Monday 16 October 2023

Landlord owed more than $35,000 in rent arrears

 To which Court or Tribunal should the case go?  Landlord and Tenant Board or Superior Court of Justice?

Increasing monthly rent amounts and the inefficiencies at the Ontario Landlord and Tenant Board have given rise to some unusual jurisdictional problems.   The Ontario Landlord and Tenant Board has a monetary jurisdiction of $35,000 as per section 207 of the Residential Tenancies Act.  On its face, this means that the Ontario Landlord and Tenant Board has the authority/power to order a person(s) to pay to another the amount of $35,000.00.   Hence, in a rent arrears case, if the tenant owes the landlord any amount up to $35,000 the Landlord and Tenant Board can Order the tenant to pay that amount and terminate the tenancy of that tenant if the amount is not paid.   There are other provisions in the Residential Tenancies Act dealing with "paying and staying" and there are requirements under the Act to allow the tenant to void an eviction Order, once made, by paying the arrears.  Within the context of proceedings to terminate a tenancy for non-payment of rent (at the Landlord and Tenant Board) there is the procedural fact that the Landlord and Tenant Board imposes no meaningful costs of any kind on the unsuccessful party in its hearings.  Meaning both sides absorb the expense of their own legal fees regardless of winning or losing (I mention this here--unusually--because the option to proceed in Court makes recovery of legal fees a possibility in that venue--versus being not recoverable in the LTB venue). To be clear, this article is not exploring anything really useful for cases involving sums under the $35,000 LTB jurisdiction. The Rules are clear and the jurisdiction of the Landlord and Tenant Board is exclusive when the amounts at stake are under $35,000.00.

What then happens if the tenant(s) owes the landlord more than $35,000.00?   The procedural pathway has not been obvious or clearly prescribed.  There is no useful guidance memo on the LTB site and exactly what to do about claims in excess of jurisdiction has been the subject of some debate and different expressed views by sitting adjudicators.   For many landlords, the nuanced legal views on jurisdiction are too lofty and impractical to parse and so they simply waive the amount of arrears that exceeds $35,000 and proceed to get an eviction Order based on the maximum LTB jurisdiction.  This is effectively a waiver of rent arrears in excess of this amount---or at least it looks like a waiver--meaning the understanding is that the waiver operates as a release for any arrears above that amount (essentially a gift to the tenant).

Waiver is not always how it is done.  There are a few interesting cases where Landlords have proceeded with claims at the LTB, far in excess of the $35K jurisdiction, and the outcome is not a waiver or forgiveness of the excess amounts.  The Orders in these cases require the tenants to pay the $35,000 in rent arrears--so this aspect of the Order is limited to the jurisdiction maximum.   HOWEVER, if the tenant wishes to remain in possession and continue the tenancy, the Order requires the tenant to pay the actual amount owed (yes, the total amount even above $35,000) to void the eviction Order. Hence, there is a chance, if proceeding at the LTB for eviction for non-payment of rent for an amount in excess of $35K that the tenant will have to pay the full amount if the tenant wishes to continue the tenancy.

If the tenant does not wish to continue the tenancy and is happy enough to allow the eviction to be enforced then the LTB Order does cap out at $35K and the landlord, at least as far as this Order is concerned has waived the arrears in excess of the $35K because the Order does not make the amount in excess of $35K collectable.   Does this mean it is an actual waiver or release of the excess?  I do not think that it is.  If the landlord does not expressly waiver the amount above $35K then the amount of that debt is not implicitly forgiven.  There is no electing into the LTB jurisdiction and no overt "limiting" of the claim to $35K.  It means, I think, that the amount in excess of $35K is still a debt owed to the Landlord but just not recoverable at the LTB.   I think it should be arguable that the landlord can indeed file a separate claim for the excess amount in Court for the excess amount.  I think it would be difficult to argue res judicata (a technical bar to litigating a claim that has "already been decided) to the excess amount as the LTB did not have jurisdiction to decide anything in relation to that amount above $35K.   Query then, do you sue in Small Claims for the excess amount if the excess amount (balance above $35K is less than the jurisdiction of the Small Claims Court which also happens to be $35K?).   Some might ask, if this is possible why sue in Small Claims if you could just file a separate L10 at the LTB for the difference.  And then, as you think about that Pandora's box opens and you start to think about splitting the claim and all the legal principles that have developed over the years to prevent multiple proceedings based on the same basic facts.  

The logic of the cases (at the LTB) maintaining the entirety of the arrears (including the amount over $35K) is that the LTB can not Order a tenant to pay more than $35,000.00 but it can refuse to issue an order voiding the eviction portion of the Order unless the total amount of rent arrears is paid.   Hence, a landlord proceeding at the LTB for amounts in excess of $35,000 will only get a Judgement for $35,000 against the tenant but will also get an eviction and vacant possession.  The only way a tenant gets to retain possession of the rental unit is to pay the entire amount even though it exceeds the monetary jurisdiction of the LTB.

