Ontario and the Rent Control See-Saw

TENANTS IN NEW BUILDINGS (November 2018) BEWARE!

The Globe and Mail ran a story (Developers forge ahead with apartments amid easing of Ontario rent-control rules December 31, 2018) about three developers who have committed to building more rental housing, ostensibly because rent control has been removed in relation to the projects they were contemplating.  This story, unfortunately, leaves a lot to be desired and creates the impression that until recently Ontario had a full rent control regime.  This is not an accurate portrayal of what the law in Ontario has been.

A brief history of rent control in Ontario requires us to consider the “dark days” before the coming into force of the Tenant Protection Act in June 1998. Prior to this date, Ontario had a very confusing mix of rent control laws where rents, in many/most buildings were actually registered rents and the lawful amount of rent that could be charged was regulated and controlled at all times by a government bureaucracy.  If a landlord charged a tenant a “market rent” but this amount was higher than the registered rent there was a system by which tenants could get rent refunds. The reality of this situation was that many landlords had buildings where the rents were unable to support maintenance and renovations and buildings fell into disrepair.  Under this system, (pre-June 1998), few developers could be convinced to build new apartment buildings as the revenue from rents was so tightly controlled.

This changed with the Tenant Protection Act and specifically section 124 of that act. This section provided that the legal and lawful rent for an apartment was the amount that a landlord first charged to a tenant.  The entire history of registered maximum rents for specific rental units was gone. This meant that whenever a landlord had a vacancy the landlord could charge the incoming and new tenant any amount that they wished—essentially, whatever the market would bear.  This, as you can imagine, was an earth shaking shift away from serious rent control.  While some tenants may reside in a unit for a very long time, many tenants are mobile or transient and their “moving” on a somewhat predictable time frame allowed landlords to adjust the rent to market rates (presumably upward but not necessarily) between tenancies.

The “rent control” that remained after the passing of the Tenant Protection Act was that the rent charged to a tenant, during a tenancy, could not be increased more than the percentage calculated and allowed by the government.  The government calculated an annual percentage that was similar to an “inflation” amount and the intended effect was that tenants couldn’t be priced out of their apartment by an exorbitant rent increase that might be disconnected to economic realities (i.e. a rent increase designed to evict).   The effect of a rent control during the tenancy and no rent control between tenancies was a partial rent control or a partial de-control depending on one’s perspective.

The Tenant Protection Act, like current legislation, also extended the exemption from partial rent control to certain specific buildings (lifting rent control entirely).  In June 1998, that exemption applied to rental units never rented since July 1975 or no part of a building residentially occupied before 1991 (basically anything built after 1991 had no rent control).

This partial rent control exemption continued through various legislative amendments and even into the new (and currently named legislation) the Residential Tenancies Act (RTA).  The RTA was passed in 2006 and came into effect on January 31, 2007.   The RTA continued the partial exemption from rent control and landlord’s could continue to charge any amount of rent that they wished for new tenants.  Hence, one a rental unit became vacant the landlord could charge the next tenant any amount that the market would bear or the tenant was willing to pay.  

With the RTA we saw a newish exemption date—but conceptually similar idea, with the exempting of any rent control from tenancies in rental units that were not occupied for any purpose before June 17, 1998.  What this means, in practice, is that rental units that fit this exemption and tenants living in these rental units, could have the amount of their rent raised to any amount whatsoever—once every twelve months with 90 days notice. Fortunately, this exemption flew under the radar for the longest time.  Most landlords, most tenants, and people generally believed that there was rent de-control between tenancies but that during a tenancy the amount of the increase was limited by the published annual amount set by government.  The outcome was that while there were many rental units (and more and more as time went by and more were built) that were exempt from the annual percentage increase amount most landlords only applied the annual percentage increase amount established by the government or some other amount that was reasonable enough to maintain the tenancy.

The big problems in rental housing started with the boom in real estate generally and what can be considered to be a housing shortage in Toronto.  Rocketing real estate prices made rental housing increasingly valuable.  Market rent for an apartment increased as well as housing increased and the market supply tightened.  Inevitably, tenants who were used to get rent increase notices in accordance with the annual guideline amount set by the government started getting double digit percentage increases because their apartment could actually command that amount of rent.  The landlord’s expenses did not necessarily increase and the cost of carrying the building did not grow exponentially—landlords simply discovered that their existing buildings could make them a lot more money.

The breadth of the exemption from guideline increases (i.e. the date that it goes back to), was largely the problem.  Philosophically, you can understand that a landlord who has invested in a new building (say up to 10 years old), wants to be able to recoup that investment as quickly as possible in accordance with what the market would allow if rents were unregulated.  The counter point, and what seemed unfair to many, is that the exemption from rent control (during a tenancy), had existed for so long (since the Tenant Protection Act in 1997 reached back to 1991), that landlords were just getting a massive windfall on buildings that were long paid for.  Essentially, landlords were hitting a jackpot because of a booming real estate market and not because of any investment in the quality of their existing rental stock.

