Thursday, 23 January 2020

Tenant Making Noise--a guide for new residential landlords

What should you do when your tenant is disturbing other tenants?

For the purposes of this article let us assume that you (the landlord) have an apartment building with multiple rental units.  It doesn't matter if it is a duplex, triplex, or even an apartment building.  The issue of dealing with tenants making noise attracts the same level of responsibility for the landlord regardless of the size of the building.

Again, to contextualize this article, let us assume that you (the landlord) receive written complaints, email complaints, text complaints and oral complaints from one or more tenants about the behaviour of one of your other tenants in the building.  Let's make the complaint about stereo noise, smoking in the hallway, shouting on the balcony and in the common hallways.  The complaint (from one tenant) or complaints from multiple tenants all involve these issues.  A complaint, to be legitimate, does not have to be about more than one thing.  The complaint could be only about noise, only about smoking, or only about some other single issue.  Also, the complaint does not have to identify a repeating pattern.  A single one time event is enough to make the complaint legitimate and is enough to require a landlord to take action to comply with their obligations under the Residential Tenancies Act.

Why does a landlord have to care about the effect of noise or other anti-social behaviours on other tenants?  Why can't the landlord simply tell the complaining tenant to approach the neighbour to "work it out"?  The answer is because the law provides to the tenant the right to have quiet enjoyment of their rental unit (apartment).

"Quiet Enjoyment" means something slightly different than "silent" enjoyment.  "Quiet Enjoyment" is a legal concept that is implied as part of every lease agreement and it means that a tenant renting from the landlord is granted by the landlord reasonable enjoyment of the rental unit for all usual purposes.  You (the landlord), when renting a unit to a tenant are giving the tenant, as part of the lease, an assurance and condition of the lease that the tenant will be able to enjoy the rental unit in all normal and usual ways.  Further, if anything happens to take away from the "quiet enjoyment" (reasonable enjoyment), then the landlord is breaching its lease/contract with the tenant unless the landlord takes steps to restore the tenant's "quiet enjoyment" of the rental unit.

Hence, if a tenant complains about a neighbour/tenant who is making loud noise, shouting in the hallways, smoking in the premises, or any other kind of unreasonable behaviour that interferes with the tenant's quiet enjoyment it is, legally, the landlord's responsibility to take action to fix it.  If the landlord does nothing, and the tenant being bothered continues to complain, and still the landlord does nothing, then the complaining tenant can actually file an application against the landlord for failing to take steps to make sure the tenant has reasonable enjoyment/quiet enjoyment of their rental unit.  If the tenant is successful, the landlord can be ordered to pay a rent abatement to the tenant, reimburse costs associated with the interference, and also be ordered to do anything that the Landlord and Tenant Board considers necessary to give the complaining tenant reasonable enjoyment of their rental unit.

THE COMPLAINT

So let's assume that you (landlord) received a complaint this morning from one of your tenants outlining stereo noise, smoking, and shouting.  Let's say that the complaint comes in via email and that it is detailed in one sense and vague in another--perhaps it reads like this:

 Hi Larry Landlord:  I just wanted to send you an email to let you know about a huge party last night in the building the cops had to come.  I  would like this to stop.  Thanks  Terry Tenant



LANDLORD'S RESPONSE

You may read this email and be taken aback at the idea that police had to respond to your building and that clearly something happened that you need to get to the bottom of.  In some respects this is true.  Being told that the police had to respond could send you on a trip to the police station trying to find out what happened based on the email received.   Going to the police station might reveal the information you are looking for or it might be a lengthy wild-goose chase that leads nowhere.

The reason is that while you have received a complaint that raises concerns you have not in fact received a complaint with enough detail to allow you to do anything meaningful.  As such, your reaction to receiving a complaint like the above (or similar), should be to write back to the tenant and ask the tenant for more details and for those details to be provided in written form.  Receiving the details in written form creates a useful record to guide you in your work and further is useful if you are ever being judged by the Landlord and Tenant Board for how you responded to a complaint about anti-social behaviour like noise, smoking, shouting etc..

As such, you might want to respond to the email complaint received by asking for the following:

Hi Terry Tenant:

I received your email about the huge party and before I can do anything would you please provide me more details and answer these questions (with whatever information you have):

  1. The date and time that the party started;
  2. The date and time that the party ended;
  3. Who were the people making the noise, causing the problem, and if you don't know the people which apartment was having the party?  Do you know the name of the tenant?
  4. What kind of things were happening that make you say it was a huge party?  Was there noise?  How did you know there was a party going on?
  5. Where was the party happening?  Just in the unit?  Which unit? Hallways, common area, backyard?
  6. Why are you writing to me about this party?  Were you bothered?  Were you affected by the party?  If so, how?
  7. Was anyone else bothered or affected by this party--in your household or others in the building?
  8. Are there any witnesses? Did you speak with police? Did you make a report? Do you have a report number? Did you take any pictures, video?

If you could write back to me with the requested details that would be very helpful.  Once I have the details I can start an investigation to figure out what happened and to figure out how this issue can be dealt with.  Please share with me any concerns that you have.