SUING IN THE SUPERIOR COURT for the full amount AND eviction

I was interested to see that there is a fresh case from the Superior Court called Ji Zhou v. Azadeh Hasem Nia et. al decided September 28, 2023.   The case is not all that remarkable except that it describes a common circumstance of many landlords these days.  Due to LTB delays many rent arrears cases are sitting so very long waiting to be heard that the amount of the arrears exceeds the jurisdiction of the LTB by the time the cases are heard.  Some landlords are not interested in waiving the excess above $35,000 and some landlords believe that their tenants are sufficiently credit worthy that it is worthwhile to get a Judgement for the full arrears in addition to an eviction Order.

In this case (cited above), the landlord had proceeded at the LTB.  Was successful in getting an Order and then the tenant initiated a review process that severely delayed the eviction and hearing.  With LTB institutional delays the landlord decided to withdraw the case from the LTB.  The LTB permitted the withdrawal of the application.   The landlord then sued in the Superior Court for the full amount owed and for an Order terminating and evicting the tenants.

The procedure in this case is very interesting for how it moved through the Residential Tenancies Act requirements and for how the Court seemed to deal more harshly (many would say properly) with significant rent arrears.    The Landlord, after issuing and serving the claim, decided to seek Summary Judgment under Rule 20 of the Rules of Civil Procedure.   This is a summary process--intended to be quick and efficient.  For those who are aware, the availability of Summary Judgment seems to be a perpetual question notwithstanding appellate directives.  Hence, it is very interesting to see here that the Court had no difficulty in proceeding with the matter as a Summary Judgment proceeding.   That is good to know and a good precedent to have if choosing to proceed in the Superior Court.

Notable as well is that the Court awarded "real" costs against the tenants when the case went against them.  I imagine that if the LTB would start visiting consequences on unsuccessful parties as the Court does here that the backlog would be significantly shorter.

The decision also raises interesting questions about the issuance of the Writ of Possession and the non-voidable (apparently) nature of the Order.  In total, it seems here that the Superior Court of Justice is able to deliver the expedited procedure and speed that the Landlord and Tenant Board is no longer capable of doing.  Looking at this decision one can imagine that the Court is soon to become the preferred venue for pursuing LTB cases for rent arrears.

Michael Thiele

www.ottawalawyers.com 

Saturday 17 June 2023

Chargebacks against Condominium Unit Owners

Condo Unit Owner's tenants cause trouble, Condo charging back expenses to owner--any limits?

This article is outside of my usual area of comment in that the legal issues engage the Ontario Condominium Act, 1998, SO 1998, c 19 and unfortunately does not engage my comfort zone area being the Ontario Residential Tenancies Act and the relationship between residential landlords and tenants.  I suppose, in a sense, that it is worthwhile noting that the Residential Tenancies Act is effectively and utterly useless to a condo unit owner when disputing with the Condominium Corporation the chargebacks and threats to lien the unit.  Even though the damage and issues were caused by or contributed to by the actions of the condo unit owner's residential tenants the Residential Tenancies Act offers no help to the residential landlord who is caught between the Condo Corp's demands for compliance and the procedural processes of the Ontario Landlord and Tenant Board.

The legal research question and a fact outline

A condominium unit owner decides to rent out the unit to tenants. Renting the unit is permitted by the Condo Bylaws and there are no restrictions as to occupancy.  The unit owner advertises the apartment/unit for rent and receives rental applications.  A standard form Ontario Lease (as required by section 12.1 RTA) indicating that the rental unit is a condo, with all the usual terms, is reviewed and signed by the landlord and the tenant.  The tenant assumes occupancy as a tenant with the protections of the Residential Tenancies Act.  Then, all hell breaks loose.

What is this hell?  The tenant smokes in the hallways, tosses cigarette butts from balconies, lets their dog do it's business on the balcony (above balconies of neighbours below), drags dripping garbage bags through hallways, damages the common area entrance areas and does such a poor job at housekeeping that various pests (cockroaches, bed bugs) so severely infest the rental unit that other neighbour units are being infested and no amount of pest control treatment in the surrounding units can knock back the burgeoning pest populations.  The landlord is informed of all of the problems by the property management company and urged to take immediate action.   The landlord/owner is shocked but immediately contacts the tenants to tell them of the problems and that this all has to stop immediately.  Instead of contrition, the landlord is told that the allegations are all false, pure lies, because the people who are complaining are hateful liars.  With contrasting stories, the landlord/owner tries to go back to the property manager to get information, evidence, proof, and seek help in dealing with the problem.  Unfortunately, the property manager while trying to help increases pressure by saying that legal action will be taken to enforce compliance and that all the costs will be charged back to the owner.  A few days after speaking with the property manager the unit owner gets a lawyer's letter from the condo's lawyer demanding immediate compliance with the bylaws with a lengthy explanation of how everything the unit owner's tenants are doing breaches the condominium act, the declaration, and bylaws of the Condominium Corporation.