The RTA was amended on May 30, 2017, to remove that exemption to the special category of rental units (based on the age of the unit or occupation of it—i.e. 1975, 1991, 1998), in which landlords could raise the rent to any amount that they wished even during the occupation of the rental unit by a tenant.  Tenants now, could only face an annual guideline increase in accordance with the amount set by government capped to a 2.5% increase on the monthly rent amount.   Of note, this big change that so upset the real estate developer world did not in fact take away the right to charge any amount that a landlord wished between tenancies.  The market rent can always be charged for a rental unit when a tenant vacates and a new tenant takes possession.   Also continued, is the right for landlords to seek Above Guideline Rent increases in the event that there are extraordinary costs incurred in relation to improving or maintaining the residential complex.

From approximately May 30, 2017 (it was backdated to the date of the announcement), landlords lost the right to increase the rent for certain exempted units to any amount that they wished.  Arguably, this gave a lot of stability to tenants who were living in apartments that had affordable rents—or perhaps phrased another way---rents that they could afford.  No longer could a landlord raise a rent by 30%,40%, 50%, or any other percentage merely because the apartment could command this amount of rent in a booming real estate market.

There is an underlying public policy in the provisions of the Residential Tenancies Act. If you think about it for a while, you will recognize that a stable rental market contributes significantly to stable families and a stable workforce.  People are connected to their community through the location of their home. Just think about the impact on employers if their workers were constantly quitting, or late to work because they were moving again. What about children who have to transfer schools if the parents are moving regularly because the rents are being legally increased to an unaffordable amount? Is this healthy for kids?  How about the connection that people have to important services such as their doctor, groceries, family, transportation, social clubs, sports, etc., that is closely connected to where they live.  When rents are unpredictable and the renting population finds itself constantly moving or under threat of being evicted by unaffordable rent there is a certain societal instability that comes with that which I don’t think anyone would say is “good”.

The Globe and Mail article reports on the removal of rent control that the current Ontario Conservative government has given us.  New legislation, removes the limit on annual guideline increases from rental units that are built or firstly available after November 15, 2018.  Tenants who move into these kinds of units are subject to unlimited annual rent increases at the whim of the landlord.  Now this doesn’t mean that the landlord has to inordinately increase rents for those units but the landlord will indeed have the right to do so.  Whether this is good or bad is left to be seen.  However, I can’t help but feel like this is a big déjà vu reflective of the passing of the Tenant Protection Act in 1997 when this conception of a special exemption was first introduced.  

This current exemption, I don’t anticipate will cause much difficulty in the near future. Rental units existing before November 15, 2018, will still be subject to a maximum annual rent increase as set by the province.  Rents can still be adjusted between tenancies and landlords with older buildings can still apply for Above Guideline Rent Increases.   I suppose what is a little surprising in the article is that you have the sense of a jubilant developer community because of the removal of the annual rent increase control for buildings constructed or occupied after November 15, 2018.   Given how the various governments create, change, and remove this particular exemption (as evidenced by the history of the exemption), I can’t imagine that any developer is really modeling a residential rental complex relying on this current state of the law.

For those interested in seeing how the current Conservative government effected the change here is the wording of the exemption from the Restoring Trust, Transparency, and Accountability Act, 2018, S.O. 2018, c.17 (Bill 57):

SCHEDULE 36
RESIDENTIAL TENANCIES ACT, 2006

1 The Residential Tenancies Act, 2006 is amended by adding the following section:

Exemptions from rules relating to rent

6.1 (1) In this section,

“addition” means, with respect to a mobile home park or land lease community, an expansion beyond the boundaries of the mobile home park or land lease community; (“rajout”)

“commencement date” means the day section 1 of Schedule 36 to the Restoring Trust, Transparency and Accountability Act, 2018comes into force. (“date d’entrée en vigueur”)

Buildings, etc., not occupied on or before November 15, 2018

(2) Sections 120, 121, 122, 126, 127, 129, 131, 132, 133, 165 and 167 do not apply on and after the commencement date with respect to a rental unit if the requirements set out in one of the following paragraphs are met:

1. The rental unit is located in a building, mobile home park or land lease community and no part of the building, mobile home park or land lease community was occupied for residential purposes on or before November 15, 2018.

2. The rental unit is entirely located in an addition to a building, mobile home park or land lease community and no part of the addition was occupied for residential purposes on or before November 15, 2018.

Rental units in detached houses, semi-detached houses or row houses

(3) Sections 120, 121, 122, 126, 127, 129, 131, 132 and 133 do not apply on and after the commencement date with respect to a rental unit if all of the following requirements are met:

1. The rental unit is located in a detached house, semi-detached house or row house which, on or at any time before November 15, 2018, contained not more than two residential units.

2. The rental unit is a residential unit that meets all of the following requirements:

i. The unit has its own bathroom and kitchen facilities.

ii. The unit has one or more exterior or interior entrances.

iii. At each entrance, the unit has a door which is equipped so that it can be secured from the inside of the unit.

iv. At least one door described in subparagraph iii is capable of being locked from the outside of the unit.

