A ROOMMATE AS COMMERCIAL TENANT?

RTA exempt.  I am roommate.  Now what?

I want to thank Mr. Maguire for emailing me and asking me to comment on Newman v. Glanville, 2019 ONSC 1040 (CanLII) .  Being somewhat too kind, he suggested that I might have valuable insight into the "problems" caused by this decision and therefore asked that I comment.  Being susceptible to flattery I will do so below but with the caveat that in relation to the issues of commercial tenancies law that I may be out of my depth.  Nevertheless, I'm willing to comment because the decision in Newman speaks to the gaping legal hole that has to do with roommate relationships of a residential nature, which appear to be residential leases and/or residential tenancies, but which are excluded from the application of the Residential Tenancies Act due to the exclusions (usually found in section 5 RTA--and typically section 5(i) where the tenant shares a kitchen and/or bath with the landlord (though there are other exemptions too)).

THE ISSUE (BIG PICTURE)

The Residential Tenancies Act captures and covers the vast majority of residential rental relationships where an owner rents a rental unit (house, apartment, room in rooming house) to a tenant in exchange for the payment of rent (money or otherwise).  The Residential Tenancies Act has numerous provisions that are designed to stymie and void contractual terms and agreements that would allow a landlord to escape the application of the Residential Tenancies Act to the relationship between the owner (landlord) and renter (tenant).   The reason that owners (landlords) sometimes try to avoid the application of the Residential Tenancies Act (RTA) is that the RTA provides a rather comprehensive code governing the relationship between landlords and tenants.  The RTA equalizes the traditional power imbalance between landlords and tenants (whether it does that well enough or too much is outside the scope of this blog).  The RTA dictates what happens when rent isn't paid, or paid late, and it creates a process for getting rent arrears paid and maintaining and continuing a tenancy while prohibiting a landlord from simply changing locks, putting the tenant on the street (at midnight or any other time) and from seizing the tenant's property (i.e. known as "distress" or "distraint" which is specifically abolished in the RTA-see section 40).  The RTA further regulates all of the important interactions between landlord and tenant and it sets out rules for repair, maintenance, entry, landlord's duty re quiet enjoyment, tenant's duties re cleanliness, termination for cause provisions, termination for not for cause, assignment, sublet, rules related to rent, (etc. etc.) and most importantly for all of these issues the RTA provides a process that must be followed for all of the issues it regulates.  The RTA provides detailed Forms and through the Ontario Landlord and Tenant Board, Rules of Procedure, Guidelines, and procedural fairness and natural justice in resolving disputes.   In sum, the totality of the RTA goes a long way to heavily regulating what residential landlords and tenants are permitted to agree to.  That landlords and tenants may wish to agree to a term, clause, condition, that is contrary to the RTA does not matter.  The RTA makes such agreements void and unenforceable.

While some find the RTA to be heavy handed and too in favour of the landlord or the tenant (depending on one's perspective), the benefit is that with knowledge of the RTA a landlord or tenant can at least predictably know the outcome of the issues that the RTA regulates.  For example, if a tenant does not pay the rent then a landlord knowledgeable in the RTA will know that the N4 (termination for non-payment of rent) process should be followed, that the tenant will be given opportunities to void, that the LTB may be applied to after 14 days, that a hearing will be scheduled and the tenant will typically receive a pay and stay order with 11 days to pay failing which the Order may be filed with the Sheriff for enforcement.   The point I'm making is that the RTA through the processes it establishes provides at least a path that is predicable as to outcome.

Compare the predictability of the RTA to a residential rental relationship that is not covered by the RTA.   You need to go back a very long way in Ontario to get to a time before the Landlord and Tenant Act had a specific part for residential tenants--i.e. 1970 when Part IV  of the Landlord and Tenant Act was passed.  Before the code like provisions of the RTA tenants were subject to common law, the whims of landlords, and the power imbalance inherent in the owner versus renter relationship.  Prospective tenants who needed a place to live were not in a position to make very great demands on their landlords.  The reasons for Part IV of the Landlord and Tenant Act--from which you can easily and clearly trace the modern Residential Tenancies Act, remain as significant and important today as they were then.  Housing security, security of tenure, and all of the things that stable housing means for human beings continues to inform the evolution of the RTA while of course balancing these important concerns with the rights of property owners and the need to ensure that property owners are encouraged to be landlords and make housing available for people.