The unit owner, stressed out, seeks legal help and discovers that the governing legal structure with the tenant is the Residential Tenancies Act.  The landlord/owner instructs counsel (or a paralegal) to prepare and deliver Notices of Termination and to file the appropriate paperwork to get an order terminating and evicting the tenant at the first possible opportunity.   Counsel tells the landlord/owner that the problem is going to be that the Ontario Landlord and Tenant Board is a broken system and that the earliest the landlord can expect a hearing is sometime many months from now, but hopefully within the next year.  And then, a hearing may be adjourned for procedural issues and extended wait times will be endured until rescheduling. Eventually a merits hearing will happen but receiving a decision can take months and then the Landlord and Tenant Board will likely "stay" any Order that is received for a "Review Hearing" (taking many months more) at the tenants' request.  Presuming eventual success the tenant will then possibly file an Appeal to the Divisional Court causing a further automatic stay of several months while an expensive motion is brought by the landlord to deal with the appeal.  The legal costs to the owner/landlord---ranges in the thousands of dollars with zero chance of recovering those costs because the Ontario Landlord and Tenant Board doesn't hold parties accountable for legal costs (regardless of their conduct) [note: costs are available at the Divisional Court for appeal proceedings].

Stricken by this advice, the unit owner informs the property manager of steps being taken.  The reality it seems is that the tenants will continue their behaviour without consequence for at least a year or more before the landlord/owner can get any kind of legal Order that evicts the tenant.  Neighbouring unit owners, when informed, exert extreme pressure on the Board of Directors to force compliance and action as living with the current circumstances is utterly unacceptable.  The Board of Directors instructs the condo's lawyer to commence proceedings, the property manager hires third party security, increased pest control, installs video cameras, and does whatever it can to lockdown the actions of the tenants with restrictions and controls.   These steps cost several thousands of dollars--even 10's of thousands of dollars.  The landlord/unit owner, sympathetic with the other owners and even agreeing that the tenants' behaviour is unacceptable, is astonished to receive huge bills demanding payment and threatening additional chargebacks and liens on the unit due to tenant behaviour.

The unit owner/landlord reviews the charges and sees all kinds of charges.  Condo legal fees, property management fees, third party security fees, additional cleaning fees, pest control fees, the list goes on and on.  Some charges seem fair, others seem high, unnecessary, or unreasonable.


What is the extent of the unit owner's liability for these chargebacks?  Is there any way to dispute or fight the charges?  What is the law? 


Unfortunately, I was unable to find any direct authority setting out a specific procedure for disputing excessive and unreasonable chargebacks levied against a unit under the Condominium Act, 1998. However, insight may be gleaned from the relevant statutory provisions and the following decisions, in which those provisions are applied by decision-makers. 

The following expenses can be charged back to the contribution to the common expenses payable for an owner's unit: 

- a levy assessed by the corporation to account for increases to the common expenses caused by a person's contravention of the occupancy standards of a unit (ss. 57(4) and (5));

- the cost of repairs and maintenance done by a corporation to a unit on behalf of a unit owner (s. 92(4));

- the cost of charges, interest and expenses resulting from the owner's failure to comply with an agreement in respect of changes to the common property (s. 98(4));

- the lesser of the costs of repairing damage done to the owner's unit by a tenant and the deductible limit of the insurance policy obtained by the corporation (s. 105(2)); and 

- an award of damages or costs in an order made against an owner or occupier of a unit to enforce compliance with the Act, the declaration, the by-laws, the rules or a specified agreement (s. 134(5)). 

If an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, the corporation has a lien against the owner’s unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount (s. 85(1)).  (Condominium Act, 1998, SO 1998, c 19)

Common expenses, in their most traditional form, apply to the monthly fees each unit owner pays for utilities and the general upkeep of the condominium project. If a unit owner defaults on those monthly obligations, the default can be liened and the unit can be sold to enforce the lien. It is one thing to allow the corporation to enforce, by way of lien, common expenses that are applicable to all unit holders and that a majority of unitholders have approved. It is entirely another to allow a condominium corporation the unfettered, unilateral right to impose whatever costs it wants on a unitholder, refer to them as common expenses and thereby acquire the right to sell the unitholder’s apartment. (Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194 (CanLII))

In Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194 (CanLII), the owner purchased the unit with the knowledge that there were no prohibitions against smoking in the unit. When the neighbours complained about smoke migrating into their units, the corporation attempted to seal any leaks and, when that didn't work, asked the owner to stop smoking in the unit. The corporation incurred legal fees to attempt to enforce the requirement that the owner stop smoking and registered a lien against the unit pursuant to s. 85(1) of the Condominium Act, 1998.