3. The rental unit became a residential unit described in paragraph 2 after November 15, 2018.

4. One or both of the following circumstances apply:

i. At the time the rental unit was first occupied as a residential unit described in paragraph 2, the owner or one of the owners, as applicable, lived in another residential unit in the detached house, semi-detached house or row house.

ii. The rental unit is located in a part of the detached house, semi-detached house or row house which was unfinished space immediately before the rental unit became a residential unit described in paragraph 2.

Non-application of exemption under subs. (2) or (3)

(4) Subject to subsection (5), the exemption under subsection (2) or (3) does not apply with respect to a rental unit that is subject to a tenancy in respect of which a tenancy agreement was entered into on or before November 15, 2018.

Application of subs. (4)

(5) Subsection (4) applies only with respect to the tenancy described in that subsection and does not apply with respect to any subsequent tenancy.

Burden of proof

(6) For greater certainty, in an application to the Board in which the application of subsection (2) or (3) is at issue, the onus is on the landlord to prove that the subsection applies.

Transition rules

(7) The following rules apply on and after the commencement date with respect to a rental unit, if subsection (2) or (3) applies to the rental unit and the unit is subject to a tenancy in respect of which a tenancy agreement was entered into before that date but after November 15, 2018:

1. Despite subsections (2) and (3), sections 121 and 122 continue to apply with respect to an agreement that was entered into between the landlord and the tenant of the rental unit under section 121 before the commencement date.

2. Despite subsections (2) and (3), section 132 continues to apply with respect to an application that was made by the landlord or the tenant of the rental unit under that section before the commencement date and was not finally determined before that date.

3. Despite subsections (2) and (3), section 133 continues to apply with respect to an application that was made by the tenant of the rental unit under that section before the commencement date and was not finally determined before that date.

4. Despite subsection (2), section 165 continues to apply with respect to an assignment of the rental unit for which the landlord granted consent under section 95 before the commencement date or which was authorized by the Board under section 98 before that date.

Commencement

2 This Schedule comes into force on the day the Restoring Trust, Transparency and Accountability Act, 2018 receives Royal Assent.

Calculating Interest Owed on Last Month's Rent Deposit

Interest owed to tenant on last month’s rent deposit


A question that I get from time to time is how to calculate the interest owing on a last month’s rent deposit.  The question is usually complicated by a multi-year tenancy where no interest has been paid during the entire tenancy.   How do you figure out how much interest is owed to the tenant?

The law that governs last month’s rent interest is the Residential Tenancies Act and specifically section 105(6) RTA.   That section provides that a landlord shall pay interest to the tenant, annually, on the amount of the rent deposit at a rate equal to the guideline interest determined under section 120 that is in effect at the time payment becomes due.

The Guideline Interest amount is the amount that a landlord may increase the rent by every year.  That percentage is set annually by the government and is published annually.  These are the annual percentages for the last 8 years.


  2023      2.50%

  2022      1.20%

  2021      0.00%

  2020      2.2%
  2019      1.8%
  2018      1.8%
  2017      1.5%
  2016      2.0%
  2015      1.6%
  2014      0.8%
  2013      2.5%


When the landlord does not pay the interest annually the amount owed is not compounded and interest does NOT run on the interest.  Accordingly, if you are calculating a multi-year amount of last month rent interest you calculate each year separately and then add all those amounts together.

EXAMPLE

 Basic Facts for example calculation

 The amount of rent on deposit is $1000.00
 Tenancy started: January 1, 2014
 Interest Never Paid
 Annual rent never increased
 Tenancy Ended Legally on November 30, 2018


 Calculation

 Year 2014    $1000 x 0.8% = $8.00 (1)
 Year 2015 $1000 x 1.6% = $16.00 (2)
 Year 2016 $1000 x 2.0% = $20.00 (3)
 Year 2017 $1000 x 1.5% = $15.00 (4)
 Year 2018 $1000 x 1.8% = $ 18.00 /12 = $1.50 x 10 months = $15.00 (5)

The amount of interest owed to the tenant on the deposit for the entire tenancy is 1+2+3+4+5 which totals $74.00.

Note that each year's interest is just added to the subsequent years interest without compounding the interest (i.e. no interest on interest).  This is known as simple interest.


WHAT HAPPENED IN YEAR 2018 (i.e. #5)?

The interest owed must take into account the fact that the deposit was not held by the landlord for the entire year.  Because the tenancy ended on November 30, 2018, there were only 11 months in the tenancy in the year 2018.  You will notice, that the interest calculated is only for 10 months and not 11 months.  The reason for this is that the last month’s rent deposit was applied to the last month of the tenancy–meaning the landlord became entitled to the money on November 1, 2018, and therefore it was no longer a deposit as of that date.


WHAT IF THE RENT WAS INCREASED DURING the tenancy?


