The Residential Tenancies Act was recently amended (June 1, 2014) to include provisions that allow Co-operative Corporations to proceed to the Ontario Landlord and Tenant Board to enforce the termination of membership rights and eviction of Co-op members. For many people involved in Residential Co-ops this is a significant change to the legal process that has been in place for as long as I can remember.
Before the legislative changes, the legal system for dealing with membership rights and eviction from a residential co-op could be summarized as follows (using "conduct" as the basis for termination as an example). If the "office" became aware of a complaint against a co-op member the "office" could try to resolve the issue informally, perhaps send a letter, or take other steps that solve the problem. If the steps taken by the "office" are ineffective, the complaint and the surrounding problems are elevated to the Co-op Board for discussion at a meeting. At that meeting the Board could direct some other less formal ways of dealing with the problem. If that too is ineffective, the Board could decide to ask the member complained about to attend a meeting with the Board to discuss the problem. There are formal notice requirements etc.. At that meeting the Board could, after hearing from the member, make a variety of decisions and one of those decisions might be to terminate membership rights in the co-op and occupancy rights and evict the member from their housing unit.
The termination and eviction decision of the Board is subsequently communicated to the member and the member is further advised of a right to appeal the termination decision to the membership of the Co-op. If the member elects to appeal to the membership, the member has rights to distribute materials to the membership and a meeting of the Co-op is called to review the decision by the Board to terminate and evict the member. There are technical procedural requirements for such meetings that are designed to grant procedural fairness to all concerned.
The manner of proceeding at the meeting is often a matter for the Chairperson of the meeting to decide along with the direction provided by the By-laws of the Co-op and the general requirement to conduct a "fair" meeting. It is not unusual for Chairpersons to adopt the procedures as set out in Robert's Rules of Order which provides a commonly accepted method of conducting a fair and respectful meeting while maintaining Order and ensuring that the meeting does not devolve into chaos. The meeting will normally have representations from the Board as to why the decision to terminate and evict was made. The member whose membership was terminated has the right to make their own statement. The floor is then opened to questions, discussion, clarification. These meetings may become incredibly tense as there are often very strongly held views amongst different factions from within the community.
At the conclusion of the members meeting (presuming that there was quorum), the members will vote (usually by secret ballot). The exact nature of the question on which they vote is sometimes a pre-determined question--such as vote to uphold the Board decision or vote to overturn the Board decision, or sometimes the exact nature of the question to be voted upon is determined by motion from the floor. How the meeting evolves, how the question to be voted on is determined, who speaks, and frankly how good or how badly the meeting goes depends on the Chairperson of the meeting and the manner in which the members of the Co-op participate.
If the membership vote to uphold the termination and eviction, the member must move out of the unit. If the former member refuses to vacate the unit, the Co-op must then apply to the Superior Court of Justice for a writ of possession which will result in the Sheriff attending the members unit and forcibly removing the person if necessary. After enforcement, the member has no legal right to be on the property and can then be arrested and charged for break and enter or trespassing if they are found in the unit without permission.
The application to the Superior Court of Justice is tremendously expensive as the entire application process is by way of affidavit, application record, and factum.
THE CHANGE IN THE LAW
The foregoing procedure remains more or less in place and Co-ops continue to have the option to proceed to the Superior Court if section V.1 (i.e. 5.1) of the Residential Tenancies Act (RTA)does not require the Co-op to proceed through the Landlord and Tenant Board as opposed to the Superior Court of Justice. At this point, on my reading of section V.1 of the RTA, there is no procedure under the Co-operative Corporations Act that must proceed through the Landlord and Tenant Board on a mandatory basis. Meaning, a Co-op has the option to proceed to the Landlord and Tenant Board if it wishes but the Co-op may still proceed with the "old" system if that is preferable.
So what does this "new" system look like. Given that the law was just proclaimed on June 1, 2014, it is all still fairly new. Hence, my comments are based on a first look. From what I see, I think there will be a need for a great many amendments to the statute to make the contemplated new process make sense and there will likely be a need for adjudicators to make procedural rulings that help make section V.1 make sense and be useful.
SO HOW DOES IT WORK?
The new provisions applicable to Co-op's, in essence apply the same rules and procedures to Co-op's that apply to regular tenants in Landlord and Tenant relationships. Unfortunately, they only apply after the Board does all of the things it had to do under the old rules. Meaning, the Board must still meet, terminate by resolution, provide appeal rights, and follow the strictures that it has always followed. The direction that this is the case is set out in section 171.8 of the Co-operative Corporations Act.
What the new law allows--but requires Co-op's to do--is to decide whether they still want to allow members the right to appeal to the membership if the Board terminates the Membership and Occupancy Rights. The new law contemplates that Co-op's will pass a by-law that removes the right to appeal to the membership in the face of a termination decision.
In my view, the only way that proceeding to the Landlord and Tenant Board will ever make sense is by passing a by-law removing the appeal to the membership as a right (the reason will become clear). Though, if a by-law is passed to remove the appeal right a Co-op should consider passing a by-law directing the Board to presumptively proceed by application to the Landlord and Tenant Board as opposed to the Superior Court of Justice unless there is good reason to proceed instead to the Superior Court of Justice.
Once the Board of Directors terminates a members occupancy and membership rights by resolution the Co-op may then decide to serve the member with a Notice of Termination under the Residential Tenancies Act. These Notices of Termination are "Special" Notices specifically designed for Co-ops. The Form Numbering, for those people familiar with regular Landlord and Tenant Board forms will be very familiar as the numbering remains the same. So, whereas a Notice of Termination for Non-Payment of Rent in a landlord and tenant case uses form N4 and Notice of Termination for Non-Payment of Occupancy Fees and charges for a Co-op uses Form N4C. Note that these forms look completely different from each other and you CAN NOT use one in substitution for the other. The other forms are numbered similarly for everything from substantial interference (Form N5 is Form N5C0 to illegal act, impaired safety, misrepresentation etc. etc..
