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