During the course of a tenancy a landlord may increase the rent in accordance with the Residential Tenancies Act.   When the landlord does this, the landlord may also require the tenant to increase the rent deposit to the legal amount of the current rent.  As the rent increase (for most rental units now) is the exact same as the interest that is payable on the deposit, it is often the case that the interest payable is just added to the deposit and therefore nothing is owing to the tenant BUT at the same time the deposit is increased to the current rent amount.   If the landlord does not take an annual rent increase or does not take the full amount authorized there will then be an interest amount owing to the tenant.

Prior to recent changes, there were many rental units that were exempt from the annual guideline amount.  Those units may have had the rent increased by more than the interest payable on the deposit.  In those situations, the rent interest may be insufficient to cover the shortfall between the deposit and the lawful rent.  Unfortunately, the match between interest payable and maximum rent increases is a again set to diverge as the current government is exempting very new buildings and rental units from the maximum guideline amount on the basis that this will spur the construction of new rental units.


Michael K.E. Thiele
www.ottawalawyers.com

Ontario's Non-Profit Housing Co-ops: A great place to live!?

Residential Co-op Housing–How good is it?

From time to time I get questions about Non-Profit Housing Co-operatives and usually the questions turn on how the Co-op is governed.  Sometimes the question comes from people thinking of moving to a Co-op and other times it is from people who are having a difficult time in the Co-op with either the Co-op taking action against them or the Co-op not doing anything to address complaints.


As this is a Residential Landlord and Tenant Blog you would think that Ontario’s Residential Tenancies Act would play a large role in the operations of an Ontario Non-Profit Housing Co-operative.  That, however, is entirely wrong headed and not the case at all.  The applicability of the Residential Tenancies Act is very limited in scope.

Ontario Non-Profit Housing Co-operatives are actually governed by the Co-operative Corporations Act.   For the most part, you are going to be interested in section 171 of the Co-operative Corporations Act through to section 171.25, however, the rest of the Act is relevant with respect to other functions of the Co-op—for example Directors and Officers in s. 85 to 110.

The Co-operative Corporations Act envisions the establishment of a self-governing community.   The structure of the community (in the housing context) is that the people living in the Co-op become “members”.  As a member of the Co-op there are certain rights and responsibilities and by agreeing to be a member you agree to be bound to the Co-op rules and by-laws.   In a non-profit housing co-operative being a member gets you the right to occupy a rental unit (a “member’s unit).  Note that it is possible that you could not be a member and that you may be allowed to rent a non-member’s unit–though this is rare.

 Getting into a Co-op usually involves an application process, various forms, and interviews with membership committees.  The decision of the membership committee is often referred to the Board of Directors for a final approval.  There are a great number of committees in the Co-op, from membership, maintenance, social, landscaping, security, etc. etc..   There is no limit on the number of committees that a Co-op might have.  Quite normally, members of a Co-op are required to participate in the work and life of the Co-op as a condition of their membership.  Failing to participate (i.e. showing up for meetings, working on committees) can be grounds to terminate membership and occupancy rights (i.e. eviction).

The committees are formed from members in the Co-op and most often are simply made up of volunteers.  The very important committees, the ones dealing with money, membership, subsidies, tend to be governed by very strict Rules and Policies.  Other committees can be less formal.

WHAT ARE THE RULES?

To a great extent the rules governing life in the Co-op are dictated by the Members who decide through majority vote on what the Rules are.   The Rules are reflected in By-laws and Resolutions that are passed at meetings of the Co-operative.  In most Co-ops the members elect a Board of Directors (again mainly from the members of the Co-op).  The Board of directors then appoints from their number various officers (President, Treasurer, Secretary, etc.).  The Board of Directors then typically hires a property management company as its employee to manage the day to day affairs of the Co-op.  The property management company may have other employees and may also rely on some volunteers from the Co-op to work in the office.  The Board of Director positions are unpaid while the Property Manager is a paid position.

The scope of the rules and by-laws can and usually are very broad.  The main by-law that typically interests members the most is the “Occupancy By-law”.  This by-law, in most co-op’s controls the behaviour among members, sets out expectations, and controls the relationships between the members and the Co-op.  You can find any unique membership requirements in this By-law and it is the one by-law that members should read at least once and preferably before or when joining a Co-op.

THE MEMBERS DON”T LIKE ME—now what?

Living in a Co-op can be a stressful adventure.  There can be cliques and it is possible for “groups” to form.  You sometimes hear the comment that it is a “little like high-school”.  That may or may not be the case but it is important to realize that in a Co-op your reputation and interaction with your co-members is indeed important.  While you do not need to get along with absolutely everyone, you need to realize that it is your co-members who are often sitting in judgment of you and determining whether complaints about you or deciding what steps a Co-op should take against you for your actions.

