide these devices will be a contravention of law and charges and fines can be forthcoming for failure to comply and it will be a basis of liability in a civil context (i.e. you can get sued and be ordered to pay money) if someone is injured as a result of carbon monoxide exposure that would not have happened but for the failure to provide the carbon monoxide detector.

Are the requirements of this law exactly the same as providing a smoke detector in a unit?  The short answer is an unequivocal "no".  The law requires that carbon monoxide detectors be hardwired into the electrical system, that there be no disconnect switch,  and that if one detector is triggered that all of the detectors in premises also go off at the same time.  It appears, from my reading of the law, that buying a carbon monoxide detector from any of the big box stores and plugging it into the wall is NOT going to discharge the obligation imposed under the law.  That being said, does every apartment in a rental complex require the installation of a carbon monoxide detector--hardwired into the electrical system.  It seems that if the rental unit has an appliance that can generate carbon monoxide then the answer is yes.  If the rental unit does not have an appliance that can generate carbon monoxide but it has a storage garage then "yes" as well if the residential unit is adjacent to the "storage garage" (query what "adjacent" means).  "Storage garage" is a defined term under the Building Code Act and it is what we commonly understand to be a residential garage in which cars can be stored and in which no repair or maintenance of vehicles is undertaken and in which no provision is made for that capability.

Whether or not the law requires a carbon monoxide detector to be installed in the context of your home or your apartment building, will require a careful consideration of the lay out of the building, the lay out of the rental units, and a consideration of the sources of carbon monoxide as well as the appliances that can generate the gas.

Perhaps you've click on the link to the legislation above to look for the RULES & SPECIFICS on where, how, and when a carbon monoxide detector needs to be installed.  Of course you're disappointed because the law simply says the Fire Protection and Prevention Act is amended and now the power to regulate carbon monoxide exists and of course there is a new Carbon Monoxide Awareness week.

I haven't quite figured out the logic of it, but the regulation that the Fire Protection and Prevention Act contemplates for the requirement of Carbon Monoxide detectors does not seem to be promulgated under the Fire Protection and Prevention Act.  Instead, those regulations seem to be under the Ontario Building Code, which in some was I don't understand must make sense.

The Rules for the installation, requirement for, location, and method of installation are set out in a Regulation.  That regulation appears to be Regulation 332/12 to the Ontario Building Code and it is not in force until January 1, 2014.  As I go through the regulation, it deals with carbon monoxide detectors as follows:

6.2.12.  Carbon Monoxide Alarms

6.2.12.1.  Application

   (1)  This Subsection applies to every building that,

    (a)  contains a residential occupancy, and

   (b)  contains a fuel-burning appliance or a storage garage.

6.2.12.2.  Location of Carbon Monoxide Alarms

   (1)  Where a fuel-burning appliance is installed in a suite of residential occupancy, a carbon monoxide alarm shall be installed adjacent to each sleeping area in the suite.

   (2)  Where a fuel-burning appliance is installed in a service room that is not in a suite of residential occupancy, a carbon monoxide alarm shall be installed,

    (a)  adjacent to each sleeping area in every suite of residential occupancy that is adjacent to the service room, and

   (b)  in the service room.

   (3)  Where a storage garage is located in a building containing a residential occupancy, a carbon monoxide alarm shall be installed adjacent to each sleeping area in every suite of residential occupancy that is adjacent to the storage garage.

6.2.12.3.  Installation and Conformance to Standards

   (1)  The carbon monoxide alarms required by Article 6.2.12.2. shall,

    (a)  except as permitted in Sentence (2), be permanently connected to an electrical circuit and shall have no disconnect switch between the overcurrent device and the carbon monoxide alarm,

   (b)  be wired so that its activation will activate all carbon monoxide alarms within the suite, where located within a suite of residential occupancy,

    (c)  be equipped with an alarm that is audible within bedrooms when the intervening doors are closed, where located in a suite of residential occupancy, and

   (d)  conform to,

           (i)  CAN/CSA-6.19, “Residential Carbon Monoxide Alarming Devices”, or

          (ii)  UL 2034, “Single and Multiple Station Carbon Monoxide Alarms”.

   (2)  Where the building is not supplied with electrical power, carbon monoxide alarms are permitted to be battery operated.

There are additional sections that deal with Carbon Monoxide detectors--for example section 3.3.5.4 Repair and Storage Garages, so please don't assume that I have comprehensively dealt with carbon monoxide detection in this Article.  If you're reading this and looking for a more comprehensive review of all things carbon monoxide in the law of Ontario, consider doing a search through the statutes and regulations through the e-law site which you can access from this LINK.