Thanks   Larry Landlord


As you may have noticed, the responding email to the tenant asks: Who, What, Where, Why, When, and How.  While it may seem like over-kill to ask a tenant for these kinds of details it is indeed very important to have these details so that you can do your job as a landlord properly (this is explained below).

As a result of you response to the tenant let's assume that you get this reply:

Hi Larry Landlord:

Thank you for writing back to me.  I was up all night (Jan 22) and called the police at 2:00 a.m. (Jan 23) to get them to shut down the party.  A stereo was blasting until past 2:00a.m. that I could hear from inside my own unit.  The pounding bass made everything in my unit vibrate and I couldn't sleep. People were running up and down the hallways shouting, hooting, and there was a lot of swearing--though it was a party.  I thought I'd try to talk to the tenant who was having the party but I couldn't find the tenant as there were too many people.  The unit that was having the party was apartment 4--the new people who moved in two weeks ago.  I smelled a lot of cigarette smoke in the hallways and it was even coming under my door which triggered my asthma.  There was a fair amount of cannabis smoke too.  The partiers were friendly and happy enough--for drunk people, but I really wasn't in the mood to join in because I had to be at work and at a job interview the next day.  The place finally quieted down around 3:30 a.m. when the police arrived.  I spoke with the officers because I called them.  They saw what was going on and the party was shut down quickly.  I didn't get a police report number.  Please, can you do something about this?  I didn't get any sleep and I have a job interview today that I am going to have to cancel.  There are lots of witnesses, I saw a lot of the neighbours partying too.  Terry Tenant

You might get a reply as detailed as this one above or maybe it will provide only a little bit more information.  You might need to go back to the tenant asking for more details or perhaps you will need to make a call to the tenant to get the information you need to understand exactly what happened.

Make sure to take note when trying to collect the details about the complaint that you get a sense of how serious the complaint is.  If the complaining tenant doesn't follow up with you or refuses to cooperate, or demands anonymity, or is otherwise hesitant to take the matter any further, this tells you a lot about what you will ultimately be able to do (even if you manage to substantiate the complaint).

THE INVESTIGATION

Having received the complaint and having details about what is alleged to have occurred it is necessary for you to reach out to the tenant being complained about.  Depending on the seriousness of the complaint you might decide to call that tenant or email the tenant.  The communication with the tenant (being complained about), should not be confrontational nor accusatory.  It isn't a fight and I don't suggest that you approach it in that way.  You are not contacting the tenant being complained about as the advocate for the complaining tenant---you're not there to make the case against this tenant.  Instead, you want to approach this as a fact finding mission with the intent being to just understand what happened.  In this regard, you might want to start off with the tenant indicating that you received a complaint about a party in the building on Jan 22/23 and that you are investigating the complaint.  And from there you see what the tenant says.

The complained about tenant might email you back or perhaps it is an oral conversation.  However it goes, you should document the response and information that get from contacting this tenant.  Perhaps, given the size of the party, you decide to contact one of your other tenants in the building who you've known for a long time to ask what happened.  Document the information you get from this as well.  The point is to collect as much information as you can as efficiently as possible.

How many people you talk to and how much effort you put into the investigation really depends on how much information you get, what the evidence looks like, the seriousness of the issues, and what action you think will need to be taken.

INVESTIGATION RESULTS

Let us assume that as a result of the investigation you have figured out what happened.  For the purpose of this article I'm going to list two different conclusions from the investigation to demonstrate how two different conclusions can lead to two different actions you might take.

Conclusion #1

The tenants in apartment 4 are 3 young guys all in University.  When you contacted one of the tenants he said, "yeah sorry, but it wasn't so bad and was a lot of fun.  Mid-term exams were finished so we blew off some steam.  We didn't invite all those people they just showed up.  I don't know how they got in the building but we didn't let them in.  Anyway, people were having fun, no one got hurt, and it was a good time.  So I don't think it's a big deal.  The neighbour downstairs complains about everything and is a real stick in the mud.  The cops shut us down because of the complaint but didn't charge us at all.

Conclusion #2

The tenants in apartment 4 apologized immediately upon contacting them.  It turns out they threw a Superbowl party.  They went to every unit in the building and invited all the neighbours before the party and asked if they would be cool with a fun, loud, and boisterous "block party" in the building. Everyone was cool and loved the idea--especially the "free beer" from the kegs brought in.   They thought that everyone in the building was cool, everyone was invited, and no one said anything negative.  Turns out that they thought the complaining tenant was away as another tenant said that Terry Tenant was away on business.   They said the party was awesome and the first sign of any issue was the police showing up.  The party was shut down immediately and they asked the cops who complained because they wanted to apologize to that person.  The police said that "privacy" prevented them from sharing that information.  

About the smoking--tobacco and cannabis---they said they noticed it too and that they asked those guests who were smoking to go outside or to leave.  They are aware of the no smoking clause and that they don't smoke and find it very disrespectful that people would presume to smoke in the building without permission.

WHAT TO DO WITH THE INVESTIGATION CONCLUSIONS?