Complaints from Co-op members, about another member, typically first go to the Property Manager.  The Property Manager—if it is a good manager—will know most of the Co-op members and hence will already have a sense about the merit of the complaint(s).  Typically, the manager will try to find a solution and will try to bring some peace to the issue that is being raised.  Often times this will be successful and the issue dies there.  However, where the issue is not solved and the problem needs to be escalated it is the Board of Directors that now receives the complaint.  The Board may give the manager instructions or alternatively the Board may ask the manager to invite the complained about member, or the complainant, to a meeting of the Board.  That invitation follows a strict set of rules and specific information needs to be disclosed to the member.

A meeting with the Board can led to a wide variety of outcomes.  The Board could cause  membership and occupancy rights to be terminated or it could enter into some kind of performance agreement or it could simply decide to take no further action.  In any event, it is at the meeting with the Board that a member’s reputation will precede them and serious decisions affecting continued housing can be made. 

If the Board of Directors decides that complaints against a member are well founded, and that there is no hope for working it out, they could decide to send the member a letter terminating membership and occupancy rights as of a certain date.  Once that is done, the Co-op will then likely serve a Notice of Termination under the provisions of the Residential Tenancies Act. specifically Part V.1 which deals with Housing Co-operatives.

In the not too long ago past, members who were having their membership and occupancy rights terminated were entitled to appeal to the membership of the Co-op at a meeting.  These meetings, from a purely academic perspective, were wonderfully wild and crazy exhibitions of direct democracy in action.   Other than that, the meetings were (in my opinion) brutal.  The appeal meetings required members to speak in public, argue why they should not be evicted and confront their neighbours and whoever it is who was complaining.  While one would hope that the members listening to the appeal would act like Judges–that was rarely the case.  Popularity certainly mattered.

For the most part, the appeals to the membership in most Co-ops in Ontario have now been removed from the By-laws.  The appeal to the Membership has been replaced by the Landlord and Tenant Board process and the Notices of Termination that must be served by the Co-op to terminate membership and occupancy rights.

The Landlord and Tenant Board process can be considered a replacement for the Appeal to the Membership because the Residential Tenancies Act–for some kind of complaints and allegations, makes the decision to terminate membership and occupancy rights voidable.  This means that the actual Notices of Termination (for Co-op’s), will reverse the decision of the Board of Directors if certain conditions are met that are set out in the Forms.

There are certain Notices, that once served are not voidable.  For example, for committing illegal acts or impairing safety.  If such a Notice of Termination is served there is no automatic voiding of that notice by changing behaviour.  Hence, an instance of criminality or seriously impairing the safety of another person is indeed grounds to terminate membership and occupancy rights.

There is still, however, another chance for members who have been served a Notice of Termination.  The final steps at the Landlord and Tenant Board include a mediation/case management hearing and ultimately a hearing before an adjudicator.  At the ultimate hearing the adjudicator retains a residual discretion to NOT terminate membership and occupancy rights if the adjudicator is satisfied that Justice would be best served by not terminating those rights.  The adjudicator can make a probation like Order (a conditional Order), preserving membership and occupancy rights so long as the member does or does not do certain things.  If the member complies, the decision of the Board of Directors to terminate the member is effectively over-ruled by the Landlord and Tenant Board.


ACTION AGAINST A CO-OP

Some of you will be familiar with the rights that tenant’s have at the Landlord and Tenant Board to bring tenant applications against landlords for maintenance issues or harassment, obstruction, threatening or even interfering with a tenant’s quiet enjoyment of the rental property.  Forget everything that you know about that process in relation to Co-ops.  Co-op members have no recourse to the Landlord and Tenant Board. 

Co-op members must effectively work through the governance structure of the Co-op to get things done.  If getting action is too difficult or impossible then a Co-op member, properly motivated and with a good amount of money at their disposal, could apply to Court in certain instances to force compliance with the member’s request.

PART II on Co-op’s will be upcoming, so look for it.  I will right about Co-op meetings and the election process.  It is truly something to behold!


Michael K. E. Thiele
www.ottawalawyers.com

Privacy: When tenants complain about other tenants

PRIVACY: HOW MUCH CAN YOU TELL THE COMPLAINING TENANT
about the steps taken against the other tenant

The Ontario Residential Tenancies Act requires the landlord to deal with complaints about tenants made by their other tenants.  The landlord, like it or not, is the cop/teacher/parent that manages the relationships in the rental complex so that all tenants have quiet enjoyment of their rental unit.  If a landlord refuses to fulfill his duty and deal with complaints then the complaining tenant will ultimately be in a position to bring an application against the landlord for failing to do his job.   That application, which will likely be brought in Form T2 before the Landlord and Tenant Board will likely seek a substantial abatement, an Order that the landlord do his job and probably a fine payable to the Ministry of Housing.

The landlord's job is not an easy one and in the course of following up on complaints the landlord might come across some concerning issues.  This article deals with the question of whether a landlord can tell a complaining tenant the intimate details of what the landlord discovers in dealing with a noise making (or otherwise trouble causing) tenant.