SUMMARY  OF WHAT'S COMING (JANUARY 1, 2014)

The law requires that buildings that contain fuel burning appliances and/or storage garages are equipped with carbon monoxide detectors that are hard-wired into the buildings electrical systems.  Only buildings without electrical service will, that would otherwise require hard-wired detectors will be permitted battery operated detectors.  The location of carbon monoxide detectors is regulated and how they interact with each other is also regulated.  It seems that the interconnectivity between the detectors (when one goes off they all go off) means that the only practical way of complying with the law in units with many sleeping areas is the installation of hardwired alarm systems or the purchase of sophisticated carbon monoxide detectors that can speak to each other wirelessly.

Michael K. E. Thiele

Ottawa Lawyer

Apartments for Rent: What Tenants should look for.

As a lawyer representing both tenants and landlords over the last 17 or so years there are certain comments made by both tenants and landlords that have become a "typical refrain".   "If I only knew" is something that I've heard both tenants and landlords say as they are dealing with a nightmare tenancy.  What is unfortunate is that the signs or hints of the nightmare tenancy were there and obvious even before the tenancy began.  "If only" the tenant had asked the right questions! So that being said, what things should a tenant be looking for when looking for Apartments for Rent?

In no particular order, I'll share with you a some of the things that I think every tenant should do when looking for a new apartment.  Not each of these suggestions will be possible in every circumstance but they should get you thinking.

1)  Reputation, Reputation, Reputation.  Landlords have reputations just like regular people do.  Doing a walkthrough in an available apartment doesn't tell you what dealing with this landlord is going to be like.  What happens if a pipe breaks, maintenance needs to be done or repairs effected?  Are you presuming that the landlord will be responsive to your calls---or just hoping that it will be a positive experience?    Better than hoping, it is worth your while to investigate your landlord's reputation.  Google searches (why not!?), google the landlords name and see what comes up, look up the landlord under news, google the street address, google the street.  If you get a lot of search results with criminal investigations, police attendances, or references to your landlord in a less than positive light you may wish to re-consider renting from this landlord.

How about, when attending to look at the rental unit, you take a moment to ask the rental agent some of the hard questions about how the landlord responds to tenant complaints, work orders, response time to requests, unit turnover (i.e. home many tenants move in and out of this building on a regular basis).  If the opportunity allows and you see people who live in the building take a look at them, speak to them, and see what kind of response you get.  Better yet, try to engage them in a longer conversation and ask them what they think about the landlord.  Ask those tenants what their experience has been like in renting their apartments from this landlord.  Ask them how long they've been in the building, are people happy living there, what is the turnover like.

Approaching existing tenants and speaking with them may feel like an odd thing to do.  Nevertheless, I encourage tenants to do it as these conversations will tell you an awful lot about your "new" building.  These people will be your new neighbours.  How they react, what they say, and how they are, should be rather insightful for you.  More than anything else, it is these people who will have the greatest effect on whether you have quiet enjoyment of your rental unit or whether you have endless sleepless nights.  So, talk to them before it is too late.

2)  Another odd kind of question, and information to seek, is to investigate how often the building has pest control issues and how often the building has bed-bug infestations.  In my utterly un-scientific method and relying solely on anecdotal stories and my gut, my experience is that the amount of pest control needed in a building tells you a lot about the landlord and about the tenants who reside in the building.  While not conclusive, a high rate of repeated infestations can be an indication that the building has a high number of transient tenants who are bringing bedbugs into the building through used and discarded household items.  This information tells you the "kind" of building that you are moving into and that you may expect to have odd and likely negative social experiences with other tenants in the building.

3)  Cash please!  Does your new landlord demand payment in a way that makes it hard to prove that you've paid your rent?  Are you being asked for a security deposit besides the last month's rent deposit?  Is the landlord demanding post-dated cheques and not making it optional?  Does the landlord impose late payment fees, interest on rent arrears, a missed rent penalty, a very high bounced cheque penalty?   Each of these things is illegal, in whole or in part.  If your landlord is prepared to set terms and conditions of the tenancy that are against the Residential Tenancies Act you should take this as a warning that this landlord may not be too concerned about your rights under the law and how comfortable you are in your new home.