Koehnen J. held that the legal expenses were not lienable pursuant to s. 85(1) of the Condominium Act, 1998 without a court order, despite a declaration that the corporation interpreted as allowing such legal expenses to be lienable in the absence of a court order. The Court held that the corporation's interpretation contravened s. 134 of the Act and an interpretation that contravenes a statutory provision is, by definition, unreasonable.

In Rahman v. Peel Standard Condominium Corporation No. 779, 2021 ONCAT 13 (CanLII), the unit owner had a disability and possessed an accessible parking permit. He used the accessible parking spaces at the condominium despite the objections of the corporation that his use violated the corporation's declaration. The corporation took the position that the accessible parking spaces were for visitors only. The Tribunal interpreted the declaration and found that the owner was entitled to park in the accessible spaces. The Tribunal held that the corporation had unreasonably imposed costs of enforcing its declaration against the unit owner and added those costs to the owner's common expenses and filed a lien against the unit. The corporation was therefore not entitled to add the reasonable expenses related to the enforcement to the common expenses payable for the unit pursuant to s. 134(5) of the Condominium Act, 1998.

Because the corporation had not quantified the costs it claimed related to its enforcement of the declaration against the owner, the Tribunal was unable to determine what part of the lien related to the unreasonably imposed costs. The Tribunal ordered the corporation to stop its enforcement proceedings, including the registration of the lien against the unit, and to provide the owner with an accounting of the costs related to enforcement.

In Metro Toronto Condominium Corporation No. 545 v. Stein, 2006 CanLII 20838 (ON CA), the corporation determined that all unit owners were required to carry out Level 5 remediation in response to a mold problem. The respondents carried out Level 1 remediation in their unit, which was more affordable and was suggested to them by a mycologist. The corporation's application to enter the unit to carry out the Level 5 remediation was denied. The corporation appealed from that order, arguing that the application judge erred by failing to defer to the corporation's decision to require Level 5 remediation.  

Rouleau J.A., for the Court of Appeal, upheld the application judge's decision, which was based on the finding that the corporation had not acted reasonably in imposing its standard of remediation and that reasonable lower cost alternatives ought to have been considered, especially in light of there being no evidence of harm to other units. The Court held that the Court of Appeal's decision in Dvorchik did not apply in this case because the corporation had made the strategic decision not to make the requirement for Level 5 remediation a rule.

Applicable Law

Section 57(4) and (5) of the Condominium Act, 1998, SO 1998, c 19 enable a corporation that has passed an occupancy standards by-law to levy an assessment against a unit in which the by-law has been contravened and provide that such a levy shall form part of the contribution to the common expenses payable for the unit: 

Assessments

(4) If the corporation has passed a by-law under subsection (1) and a person contravenes the standards for the occupancy of a unit set out in the by-law, the board may, by resolution, levy against the unit,

(a) an assessment for the amount that reasonably reflects the amount by which the contravention increases the cost of maintaining the common elements and repairing them after damage; and

(b) an assessment for the amount that reasonably reflects the amount by which the contravention increases the cost of using the utilities that form part of the common expenses. 1998, c. 19, s. 57 (4); 2015, c. 28, Sched. 1, s. 53 (2).

Part of common expenses

(5) The assessments mentioned in subsection (4) shall form part of the contribution to the common expenses payable for the unit. 1998, c. 19, s. 57 (5).

Section 92(4) of the Condominium Act, 1998, SO 1998, c 19 provides that the cost of any repairs or maintenance done by the corporation to the unit on behalf of the owner shall be added to the contribution to the common expenses payable for the owner's unit: 

Cost

(4) An owner shall be deemed to have consented to the work done by a corporation under this section and the cost of the work shall be added to the contribution to the common expenses payable for the owner’s unit. 1998, c. 19, s. 92 (4); 2015, c. 28, Sched. 1, s. 83 (2).

Section 98(4) of the Condominium Act, 1998, SO 1998, c 19 provides that the corporation may add the costs charges, interest and expenses resulting from the owner's failure to comply with an agreement in respect of changes to common property to the common expenses payable to the owner's unit: 

Lien for default under agreement

(4) The corporation may add the costs, charges, interest and expenses resulting from an owner’s failure to comply with an agreement to the common expenses payable for the owner’s unit and may specify a time for payment by the owner. 1998, c. 19, s. 98 (4).