The investigation conclusions (both versions), confirm to you that there was a party, it was loud, and that there was activity (smoking, shouting, stereo), that would very likely be disturbing to other tenants.  The legal question is whether the complained about activity amounts to a "substantial interference with the reasonable enjoyment of the residential complex for all usual purposes by the landlord or another tenant or substantially interferes with another lawful right, privilege, or interest of the landlord or another tenant."   This legal question is the legal requirement for serving a Notice of Termination under section 64 of the Residential Tenancies Act (RTA).

As we look at the provisions of section 64 (above) ask yourself whether the investigation conclusions justify a determination that there was a "substantial" interference.  Not just any noise, party, or shouting that bothers another tenant is enough to meet the legal test for eviction.  The complained about activity must be "substantial".  Further, the "substantial" interference must also be interfering with "reasonable" enjoyment.

"Reasonable" enjoyment does not mean any kind of enjoyment that a tenant has.  The "enjoyment" that is interfered with must be "reasonable" within the context of the building and the community and the other circumstances of the residential complex.  For example, a tenant may really enjoy almost perfect silence in the early evening and then want to go to bed at an early hour (for whatever reason). If a tenant moves in above that tenant but lives a different life style with perhaps children playing or toddlers bumping around or babies crying or with a dog that barks occasionally or who watches television until late in the evening or who has several friends over regularly to play cards or other activity which isn't "perfectly silent" and the ordinary sounds of those activities transfer between the units due to the construction of the building--this is not an interference with "reasonable" enjoyment. 

A tenant's demand for "perfect silence" is not reasonable when the noises complained about arise from normal living and objectively reasonable behaviour.  At a certain point there are some sounds and building noises that are part of apartment living in that building and these sounds must be accepted.  Tenant's who cause normal sounds will not be in breach of section 64 RTA.


IS THERE A SUBSTANTIAL INTERFERENCE with REASONABLE ENJOYMENT?

I think in both investigation conclusions that it is fairly obvious that there was a substantial interference.  The music was admittedly loud.  The police shut down the party.  The sound travelled between units and vibrated the walls.  The smoking was contrary to the lease as well as the Smoke Free Ontario Act and it triggered asthma and made another tenant ill.  That a tenant would want to be able to sleep peacefully during the night is, I think, "reasonable enjoyment" as is not wanting to inhale second hand smoke.   In all respects, I think, both investigation conclusions support a determination that the tenants in apartment 4 breached section 64 RTA and that Terry Tenant's complaint is justified.

WHAT DO YOU DO THEN?

Section 64 of the RTA is the legal basis for dealing with a tenant substantially interfering with the reasonable enjoyment of the premises.  Section 64 is the section that supports a Notice of Termination in  Form N5.  The Form N5 is available on the Landlord and Tenant Board website.  The letter "N" stands for "notice".  The number "5" simply means that it is the 5th notice.

Because of what you have determined in your investigation you should consider serving the tenant in apartment 4 with a Notice of Termination in Form N5.

The N5 Form is the correct form to use when the issue is "substantial interference".  Unfortunately, it is also one of the trickiest forms to use under the Residential Tenancies Act.   If you have not filled out an N5 before you will need to set aside some time to read the form and the online guide and take time to understand how the form works.   An N5 is a voidable Notice of Termination meaning that a tenant who receives one will be given a chance to correct their behaviour and continue their tenancy.

There are blank spots throughout the N5 Form that you need to fill out. You can get help on how to fill out the various blanks by reading the Guide.  

There are two areas in the Form that are most susceptible to fatal error.  A fatal error is one that makes the Form void and useless.  Do not presume that a small mistake can be corrected.  For the most part, an N5 must be correct and any error results in the form being declared void and you must start all over again.  There is no benefit of the doubt and there is no sympathy for it being your "first time" and simply not knowing or making a mistake.  The Appellate caselaw is clear that certain errors in a Notice of Termination are not correctable.

Hence, I would urge you to pay attention to the blank part of the form in which you must insert the Termination Date.  Note that the termination date is a future date that you insert based on a specified number of days of notice.  For an N5 the number of days for a 1st N5 is 20 days and for a 2nd N5 it is 14 days.  Be sure to understand how to calculate time and how to count days in accordance with the Landlord and Tenant Board Rules.

The second blank spot that creates major problems is the part of the Form N5 that has you insert the "Details for this Notice".   The Form gives the impression that you can fill in the required detail in the small space provided.  What you should actually do is type into the space "see attached" and then attach a sheet of paper to the Form that provides the proper level of detail.

WHAT IS THE PROPER LEVEL OF DETAIL IN AN N5?

This question is answered by looking back at the level of detail you asked for from the complaining tenant.  The law provides that a tenant who receives an N5 Notice is entitled to a very high level of detail so that they know exactly what is being alleged and so that they know exactly what conduct to stop and so that they can know exactly whether the allegations are legitimate or wrong.  A tenant who receives an N5 will use the allegations as the basis for the claim against them and it is these allegations that the tenant will seek to defend against.

If the Details in the N5 are vague or insufficient then the N5 is void.  A void N5 means that the Landlord and Tenant Board has no power to evict and no power to consider the application.  Your case will be dismissed, the application fee that you paid will be wasted, and you will have to start again.