4)  Check the condition of the building---not just your apartment!   Countless times I have heard tenants complain that the landlord fails to maintain the their apartment.  The story usually goes that the landlord had promised--at the time of signing the lease---to sand the floors, paint the walls, fix the cupboards, fix the mold/mildew/yucky shower surround, replace some screens, fix broken window latches, replace the door locks,  shampoo the rugs, fix the stove or fridge.  The excuse for why these things are not repaired at the time of viewing the apartment is that the former tenant just moved out, that the landlord's maintenance crew will be in the unit soon, and that there is nothing to worry about as all the work will be done by the time you move in.   That the work often isn't done is an understatement.

In the best case, your landlord will attend to the repairs, maintenance requests in the weeks following your move into the unit.  It will likely be a nuisance as you will be getting 24 hour notices of entry and have contractors in your unit (or worse "Mr. Fix It" landlord himself) while you are trying to settle in and live.  In the worst case, you will find yourself "living with" the non-repair and simply dealing with the situation because your maintenance/repair requests don't get answered.

Certainly, the Residential Tenancies Act gives you options on how to get your landlord to make repairs.  How you do this is detailed in other articles in this blog.  Also, you can always use the property standards department of your City or town to order the landlord to make repairs.  However, the point here is not whether you can get the work done by forcing the landlord but whether you want the hassle of a "slummy" landlord to begin with.

Is it reasonable that the vacant apartment you are looking at hasn't been prepared for a new tenant?  How long has it been vacant?  Does the landlord not have the money to do the work in a timely manner?  The answers to these questions can be a warning sign.  Then, take a look around the whole building.  How are the common areas of the complex maintained.  Are the floors clean? Are lightbulbs burnt out? Is there garbage in the hallways? Are the nooks and crannys crammed with junk?  What does the building entrance look like?  Are the walls washed, painted, and clean?  Is there garbage outside on the property?  Is the lawn cut, the walk shovelled, the parking lot clean and parking spots marked?  What does the garbage room look like (like a tornado hit it?).  Is it apparent that the landlord has rules for garbage, guest parking, and storage?  Do you get a sense that it is a bit of a free for all in the building--for example are people padlocking bikes to fire-escapes?

Hopefully you understand my point that the condition of the whole building--of the things that you can see--is a reflection of the landlord's commitment to cleanliness, maintenance, and order.  In my view, when renting an apartment you need to find a landlord whose standards for the building match your expectations.  If your prospective landlord is indifferent to maintenance standards that you consider a bare minimum----and you can literally see evidence of that indifference in how the whole building is operated, you can not reasonably expect that the landlord will do anything to maintain the inside your unit to an acceptable standard.

5)  THE LEASE  The lease document itself is often evidence of the kind of landlord you are renting from.  Though it is usually not possible until after you sign it, if you can get a copy of the lease at the beginning of the rental process and see what terms the landlord is inserting you can get a very good sense about your landlord and what it is going to be like living in the building.  In Ontario, there are strict limitations on what a landlord may demand in a lease.  To that end, there are fairly standard form leases and standard clauses that are acceptable under the law.  Has your landlord drafted his/her own lease?  Do the clauses strike you as draconian?  Are there strange clauses or things that just don't seem quite right (i.e. you have to get permission to have guests?)  If circumstances permit, review the landlord's lease or get a copy of it to think about before you sign it.  If in reviewing it you have questions consider calling a lawyer or licences paralegal to review the lease terms.  Again, the point here is that a landlord who is prepared to offer a lease that contains illegal terms is likely to not be concerned about your legal rights, your comforts and your happiness in renting the apartment.

CONCLUSION

Finding a decent apartment is a serious job in an of itself.  Not all landlords are the same and in fact they range from the meticulous serving the luxury tenant to the slumlord who only cares about a rent cheque even as the building is collapsing around the tenants.   You need to think about where on this spectrum you want to be and of course where on this spectrum you can afford to be.  The Residential Tenancies Act imposes the same legal requirements on all landlords but it is simply not realistic to expect the same level of service from all landlords.   The amount of rent that you are paying, or are being asked to pay, is not necessarily a reflection of the service that you can expect.  Even the slumlord will charge luxury prices if he finds a willing tenant.

In this article I haven't mentioned searches of on-line registries, case-law reviews, going to local organizations that deal with tenant issues, as there is a level of investigation that become impractical. However, if you've read this far and you have suggestions of other things that you have done to vet a new landlord I'd be happy to get an email from you so I can update this article (I'll even give you credit!).