THE ROOMMATE

What exactly is a "roommate"?  It isn't a term of a fixed definition.  For the purposes of this article the "roommate" I'm talking about is a non-RTA covered person (i.e. someone who doesn't have the protection and rights granted to tenants under the Residential Tenancies Act).  The typical roommate I am talking about either rents a room from the owner who also resides in the property OR rents a bedroom from a person who is a residential tenant of the owner.   The first roommate (shares with the "owner"), has no rights under the RTA.  The second roommate (roommate of actual tenant) has some protections under the RTA but arguably those are derivative and arising from their occupation with the tenant in the tenant's household.

The "roommate" exemption (vis a vis "owner"), is in section 5 (i)  RTA and states as follows:

This Act does not apply with respect to, (i) living accommodation whose occupant or occupants are required to share a bathroom or kitchen facility with the owner, the owner’s spouse, child or parent or the spouse’s child or parent, and where the owner, spouse, child or parent lives in the building in which the living accommodation is located;

The "roommate" exemption (vis a vis "tenant), arises by definition in that a tenant can't be a landlord (by definition) and hence no landlord and tenant relationship that could be RTA covered can be formed between the actual tenant and a roommate who moves in (see section 2(a) RTA)

SO WHAT'S THE PROBLEM?

A serious problem can arise when the relationship between the "owner" and "roommate" falls apart or when the relationship between "RTA tenant" and "roommate" falls apart.  In either situation, there is no protection for the "roommate" under the RTA.  Quite literally, if the "owner" or "RTA tenant" is upset at the "roommate" they can tap them on the shoulder in the middle of the night, rouse them from their sleep and require that they "get out now".  Depending on the circumstances (and probably most of the time), getting kicked to the curb in the middle of the night with zero notice and no place to go is a shocking experience and one that you'd expect would be illegal.  However, subject only to a potential claims for "damages", the roommate has no security of tenure; may be required to vacate immediately and without notice, and have no recourse to maintaining their occupancy for any period of time at all (i.e. there is no court application that lets them stay in the unit).

The reality is that the RTA has no process for roommates.  There are no forms, no application, no Orders, no sheriff, no "rights".  The RTA simply doesn't apply.

Some "owners" and landlords hold the view that the RTA exempt situation must be fantastic.  With the RTA not applying the owner can make the rules and the roommate must simply do what the owner requires.   Indeed, this is one possible outcome when the RTA does not apply.  Another possible outcome is that the" roommate" refuses to leave, refuses to cooperate, and basically refuses to listen to any demands from the owner or RTA tenant.   When this happens it can be rather shocking to discover that the RTA (and hence the Landlord and Tenant Board) has no path nor process for the owner nor the RTA covered tenant to force the "roommate" to leave.

While the experience varies dramatically, it is not uncommon for police forces around the province to respond to owners or tenants' demands to remove roommates from a property with a refusal and direction to get an "Order".  Certainly, there are exceptions and some police officers will indeed remove roommates, but often enough police officers will refuse the request if the roommate is calm, there is no risk of violence, the "peace is being kept", and the roommate seems sensible, calm, and clearly lives in the property.  If this happens what do you do as the owner?  What do you do as the RTA covered tenant who has a roommate who won't leave?  Do you dare take the matter into your own hands and try to physically remove the "roommate" yourself?  Do you dare risk violence?  If you do, are you prepared to risk being arrested, injured, causing injury, etc.?

SOLVING THE PROBLEM

When a roommate refuses to move out, the police won't help, and you're not willing to "self help" the roommate out the door then the approach is typically to apply to the Court for a "writ of possession".  The roommate is a "trespasser" and having been asked to leave is required to vacate the premises.  If the roommate has paid "rent" or has prepaid rent they can ask for a refund and if there are other issues (damage, theft, etc.) then that too can be subject to a claim based, normally, in contract.  I suppose the door is also open to tort claims going either way between owner and roommate and RTA tenant and roommate.