Section 105(2) of the Condominium Act, 1998, SO 1998, c 19 provides that the corporation can add the lesser of the costs of repairing damage done to the unit by a tenant and the amount of the insurance policy deductible to the common property expenses payable for the owner's unit: 

Owner’s responsibility

(2) If an owner, a lessee of an owner or a person residing in the owner’s unit with the permission or knowledge of the owner through an act or omission causes damage to the owner’s unit, the amount that is the lesser of the cost of repairing the damage and the deductible limit of the insurance policy obtained by the corporation shall be added to the common expenses payable for the owner’s unit. 1998, c. 19, s. 105 (2).

Section 134(5) of the Condominium Act, 1998, SO 1998, c 19 provides that where a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit to enforce compliance with the Act, the declaration, the by-laws, the rules or a specified agreement, those damages or costs can be added to the common expenses for the unit: 

Addition to common expenses

(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit. 1998, c. 19, s. 134 (5).

Section 85 of the Condominium Act, 1998, SO 1998, c 19 provides that a corporation has a lien against the owner's unit for failure to contribute to the common expenses payable for the owner's unit: 

Lien upon default

85 (1) If an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, the corporation has a lien against the owner’s unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount. 1998, c. 19, s. 85 (1); 2015, c. 28, Sched. 1, s. 78 (1).

In Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194 (CanLII), the owner purchased the unit with the knowledge that there were no prohibitions against smoking in the unit. When the neighbours complained about smoke migrating into their units, the corporation attempted to seal any leaks and, when that didn't work, asked the owner to stop smoking in the unit. The corporation incurred legal fees to attempt to enforce the requirement that the owner stop smoking and registered a lien against the unit pursuant to s. 85(1) of the Condominium Act, 1998.

Koehnen J. held that the legal expenses were not lienable pursuant to s. 85(1) of the Condominium Act, 1998 without a court order, despite a declaration that the corporation interpreted as allowing such legal expenses to be lienable in the absence of a court order. The Court held that the corporation's interpretation contravened s. 134 of the Act and an interpretation that contravenes a statutory provision is, by definition, unreasonable: 

[27] The enforceability of the lien turns on whether the amount the Corporation claims falls within s. 85 or s. 134 of the Act.

[28] Section 85 of the Act provides:

85 (1) If an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, the corporation has a lien against the owner’s unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount.

[29] Section 134 of the Act allows the Corporation, among others, to apply to the Superior Court of Justice for an order “enforcing compliance” with any provision of the Act, the condominium’s declaration, bylaws or rules (which I may refer to from time to time as its constating documents) and recover the costs of doing so in a court order: 

134 (1) Subject to subsection (2), an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation or a mortgagee of a unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this Act, the declaration, the by-laws, the rules or an agreement between two or more corporations for the mutual use, provision or maintenance or the cost-sharing of facilities or services of any of the parties to the agreement (Emphasis added).

(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit.

[30] The Corporation submits the lien amounts fall within s. 85 of the Act and are automatically enforceable. The Amlanis submit that the lien amounts fall within section 134 of the Act and are not enforceable in the absence of a court order that awards the Corporation damages or costs. Since there has been no court order, the Amlanis submit that the lien is invalid and must be vacated. 

[31] In determining which interpretation I adopt, the Corporation submits that I must keep in mind the overall purpose of those sections and of the Act which is to place the financial burden created by the conduct of any one unit holder on that particular unitholder rather than on the Corporation. If the financial burden is placed on the Corporation, it is effectively placed on innocent unitholders who must pay for the Corporation’s expenses by way of common expenses or special assessments: Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc.2005 CanLII 13778 (ON CA), [2005] O.J. No 1604 at para. 40.

[32] I accept that this is part of the overall scheme of the Act but am nevertheless of the view that the expenses the Corporation claims are not common expenses under s. 85 but are expenses that relate to “enforcing compliance.” It is clear that s. 134 costs cannot be added to the common expenses of the Amlanis’ apartment without an order under section 134 (5): Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc.2005 CanLII 13778 (ON CA), [2005] O.J. No 1604 at para. 35 (C.A.). Here, however, the Corporation seeks to shift the financial burden from itself to Mr. Amlani without a court order authorizing it to do so.

[33] Common expenses, in their most traditional form, apply to the monthly fees each unit owner pays for utilities and the general upkeep of the condominium project. If a unit owner defaults on those monthly obligations, the default can be liened and the unit can be sold to enforce the lien. Section 84 (1) of the Act underscores this interpretation when it provides that a unitholder shall pay common expenses in the proportions specified in the declaration.