Michael K. E. Thiele
Ottawa Lawyer

Landlords: Proving that noise disturbs the tenants so you can evict

How do you know when loud is too loud?  In short, you know it when you hear it.  Does this help you, the landlord, when trying to explain to the Landlord and Tenant Board that the tenant you have served with an N5 (Notice of Termination for Substantial Interference with Reasonable Enjoyment) has indeed bothered other people?

Proving that certain noises are indeed bothering other tenants is the easy part of an application.  Call the complaining tenants as witnesses to testify that they hear "noise", be it music from the stereo, yelling, shouting, screaming, fighting, or even a very loud television, and have them state that they are bothered by the noise and you have established that these particular tenants are indeed bothered.

Unfortunately, that some tenants are bothered, disturbed, and even annoyed, is not actually enough to terminate a tenancy and evict a person.  Just because they hear a stereo, television, foot-steps, a crying baby, an occasional joyous yelp when the Senators score (or I guess that could be a joyous yelp when the Leaf's are scored against!) does not mean that there are grounds to evict the tenant making the noise from his apartment.

When thinking about noise complaints it is important to consider the legal test that the Landlord and Tenant Board is required to apply.  It is set out in section 64 of the Residential Tenancies Act and it provides as follows:

A landlord may give a tenant notice of termination of the tenancy if the conduct of th etenant, another occupant of the rental unit or a person permitted in the residential complex by the tenant is such that it substantially interferes with the reasonable enjoyment of the residential complex for all usual purposess by the landlord or another tenant or substantially interferes with another lawful right, privilege or interest of the landlord or another tenant.


So, what does this mean in simpler language?  What it does NOT mean is that not just any noise is grounds for eviction.  Music, talking on the phone, television sounds, banging pots, the patter of feet on the floor, a baby crying, and the occasional shouts that someone is home, may not meet the legal test for eviction. 

Note that the legal test states that the conduct must "substantially interfere with ...".  In my experience, this means that the law presumes and allows that tenants, may indeed make noise that disturbs others as well as hear noise that is disturbing to them.  The idea that tenants in a building are entitled to absolute silence is simply not a position that is supported by the law.

So what does "substantially interfere" mean?  Of course, the definition of the word "substantially" should help.  Looking up the word in Black's Law Dictionary (Abridged 6th Edition), gives us this definition:  Essentially; without material qualification; in the main; in substance; materially; in a substantial manner. About, acutally, competently, and essentially. 

Does this definition help?  Probably not all that much, except that we can understand the phrase "substantially interferes" to mean something significant, that isn't fleeting or minor in nature.  In a way, we are sort of left with "I know it when I hear it".

What factors should go into assessing the quality and substance of noise?  Certainly, it seems to me that "context and frequency" is important.  Are you going to argue that hearing celebration noises for a short while at New Years (midnight) or when Team Canada wins gold that these sounds of jubilation warrant a Notice of Termination?  However, if there is a celebration every night, and the noise is not so much celebration as it is drunken shouting then perhaps the noise is indeed "substantially interfering". 

Aside from context, I think the nature of the building also informs what will be considered substantial interference.  If a tenant chooses to live in an apartment building that is wood frame, no insulation between the floors with beautiful hardwood flooring; then that tenant shouldn't expect the same level of quiet as one would expect in concrete construction.  The nature of the building construction does inform what can reasonably be expected in that building.

The next factor to consider, in deciding whether the noise being complained of, is "substantially interfering" is to consider the character of the person who is making the complaint.   Certainly, there are many noises that "substantially interfere with" reasonable enjoyment of some tenants but which sound would not interfere with the reasonable enjoyment of most other tenants.   Do you, the landlord, measure the impact of the noise as it relates to the person complaining?  Or, do you measure the impact of the noise as against the "model" tenant as determined from an objective perspective?

This last question I think, often figures unconciously into the consideration of what is substantial interference.  Adjudicators will often ask themselves if "they" were subjected to this noise would it be a substantial interference.  When an adjudicator thinks of themselves, and thinks about whether it would bother them, they are thinking about themselves as being representative of a typical and ordinary tenant.   In short, my experience is that the noise being complained about has to "substantially interfere" with the reasonable enjoyment of the ordinary tenant or the "reasonable person".  If the complaining tenant is being hyper-sensitive or intolerant of noise then you can expect to see in an adjudicator's reasons (dismissing your application) references to the reality of apartment living and the natural sounds that one has to expect (and tolerate) when living in an apartment complex.