"Roommates" while they don't recourse to maintain their occupancy of the property they do successfully bring cases against the "owner" or "RTA tenant" for damages arising from the breakdown and end of the rooming relationship.   Owners and RTA tenants have been found liable for kicking out roommates without notice and short notice.  They have been required to cover expenses associated with the wrongful and short notice removal from the property.  They have been required to cover damages for loss of property or damage to the roommate's personal property.  The law has clearly developed that while the relationship between owner and roommate or RTA tenant and roommate is not covered by the RTA that does not allow the owner to simply do whatever they want without any legal consequence.   This is why, when you read all of the legal texts and cases dealing with the breakdown of the owner/roommate relationship that the word "reasonableness" appears repeatedly to describe the obligations and behaviour of owner and roommate.

NEWMAN v. GLANVILLE

When Mr. Maguire wrote to me, he stated that legal practitioners were interpreting the Newman case to mean that every "owner/roommate" relationship and/or every "RTA tenant/roommate" relationship, where it is exempt from the Residential Tenancies Act it is then covered by the Commercial Tenancies Act.   One can forgive this conclusion (and frankly think that it must be true), given paragraph 7 of the Newman case which states:

Mr. Newman initially sought to evict Mr. Glanville from the home by applying to the Landlord and Tenant Board under the Residential Tenancies Act 2006. The board declined jurisdiction to hear the application citing section 5(i) of the Residential Tenancies Act which excludes jurisdiction in circumstances where the landlord and tenant share either a bathroom or a kitchen. Mr. Newman and Mr. Glanville share both. In those circumstances, the Commercial Tenancies Act applies rather than the Residential Tenancies Act (emphasis added).

That the Commercial Tenancies Act (CTA) is determined to apply when the RTA doesn't, and the relationship is owner/roommate, is leading some to conclude that the owner has the right of distress over the roommate's personal property and that this relationship (and what everyone must do) is covered by the CTA.  Distress (or distraint) simply put is the landlord seizing and sometimes selling a tenant's property to satisfy rent arrears or other obligations under the lease.

When I heard about "distress" being applied to get rent arrears (from roommates) using the CTA I wondered if the CTA wasn't being misused.  "Distress", as I recall, can't be combined with excluding a tenant from the property in a commercial context.  As I recall, it is one or the other--but not both.  

Why then are people grasping at parts of the CTA--or at least the parts that seem useful?  It seems to me that the CTA is attractive because the exemption from the RTA (and the useful processes it supplies)  leaves a vacuum of how to resolve the issues between owners/tenants and roommates.

Newman:  limited value

Having reviewed Newman it seems to me that it has limited value.  As an undefended application, where the Court did not have the benefit of counsel (for either side) presenting and arguing the law it seems to me that this case solves the problem in this particular case but the precedent value of the case for broad application is low.  As far as I can see the case has not been followed (it has no treatment) and therefore it does not seem to be establishing the general proposition that when the relationship is exempted from the RTA that the CTA applies.

CAN THE CTA apply?

In my opinion it is highly unlikely that the CTA will apply in the circumstances where the RTA is exempted due to the section 5(i) exemption or the definitional exemption when the RTA tenant rents out a room to a roommate.   While the Honourable Justice does conclude that the CTA applies if the RTA doesn't, there is no explanation in the decision of why this would or should be the case. 

Against that proposition, I'll submit that the legal relationship described in the Newman case is that of licensor and licensee.  For a landlord and tenant relationship to exist, or for one to come into existence, there are fundamental requirements of property law that must be met to create that relationship.  Borrowing one specific sentence, from the case cited below, is instructive: 

An agreement which confers exclusive possession of the premises as against all the world, including the owner, is a lease, while if it merely confers a privilege to occupy under the owner, it is a licence.  The case further states that "no estate in land passes to a licensee and this, on the authorities, is the principle distinguishing trait between the two relationships". 

A landlord and tenant relationship is recognized as much more than a contract.  It is a characterized by the conveyance of an estate in land.

It seems to me that in Newman, where the owner shares the house with the roommate, where they literally live in the house together, such that the roommate's hygiene, alcohol consumption, and use of utilities informs the relationship breakdown, that it is impossible to find a conferring of "exclusive possession of the premises as against all the world".  