[34] It is one thing to allow the corporation to enforce, by way of lien, common expenses that are applicable to all unit holders and that a majority of unitholders have approved. It is entirely another to allow a condominium corporation the unfettered, unilateral right to impose whatever costs it wants on a unitholder, refer to them as common expenses and thereby acquire the right to sell the unitholder’s apartment.

[35] I am strengthened in this view by other provisions in the Act that specifically allow a condominium corporation to add certain types of costs unique to a single owner to the common expenses of the particular unit holder without a court order. By way of example, sections 92(1) and (4) provide that a corporation can carry out certain repairs if an owner fails to do so and can add the cost of such repairs to the owner’s common expenses. In a similar vein, section 105(2) provides that if an owner causes damage, the lesser of the cost of repair or the corporation’s insurance deductible may added to the owner’s common expenses. Legal fees and enforcement costs do not fall into these categories. 

[36] In the Corporation’s communications with Mr. Amlani and in its law firm’s accounts, the services in respect of which the Corporation seeks reimbursement are described as compliance and enforcement expenses, not as common expenses. By way of example:

(a) The Fine & Deo letter of July 6, 2017 stated that if Mr. Amlani failed to “comply” he would be held liable for the Corporation’s “cost of enforcing your compliance by means inclusive of a court application under section 134 of the Act”.

(b) The Fine & Deo account of October 4, 2017 is for “legal costs incurred in enforcement of the Corporation’s Declaration and Rules.”

[37] It is only in the notice of lien that these enforcement costs are referred to as “common expenses”.

[38] The Corporation submits that the Declaration allows it to add these costs to Mr. Amlani’s common expenses through two provisions: the definition of common expenses and an indemnification provision.

[...]

[43] The Corporation argues the Declaration contains an indemnity in article 11 which allows it to act as it has. The indemnity provides:

Each owner shall indemnify and save harmless the Corporation from and against any loss, cost, damage, injury or liability whatsoever which the Corporation may suffer or incur resulting from or caused by an act or omission of such owner, … to or with respect to the common elements and/or all other units except for any loss, costs, damages, injury or liability caused by an insured (as defined in any policy or policies of Insurance) and insured against by the Corporation. (Emphasis added)

All payments pursuant to this clause are deemed to be additional contributions toward the common expenses and recoverable as such.”

[44] The Corporation interprets the indemnity as meaning that the legal expenses of its lawyers are lienable under section 85 (1) of the Act and relies on London Condominium Corporation No. 13 v. Awaraji2007 ONCA 154 for the proposition that a court should not interfere with a condominium corporation’s interpretation of its declaration unless it is unreasonable.

[45] In my view, the Corporation’s interpretation of the indemnity is unreasonable.

[46] The indemnity applies only with respect to costs the Corporation incurs arising out of acts by owners “to or with respect to the common elements and/or all other units.” There was no act of Mr. Amlani to the common elements or to all other units. Moreover, the costs the Corporation incurred after Mr. Amlani left his unit could not possibly arise out of acts by Mr. Amlani to the common elements or all other units because he was out of the building and was not engaging in any acts with respect to the common elements or otherwise. Finally, the interpretation the Corporation advances contravenes section 134 (5) of the Act because the costs it claims related to compliance and enforcement costs without being embodied in a court order. An interpretation that contravenes a statutory provision is, by definition, unreasonable. Here again it is relevant to note that the legal accounts for which the corporation claims indemnity describe the services as relating to the “enforcement of the Corporation’s Declaration and Rules” and not as relating to the protection of any common elements.

In Rahman v. Peel Standard Condominium Corporation No. 779, 2021 ONCAT 13 (CanLII), the unit owner had a disability and possessed an accessible parking permit. He used the accessible parking spaces at the condominium despite the objections of the corporation that his use violated the corporation's declaration. The corporation took the position that the accessible parking spaces were for visitors only. The Tribunal interpreted the declaration and found that the owner was entitled to park in the accessible spaces. The Tribunal held that the corporation had unreasonably imposed costs of enforcing its declaration against the unit owner and added those costs to the owner's common expenses and filed a lien against the unit. The corporation was therefore not entitled to add the reasonable expenses related to the enforcement to the common expenses payable for the unit pursuant to s. 134(5) of the Condominium Act.