Imagine this example.  In a two unit building one tenant complains to the landlord that the other tenant is making noise well into the evening and that it is disturbing them.  The landlord receives the complaint and approaches the other tenant with the fact that a complaint was received.  The noise making tenant responds that he has a medical condition and the sound is a machine he uses for breathing (sleep apnea).   The landlord thanks the tenant for revealing this information and asks the tenant to take some steps to reduce the sound and the tenant agrees.   The landlord tells the complaining tenant “the issue is dealt with”, but provides no further details to the complaining tenant.  The landlord doesn't give details because the noise making tenant is embarrassed by the need for the machine because his sleep apnea is likely caused by weight gain and the tenant asked the landlord to treat the information as confidential.  

A few more weeks go by and the complaining tenant calls the landlord again and says that the noise in the evening continues.  Oddly, only at night when they are heading to bed.  The landlord says he will speak to the tenant again.  The landlord goes to the tenant and the tenant reveals that he took steps to reduce the sound and it is clear to the landlord that this has in fact been done.  The tenant then demonstrates the machine and the level of sound is minimal.  What is apparent to the landlord is that the upstairs tenant is now sensitive to this sound and at night, when the building is quiet, the sound may seem louder than it actually is.

The landlord explains to the tenant (whose machine is making the noise) that the other tenant can still hear the sound.  The tenant apologizes and says he will try something else.

In another month’s time, the situation repeats and the complaining tenant complains again.  The landlord returns to the tenant making the noise.  Again, he had taken steps to reduce the noise and again the landlord says that the other tenant is still complaining.   This time, the tenant moves his bedroom to another spot in the rental unit and there are no more complaints.

From the first complaint to the resolution of the complaint it takes 5 months.  During that entire time the landlord responded diligently to the complaining tenant’s complaints and approached the other tenant. However, due to his belief that the tenant who is being complained against has a privacy interest in the information that the tenant gives the landlord the landlord does not tell the complaining tenant the details about the situation with the neighbour.

Should the complaining tenant be entitled to know that his neighbour (who is making noise), has a medical condition and that he uses a machine to assist with his breathing at night?  Is this personal information confidential?  What if the complaining neighbour also has a strong dislike for the other tenant and the landlord suspects that the complaint is at least partially motivated by the complaining tenant’s dislike of the other tenant.  Does the fact of the tenants’ mutual dislike of each other make the privacy interests of each tenant even more serious?  How upset would the noise making tenant be if the landlord simply went to the complaining tenant and told him about the noise making tenant’s medical condition, what is causing it, steps that the tenant will take to deal with the concerns, etc..   Is that okay?

In this example, the landlord protected and kept confidential the information provided by the noise making tenant.  He simply thanked the complaining tenant and said the issue was being dealt with.

The complaining tenant felt ignored and came to believe that the landlord was ignoring the complaint and not respecting his rights to quiet enjoyment of his rental unit.  When he asked the landlord what was being done the landlord simply said that "appropriate steps" were being taken and that the complaining tenant should let him know if there were any more problems.  To the complaining tenant, this is just not good enough.  For over 5 months, the complaining tenant felt ignored and particularly upset that this other tenant (who he did not like anyway) was disturbing him in this way.

To deal with the issue, the complaining tenant files an application against the landlord seeking a rent abatement for 5 months on the basis that the landlord did nothing to deal with his complaints.  The rent abatement claimed is 30% of the rent for that entire period until the issue was finally resolved.  The tenant alleges that the landlord simply did nothing during that time to deal with his complaints and that he doesn’t believe that the landlord even spoke with the noise making tenant.

THE APPLICATION

It is not uncommon for tenants to make applications against landlords for the behaviour of other tenants.  This occurs because there is no direct right to make a claim against another tenant (by a tenant) at the Landlord and Tenant Board.  The Landlord and Tenant Board only adjudicates claims between landlord and tenant.

To defend an application by a tenant making these allegations a landlord necessarily has to advise the Board of the steps he took to deal with the noise making tenant.  The noise making tenant is not likely to be a party to the application and is quite unlikely to be present at the hearing against the landlord (though the landlord could summons the noise making tenant as a witness).  Is there any problem with the landlord disclosing the information he has collected about the noise making tenant to the Landlord and Tenant Board?  What if the information that the landlord collected included a report from the noise making tenant’s doctor–which report contains information like the noise making tenant's date of birth, details of his medical condition, details of his medication and dosages, referrals to other doctors, a diagnosis and prognosis.  Is the complaining tenant entitled to a copy of this report when the landlord wants to explain to the adjudicator what the results of his investigation were?

I put it to you that the landlord is between a rock and a hard place.  It is very difficult to imagine that the noise making tenant would be at all pleased that his personal information is being shared with another tenant who he does not like and is being discussed in an open forum like the Landlord and Tenant Board.   What then, does the law say about disclosing this information to other tenants and to the Landlord and Tenant Board?  Unfortunately, the Residential Tenancies Act says absolutely nothing useful about this problem.  The Landlord and Tenant Board Rules of Practice are also unhelpful.  Perhaps the answer lies in other legislation–but it is clear that the specific circumstances of the landlord and tenant relationship is not considered from a privacy perspective anywhere in statute law.