The "Details" that you should be providing in the N5 should cover: Who, What, Where, When, Why and How.  These details would include the dates and times of the incident.  The incident should be described and it should be explained how the incident substantially interfered with the reasonable enjoyment of the residential complex by the landlord or another tenant.    Allegations that are generic or just general allegations of "bad behaviour" are unlikely to be sufficient to meet the details requirement.

TO SERVE THE N5 NOTICE OF TERMINATION or not?

Is serving a Notice of Termination a landlord's only option when the complaint is well founded?  As you will recall you have two very different investigation conclusions arising from the same complaint?  Does your response, as a landlord, need to be the same for both?

The short answer is "no".  As a landlord you have a duty to investigate, determine what happened, and then decide what the next appropriate steps should be.  Simply because the legal test is satisfied does not mean that you must serve legal notice to terminate a tenancy.  You are entitled to exercise some judgment and to be reasonable in your approach.  When deciding how to deal with an issue (after the investigation is done), you might consider how the tenant reacted, the chance of further problems, the evidence available at a hearing, the assumption of responsibility by the tenant, remorse shown by the tenant, and the likely outcome at a hearing.

The first investigation outcome led to a conclusion, I think, that the tenant was indifferent to the problems that he caused.  He did not accept responsibility, blamed the complainant, and suggested that responsibility actually fell to someone else.   It does not seem that this tenant will have learned anything by virtue of the complaint and there is nothing to suggest that there was a misunderstanding or other circumstance that makes the incident less blameworthy.  For this tenant, serving a voidable 1st N5 Notice of Termination makes sense.

The second investigation conclusion is very different.  While an N5 could still be served--is it required to be served?  I suggest that it is not.  Here you have a tenant who sought buy-in from the neighbours and thought he had everyone on board.  He was remorseful of the problem caused and sought to apologize to the tenant who complained.  During the event he recognized his responsibility and tried to deal with smokers who were breaking the Rules. 

Further this tenant was seeking to have a party and make fun for all of the tenants in the building.  A block party style celebration in an apartment building is something that you might not want to discourage.  A happy tenant community that communicates well leads to a happy building.  As a landlord you likely want to encourage this.  Given what you have concluded would serving an N5 be over the top?

Of course you can serve the N5 but there are other considerations.  If you are satisfied that serving an N5 is unnecessary then make note of your conclusions and reasons and end the matter there.  You may then wish to contact the complaining tenant (Terry Tenant) and advise that you have looked into the matter and that you are satisfied that it will not happen again.  Invite the tenant to contact you if anything further does occur in the building.

FURTHER INCIDENTS

If you served the N5 on the tenant and the "substantial interference with reasonable enjoyment" continues within 7 days of serving the first N5 then you may apply to the Landlord and Tenant Board using Form L2.  

The "L" letter stands for Landlord and the "2" number simply means 2nd application form.  The L2 application relies on the N5 Notice of Termination that you served.  You may file the application on-line with the LTB and in due course the Landlord and Tenant Board will send you a Notice of Hearing to attend (presuming that the tenant did not move out in accordance with the N5).

If, after serving the N5, the tenant stopped the complained about behaviour for at least 7 days then the first N5 Form has been voided and you can not apply to the LTB on that Notice.  However, if after 7 days but before the expiration of 6 months the tenant does something again then you can serve a 2nd N5 Notice of Termination and then apply to the LTB using the Form L2.

AT THE HEARING

When you are drafting your N5's and making the various allegations in these Notices you should consider whether you are in a position to prove the allegations at a hearing.  For proof you will need witnesses to attend at the hearing to testify about what happened.  If the witnesses are unwilling to come or the person who complained refuses to cooperate in telling the LTB what happened then the entire process of serving a Notice and filing an Application is likely a waste of time.  As the landlord you have the burden of proof (on a balance of probabilities) to prove that the things you allege in the N5 actually happened.  If you can not convince the adjudicator that what you say happened did indeed happen then your case is dismissed.  A tenant is not required to prove anything at all because the burden rests with you as the landlord.

The examples in this article (noise, smoking, shouting) were all experienced by Terry Tenant.  The person disturbed by the incident is Terry Tenant and as such the evidence from Terry Tenant is very important to have.  Could you rely on a letter or affidavit from Terry Tenant as opposed to having her come to the hearing?  Not really.  While the Landlord and Tenant Board will accept a letter or an affidavit, if the tenant challenges the allegations and explains something contrary to what is written by Terry Tenant then it is likely that the LTB will accept the evidence from the person who actually showed up to testify over the person who only wrote a letter.

OUTCOMES OF N5 / L2 applications

There is a very wide range of outcomes when it comes to these kinds of cases.  The Landlord and Tenant Board is not actively seeking to terminate tenancies and evict people.  In fact, the RTA requires the LTB to consider preserving tenancies if at all possible.  An adjudicator is required to consider relieving against eviction when it is reasonable to do so.  In deciding this the adjudicator will take into account all of the circumstances as well as any issues that may arise under the Ontario Human Rights Code (HRC) if the issues arise from a disability or other HRC factor. 