WHY IT'S OKAY TO REVOKE THE MEMBERSHIP APPEAL
If the Co-op proceeds to serve any of these Forms you will see that the same voiding provisions apply that arise in landlord and tenant cases. So, as an example, if a member is behind in housing charges and the Board of Directors decides to terminate they could serve a Form N4C. That Form, provides in its terms, that the member who receives this Form N4C can void the termination by paying the housing charges. In effect, the Form N4C will operate to over-ride the decision of the Board of Directors if the member does or does not do certain things. The same is true for conduct related Notices of Termination---hence if the Board of Directors chooses to terminate for behavior and then serves a Form N5C--that form, if it is complied with will result in the decision of the Board of Directors being over-ridden and the Landlord and Tenant Board will not evict the member (or put another way, it will lack the jurisdiction to evict the member).
At the moment, what is not entirely clear to me is whether the voiding of a Notice of Termination served under the Residential Tenancies Act automatically reinstates the membership rights of a member. Is there anything explicitly stopping a Co-op from applying to the Superior Court of Justice for a Writ of Possession if the member manages to void a Notice of Termination by complying with the provisions of the Notice. I don't see such a prohibition explicitly but certainly I think it would be foolhardy for a Co-op to engage the Residential Tenancies Act process and then abandon it when it doesn't work out as they expected. I imagine a Superior Court judge would deliver a rather damaging Judgment against the Co-op in such circumstances.
What about non-voidable Notices of Termination for things like: Illegal Act (drug dealing and other criminal activity), impaired safety, subsidy misrepresentations, subsequent breaches of a lawful right interest or privilege of the Co-op, or subsequent behavior problems. Such Notices of Termination are not voidable--does this meant that eviction is a foregone conclusion?
Not at all in fact. The Co-op still needs to prove to the adjudicator at the Landlord and Tenant Board that the alleged transgressions did happen and that the Board of Directors by resolution did terminate the membership and occupancy rights of the member. The adjudicator at the Landlord and Tenant Board is then given explicit power to exercise discretion and refuse to grant the application. That discretion is found at section 94.12 of section V.1 of the RTA. It is similar in nature to the discretion afforded to adjudicators under section 83 of the RTA in landlord and tenant applications. Given that the wording of the two sections are the same, I would expect that section 94.12 will be interpreted in the same way as section 83 which means that the Adjudicators will feel free to make such orders as they consider fair. In effect, the traditional view that Co-operatives regulate their own affairs through their Boards and members meetings is over-ridden by this new legislative structure that leaves the final say in the hands of adjudicators at the Landlord and Tenant Board.
What is appealing about discretionary relief in the hands of adjudicators as opposed to members' meetings is that the adjudicator is charged to make a decision in a judicious manner. Having attended a great number of members appeals--on both sides--I think it is fair to say that the decision making in Co-ops is not necessarily confined to pertinent facts.
CONCLUSION
I do believe that proceeding to the Landlord and Tenant Board is the "way to go" for Co-operatives. The learning curve is of course in applying new rules in the context of what has always been done. However, I do see a certain efficiency in using the LTB forms and I think Co-operatives will be able to save significant costs in legal fees by going through the administrative process of the Landlord and Tenant Board.
As this legislation is new and I myself have not yet been through an application I would be pleased to receive comments from anyone reading this blog about their experiences.
Michael K. E. Thiele
Ottawalawyers.com
Monday, 23 June 2014
Monday, 9 June 2014
Options when you can't pay your rent to your landlord.
Being short on the rent can happen. This article speaks to options that Ontario tenants have when they are unable to pay their rent in full or on time.
When I have tenant clients who are facing an application for termination for non-payment of rent there are a series of questions that have to be asked before becoming too concerned about dealing with the eviction. It is worthwhile for anyone who is having trouble paying the rent to answer these questions:
1) Why is the rent late? Is it because there is not enough income, unexpected bills, poor spending control, the rent is too high, roommate moved out, illness, loss of job, hours at work cut, on strike?
2) Can the reason that the rent is late be fixed so that the tenant is able to pay the future rents in full and on time? If not, is there a period of time over which the problem can be fixed? What is the timeline?
3) Is there enough income coming in that the rent can be paid in full on an ongoing basis and a small amount can be paid towards the arrears?
4) Is there a family member, friend, or someone who can and who is willing to help out?
5) How long is/was the tenancy and are there any special circumstances.
RENT ARREARS: NOT THE END OF THE WORLD
Being in arrears of rent is not a tragic situation. Getting evicted is not the obvious outcome and the likelihood is that you can indeed preserve your tenancy---i.e. you won't be evicted--depending on how you answered the questions above.
The Residential Tenancies Act is the law that governs landlord and tenant relationships in Ontario. As a provincial statute it is a law that takes precedence over any contract or lease document that a tenant may have signed. In fact, it doesn't matter what a tenant agrees to, in writing or not, if that agreement violates the provisions of the RTA then the agreement is void. The law does not allow a residential landlord and tenant to make just any deal that they wish. This includes agreements or terms that appear to be reasonable and fair to both parties. If the deal breaches the RTA--it is void---regardless of the perceived fairness of the arrangment.
The structure of the RTA matters--and its precedence over lease terms matters--as the RTA itself gives tenants many many chances to pay rent arrears, to make deals, and to seek relief from eviction from the landlord and tenant board. In fact, the structure of the RTA is such that the tenant gets the chances--whether the landlord likes it or not---and the hearing process is such that the law requires the adjudicator (judge at the Landlord and Tenant Board) to consider alternatives to eviction (called section 83 relief). As a tenant in a rent arrears situation you can access these chances and alternatives to eviction simply by participating in the process that the Landlord needs to follow. At some point in going through the process you will find yourself standing in front of an adjudicator--and depending on the answers to the questions I've set out above--you can likely save your tenancy.