Because the corporation had not quantified the costs it claimed related to its enforcement of the declaration against the owner, the Tribunal was unable to determine what part of the lien related to the unreasonably imposed costs. The Tribunal ordered the corporation to stop its enforcement proceedings, including the registration of the lien against the unit, and to provide the owner with an accounting of the costs related to enforcement:

[35] PSCC779 issued its second enforcement letter on June 19, 2020. This letter raises new grounds of harassment against Mr. Rahman, including writing two emails 2 minutes apart to PSCC779 board members in violation of the “Communication Policy” of PSCC779. The condominium corporation repeats its position that Mr. Rahman has not provided sufficient medical evidence to support a human rights accommodation to a handicap parking space. PSCC779 claims a chargeback of $1,833.99 for “Legal Costs of Enforcement” to that date. The claim is made in a one-line statement with no details provided.

[36] On June 23, 2020, PSCC779 issued a third enforcement letter. This letter responded to emails from Mr. Rahman. In this letter, PSCC779 took the position that the accessible parking spaces were for visitors only. The letter concludes by advising Mr. Rahman that, “because of your further harassment of the Corporation’s Building Manager, you are responsible for indemnifying the Corporation for its increased legal costs in this enforcement matter against you . . ..” The letter attaches an updated legal bill, with a one-line charge of $2,522.16 for undetailed legal costs.

[37] On October 2, 2020, PSCC779 sent a “follow-up” to its third enforcement letter. The letter refers to alleged violations of PSCC779’s Communication Policy and alleged harassment by Mr. Rahman as well as to his continued use of the accessible parking spaces. This letter offered Mr. Rahman the opportunity to lease a space in the handicap parking for, by way of example, $100 per month if Mr. Rahman would provide “sufficient medical documentation”. The letter concluded by stating that the “payout statement” included in the June 23rd letter was no longer valid and that if Mr. Rahman wished to pay off the chargeback, he should contact PSCC779’s legal counsel for an updated account. The letter refers to the outstanding chargeback as being added to “your Unit’s arrears”. It is not clear from this reference if PSCC779 was adding its claims for legal costs of enforcing compliance to Mr. Rahman’s common expenses but that is the implication.

[38] On October 8, 2020, Mr. Rahman’s doctor provided a letter, as discussed above. The letter ends,

Mr. Rahman Has a disability parking permit and has spoken to me on a number of occasions regarding harassment by his condo management which he has told me is causing stress and anxiety in his life. Any action to reduce this stress would obviously benefit Mr. Rahman’s overall Health. IF you require any further information please do not hesitate to contact our office.

PSCC779 submitted that they did not find the letter sufficient support for Mr. Rahman’s request and wrote to the doctor for more specific information. They did not receive a reply, which they assume was on Mr. Rahman’s instructions.

[39] During the month of October, there were a number of email exchanges between the parties, during some of which Mr. Rahman threatened to report PSCC779’s counsel to the Law Society of Ontario, a threat for which Mr. Rahman subsequently apologised.

[40] On October 14, 2020, PSCC779 served Mr. Rahman with a Notice of Lien in the amount of $6,982.70. On October 26, 2020, PSCC779 emailed Mr. Rahman and advised Mr. Rahman that it was on that date registering a Certificate of Lien on Mr. Rahman’s condominium unit. The email continues, “Please be advised that PSCC779’s costs of our continued involvement in this enforcement matter against you is [sic] being charged back to your Unit’s common expenses – including the legal costs of having to defend and/or counterclaim against the Action in the Brampton Superior Court which you apparently electronically-issued [sic] this morning.” PSCC779 submitted that, pursuant to its Declaration, it was charging Mr. Rahman interest at 18% per annum, compounded monthly, on its cost claims.

[41] There are a series of letters in November and December advising Mr. Rahman that the amount secured by the lien was increasing. On December 31, 2020, a Notice of Sale was registered by PSCC779 against Mr. Rahman’s condominium for an amount of $13,839.68, which was expected to increase by February 1, 2021 to $15,162.51. PSCC779 advised that if payment in full was not received by February 19, 2021, PSCC779 would proceed to sell Mr. Rahman’s condominium.

[42] Mr. Rahman had earlier protested that PSCC779 could not add its legal costs in this matter to his common expenses without a court order. Mr. Rahman cited subsection 134(5) of the Act, which reads:

 If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit.

[43] In response, PSCC779 cited the case of Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194, a decision of the Superior Court of Ontario. PSCC779 takes the position that this case authorises them, with properly constructed indemnification clauses in its Declaration, to add its costs of enforcing compliance with its Declaration to Mr. Rahman’s common expenses without seeking a court order. The importance of this interpretation is that common expenses may be the subject of a lien and that lien may be enforced through the sale of, in this case, Mr. Rahman’s condominium unit.