At the hearing you will be first offered mediation (typically) and if that does not result in a settlement the case will proceed to hearing.  As the applicant you will proceed first and prove the allegations in the N5's to the best of your ability.  You will call witnesses, tender documents, show video, photos, and whatever else it is that you have to prove the case.  As your witnesses testify, the tenant (or the tenant's lawyer) will be permitted to cross-examine your witnesses.  

Once your case is concluded the tenant is permitted to lead evidence and defend against the allegations.  The tenant could deny what happened or perhaps admit what happened but provide a different explanation or context for the incident.  The tenant's entire case could be aimed at getting the LTB adjudicator to exercise discretion and let them stay notwithstanding the incident.

You will be permitted to cross examine any of the tenant's witnesses and the tenant as well if the tenant gives evidence.

The hearing will end with you and the tenant making submissions and arguing to the LTB what you think the evidence proved and what the proper outcome of the case should be.

The adjudicator will very likely reserve the decision.  This means that the decision will be written out and delivered in the mail in the coming month or so.  There is no strict deadline for a decision being made though the service standard suggests a 30 day period for a decision to be rendered.  

CONCLUSION

This article is a high level view of how to deal with complaints about tenant's making noise.  Within this article there are topics that have been skimmed over but which you should still learn about.  The technicalities of Notices of Termination, how applications are filed, how evidence is presented, how law is argued, and the various possible outcomes and how to argue for them are all major aspects of arguing and presenting cases before the Landlord and Tenant Board.

Is it reasonable for a landlord to be expected to know how the Residential Tenancies Act is to be applied in detail?  My personal view is that every landlord has an obligation to know the structure of the RTA and the high-level structure of the law.  Every landlord should be aware of their legal obligations and the legal rights of tenants in the big picture.  A landlord can get into far too much trouble if they don't have a basic understanding of the Residential Tenancies Act.  Beyond that, I do think it is a bit much for a landlord to have a detailed appreciation of the RTA.

Unless you are a very unlucky landlord and have very troublesome tenants you should hope to have very little interaction with the LTB and hope to not really need Notices of Termination.  If you have selected and screened your tenants well you could reasonably avoid the LTB and the legal niceties of eviction.   However, the key is to be aware of your obligations and to know when you are getting out of your depth.  When that occurs, consider retaining a paralegal or lawyer who does this kind of work on a day in and day out basis to properly guide you.  While the expense of legal help is unavoidable at least you will have the best chance of dealing with a problem and solving it.  Landlord's can suffer serious losses if they have a tenant disturbing other tenants and whose behaviour isn't controlled.  Other tenants will only tolerate being bothered for so long before they give a notice to terminate their own tenancy (so you lose a good tenant) or they decide to file an application against you to force you to do your job and pay them money for not doing it.

TAKE AWAY FROM THIS ARTICLE

You will hopefully realize that when you receive complaints about tenants making noise from other tenants that you have a duty to respond to that complaint.  You must investigate and determine what, if anything, needs to be done about the incident complained about.

Michael K. E. Thiele
www.ottawalawyers.com

Tuesday, 21 January 2020

UNPAID RENT--a guide for new residential landlords

WHAT SHOULD YOU DO WHEN YOUR TENANT IS LATE WITH THE RENT?

Are you renting out residential properties to tenants with the aim of earning a reasonable living, building some equity, and perhaps using the rental income to pay the ongoing expenses and paying all or some of the mortgage?  If this is your intent then you are running a business.  As a business person, the policies and procedures that you adopt, when it comes to enforcing the legal rights of your business will have a direct impact on whether you are successful or not.  It is for that reason that you should make conscious choices about how you will deal with the problem of "non-payment of rent" by your tenants.

For well over the last 20 years I have been practicing Landlord and Tenant law.  In that time I have come across many landlords who are owed in excess of a year's worth of rent and usually thousands and thousands of dollars.  These poor landlords, for the most part, never recover these rent arrears and the losses end up being a complete write off.  In some instances the non-payment of rent causes severe hardship, requires the landlord to pay the expenses of the rental unit from other income and sometimes it even forces the landlord to sell the property because they can't afford to keep the rental unit without the rental income.   Often enough, new landlords are brought into the business of being a landlord by attending a real estate seminar or after listening to a friend or acquaintance touting the easy money that is made when you "let your tenant pay your mortgage".  Unfortunately, the reality of being a landlord doesn't always mesh with the theoretical ease of letting a tenant pay the mortgage.

How do rent arrears happen?  How do rent arrears get out of control?  How do rent arrears destroy a landlord's business?

The first point that I'll make is that the landlords who get into rent arrears problems are typically well meaning and trusting people.  The rent arrears accumulate firstly because of slow book keeping and then because excuses are accepted and faith is placed in the tenant who promises to pay.  Secondly, after the arrears start to mount, the arrears get worse because landlords seem to enter into a form of denial where they can't believe and refuse to accept that the tenant isn't going to pay.  At this stage the landlord ends up desperately wanting to believe the promises of the money that is soon going to come to take care of the rent arrears (hoping against hope).  Finally, it is only when the amount of the arrears represents a serious danger to the financial viability of the landlord that the landlord finally recognizes that the rent arrears are unlikely to ever be paid, that legal proceedings are necessary, and that they have mistakenly trusted a tenant who is unwilling to pay or who never intended to pay.