At this point, I should make it clear to tenants that a landlord is NOT allowed to simply change the locks. A landlord is not allowed to enter your unit and evict you. A landlord is not permitted to demand that you move by a certain time and date and enforce that demand himself or through friends or acquaintances. A landlord does not have the right to remove a tenant who is covered by the Residential Tenancies Act from the rental unit. In Ontario, the only person who can physically evict a tenant from a rental unit is a Court Enforcement Officer--known as the Sheriff---and the Sheriff will only do that based on a valid Order from the Ontario Landlord and Tenant Board or the Superior Court of Justice. Landlord's have no self help right to kick out a tenant who has not paid the rent (regardless of what any lease or agreement to the contrary might say).
WHAT IS THE LEGAL PROCESS and how should a tenant respond to the steps?
When a tenant is in arrears of rent they should expect that a landlord might call to ask for the rent. In my experience it is best to be honest and straightforward with the landlord and advise truthfully about the reason for late payment. Often enough, a landlord will accept the explanation and make a deal to take care of the rent arrears. If this can be done an awful lot of anxiety and stress can be avoided. Note that you can only make a deal if you take the landlord's call---don't dodge the landlord or avoid him in the hopes that he will "forget" about the rent that you owe.
If the landlord does not call to talk to the tenant about the rent arrears or is unwilling to make a deal on acceptable terms, then the landlord will have to proceed with the legal way of terminating the tenancy and evicting the tenant. This process will take a fairly long time and the tenant will indeed get several opportunities to pay the rent and maintain the tenancy.
The first legal document that a tenant will get is a form N4 (Notice of Termination for Non-Payment of Rent). Note I said "legal document". Letters, notes, texts, emails demanding the rent and threatening eviction if the rent is not paid are not "legal" documents. The Form N4 is a form from the Ontario Landlord and Tenant Board and only that form can be used to terminate and evict a tenant for non-payment of rent.
As a tenant, when you receive a Notice of Termination (like the N4) take a look at the notes that are at the end of the form. The print is small but the notes explain your rights very clearly and demonstrate that the big bold letters and boxes on the form don't mean exactly what you think they mean. The biggest example of this is the box that says "TERMINATION DATE". When you see the date in this box you will think that you need to move out by that date. In fact, that is not true. If you pay the rent by that date then the Notice of Termination is void. That date is a minimum of 14 days after you receive the Notice of Termination (and if the time period is shorter the notice is invalid).
If you are unable to pay the rent by the Termination date then you still do not have to move out. You can require the landlord to file an application with the Landlord and Tenant Board. You do this by not moving out of the apartment. If you refuse to move out then the only legal way for the Landlord to get the unit back is to apply for a hearing date with the Board.
Applying to the landlord and tenant board will take another week or two or three before the case comes on for hearing. If at any time before the hearing you come up with all of the rent arrears (plus the $170 application fee) then it is guaranteed that at the hearing the adjudicator will dismiss the application and allow your tenancy to continue (because you have paid all of the rent and the costs). Sometimes this works out because the passage of time between getting the N4 (waiting 14 days) and then another week or two passing before the hearing allows the tenant enough time to come up with the rent arrears.
If the tenant is unable to come up with all of the rent arrears before the hearing then it is worthwhile for the tenant to attend the hearing. At the hearing, the adjudicator will ask what the rent arrears are and establish what amounts are owing. Often enough the tenant is in a position to agree what is owed. The adjudicator, after determining what is owed, will begin to ask the tenant questions very similar to the ones I've set out above. The adjudicator will want to know whether the tenant wishes to continue the tenancy, the reason for the rent arrears, whether the reason for the arrears arising has been fixed, whether ongoing rent can be paid in full and on time, whether the tenant can offer a repayment plan on a reasonable time line, and whether there are circumstances that exist that should result in the adjudicator exercising his or her discretion to impose a deal on the landlord that allows the tenant to maintain the tenancy while still protecting the landlord's ongoing right to rent.
Even if the tenant has no decent explanation--no acceptable plan---and can't possibly ever pay the rent arrears and is unlikely to be able to pay future rent as it becomes due--the Landlord and Tenant Board will still issue an order giving the tenant 11 days to pay all of the rent arrears plus the $170 application fee and thereby void the eviction order. If the tenant does not pay the rent within those 11 days, then on the 12th day the landlord may go to the sheriff to file the eviction order. The Sheriff will give the tenant a minimum of 7 more days before returning to evict. If during the period that the sheriff has given notice to the tenant the tenant pays the rent arrears and costs then the eviction order is voided again and the tenant can stay (this can only be done once during a tenancy).
The point of the foregoing timeline is highlight how many opportunities a tenant is given to pay the rent arrears and maintain the tenancy---even when it is clear that payment is unlikely or impossible.
EXERCISE OF DISCRETION (section 83)
Let us presume for a moment that the answers to the questions I laid out were such that it was clear that the reason for the rent arrears was a one time event--an unfortunate occurrence. For example--the cash rent was stolen before it was handed over to the landlord. Or, a roommate moved out. Or, the tenant lost a month's pay because they broke a bone and couldn't work. All of these explanations result in a temporary inability to pay the rent. The rent arrears happened because the tenant lost the ability to pay the rent for a short period of time. However, the tenant earns new money to replace the stolen cash, the tenant gets a new roommate, the bone healed and the tenant returned to work, and therefore the things that caused the rent arrears are fixed.
The "fix" allows the tenant to pay future rent in full or on time. Or, the "fix" allows the tenant to pay most of the future rent in full and all of the rent in full in a month or two. The point is that the "fix" sets out a plan that shows how a tenant can get into a position to pay all of the ongoing rent in the future.
An adjudicator needs to see--or have it explained to him or her by the tenant, how the future rent is going to be paid. Once the adjudicator is satisfied that future rent is going to be paid and that the "fix" or the "plan" is a reasonable one--then the adjudicator will turn their minds to the rent arrears that built up while the tenant was having the problem (i.e. while the bone was broken, when the roommate left, when the cash was stolen).