The nature and quality of noise is so very hard to describe.  Unless you are there to hear it there is very little that one can say that communicates the impact of sound to a third party.  To that end, it is worthwhile, when trying to prove repeated noise problems to have a number of people try to "hear" the noise--especially noise by-law officers.  A broad consensus among a number of people about how loud something is, is much more likely to be accepted by an adjudicator as a basis for terminating a tenancy than the evidence of a single person that is contested by the accused tenant.

Michael K. E. Thiele
Ottawa Lawyer

Winter Risks for Tenants & Landlords

This article is intended to help the new landlord as well as the new tenant and provide a reminder to everyone about the risks associated with winter freezing in apartments, apartment buildings and all rental units.

The biggest winter related issues that my clients typically face are problems that arise from freezing pipes that burst and cause floods. The consequent losses can be substantial with many thousands of dollars being spent to repair the damage caused by water as well replacing the items in the rental unit that are destroyed by water.

The point today is to highlight to new landlords that tenants do not automatically assume that they are responsible to shut off outside water taps, drain water from any standing pipes (sprinklers & hoses). Even though storm windows may be "in the shed" or that a certain door should not be closed in winter, or that the clay pots need to be emptied, you must allow for the fact that many tenants will not have the experience to know what to do or alternatively they may not believe that it is their responsibility to do the winter prep or maintenance. Beyond that, it may be prudent to discuss winter maintenance with your tenant or provide a fact sheet about winter use of the property. It may very well be that your tenant is new to the local climate and that they have little experience with the potentially wide temperature swings during a 24 hour period. Tenants who are unfamiliar with the climate may not think twice about opening a window and "forgetting" about it because it feels warm out. These same tenants, in the interests of saving heating costs, may not appreciate that turning off the heat or turning it down really low may cause a part of the apartment to freeze and therefore cause a water pipe to burst.

So, landlords, for your own protection, ensure that the winter maintenance is done and don't presume that the tenant has done it even though it may seem reasonable. Further, make are that the tenants are warned about the local climate and of what constitutes reasonable behaviour in the local climate.

To the new tenant. Be aware that in Eastern Ontario you can not leave windows open for any length of time in the winter. Wildly fluctuating temperatures can freeze an apartment and the pipes, and burst the pipes, even if the window is open just a crack. Be aware that a window that is only open a little bit can spot freeze pipes in the walls around the window and cause an undue amount of damage.

Care should also be taken with the furnace to ensure that you don't turn it off or down too low. In some apartments closing a bedroom door or laundry room door or the back of the house can restrict air circulation enough to freeze a room and the pipes in that room. This can be a problem if you go away for a few days and the air doesn't get to move around the house.

For tenants, the biggest surprise can be that they are responsible not only for the loss of their own property but the landlord or its insurance company can also sue you for the cost of repairs and the losses sustained by other tenants in the building. This is a good reason to have tenant's insurance to cover you for any mistakes that you might make.

On the point of insurance, homeowners or a tenants package, take a close look at the wording and requirements of the policy for holidays and leaving the unit for extended periods of time.  Most insurance policies require the owner or tenant to have a  responsible person enter the unit on a daily basis if the tenant or owner is absent for more than a few days.  Check your own policies to see what the time-line is---it is often 48 hours or less and not the 7 days that many people assume.

Avoiding freezing damage when away from home or the apartment may also be accomplished by turning off the water in the premises at the main and draining the water from the pipes by opening a tap at the lowest position in the premises after turning off the water (once drained close the tap again).

Damage caused by freezing happens regularly and often in Ontario.  It's not always the result of fault--sometimes the furnace breaks or the thermostat gets stuck.  However the freezing happens though, the expense can be substantial.  Take a little time to make sure that your property/apartment has been properly winterized and that you are ready for the below zero temperatures that are just around the corner.

Michael K. E. Thiele
www.ottawalawyers.com

Autistic Child, Noise and Eviction

The Ottawa Citizen newspaper today printed a story about a family with an autistic child who makes a fair amount of noise in their Ottawa townhouse rental unit.  The landlord served the tenants, John From and Kerri Oastler, with a Notice of Termination on the basis that the child is banging and jumping to the extent that this is substantially interfering with the reasonable enjoyment of the residential complex by other tenants. 

I thought I would take a moment to comment about this newspaper article and fill in some of the blanks that do not appear in the newspaper story. 

The Notice of Termination that the landlord would have served on the tenant is a Form N5 (as published by the Ontario Landlord and Tenant Board HERE).  The fact that the tenants, in the story, are advised that they have 7 days to correct the behaviour is an indication that they received a voidable notice of termination--which necessarily is the form N5 in these circumstances.