The story above, about how rent arrears get out of control, is fairly common with new and inexperienced landlords.  Giving people the benefit of the doubt and wanting to believe that if you work with a tenant, that rent will be paid, can indeed be a noble gesture.  If the grace period given to a tenant is affordable to the landlord then perhaps there is no problem with delays and accepting promises.  However, for any landlord it is important to retain control over the situation and make sure that delays and grace periods are granted as opposed to taken and that the amount of the rent arrears does not become unmanageable or seriously affect the viability of the business.  To this end, it is critical to approach the issue of rent arrears from a policy perspective and to have hard rules in place of how rent arrears are to be dealt with.

RECOMMENDED STEPS and POLICY FOR DEALING WITH RENT ARREARS

In my opinion the proper way to deal with rent arrears is to immediately exercise the rights granted to the landlord under the Residential Tenancies Act.  Exercising these legal rights puts the landlord in the very best possible legal position, avoids the loss of more rent than necessary, and still allows the landlord to be flexible and understanding when the circumstances of the tenant require.

FIRST STEP

If the rent is due on the first of the month then the landlord should have the rent money by midnight of the first of the month.  It doesn't matter if it is a holiday, a weekend, a snowstorm, or anything else.  If the rent is due on the 1st then it needs to be in the landlord's hands on the first.  If, as a landlord, you don't require the tenant to pay on the first, or you tolerate rent being late, then you set up expectations on the part of the tenant that the rent due date is more of a guideline than a rule.  This expectation can attract legal force if it goes on long enough and ultimately the rent due date can become a moving target depending on the tenant's expectations and on what the landlord has allowed.

Therefore, I recommend that the landlord immediately serve a FORM N4 (available on the Landlord and Tenant Board website) on the very first day after rent is due and unpaid.   Hence, on the 2nd of the month (if rent is due on the first) take a look at the receipts and whoever is late with the rent should immediately be served with an N4 (Notice of Termination for Non-Payment of Rent).  When filling out the N4 make sure to fill it out correctly, sign it, and make two exact duplicate copies (i.e. photocopies).  Then serve the N4 on the tenant and fill out a Certificate of Service.

The value of immediately serving the N4 is that it sends a message to the tenant(s) that from a business perspective that you require payment of the rent in full and on time.  As tenants learn this about you they will adjust their behaviour to make sure that rent is paid on time.  If you don't insist on timely payment then tenants will not go out of their way to ensure timely payment.

Timely payment is useful for a landlord because it adds efficiency to your business.  If you receive all of the rent from all of your units on time then your banking, deposits, and bookkeeping can be done all at once and efficiently.  Imagine having to do multiple trips to the bank and having to re-open and re-attend to the bookkeeping several times over the course of the month as rents are received.  It is a big investment of time that could otherwise be saved if everything could be done once.   The value of these efficiencies are high enough that I had a landlord with over 300 units actually offer tenants a rent discount for prompt payment.

The next great reason to immediately serve an N4 when rent is past due is that the service of the Notice starts the statutory clock rolling.

The law requires you to give the tenant a 14 day notice period before terminating the tenancy.  This date is reflected in the N4 Form and it is called the termination date.  The termination date is a minimum of 14 days after the N4 Notice is served.  Therefore, if you serve the N4 immediately when you are able to the statutory delay will start counting down.

The law prohibits you from taking any action against a tenant for rent arrears until the N4 has been served and the 14 day notice period has expired.  Therefore, by simply following the law and serving the N4 you are giving the tenant the legally required grace period of 14 days.

If you don't serve the tenant with an N4 immediately when rent is due you are effectively deciding to give the tenant a grace period of however long it takes you to serve the N4 PLUS the 14 days that the N4 requires you to give.

2nd STEP TO TAKE

After you serve the N4 on the tenant you can chat with the tenant and see when the rent will be paid.  The tenant can make promises and you can seek to be helpful etc. etc..  If the rent is paid within the 14 day period the N4 becomes "void" and the tenancy is maintained.  However, if the rent is not paid within the 14 day period you may, as landlord, apply to the Landlord and Tenant Board for an Order to evict on the 15th day after the N4 was served.

I do recommend that if the rent is not paid within the 14 day period and there is no satisfactory agreement with the tenant to pay the arrears that the landlord immediately apply to the Landlord and Tenant Board using a Form L1 (Landlord's Application to Evict for Non-Payment of Rent).  This application can be filed online using the portal on the Landlord and Tenant Board website.