The adjudicator will not forgive the rent arrears and will indeed expect these arrears to be paid to the landlord. However, the adjudicator will be very open to the idea of an affordable payment plan whereby the tenant pays off the arrears over time. It is certainly true that this "payment plan" often makes landlords very upset. However, the "payment plan" is indeed a very logical thing to allow. The landlord is already out the money. Nothing can force a tenant to pay the money any faster than in a way that they can afford. Nothing that the Board can order will force a repayment if the tenant doesn't have the money. Evicting the tenant--for the rent arrears---will not result in the landlord getting the money any faster. Therefore, and so long as the tenant is in a position to pay ongoing rent in full, and on time, then it makes sense to grant the tenant a reasonable repayment plan for any sum of rent arrears. The repayment plan can be anything that makes sense within the tenant's budget.
To propose a payment plan, a tenant should be ready to put the details of their financial life on the table. Show paystubs, benefit stubs, and the sources of income. Show expenses and the things that the income is necessarily spent on. Show what the surplus is, or if there is no surplus of income show where you could cut back in the budget to pay the landlord an amount towards the rent arrears. Where a tenant produces a clear picture of their income, provides confirmation of income sources, and demonstrates what amount can reasonably be paid from the budget, it is my experience that for the most part, the Board will allow the tenancy to be maintained so long as the payment plan is followed.
Most payment plans of rent arrears are conditional on future rents being paid in full and on time. It is most important to pay ongoing rent--in full. The reason for this is that the Board, in exercising its discretion to maintain your tenancy and allowing you to remain in your apartment, will impose a section 78 condition on your tenancy. Section 78 allows the landlord to apply to the Board in the event that you breach the conditional order, without notice to you and obtain a without notice eviction order.
If a tenant has failed to make a payment towards the arrears as required by the discretionary order not all is lost. Even though a landlord may apply under section 78 for an eviction order, a tenant may set aside that eviction order on motion and again seek the exercise of discretion depending on the reasons for the breach of the eviction Order. Note however, that getting the exercise of discretion (relief) repeatedly becomes increasingly difficult as the failure to comply with an order arouses a suspicion that the tenant simply can not afford the rental unit.
THE THEME OF THE LEGISLATION
If you are a tenant who is in rent arrears, I hope that you have taken from this article the notion that being in arrears of rent is not a catastrophe. Losing your home, being evicted, is not the automatic consequence of falling behind in the rent. If the rent arrears are the result of an unexpected event, a tragedy, an illness, a problem of some kind, the RTA has built in chances and opportunities for tenants to recover from these problems. Ultimately, the RTA builds in compassion and understanding from adjudicators who are directed by law to consider alternatives to termination and eviction. Falling behind in the rent is not an insurmountable problem if the issues that lead to the arrears can be fixed and a viable plan is created that demonstrates that future rent can be paid and that arrears will be paid in a structured manner.
HOPELESS CASES
Sometimes, the reason for the rent arrears arises from a problem that can not be fixed. Sometimes a tenant's income will fall, or the circumstances are such that paying the future rent is simply not realistic. As indicated earlier in this article, the Board will still grant time to pay and the process of going to the sheriff will add more time to the ultimate eviction. Even in these circumstances, though, if the reasons are sufficient, it is worthwhile to participate in the proceeding and explain what is going on to the adjudicator. A tenant can ask for more time, or delayed eviction, or try to make a deal premised on partial payments or an indication of an honourable intention to pay the debt at a future time. Many landlords will agree, sometimes with the urging of an adjudicator to agree to a timeline that is least traumatic to the tenant--or the tenant's children---and allow an orderly end to a tenancy that simply can not continue.
Michael K. E. Thiele
QTMG LLP
Ottawa Lawyers
When I have tenant clients who are facing an application for termination for non-payment of rent there are a series of questions that have to be asked before becoming too concerned about dealing with the eviction. It is worthwhile for anyone who is having trouble paying the rent to answer these questions:
1) Why is the rent late? Is it because there is not enough income, unexpected bills, poor spending control, the rent is too high, roommate moved out, illness, loss of job, hours at work cut, on strike?
2) Can the reason that the rent is late be fixed so that the tenant is able to pay the future rents in full and on time? If not, is there a period of time over which the problem can be fixed? What is the timeline?
3) Is there enough income coming in that the rent can be paid in full on an ongoing basis and a small amount can be paid towards the arrears?
4) Is there a family member, friend, or someone who can and who is willing to help out?
5) How long is/was the tenancy and are there any special circumstances.
RENT ARREARS: NOT THE END OF THE WORLD
Being in arrears of rent is not a tragic situation. Getting evicted is not the obvious outcome and the likelihood is that you can indeed preserve your tenancy---i.e. you won't be evicted--depending on how you answered the questions above.
The Residential Tenancies Act is the law that governs landlord and tenant relationships in Ontario. As a provincial statute it is a law that takes precedence over any contract or lease document that a tenant may have signed. In fact, it doesn't matter what a tenant agrees to, in writing or not, if that agreement violates the provisions of the RTA then the agreement is void. The law does not allow a residential landlord and tenant to make just any deal that they wish. This includes agreements or terms that appear to be reasonable and fair to both parties. If the deal breaches the RTA--it is void---regardless of the perceived fairness of the arrangment.
The structure of the RTA matters--and its precedence over lease terms matters--as the RTA itself gives tenants many many chances to pay rent arrears, to make deals, and to seek relief from eviction from the landlord and tenant board. In fact, the structure of the RTA is such that the tenant gets the chances--whether the landlord likes it or not---and the hearing process is such that the law requires the adjudicator (judge at the Landlord and Tenant Board) to consider alternatives to eviction (called section 83 relief). As a tenant in a rent arrears situation you can access these chances and alternatives to eviction simply by participating in the process that the Landlord needs to follow. At some point in going through the process you will find yourself standing in front of an adjudicator--and depending on the answers to the questions I've set out above--you can likely save your tenancy.