A form N5 is voidable if the complained about behaviour stops after service of the Notice of Termination.  Hence, if there is no more banging or noise--then the tenants can not be evicted for the grounds set out in the Notice of Termination.

Of course, the problem for this family is that they have a limited amount of control over the behaviour of their son who allegedly is shaking the walls, running, jumping and screaming and behaving in such a way that other people in the complex are bothered.  The family feels that the Notice of Termination is "discrimination" and appears to be considering a Human Rights complaint of their own as they maintain that the behaviour arises from a disability (i.e. autism).

Presuming that the disability (autism) is indeed causing the son to create noise and disruption that amounts to a "substantial interference with the resonable enjoyment of the residential complex by another tenant" then the legal requirements for eviction are technically met.  The Residential Tenancies Act sets out in section 64 the landlord's right to terminate a tenancy where the conduct of a tenant or occupant substantially interferes with the reasonable enjoyment of the residential complex by other tenants.

Surely, where the complained of noises are "shaking the walls", running, jumping, screaming, and making noise that sounds like 50 pound box being dropped repeatedly, that would be enough to constitute a substantial interference warranting eviction?  In cases where there is no explanation for the noise arising from a disability there is almost no defence to the landlords application.  However, in cases such as this (autism), there is in fact a defence of sorts just as the parents intuit, which is a defence based on the application of the Ontario Human Rights Code.

The human rights code is, in the hierarchy of laws, constitution like.  Meaning it has a certain supremacy that all other laws in the Province are generally subject to.   When you review the Ontario Human Rights Code you will find that the Code does speak to discrimination in housing and that in fact the provisions of the Residential Tenancies Act are subject to the Ontario Human Rights Code.  You will actually find several references to the Ontario Human Rights Code in the Residential Tenancies Act itself and it is well accepted that Adjudicators at the Ontario Landlord and Tenant Board must apply "Human Rights Law" in their decision making process.

That Human Rights law applies is all well and good.  The more interesting question is "how" does it apply to the circumstances described in this newspaper article.  The fact is that there is noise---substantial noise.  Tenants are bothered and they are bothered a lot.  Does the Human Rights Code state that you can not evict a family because the noise is directly caused by an occupant with a disability?  Does the HRC trump the provisions of the Residential Tenancies Act such that a person with a disability can disturb neighbours with impunity?

How you answer the question is often not an all or nothing proposition and generally it is a matter of degrees.  Most people would expect that in accommodating a person with a disability that there would have to be a little more leeway in interpreting the rules and that you do not apply the same standard to a person with a disability as you would to a person without a disability.  This is in fact what the Court has done.

There is a decision in the case of Walmer Developments v. Wolch which dealt with a Notice of Termination being served on a tenant who suffered from schizophrenia.  That tenant, as a direct result of the disability, behaved in a way that substantially interfered with the reasonable enjoyment of the property by other tenants (screaming).  The Court held that the landlord, before evicting the tenant, has a duty to make reasonable accommodation for the tenant to the point of undue hardship.  The court held that the tenant's suggestion that the landlord notify her family at the signs of problems (i.e. the tenant being off medication), is a reasonable accommodation request.  By notifying the family, the family could intervene and ensure that the tenant got back on her medication and hence the disturbances would cease.

What is instructive from the caselaw is that the Court decisions make it clear that the duty to accommodate does not mean that one just needs to put up with the disturbance.  The HRC is to be used to foster cooperation and working together so that the person with the disability is able to remain in the apartment and the other tenants and landlord are able to enjoy their units peaceably.   To a degree, this means putting up with some disruption or a little more than what one would have to put up with otherwise.  It is a matter of compassion, living as community, and determining what is reasonable to expect from your community in the circumstances.

Where accommodating a person--up to the point of undue hardship--does not result in the issues being resolved then the HRC and the RTA allow for the conclusion that termination of the tenancy is the only option.  Landlords and tenants will not be required to indefinitely tolerate an intolerable situation regardless of the reason.

In reading this newspaper article I see the solution as being a matter of putting options on the table that will stop the noise and the things that cause the problem.  That may mean moving to another unit, padding on walls, or other things suggested by treatment providers that would allow the disturbing behaviour to be curbed.  If there is a plan of action, that would ultimately meet the goal of quieting things down, and the timeline is reasonable, then it is likely that the Landlord and Tenant Board would order the tenancy preserved while the plan is implemented.  It is doubtful that the plan would have to be "perfect" and this is as one would expect given the age of the child and what is rather unpredictable behaviour and likely changing behaviour over time.