The problem described in this article is a problem that I indeed have encountered and indeed have made an issue of.  This week I received an interim Order from the LTB addressing the issue.  I am very thankful to Member Moniz for tackling the question because it is a hard question and I don’t know that the “right” answer is immediately obvious.  What does seem likely is that one side or the other is going to be unhappy depending on whether the information can be freely disclosed or not.

I want to share that interim Order with you in the pages below.  The conclusion it appears is that in the legal proceedings instituted by the complaining tenant the private information of the noise making tenant can be disclosed without getting the consent of that noise making tenant. 

There is nuance, of course, and I don’t think the decision stands for the proposition that all information can be disclosed freely without concern for the privacy of the noise making tenant.  However, I do think the decision stands for the proposition that information gathered during the course of the landlord’s investigation from the noise making tenant can be disclosed in the legal proceedings involving the complaining tenant without the consent of the noise making tenant being required.  The information needs to be disclosed in order for the landlord to defend himself from the complaining tenant's application and hence the confidentiality of the gathered information is waived.

Here is the decision–redacted in part–for you to consider.

Ontario's Standard Form Lease

Residential landlords looking for a template lease in Ontario

Fairly often I get an inquiry from a "new" landlord who is in the process of renting out their rental unit for the first time.  In getting ready to rent out the unit they are looking for a blank lease for their tenant(s) to sign.  For many years, this request for a blank lease brought on much consternation.  While a great deal of the rental relationship between landlord and tenant is governed by the Residential Tenancies Act (RTA), and further the Residential Tenancies Act makes any lease clause that is inconsistent with the RTA void (see section 4 RTA), a lease may still contain some unique clauses that are specific to the circumstances.

The "unique" requirements often led to a mish-mash of conditions and a merging of a variety of leases.  Still today you can find leases dealing with water-closets, coal chutes and stabling of horses.  The biggest problem in these leases is the inconsistency that arises through the lease.  Clauses are contradictory and the result is confusion and lack of clarity.  When this occurs, the law provides that any ambiguity is read or interpreted in favour of the party (usually the tenant) who did NOT draft the lease.   Hence, if you have a messy lease you will not be able to rely on vague terms to insist that the lease means one thing when it could reasonably bear the interpretation of meaning many other things.

The issue with confusing leases and bookstore leases (i.e. off the spinny self-help shelf) has been addressed by the government.  There is now a "standard form lease" that is required to be used in the vast majority of residential rental situations.   That lease can be found at this LINK which is the website for the Ontario Central Forms Repository.

This standard form lease became available and is required to be used in most private residential tenancy agreements entered on or after April 30, 2018.  The failure to use this form has potential negative consequences for landlords.  As you work your way through the form you will find spaces to include special clauses and specific rules for the rental unit.  Including unique clauses in this standard form does not make an otherwise illegal clause valid.  Anything "unique" that you want to include still needs to be consistent with the RTA.  

For the "new" landlord who is looking for a reasonable lease that is consistent with Ontario Law the standard form lease covers the bases.  It, through the formatting process will call your attention to some of the things that landlords may want to include in a lease that they technically do not have to address (ex. smoking).  As time goes on, a landlord may discover that there are certain rules and requirements in relation to the property that in future versions of the lease they can add.

Michael K. E. Thiele
www.ottawalawyers.com

EVICTION FOR LANDLORD'S OWN USE (or his family's use)

EVICTION BECAUSE THE LANDLORD IS MOVING IN (Possibly in bad faith)

the new rules

The Residential Tenancies Act and at least the last two previous versions of the residential tenancies law in Ontario has allowed a landlord to evict a sitting tenant for no reason other than the landlord wanting to take over the rental unit for themselves, their family members (the relationship being designated in the law), or for care givers.  The notice period was then and still is 60 days to the end of term.  The notice form is a form N12.

Tenancies can be terminated regardless of any fault or lack of fault on the part of the tenant.  Good tenants are as likely to be evicted as bad tenants.  The N12 (Landlord’s Own Use) process does not require the tenant to have done anything to justify termination for this purpose.

Historically, tenants have challenged the N12 (Landlord’s Own use) on the basis of the landlord “wanting” the rental unit for their own use or “needing” the rental unit for their own use.   The difference between “want” and “need” is significant and where the landlord by accident allowed the analysis to become about “need” then the Ontario Landlord and Tenant Board would look at the legitimacy of the “need” and assess whether the expressed need was legitimate and asserted in “good faith”.   

When landlords did not stumble into asserting a “need” but simply stood firm on “wanting” the rental unit the analysis at the Landlord and Tenant Board focused more or entirely on the question of whether the landlord required the rental unit “in good faith” for residential purposes.    The LTB would analyze the evidence to determine why the N12 was served and whether the landlord or the person he indicated on the form was apparently going to move into the rental unit.  An affidavit from the person who was claiming to move in was also provided to the LTB in the application process.