At this point, I should make it clear to tenants that a landlord is NOT allowed to simply change the locks. A landlord is not allowed to enter your unit and evict you. A landlord is not permitted to demand that you move by a certain time and date and enforce that demand himself or through friends or acquaintances. A landlord does not have the right to remove a tenant who is covered by the Residential Tenancies Act from the rental unit. In Ontario, the only person who can physically evict a tenant from a rental unit is a Court Enforcement Officer--known as the Sheriff---and the Sheriff will only do that based on a valid Order from the Ontario Landlord and Tenant Board or the Superior Court of Justice. Landlord's have no self help right to kick out a tenant who has not paid the rent (regardless of what any lease or agreement to the contrary might say).
WHAT IS THE LEGAL PROCESS and how should a tenant respond to the steps?
When a tenant is in arrears of rent they should expect that a landlord might call to ask for the rent. In my experience it is best to be honest and straightforward with the landlord and advise truthfully about the reason for late payment. Often enough, a landlord will accept the explanation and make a deal to take care of the rent arrears. If this can be done an awful lot of anxiety and stress can be avoided. Note that you can only make a deal if you take the landlord's call---don't dodge the landlord or avoid him in the hopes that he will "forget" about the rent that you owe.
If the landlord does not call to talk to the tenant about the rent arrears or is unwilling to make a deal on acceptable terms, then the landlord will have to proceed with the legal way of terminating the tenancy and evicting the tenant. This process will take a fairly long time and the tenant will indeed get several opportunities to pay the rent and maintain the tenancy.
The first legal document that a tenant will get is a form N4 (Notice of Termination for Non-Payment of Rent). Note I said "legal document". Letters, notes, texts, emails demanding the rent and threatening eviction if the rent is not paid are not "legal" documents. The Form N4 is a form from the Ontario Landlord and Tenant Board and only that form can be used to terminate and evict a tenant for non-payment of rent.
As a tenant, when you receive a Notice of Termination (like the N4) take a look at the notes that are at the end of the form. The print is small but the notes explain your rights very clearly and demonstrate that the big bold letters and boxes on the form don't mean exactly what you think they mean. The biggest example of this is the box that says "TERMINATION DATE". When you see the date in this box you will think that you need to move out by that date. In fact, that is not true. If you pay the rent by that date then the Notice of Termination is void. That date is a minimum of 14 days after you receive the Notice of Termination (and if the time period is shorter the notice is invalid).
If you are unable to pay the rent by the Termination date then you still do not have to move out. You can require the landlord to file an application with the Landlord and Tenant Board. You do this by not moving out of the apartment. If you refuse to move out then the only legal way for the Landlord to get the unit back is to apply for a hearing date with the Board.
Applying to the landlord and tenant board will take another week or two or three before the case comes on for hearing. If at any time before the hearing you come up with all of the rent arrears (plus the $170 application fee) then it is guaranteed that at the hearing the adjudicator will dismiss the application and allow your tenancy to continue (because you have paid all of the rent and the costs). Sometimes this works out because the passage of time between getting the N4 (waiting 14 days) and then another week or two passing before the hearing allows the tenant enough time to come up with the rent arrears.
If the tenant is unable to come up with all of the rent arrears before the hearing then it is worthwhile for the tenant to attend the hearing. At the hearing, the adjudicator will ask what the rent arrears are and establish what amounts are owing. Often enough the tenant is in a position to agree what is owed. The adjudicator, after determining what is owed, will begin to ask the tenant questions very similar to the ones I've set out above. The adjudicator will want to know whether the tenant wishes to continue the tenancy, the reason for the rent arrears, whether the reason for the arrears arising has been fixed, whether ongoing rent can be paid in full and on time, whether the tenant can offer a repayment plan on a reasonable time line, and whether there are circumstances that exist that should result in the adjudicator exercising his or her discretion to impose a deal on the landlord that allows the tenant to maintain the tenancy while still protecting the landlord's ongoing right to rent.
Even if the tenant has no decent explanation--no acceptable plan---and can't possibly ever pay the rent arrears and is unlikely to be able to pay future rent as it becomes due--the Landlord and Tenant Board will still issue an order giving the tenant 11 days to pay all of the rent arrears plus the $170 application fee and thereby void the eviction order. If the tenant does not pay the rent within those 11 days, then on the 12th day the landlord may go to the sheriff to file the eviction order. The Sheriff will give the tenant a minimum of 7 more days before returning to evict. If during the period that the sheriff has given notice to the tenant the tenant pays the rent arrears and costs then the eviction order is voided again and the tenant can stay (this can only be done once during a tenancy).
The point of the foregoing timeline is highlight how many opportunities a tenant is given to pay the rent arrears and maintain the tenancy---even when it is clear that payment is unlikely or impossible.
EXERCISE OF DISCRETION (section 83)
Let us presume for a moment that the answers to the questions I laid out were such that it was clear that the reason for the rent arrears was a one time event--an unfortunate occurrence. For example--the cash rent was stolen before it was handed over to the landlord. Or, a roommate moved out. Or, the tenant lost a month's pay because they broke a bone and couldn't work. All of these explanations result in a temporary inability to pay the rent. The rent arrears happened because the tenant lost the ability to pay the rent for a short period of time. However, the tenant earns new money to replace the stolen cash, the tenant gets a new roommate, the bone healed and the tenant returned to work, and therefore the things that caused the rent arrears are fixed.
The "fix" allows the tenant to pay future rent in full or on time. Or, the "fix" allows the tenant to pay most of the future rent in full and all of the rent in full in a month or two. The point is that the "fix" sets out a plan that shows how a tenant can get into a position to pay all of the ongoing rent in the future.
An adjudicator needs to see--or have it explained to him or her by the tenant, how the future rent is going to be paid. Once the adjudicator is satisfied that future rent is going to be paid and that the "fix" or the "plan" is a reasonable one--then the adjudicator will turn their minds to the rent arrears that built up while the tenant was having the problem (i.e. while the bone was broken, when the roommate left, when the cash was stolen).