For cases such as this to work out it is clear that the landlord needs to approach the tenants cooperatively.  This is not only a matter of decency but it is also the law---i.e. duty to accommodate.  For the tenants to receive the benefit of the duty to accommodate the tenants will need to acknowledge the problem (i.e. admit it), and then propose solutions and seek assistance from the landlord in coming to a mutually satisfactory resolution.  In my experience, it is impossible to do effective "accommodation" in an adversarial manner.    Cooperation is the key, and I find that once the landlord and the tenant know the scope of the duty to accommodate that they can work together. 

A landlord who refuses to accommodate a tenant and work towards a resolution where HRC issues are at play should expect that their applications to evict will be dismissed.  Likewise, a tenant who refuses to cooperate in coming up with a reasonable accommodation plan to solve the problems can also expect that their tenancy will be terminated and they will be evicted notwithstanding the fact that the problem arises from a disability.

Michael K. E. Thiele
www.ottawalawyers.com

P.S.  A last issue that the article seems to raise, which is interesting to me, is that the rental unit seems to be part of a condominium complex.  Query whether the Landlord and Tenant Board has jurisdiction in this matter and whether this isn't an opportunity to raise these same legal issues (as in Walmer) in the Superior Court.

Co-operative Housing (Co-op) at the Landlord and Tenant Board

Something quite significant has happened in the context of Co-operative Housing in Ontario.  The Ontario Legislature has passed Bill 14 the Non-Profit Housing Co-operatives Statute Law Amendment Act 2013.  It received Royal Assent on September 26, 2013, and is awaiting a proclamation by the Lieutenant Governor to be in force.

So, what is the big deal?  To understand the significance of this new law one needs to understand the cumbersome legal process that Non-Profit Housing Co-operatives have had to follow in dealing with their members for serious matters related to their continued membership and occupancy of their member housing units.   I'll take a moment or two to outline the practice at the present time, but be aware it is a high-level summary of the procedure that intentionally leaves out some of the nuance so that this article can come in at a reasonable length.

A non-profit housing co-op is a community that is run on democratic principles whereby the members of the Co-op, by vote and representation through a Board of Directors decide on the "rules" of living in the community.  The Co-op is made up of "members" and the members elect the Board of Directors.  Non-profit housing co-ops tend to have certain themes or ideologies--whether it is to provide housing to low income persons or to live "green" or whatever else strikes the fancy of the members.  The point is that co-ops are recognized, at law, to be a reflective of a manner of voluntary association in accordance with certain rules that the members decide.  In a word, it is a rather "communal" lifestyle.

When a co-op needs to terminate a member's membership and terminate occupancy rights, the co-op board of directors are required to invite a member to appear before the Board.  The member is informed of the reason for the invitation (terminate membership because of XXX (i.e. housing charges arrears, non-compliance with rules etc.) and the member is given an opportunity to explain the situation and perhaps make proposals to resolve the issues.  The Board then considers the member position and comes up with a decision.  Sometimes the decision is a performance agreement or some sort of other satisfactory resolution.  Other times, the decision is to terminate the membership and occupancy rights of the member.

Once the Board makes its decision the member has the right to appeal the decision to the membership.  At a meeting of the membership of the Co-op the member has the right to make a pitch to the membership to explain their position and to ask the membership to make a different decision.  Sometimes the members change the Board's decision, sometimes not, or sometimes the Board's decision remains as not enough members show up to the meeting to make quorum.

If the decision to terminate the membership and occupancy rights of the member are upheld, and the member does not abide by the decision (i.e. does not move out), then the Co-op has to get it's decision enforced through the law.  The framework for this enforcement is set out in the Co-operative Corporations Act  starting at section 171.1.

The framework for enforcement requires the Co-op to apply to the Superior Court of Justice, via application, to terminate the membership and occupancy rights and to obtain a writ of possession which directs the sheriff to enforce the eviction of the member.  The Judge hearing the application typically will be concerned to ensure that the procedures were fair and in accordance with the legislation and the Co-op's own by-laws and regulations.  For the most part, there is not much intervention in the actual decision to terminate and evict if the process was fair and in accordance with the law (i.e. the Judge will generally not interfere as a matter of "discretion" and "sympathy").