The reason to apply immediately is that it again takes time for the Landlord and Tenant Board to process the application and to schedule a hearing.  From the date of filing it could take 2 to 6 weeks to get a hearing date (sometimes longer).  During that time a landlord is prohibited from taking action against a tenant and it is entirely possible that further rent due dates will come and go before the case is actually scheduled for a hearing.  Under the very best scenario and applying as quickly and as soon as possible the tenant will likely be in arrears in excess of 2 months rent by the time of the hearing (presuming that the tenant does not pay).  My point here is that the structure of the legislation and the bureaucratic processes take at least this long before you get in front of an adjudicator.  Imagine how many months of rent arrears can accumulate if you don't exercise your legal rights immediately when the law allows.

3rd STEP

This step is more of a procedural item.  If as a result of serving the N4, or after serving and filing the L1 application, the tenant pays all of the rent arrears or rent arrears plus the LTB application fee, the tenancy will continue and the eviction proceedings are void.  However, this does not mean that the process was for nothing.  The process did likely result in getting the arrears paid--which is a good thing.

The additional value to having proceeded immediately with an N4 is that the N4 is evidence of the landlord's requirement that rent be paid on time.  The copy of the N4, served on the tenant, should be saved in the tenant's file.   There may be more than one N4 in the tenant's file.  The tenant may be late every month.  If so, the collection of the N4's becomes very useful for proving the tenant's breach of the obligation to pay rent in full and on time.  The N4's then, become evidence of "persistent late payment of rent".  If a tenant is persistently late with rent then the landlord can serve a Notice of Termination in Form N8 (Persistent Late Payment of Rent).  This Notice of Termination is not technically voidable.

4th STEP

The fourth step is the Landlord and Tenant Board hearing.  After filing the L1 application with the Landlord and Tenant Board the LTB will issue a Notice of Hearing.  That Notice of Hearing will be served on the tenant (by the LTB) by mail.  It is a matter of good practice for you to also serve the tenant with a copy of the application on the tenant (personally is best or by email) so that you know for sure that the tenant is aware of the hearing.

If between the date of filing the application and the hearing the tenant pays the arrears plus the costs then the tenancy is preserved.  This time period, again, is a grace period and the landlord and tenant can negotiate a resolution while waiting for the hearing to occur.  However, if no deal is reached then at least a hearing is coming and a legally enforceable eviction can occur.

At the Hearing of the application the landlord is required to have an L1/L9 update sheet available.  This form, available on the LTB website, is an update to the Board of how much money is currently owing to the landlord as of the date of the hearing.  By filling out this form you are telling the LTB what rents have become due since filing, what amounts might have been paid, and whether there are any rent increases.  It is very important to have this form filled out prior to the hearing taking place.


5th STEP---position at the hearing.

In my view it is important to proceed to a hearing and to obtain an Order dealing with the rent arrears.  Adjourning the case is to be avoided if possible as this only adds to the delay and hence greater rent arrears.  If an adjournment must be granted or will be granted over the landlord's objections the landlord should try to get conditions imposed requiring ongoing rent to be paid to avert great prejudice to the landlord being caused by the delay.

At the hearing the landlord and tenant may be asked if they want to mediate.  Certainly there is no problem with mediation and striking a deal with the help of a mediator can be a reasonable way to resolve a dispute.  However, when you enter mediation keep in mind that the mediator's job is not to strike a fair bargain for the parties.  The mediator is trying to get an agreement and it remains up to the parties to decide what is in their best interests.

6th STEP---contested hearing

At the Hearing you the landlord will give the LTB adjudicator the L1/L9 update sheet.  The adjudicator will review that and perhaps have a question or two.  It is very handy to also have a copy of the rent ledger showing the rent history with the tenant.  A landlord is not required to do much else to prove rent is owing.  Simply stating "I have not been paid" is enough to establish that aspect of the application.  If the tenant wants to insist that the rent has been paid it will be up to the tenant to produce receipts or other proof of payment.  The burden to prove payment falls to the tenant once the landlord asserts that the rent has not been paid.

The adjudicator may ask the landlord then what they are seeking from the hearing.  The answer, in almost all situations, will be for an eviction Order, plus daily compensation, plus an Order for the arrears, plus the costs of the application.  The adjudicator may ask "when" should the Order be enforceable to which the landlord will typically want to say "immediately".  The adjudicator will then advise that a "Standard Order" will allow the tenant 11 days to pay the rent plus costs to void the eviction Order and continue the tenancy.

The LTB typically issues the "Standard Order" on rent arrears applications.

WHAT THE TENANT MIGHT ARGUE!

Once the rent arrears are established the adjudicator will turn to the tenant and ask the tenant to confirm that the amount of the rent arrears is correct.  The tenant can either agree that the amount is correct or dispute the amount.  If the tenant disputes the amount the tenant will need to prove payment or prove that the rent charged is somehow not lawful.  Otherwise, the LTB is very likely to find that the rent has not been paid and therefore is owed.

The tenant is also entitled to ask the adjudicator to order a payment plan or otherwise give the tenant a break with respect to the timing of payment.  The authority for this arises from section 83 of the Residential Tenancies Act.  This section is known as the discretion section and it is legally required to be considered by the adjudicator in every single case.  The factors that can support the exercise of discretion in favour of the tenant are too numerous to list.  The following broad categories can justify discretion being exercise---job loss, reduction in work hours, a strike, illness, death in family, theft of rent money, family emergency, really bad luck, unforeseen events amounting to an urgent situation.  Any of these things can result in the adjudicator cutting the tenant a break and perhaps delaying eviction or perhaps giving the tenant an extended payment plan to pay the arrears over time.