Unfortunately,  the LTB’s ability to analyze the landlord’s intent was rather limited.  If a landlord swears “We’re moving in” and there are no surrounding facts available to the tenant to prove otherwise the application was normally granted.   For many years, the LTB did not worry too much about granting the Order because the RTA provided a remedy if the landlord did not move in.  However, with the passage of time it became readily apparent that the remedy for a false N12 was easily averted and tenants who moved out only to find their unit up for rent again (at a higher rent), ended up with no effective recourse or remedy.

The Landlord’s Own Use notice was increasingly a silver bullet that could kill any tenancy.  Proving that a landlord has served an N12 in bad faith is a very difficult thing to do if the landlord is careful and doesn’t say too much.  While a tenant’s suspicions may be strong, the burden to prove that the N12 was served in bad faith rests with the tenant.  If the tenant is unable to prove that bad faith then the eviction order was/is very likely to be granted albeit normally with a little bit of extra time.

ABUSE OF THE N12

Over many years it became obvious to those of us working in residential landlord and tenant law that the N12 (termination for landlord’s own use) was being abused by landlords as a simple way to evict a tenant without any real consequence. In fact, I had and still have many cases where licenced realtors are giving advice to landlords to serve an N12 to get possession to make it easier to sell a property.  This is entirely contrary to the RTA but it was quite common.

The N12 (Landlord’s own use) was in the early years interpreted strictly.  At one time it was impossible for a corporate landlord to take up residence in an apartment.  It was believed that a corporation couldn’t live in an apartment. Over time that changed and where a corporation was closely held (one shareholder) it was determined that the shareholder could move in and then it was determined that the shareholder’s family member could move in.  The effect was an expansion of the number of ways that a tenant (who was doing nothing wrong) could be evicted from their home.

THE CHANGES

The abuses finally became too much and the Residential Tenancies Act has been amended with respect to a “Landlord’s Own Use” application [Form N12].  The applicable residential tenancies act section is section 48.  This section has now been amended to make the N12 more difficult and more costly to use.  

These are the major changes:

1.    When serving an N12 the landlord or his family member designate must require the rental unit for residential purposes and must intend on living there for at least one year (section 48(1) RTA);

2.    Once the landlord serves an N12 for landlord’s own use the landlord must pay the tenant compensation equal to one month of rent or offer the tenant an alternate and acceptable rental unit (section 48.1 RTA);

3.    The N12 may only be served if the rental unit is owned in whole or in part by an individual (section 48(5)(a));

4.    The landlord is an individual (section 48(5)(b)).

The requirement that the N12 notice be served in “good faith” and that the rental unit is required for residential purposes continues to be a prerequisite to serving the N12.

As you can see from these changes the use of an N12 is now more onerous.  It is not impossible, but there is now a greater basis on which the tenant can challenge an N12.  Corporate landlords may no longer serve an N12.  If the landlord on a lease is a property management company it is arguable that an N12 can not be served.   There appears to be a greater barrier to landlord’s using the N12 to evict tenants.   The requirement that a landlord or his family member live in a rental unit for at least one year makes temporary living arrangements impossible.  The one year requirement allows for a greater questioning of prospective landlord occupiers, especially children who are often the intended beneficiaries of N12’s.  

The compensation requirement is another interesting and new requirement.  I read the section as requiring payment upon service of the N12 regardless of whether the landlord follows through on the N12. As soon as the N12 is served, compensation equal to a month’s rent is due to the tenant.  I believe this is a fair interpretation of this section given the apparent intent to limit the improper use of N12’s.  Requiring compensation to be paid is a good way to stop frivolous use the N12 or using the N12 as a threat.  I have seen too many times where landlord’s serve N12’s just to see what happens and to see if a tenant will leave because of it. Currently, landlord’s are arguing that the compensation does not need to be paid if the Landlord does not apply to the LTB on the N12.  I disagree with this position.  As far as a I know there is no binding authority on this point at the time of writing this article.

THE HEARING PROCESS

The process before the Board remains as it always has.  A landlord may apply to the LTB, based on an N12, at any time after service of the N12.  The notice period of 60 days (to the end of term), continues to only be a minimum notice period and not a maximum.  Hence a landlord who absolutely needs to know when they are getting the rental unit should apply to the Board immediately after serving the N12.  The LTB is fully authorized to extend the 60 day notice period to a future date that seems fair under the circumstances.  Because the tenant is not at “fault” in an N12 situation the Board looks favourably at tenants and their particular needs.  If a tenant has a child in school and wants a few extra months to allow the child to finish school then that extension of time is likely to be allowed.  There are many many reasons for the LTB to extend the termination date even if the landlord is found to have served the N12 in good faith.

Because you can not know for certain when the LTB will terminate the tenancy it is a good idea to apply sooner than later, even if the tenant advises that they will be moving.   Regardless of what the tenant says, it is only lawful to evict the tenant with an Order of the LTB.

Michael K. E. Thiele

www.ottawalawyers.com