The adjudicator will not forgive the rent arrears and will indeed expect these arrears to be paid to the landlord. However, the adjudicator will be very open to the idea of an affordable payment plan whereby the tenant pays off the arrears over time. It is certainly true that this "payment plan" often makes landlords very upset. However, the "payment plan" is indeed a very logical thing to allow. The landlord is already out the money. Nothing can force a tenant to pay the money any faster than in a way that they can afford. Nothing that the Board can order will force a repayment if the tenant doesn't have the money. Evicting the tenant--for the rent arrears---will not result in the landlord getting the money any faster. Therefore, and so long as the tenant is in a position to pay ongoing rent in full, and on time, then it makes sense to grant the tenant a reasonable repayment plan for any sum of rent arrears. The repayment plan can be anything that makes sense within the tenant's budget.
To propose a payment plan, a tenant should be ready to put the details of their financial life on the table. Show paystubs, benefit stubs, and the sources of income. Show expenses and the things that the income is necessarily spent on. Show what the surplus is, or if there is no surplus of income show where you could cut back in the budget to pay the landlord an amount towards the rent arrears. Where a tenant produces a clear picture of their income, provides confirmation of income sources, and demonstrates what amount can reasonably be paid from the budget, it is my experience that for the most part, the Board will allow the tenancy to be maintained so long as the payment plan is followed.
Most payment plans of rent arrears are conditional on future rents being paid in full and on time. It is most important to pay ongoing rent--in full. The reason for this is that the Board, in exercising its discretion to maintain your tenancy and allowing you to remain in your apartment, will impose a section 78 condition on your tenancy. Section 78 allows the landlord to apply to the Board in the event that you breach the conditional order, without notice to you and obtain a without notice eviction order.
If a tenant has failed to make a payment towards the arrears as required by the discretionary order not all is lost. Even though a landlord may apply under section 78 for an eviction order, a tenant may set aside that eviction order on motion and again seek the exercise of discretion depending on the reasons for the breach of the eviction Order. Note however, that getting the exercise of discretion (relief) repeatedly becomes increasingly difficult as the failure to comply with an order arouses a suspicion that the tenant simply can not afford the rental unit.
THE THEME OF THE LEGISLATION
If you are a tenant who is in rent arrears, I hope that you have taken from this article the notion that being in arrears of rent is not a catastrophe. Losing your home, being evicted, is not the automatic consequence of falling behind in the rent. If the rent arrears are the result of an unexpected event, a tragedy, an illness, a problem of some kind, the RTA has built in chances and opportunities for tenants to recover from these problems. Ultimately, the RTA builds in compassion and understanding from adjudicators who are directed by law to consider alternatives to termination and eviction. Falling behind in the rent is not an insurmountable problem if the issues that lead to the arrears can be fixed and a viable plan is created that demonstrates that future rent can be paid and that arrears will be paid in a structured manner.
HOPELESS CASES
Sometimes, the reason for the rent arrears arises from a problem that can not be fixed. Sometimes a tenant's income will fall, or the circumstances are such that paying the future rent is simply not realistic. As indicated earlier in this article, the Board will still grant time to pay and the process of going to the sheriff will add more time to the ultimate eviction. Even in these circumstances, though, if the reasons are sufficient, it is worthwhile to participate in the proceeding and explain what is going on to the adjudicator. A tenant can ask for more time, or delayed eviction, or try to make a deal premised on partial payments or an indication of an honourable intention to pay the debt at a future time. Many landlords will agree, sometimes with the urging of an adjudicator to agree to a timeline that is least traumatic to the tenant--or the tenant's children---and allow an orderly end to a tenancy that simply can not continue.
Michael K. E. Thiele
QTMG LLP
Ottawa Lawyers
Friday, 6 June 2014
Small Landlords: What to do when the rent is late.
HOW DID I GET THIS FAR BEHIND?
Often enough, I have landlord clients who find themselves with a tenant who is many months in arrears of rent. The rent arrears amount to several thousands of dollars and the landlord, when speaking to me, is only slowly overcoming their denial of the huge financial loss they are about to experience. I've looked at this often enough and have asked many landlords how they got to the position of their tenant owing them so much in rent arrears. The explanations are always the same.
These landlords describe a situation where the tenant falls behind in rent. Often just part of the rent. The tenant pays the late rent but it is nevertheless late. In subequent months the entirety of the rent is not paid but the tenant describes a tragedy of some kind---a lost job, a death in the family, unexpected expenses, a spouse leaving, not receiving spousal or child support---and asks for a little time to pay. The landlord, feeling compassion agrees to extend credit and the tenant is very thankful. Time passes and the tenant fails to pay the entire arrears, or only makes a small additional payment. The excuses compound and the landlord describes feeling like a villain if they pile on financial worry to the recent hardship experienced by the tenant. At this point, the arrears are starting to be meaningful.
As time passes, and even more rent is not paid, the landlord finally has enough and approaches the tenant with an ultimatum--pay or move. The tenant responds that everything is finally looking good, thanks the landlord for their patience, and says that the money should be available shortly because they are: getting a tax refund, inheriting some money, getting a loan from family, started a new job and has extra shifts or some other explanation. The landlord who doesn't like being nasty about money is thrilled that the arrears will be paid and pats himself on the back for having given the tenant a break. The landlord waits a couple of weeks, still the tenant has not paid, has not shown up. Perhaps the landlord has a little trouble reaching the tenant and when he finally does the tenant explains that there was a hiccup with the tax return, new job, loan, or whatever the excuse was but that it is now sorted and the money should be forthcoming very soon. Again, the landlord is relieved though suspicion is starting to set in. At this point, it is not uncommon for 4 to 6 months to have passed with partial rent payments or no rent payments at all.