The case from which I borrowed the sentence is B.A. Oil Co. v. Halpert, an Ontario Court of Appeal decision (leave to SCC denied).  This decision is instructive as it explains the nature of a landlord and tenant relationship as well as a licensor and licensee relationship and the tests to be applied in determining the difference.  In Halpert the Court states that the intention of the parties must be ascertained.  Newman, makes clear that there was no written lease and that the two parties were friends who shared the house for years.  Given this description (see para 1, Newman) I can't imagine that the facts if inquired upon would support the proposition that Mr. Newman intended to confer exclusive possession of the premises as against all the world to Mr. Glanville.  In fact, it seems inherent in the sharing nature of the space that there is an explicit intention to "not" grant exclusive possession to the roommate.

As you think about it further, you might also realize that if indeed one could conclude an intention to create an "exclusive possession" in the roommate (so as to give rise to a Commercial Lease), then the Commercial Tenancies Act would be displaced by the Residential Tenancies Act as section 5(i) could not apply (because there would be no sharing of kitchen and/or bath).

CONCLUSION

Relying on Halpert, as well as Residential Tenancies in Ontario (3rd Edition), LexisNexis Canada Inc. 2015 by Jack Fleming (see section 4), V Hazelton Limited v. Perfect Smile Dental Inc., 2019 ONCA 423 (CanLII) (specifically para 27 Nature of a Commercial Lease), it seems highly unlikely to me that the law supports the proposition that when a particular roommate relationship is RTA exempt as per section 5 that the Commercial Tenancies Act therefore applies.   In fact, it seems far more likely to me that in the vast majority of owner/roommate relationships or RTA tenant/roommate relationships that I've described that the legal right of the roommate is best characterized as a licence.  Because a licence does not create an estate or interest in the land there is no right to occupy the property nor to compel the owner to allow the roommate to remain in the property.  The licence, once revoked for any reason, makes the roommate a trespasser if the roommate refuses to leave the property.

Of course, if the licence is revoked arbitrarily or unreasonably, then the consequence of that revocation can result in a legal claim being brought against the owner or RTA covered roommate.  We see these cases already and damages are awarded against owners when they revoke a licence arbitrarily or unreasonably.  The analysis is in terms of contract/breach of contract, which is an easy and readily understood manner of determining entitlement to damages.

WHAT WAS NEWMAN TO DO?

After all of this what was Newman to do?  I do think he proceeded correctly in applying to the Court for a Writ of Possession.  Practically speaking, if a tenant won't leave, the police refuse to do anything, and self-help raises unreasonable risks, then the only thing one can do is apply to the Court for a Writ of Possession.  However, in doing so, the legal underpinning of the argument for the Writ of Possession (on the facts in Newman) is not the Commercial Tenancies Act because there isn't, in law, a commercial tenancy in existence.

Michael K. E. Thiele

www.ottawalawyers.com

University Courses are now Online: Can I terminate my lease?

CLASSES ARE ONLINE:  Can we cancel our lease?

I've been getting questions from university and college students, and some from landlords, asking if residential leases are still valid (or voidable) if students no longer want the house/apartment because they will stay home (with parents presumably) to take classes online.  Does the fact of fall classes (at most colleges and universities in Ontario) being online void residential leases?  Or does this fact allow students to cancel a lease?

The typical scenario is of students who rented a house in mid-winter to early in the new year of 2020 for this coming September.  Some started their lease already in May/June but only intend to move into the property in late August or early September and others still have an upcoming start date in the next month or two.  The renting, moving, and occupying of  "student houses" follows a fairly typical timeline, is ritualistic in nature, and has been so for as long as I can remember.  When house hunting, students try to rent as close to school as possible so that getting to class will be convenient (and fast) while also living in a student ghetto or area that serves the university/college crowd.  A significant part of choosing where to live is all about the social aspect of student life.   So it is with great surprise and profound discouragement that COVID (indirectly) has utterly disrupted the traditional return of students.  Students around the province (indeed the country) are learning that their fall semester (in most cases) will be entirely online and that they don't need to be anywhere near campus.  