When it comes to payment plans the adjudicator will hear the tenant's proposal and then ask the landlord what it thinks about the proposal.  Responding with "no" or "I want all the money now" is not helpful and the adjudicator is likely to stop taking the landlord seriously in relation to the proposed payment plan.

What is helpful for the adjudicator to hear from the landlord is how the proposed payment plan is prejudicial to the landlord.  Speak to how the rent arrears are beyond the tenant's ability to pay back.  Speak to how the rent is unaffordable in the tenant's circumstances and denying eviction is simply going to delay the inevitable ultimate eviction.  Speak to how a payment plan creates another layer of process and delay if the payment plan is not followed by the tenant.  The payment plan could end up being just another delay (tactic) and even more rent arrears will accrue when the payment plan isn't complied with.  It is also useful if a long period of time has passed between application and the hearing to point out whether the tenant has made any payment plan proposals prior to the hearing date or whether this is only being sprung at the hearing.  The "good faith" of the payment plan proposal can be judged from the tenant's behaviour leading up to the hearing.

If the landlord can demonstrate that the payment plan is unlikely to be followed, that the rent is unaffordable based on the tenant's income, that multiple chances have already been given, or that other circumstances make it highly unlikely that the tenancy can be successfully preserved then the adjudicator is unlikely to grant the payment plan.  Instead, the adjudicator will be more likely to simply issue a standard order terminating the tenancy in 11 days unless the tenant pays off all of the rent arrears plus the costs.

7th STEP

A good defence is a strong offense.  As  a Landlord you need to be aware that the Residential Tenancies Act allows a tenant to defend an application for non-payment of rent by raising any kind of issue that the tenant could have filed an application for.  The law (section 82 RTA) effectively allows a tenant to raise such claims by ambush and without warning.  The law does not require the tenant to file an application or even fill one out.  The law simply allows the tenant to raise any issue in defence to the non-payment of rent application and to further claim an abatement of rent and other orders.

As you can imagine, the point of raising claims under section 82 is to reduce the amount of rent arrears and to put the tenant in a position of being able to void the eviction for non-payment of rent. Most of the time when you see section 82 claims the tenant is not well prepared and isn't in a position to actually prove anything.  Typically the tenant lobs the threat of a claim for maintenance, repairs, harassment, illegal entry, etc., with the hope that this some reduces the amount of the arrears.  For the most part this doesn't work.

Sometimes, however, a tenant comes to a hearing prepared with large binders full of documents, photos, videos, etc. etc., and wants to proceed with the tenant application at the same time as the Landlord's application.  This is a difficult problem because the law allows the tenant to do this, but of course it is an ambush of the landlord.  In these circumstances it may be best to seek an adjournment to prepare to defend the tenant's section 82 claims.  Of course, the delay caused by the adjournment may be exactly what the tenant was hoping for.  The delay might allow the tenant time to move, or time to find the money to pay the arrears, or perhaps even find a roommate to be able to afford the ongoing rent.

Whether you should adjourn or not in the face of a sizeable section 82 claim is a judgment call.  What I do recommend, if you think a section 82 claim is at all possible, that you bring with you the entirety of the tenant file and that you have completed an inspection of the rental unit within a reasonable period of time prior to the hearing to determine the condition of the premises.  An occasional inquiry with the tenant about any repairs or issues---by email is also useful as the tenant's claim is greatly affected by any notice of the problem given to the landlord.  If the tenant fails to give notice of any repair issues then the monetary award for this problem not being fixed is likely to be very little.

8th STEP--THE ORDER

It is very unlikely that the LTB will give you a decision on the day of the hearing.  If you are going to get a Standard Order the adjudicator may inform you of that.  Otherwise, if the adjudicator is going to exercise discretion or is thinking about doing so the adjudicator will typically reserve the decision.  This means that the adjudicator will decide the case in writing and the decision/Order will be sent to you in the mail.

In the days following the hearing you can check on the LTB website as to the status of the application.  Using just the file number and postal code you can see whether a decision has been rendered or not (though you can't read the decision on-line).   You can then know to look for the decision to arrive in the mail or if you are nearby you can drop by the LTB to get a copy of the decision. Often enough, if your curiosity is too strong and you don't leave nearby to a Board office you can call the 1-800 number for the LTB and the customer service rep will tell you the gist of the decision.

9th STEP ENFORCEMENT

Enforcement of LTB Orders is done through your local Courthouse.  The LTB and the Residential Tenancies Act has no enforcement mechanism.  Hence, to enforce eviction you would use the Sheriff through the Courthouse or for collection of money you would use the enforcement provisions through the Small Claims Court (garnishment, Writ of Seizure and Sale, Debtor;s examination, etc.).  To use the Small Claims Court procedures to collect money owing you will need to familiarize yourself with the Rules of the Small Claims Court.


Michael K. E. Thiele
www.ottawalawyers.com




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