When the promised money does not materialize the landlord begins to finally suspect that there is a serious problem. That feeling however, is tempered with denial as the landlord finally does the math and realizes that these rent arrears are significant and that not getting this rent will have a real impact on the landlord's personal finances. That realization sometimes stuns the landlord into further inaction as they choose to believe that the tenant will come up with the money if just given a little more time. Of course the money never comes.
Eventually, the landlord realizes that legal steps need to be taken. Often, small landlords who haven't had this kind of problem ever before only now begin to learn of the procedure provided under the Residential Tenancies Act. Being finally ready to evict the tenant because they are losing their shirt the landlord is stunned to learn that the Residential Tenancies Act (RTA) provides an entire method/structure/rules for terminating a tenancy for non-payment of rent and that the process provided for under the RTA could easily take another 2 to 3 months from serving the Notice of Termination to getting an eviction order. What many landlords find profoundly frustrating is that the Landlord and Tenant Board refuses to deal with their matter in an expeditious way (i.e. faster then the system allows) even though the landlord knows he won't be paid and he has given the tenant numuerous chances.
SO WHAT SHOULD A LANDLORD DO?
The very first thing that a landlord needs to recognize is that they are running a business. In order for the business to be profitable the customers must pay and they must pay on time. You should not allow the customer to consume the product without paying for it. Accordingly, I recommend to all of my landlord clients that as soon as the rent is late--which is the day after it is due--that the landlord prepare and serve a Form N4--Notice of Termination for Non-Payment of Rent. No waiting, no excuses, no delays---the only exception being if you believe the tenant is trying to escape from a fixed term lease.
The service of a Form N4 starts a termination procedure. That procedure is long and drawn out. The N4 gives the tenant 14 days to pay the rent from the date that the N4 is served. The tenant gets 14 days whether you serve the Notice the day after rent is due or 6 months after the rent is due. The point is that the law always gives the tenant 14 days to pay.
After the 14 days expires, and presuming that the tenant has not paid the rent owing, paid only part of the rent owing, or hasn't paid all of the rent owing and any rent that became due after the service of the N4, then the Landlord may apply to the Landlord and Tenant Board to evict the tenant for non-payment of rent and further to get an Order for the rent owing. The form that the landlord uses is Form L1 (available online and from the Landlord and Tenant Board). Filing the L1 form will result in the Landlord and Tenant Board issuing a Notice of Hearing. That hearing date could be a couple of weeks after filing or sometimes even a little longer after filing.
During this entire period of time, a landlord is not allowed to take any action against the tenant. It is illegal to simply change the locks, interfere with services, harass or intimidate the tenant in any way. If the landlord does do something illegal and contrary to the RTA the Board may refuse to terminate the tenancy, it may fine the landlord, grant damages to the tenant, and possibly even refer the landlord for prosecution under the Provincial Offences Act.
Having waited for the hearing date, the landlord and tenant will attend. The tenant may seek an adjournment and it is not necessarily guaranteed that the case will proceed on the scheduled date. The tenant may be ill or have some other explanation for why they are not reasonably able to participate in the hearing. Any of these things could lead to an adjournment. Further, the tenant could indicate an intention to file their own case, or that they have filed their own case and that they have a separate hearing date and want the cases joined to the later date, or there could even be an issue with language and needing a bi-lingual hearing block.
Presuming that the case proceeds and is not adjourned, and further presuming that the case is straightforward without the tenant claiming against the landlord for anything, and presuming also that the tenant admits the amounts owing; the landlord and tenant board, absent any special considerations will make an order requiring the tenant to pay the rent in the next 11 days (from the date of the order). If the tenant pays--the tenant gets to stay and the order is void.
If the tenant does not pay, then on the 12th day, the landlord may attend on the Court Enforcement Office (aka Sheriff) and ask the sheriff to enforce the eviction Order after paying a fee in the range of $350. Depending on where you are in the province, the timing for enforcement can be a week or longer. During this entire period of time it is possible that the tenant is not paying rent.
While the time-line described is long enough, it is also possible that the tenant will ask for an extension of the 11 day period or ask for a payment plan to allow the rent to be paid off over time. All of these possibilities arise from the adjudicator's power to exercise discretion under section 83 of the Residential Tenancies Act.
If you have been adding up the blocks of time that the Residential Tenancies Act allows to tenants to void the eviction and pay the rent, you will have discovered that from the date of service of the N4 to the date of eviction is a minimum of one month (if you are extremely lucky) and is more likely in the range of 2 to 4 months. This can be a very long time to go without getting rent if you are relying on the rent for your own expenses.
In strictly following the rules provided for in the law you will recognize that the tenant will have plenty of opportunities to pay the rent arrears and keep their tenancy. The law makes any step that you take to terminate and evict the tenant void if the tenant pays the rent. Even after the Landlord and Tenant Board has given the tenant the final 11 days to pay the tenant can still pay the rent (once during a tenancy) after the sheriff has been instructed to attend and evict and thereby void the eviction order.
CONCLUSION
So the point of this article then, and to answer the question posed in the title the thing that a landlord should do, when the rent is late, is to immediately start the legal process to terminate and evict the tenant. Starting early will get you through the mandatory blocks of time that a tenant is granted to pay the rent before the rent arrears become ridiculously large. From the time line set out above you can see that it is virtually guaranteed that you will lose rent--even after applying the Last Month's Rent deposit to the rents owing.
Michael K. E. Thiele
www.ottawalawyers.com
Often enough, I have landlord clients who find themselves with a tenant who is many months in arrears of rent. The rent arrears amount to several thousands of dollars and the landlord, when speaking to me, is only slowly overcoming their denial of the huge financial loss they are about to experience. I've looked at this often enough and have asked many landlords how they got to the position of their tenant owing them so much in rent arrears. The explanations are always the same.