Online classes can be taken "anywhere with an internet connection" and some students are thinking about saving the rent money by not moving into rented accommodation near the University/College campus.  Of course, another factor is concern about catching COVID by going to school or living with roommates from all over the province or world.  It might just be a risky thing to do (going to school) versus living in the relative isolation of "home".  Of course, not physically moving to school and staying "home" has a dramatic impact on student life and the personal freedom that comes with living away.  Most of the students I've spoken with raise this issue as the biggest driver for still moving from home to school.  This argument is then augmented by the fact that their institutions are indicating an intention of getting "back to normal" by the end of 2020 which isn't long after school starts.  Hence, some of the questions I've gotten is whether students have a legal basis to delay the lease (like deferring enrolment) and still keep the rental unit available for themselves when school goes "back to normal".   The short answer to that question is "no".  A further consideration seems to be that if a rental unit (especially coveted units in good areas) is given up then there is no guarantee that it will be available for rent when school goes "back to normal". 

So the above is the set up for the issue that is concerning tenants and landlords and it is the topic of this article.  My response to these concerns has been rather consistent and is related below.

SIGNED LEASE

If there is a signed lease then there is an obligation for the tenants to take possession, occupy and pay rent.  They don't need to physically move in (if they wish to stay home or wherever they are when not at school) but the obligation to pay rent and "take possession" in the sense of controlling the rental unit is required by the lease.    The fact of COVID does not create an exception to performing the lease.  The fact that schools have moved most classes "online" does not create an exemption to the lease nor does it relieve a student (or their parent guarantors) from paying rent.  Having been asked how to "avoid" a lease I confess that  I don't see an argument that would work to void the lease because of COVID or the changed content delivery plans of schools.  Thinking about this I can see how someone might want to argue that the leases are "frustrated" and that the "frustrated contracts act" applies to void the lease so that both landlords and tenants go back to their original positions prior to the execution of the lease.  The application of these principles would require a return of deposits and voiding of the contract.  I've also heard some wanting to argue a force majeure [act of God] to void the residential lease.  Those arguments being identified, I wonder if perhaps someone will be successful with them. However, until I read a successful decision of the LTB or Superior Court voiding residential leases for COVID or "classes online" reasons I don't see any chance of tenants getting out of their leases for these reasons.

NORMAL RTA rights

Because I think tenants are bound to their leases (notwithstanding COVID and classes going online) any recourse to ending their leases needs to come from the standard RTA provisions.  In this regard, tenants can exercise "sublet" and "assignment" rights (start reading about these at section 95 of the Residential Tenancies Act) .  Tenants (students) who do not want to start their leases or who want out of them can seek to sublet their units to other persons if they wish to return to the unit at a future date.  

A "sublet" would make sense for the current term and then return to the unit next term when classes are expected to be in person again.  The issues with a sublet, however, will be finding a person to take over for a short while and whether you can trust that person to pay rent and not trash the place during the sublet.  Because a tenant remains liable to the landlord, during the course of a sublet, for rent and damage to the rental unit even if it is caused by the sub-letter, it is critically important to choose your sub-letter well.  You should never sublet the unit to just anyone.   Note also, that a sublet is only legal if the landlord consents to the unit being sublet.  If the landlord unreasonably refuses to give consent this can be grounds to terminate the tenancy or to apply for an order compelling the landlord to give consent.

The next option for tenants is to seek to assign the rental unit.  An assignment is different from a sublet in that the existing tenants never return to the rental unit.  The existing tenants cease being responsible for anything related to the rental unit as of the date of the assignment of the lease (they remain responsible for everything prior to the assignment).    This is a tricky process and the sections of the RTA (see link above) should be read closely.  A tenant can ask for a "general" right to assign or a "specific" assignment.  A landlord must respond promptly and properly, failing which the tenants may acquire termination rights.  Hence it is very important to understand the process as it is full of technicalities and unexpected outcomes if one doesn't know the rules.  For many tenants using this process leads to an unexpected right to serve an N9 to terminate the tenancy in short order.

Absent a successful assignment or sublet the tenants remain liable under the lease if it isn't otherwise terminated.  Given the work in finding suitable sub-letters (and the risk that goes with them) or assignees, and perhaps the impossibility of finding such persons, is there anything else that can be done to get out of a lease?   In short, the RTA says "no".   Unless the tenancy is otherwise validly terminated the tenants' obligations continue.

For those of you reading this very closely, and looking for loopholes, you might have twigged on "unless the tenancy is otherwise validly terminated ..".  That sounds good--how might that happen?  