The issue for many Co-op's has been that the process of applying to the Superior Court of Justice has been an expensive method of proceeding.  It is especially expensive in comparison to the relative ease of the process at the Landlord and Tenant Board.  Invariably, the co-op process in relation to housing is compared to the legal process of evicting tenants in more conventional landlord and tenant relationships.   The comparison has been ongoing since the Landlord and Tenant law eviction process was taken out of the Courts (with the advent of the Tenant Protection Act in 1997/98) and put before a specialized and streamlined administrative tribunal.   The current Landlord and Tenant Board (previously the Ontario Rental Housing Tribunal), is not constrained by the same procedural requirements nor the protections afforded to parties by the Rules of Evidence.

On a direct comparison basis, it does appear that a landlord (be it a non-profit housing provider or a for profit landlord) has quicker and cheaper access to an adjudicative process than does a Non-Profit Housing Co-Operative.   In my opinion, the fundamental reason for the great difference is that the application process to the Court requires the submission of all of the evidence by affidavit whereas the Landlord and Tenant Board process relies on oral evidence of the parties.

To prepare an application record (to the Superior Court) requires a lawyer to put together an affidavit that covers all of the potential issues that may arise.  Technically (and it is a big Technicality) on an application before a Judge, the only "evidence" is what is contained in the affidavits.  If what you want to say or submit to the Court is not in the affidavit, then you can't say it--regardless of how true or important it is and technically the Court may not accept any facts as true unless those facts are in an affidavit.  The significance of this is that lawyers, acting on behalf of co-ops are very careful to ensure that the affidavits and the application records are very complete and contain a full explanation of everything that occurred.  Writing all of this into an affidavit, proofing it, reviewing it with the client, and ensuring that it is complete is a big job that can easily take hours and hours.  Those hours cost a significant amount of money--but they can't be avoided. 

The frustrating part of the "application" process is that all of the work that goes into the Application record and the affidavits often seems wasted as the "member" just before the court hearing either moves out or advises the Court that he/she/they are able to vacate in short order.  The great expense (time and money) seems to have been unnecessary and is a big hit to the co-op's operating budget.  While some of these costs are ordered by the Court to be recoverable against the member, such an order is often not complied with as the member does not have money.

The Landlord and Tenant Board process is compartively simple to get before the Board.  The application process involves two to three forms--which consist substatnitally of ticking off boxes.  The boxes on the forms that require actual writing are small and do not call for the same level of detail as the Superior Court application process.  This is because the Landlord and Tenant Board process is designed such that the evidence (i.e. all of the information that goes into the affidavit in the Superior Court) will be tendered at the hearing through oral evidence of witnesses and documents made as exhibits during the course of the hearing. 

The Landlord and Tenant Board process often avoids an actual hearing as the Board provides mediation services which allows the parties to make a deal without having to have a long hearing.  Also, the Board process forces the parties together (into the same space) and makes them wait for their turn at the Board.  The waiting process, and forcing people to be at a location that rather not be at, also encourages deal making (thereby avoiding the need to go through with a hearing). 

The Landlord and Tenant Board process does not require the same amount of legal work, on the part of the lawyer, to get the case before the Judge/Adjudicator.  Therefore it ends up, most of the time, being cheaper than the process that Co-op's are required to follow under the Co-operative Corporations Act.

SO WHAT IS THE NEWS?

Now that you understand the system, the big news is that the Province of Ontario has passed legislation that will allow Co-op's to proceed with termination and eviction applications to the Ontario Landlord and Tenant Board.  This means that the expensive process of going to Court (with detailed affidavit evidence etc.) is no longer necessary.  Co-op's will have access to the more efficient Board process and Co-op's will not have to prove their cases in accordance with strict evidentiary rules and the procedural fairness requirements of the Court process.  The looser rules applicable to proceedings before administrative tribunals will now apply to co-op cases as well.

To be clear, the hallmarks of being a co-op are not being washed away by this legislation.  The communal style of living, the rules being made by members, and the authority of the Board of Directors will continue to exist.  What is different is that the enforcement of the eviction may now be pursued at the Landlord and Tenant Board.

If you are interested in seeing this new legislation the best link I have found is HERE.  If the link goes dead, the "new" parts of the Residential Tenancies Act are now in section 5.1 of the RTA.  The Landlord and Tenant Board website, under its Law section has the new provisions in the Act itself.

A small caveat to this article is that I have to say that I have only been through Part 5.1 of the RTA (the new co-op provisions) once.  It will take some time getting used to how the mechanics of this part of the Act will actually work--therefore, this new law is still a learing curve for me and you should read it closely as well to see how it is intended to operate.

Michael K. E. Thiele
www.ottawalawyers.com
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