These landlords describe a situation where the tenant falls behind in rent. Often just part of the rent. The tenant pays the late rent but it is nevertheless late. In subequent months the entirety of the rent is not paid but the tenant describes a tragedy of some kind---a lost job, a death in the family, unexpected expenses, a spouse leaving, not receiving spousal or child support---and asks for a little time to pay. The landlord, feeling compassion agrees to extend credit and the tenant is very thankful. Time passes and the tenant fails to pay the entire arrears, or only makes a small additional payment. The excuses compound and the landlord describes feeling like a villain if they pile on financial worry to the recent hardship experienced by the tenant. At this point, the arrears are starting to be meaningful.
When the promised money does not materialize the landlord begins to finally suspect that there is a serious problem. That feeling however, is tempered with denial as the landlord finally does the math and realizes that these rent arrears are significant and that not getting this rent will have a real impact on the landlord's personal finances. That realization sometimes stuns the landlord into further inaction as they choose to believe that the tenant will come up with the money if just given a little more time. Of course the money never comes.
Eventually, the landlord realizes that legal steps need to be taken. Often, small landlords who haven't had this kind of problem ever before only now begin to learn of the procedure provided under the Residential Tenancies Act. Being finally ready to evict the tenant because they are losing their shirt the landlord is stunned to learn that the Residential Tenancies Act (RTA) provides an entire method/structure/rules for terminating a tenancy for non-payment of rent and that the process provided for under the RTA could easily take another 2 to 3 months from serving the Notice of Termination to getting an eviction order. What many landlords find profoundly frustrating is that the Landlord and Tenant Board refuses to deal with their matter in an expeditious way (i.e. faster then the system allows) even though the landlord knows he won't be paid and he has given the tenant numuerous chances.
SO WHAT SHOULD A LANDLORD DO?
The very first thing that a landlord needs to recognize is that they are running a business. In order for the business to be profitable the customers must pay and they must pay on time. You should not allow the customer to consume the product without paying for it. Accordingly, I recommend to all of my landlord clients that as soon as the rent is late--which is the day after it is due--that the landlord prepare and serve a Form N4--Notice of Termination for Non-Payment of Rent. No waiting, no excuses, no delays---the only exception being if you believe the tenant is trying to escape from a fixed term lease.
The service of a Form N4 starts a termination procedure. That procedure is long and drawn out. The N4 gives the tenant 14 days to pay the rent from the date that the N4 is served. The tenant gets 14 days whether you serve the Notice the day after rent is due or 6 months after the rent is due. The point is that the law always gives the tenant 14 days to pay.
After the 14 days expires, and presuming that the tenant has not paid the rent owing, paid only part of the rent owing, or hasn't paid all of the rent owing and any rent that became due after the service of the N4, then the Landlord may apply to the Landlord and Tenant Board to evict the tenant for non-payment of rent and further to get an Order for the rent owing. The form that the landlord uses is Form L1 (available online and from the Landlord and Tenant Board). Filing the L1 form will result in the Landlord and Tenant Board issuing a Notice of Hearing. That hearing date could be a couple of weeks after filing or sometimes even a little longer after filing.
During this entire period of time, a landlord is not allowed to take any action against the tenant. It is illegal to simply change the locks, interfere with services, harass or intimidate the tenant in any way. If the landlord does do something illegal and contrary to the RTA the Board may refuse to terminate the tenancy, it may fine the landlord, grant damages to the tenant, and possibly even refer the landlord for prosecution under the Provincial Offences Act.
Having waited for the hearing date, the landlord and tenant will attend. The tenant may seek an adjournment and it is not necessarily guaranteed that the case will proceed on the scheduled date. The tenant may be ill or have some other explanation for why they are not reasonably able to participate in the hearing. Any of these things could lead to an adjournment. Further, the tenant could indicate an intention to file their own case, or that they have filed their own case and that they have a separate hearing date and want the cases joined to the later date, or there could even be an issue with language and needing a bi-lingual hearing block.
Presuming that the case proceeds and is not adjourned, and further presuming that the case is straightforward without the tenant claiming against the landlord for anything, and presuming also that the tenant admits the amounts owing; the landlord and tenant board, absent any special considerations will make an order requiring the tenant to pay the rent in the next 11 days (from the date of the order). If the tenant pays--the tenant gets to stay and the order is void.
If the tenant does not pay, then on the 12th day, the landlord may attend on the Court Enforcement Office (aka Sheriff) and ask the sheriff to enforce the eviction Order after paying a fee in the range of $350. Depending on where you are in the province, the timing for enforcement can be a week or longer. During this entire period of time it is possible that the tenant is not paying rent.
While the time-line described is long enough, it is also possible that the tenant will ask for an extension of the 11 day period or ask for a payment plan to allow the rent to be paid off over time. All of these possibilities arise from the adjudicator's power to exercise discretion under section 83 of the Residential Tenancies Act.
If you have been adding up the blocks of time that the Residential Tenancies Act allows to tenants to void the eviction and pay the rent, you will have discovered that from the date of service of the N4 to the date of eviction is a minimum of one month (if you are extremely lucky) and is more likely in the range of 2 to 4 months. This can be a very long time to go without getting rent if you are relying on the rent for your own expenses.
In strictly following the rules provided for in the law you will recognize that the tenant will have plenty of opportunities to pay the rent arrears and keep their tenancy. The law makes any step that you take to terminate and evict the tenant void if the tenant pays the rent. Even after the Landlord and Tenant Board has given the tenant the final 11 days to pay the tenant can still pay the rent (once during a tenancy) after the sheriff has been instructed to attend and evict and thereby void the eviction order.
CONCLUSION
So the point of this article then, and to answer the question posed in the title the thing that a landlord should do, when the rent is late, is to immediately start the legal process to terminate and evict the tenant. Starting early will get you through the mandatory blocks of time that a tenant is granted to pay the rent before the rent arrears become ridiculously large. From the time line set out above you can see that it is virtually guaranteed that you will lose rent--even after applying the Last Month's Rent deposit to the rents owing.
Michael K. E. Thiele
www.ottawalawyers.com