In this regard we get into how the Residential Tenancies Act works in practice versus how it is intended to work in theory.  The RTA was not drafted with the intent to provide loopholes and backdoor escapes to lawful agreements for improper reasons.  That being said, these backdoors and loopholes do exist and if a landlord is not tuned into the strategy a tenancy may be terminated inadvertently by a landlord in fulfillment of a tenant's objective.  Further, there are technical requirements (especially surrounding the signing and use of the new Ontario Standard Form lease) that create options to terminate and avoid a lease that is not compliant with the standard form lease provisions (see section 12.1 and 47.0.1 RTA).   

Arguably (and it does work), if a tenant fails to pay the rent and a landlord serves an N4 (Notice of Termination for Non-Payment of Rent) then the tenant (if they follow the wording of the form very closely) can escape a fixed term lease by relying on the N4 form.    Basically, this strategy is to "get evicted".  While that sounds horrible it turns out that the repercussions of an eviction are basically "zero".  "Privacy law" hides the fact of the eviction and if the rent arrears are carefully paid after the tenancy is terminated it is highly improbable that anything even ever shows up on a credit report.

Landlords need to think about serving any kind of "termination" notice if they believe the tenant's behaviour or non-payment is intended to get the landlord to serve a termination notice.  For inexperienced landlords a phone call to the Landlord and Tenant Board will typically result in advice to serve an N4 if the tenant has not paid the rent.  As soon as the landlord does that the tenant is given a way to terminate the lease even if it is a fixed term.  The law is fairly clear now that the rent obligation stops with the N4 even if there is a longer term tenancy.  The alternative option to serving an N4 is filing an L9 (without serving an N4).  An L9 does not terminate the tenancy and is the equivalent of suing for the rent at the LTB.  The risk of proceeding with an L9 is that you can never evict for the arrears covered by the Order obtained on the L9 application.  However, if the rent was being held back as a tactic/strategy to get the tenancy terminated (because the tenants were hoping for an N4) then serving the L9 normally results in rent being paid immediately (because the strategy failed).

SUMMARY

My legal opinion is that COVID and the fact of Universities and Colleges putting classes online for the fall semester is not a legal basis to void or escape a validly signed and legal residential lease.  I don't see any real chance of the lease being frustrated and its doubtful that tenants will escape from the responsibilities that normally flow from the landlord and tenant relationship created by the lease.  Of course, the usual rights under the RTA continue (sublet & assignment) and the RTA can be used to terminate the lease in the usual course.

ONE LAST OPTION

If none of the above is helpful or interesting to tenants is there anything else at all?   Well, you (tenants) could just abandon the rental unit and very clearly and purposely put the landlord back in possession of the rental unit.  Return the key and have written confirmation to and from the landlord that you have abandoned the unit and/or are not taking possession of it.  Don't pay the rent.  Create arrears and allow them to accumulate.   The RTA requires (as does the law generally) that the landlord mitigate its losses.  When you return possession to the landlord and hand the keys back (and you have proof of  doing that) you trigger the duty to mitigate (which for a landlord means he must re-rent the unit to new tenants).  The landlord must mitigate and must seek to re-rent the unit as soon as possible. Rent should not be paid during this time as the landlord has nothing to mitigate if rent is being paid.  The landlord needs to actively market the unit and seek new tenants.  Keep track of the landlord's efforts to find new tenants because at some point the landlord will be required to prove that they diligently sought new tenants and that they did in fact actively market the unit.

If the landlord successfully mitigates, in a reasonable amount of time, then the original tenants are typically liable for the rent for the time it took the landlord to re-rent the unit.  Normally, a "reasonable" period of time for a landlord to mitigate and re-rent a unit is 60 days.   After 60 days a court will begin to question how hard a landlord is trying to mitigate and whether active steps are actually being taken to find new tenants.  If a Court determines that a landlord did not take reasonable mitigation steps then the landlord can be denied the rent arrears after a certain period (normally after 60 days).   Therefore, if you are a landlord and the tenant does return possession it is critical to maintain a record of all mitigation activity.  You need to actively maintain a record of all advertising, take pictures of the "For rent" signs, use an agent, and do what you normally do to re-rent the unit.  Simply sitting back and expecting the tenant to pay rent because there is a lease won't work.  Delays in marketing, upgrades, raising the rent, or keeping the unit off of the market to do repairs will result in reduced rent arrears or an outright denial to damages altogether.

Michael K. E. Thiele

www.ottawalawyers.com