[44] The Amlani case deals with the interpretation of an indemnification clause and the operation of section 134 of the Act. However, the case does not stand for the proposition that, through deft wording of an indemnification clause, a condominium corporation can deprive an owner of his or her day in court as provided for in subsection 134(5) of the Act. In fact, the Court says, at paragraph 34,

It is one thing to allow the corporation to enforce, by way of lien, common expenses that are applicable to all unit holders and that a majority of unitholders have approved. It is entirely another to allow a condominium corporation the unfettered, unilateral right to impose whatever costs it wants on a unitholder, refer to them as common expenses and thereby acquire the right to sell the unitholder’s apartment.

[45] Another way of considering the matter is to determine if PSCC779’s interpretation of its indemnification clauses is reasonable. Here again, reference may be had to the Amlani case, where the Court wrote, at paragraph 46:

Finally, the interpretation the Corporation advances contravenes section 134 (5) of the Act because the costs it claims related to compliance and enforcement costs without being embodied in a court order. An interpretation that contravenes a statutory provision is, by definition, unreasonable

[46] From the outset PSCC779 took an aggressive posture in enforcing compliance despite the fact that it would have been clear to a reasonable person that Mr. Rahman had, at the minimum, a prima facie case for his use of the accessible parking space. PSCC779’s position became increasingly aggressive. It added its legal costs in enforcing the Declaration, together with associated interest charges, to Mr. Rahman’s common expenses. Despite Mr. Rahman, correctly, advising PSCC779 that it could not add these costs to his common expenses without a court order as required under subsection 134(5) of the Act, PSCC779 persisted. It not only added those costs to Mr. Rahman’s common expenses but attempted to collect its legal costs and interest by way of lien and notice of sale. It proceeded despite hearing from Mr. Rahman’s doctor that its treatment of him was causing him stress and anxiety.

[47] PSCC779 has not quantified the costs it is claiming related to its enforcement of compliance of Article 4.2 of its Declaration against Mr. Rahman. It is impossible to determine what part of the lien registered against Mr. Rahman’s property or the Notice of Sale relates to claims of indemnity of enforcement costs concerning Mr. Rahman’s use of the accessible parking. Despite being specifically invited to set out its costs in this hearing, PSCC779 declined to do so. As discussed above, it apparently takes the position that it is sufficient to assert a claim in order to force Mr. Rahman to defend against it. PSCC779 is doing exactly what the Court in the Amlani case warned against, that is, PSCC779 claims, “the unfettered, unilateral right to impose whatever costs it wants on a unitholder, refer to them as common expenses and thereby acquire the right to sell the unitholder’s apartment.”

[48] At some point in pursuing this matter, PSCC779 tipped over from aggressively pursuing its claims to harassing one of its condominium unit owners. PSCC779 persistently ignored Mr. Rahman’s claims, brushed off his references to the Act and the Mississauga Parking By-Law. Most egregiously, despite the letter from Mr. Rahman’s doctor testifying to the stress it was causing, PSCC779 registered a lien on Mr. Rahman’s condominium units and is now moving to enforce the lien by selling Mr. Rahman’s home. It is important to underscore that both the lien and the Notice of Sale are being pursued in contravention of subsection 134(5) of the Act, which requires a court order before enforcement costs can be added to Mr. Rahman’s common expenses.

[49] What is to be done about this? The first step is to have PSCC779 provide Mr. Rahman with a complete accounting of what costs it has claimed for enforcement of Article 4.2 of its Declaration against Mr. Rahman. It is important that Mr. Rahman understand what part of the lien against his property and the Notice of Sale relates to this matter and what part he will have to seek a remedy for in another forum.

[50] Second, PSCC779 must stop any enforcement actions it is currently taking that relate to costs it claims in enforcing Article 4.2 of its Declaration against Mr. Rahman. Included in these actions are the registration of a lien against Mr. Rahman’s condominium units and the Notice of Sale served by PSCC779 against him.

[51] I will direct PSCC779 to pay Mr. Rahman’s costs in this matter in the amount of $200 under subparagraph 1.44(1) 4 of the Act.

In Metro Toronto Condominium Corporation No. 545 v. Stein, 2006 CanLII 20838 (ON CA), the corporation determined that all unit owners were required to carry out Level 5 remediation in response to a mold problem. The respondents carried out Level 1 remediation in their unit, which was more affordable and was suggested to them by a mycologist. The corporation's application to enter the unit to carry out the Level 5 remediation was denied. The corporation appealed from that order, arguing that the application judge erred by failing to defer to the corporation's decision to require Level 5 remediation.  

Rouleau J.A., for the Court of Appeal, upheld the application judge's decision, which was based on the finding that the corporation had not acted reasonably in imposing its standard of remediation and that reasonable lower cost alternatives ought to have been considered, especially in light of there being no evidence of harm to other units. The Court held that the Court of Appeal's decision in Dvorchik did not apply in this case because the corporation had made the strategic decision not to make the requirement for Level 5 remediation a rule: 

[19] The application judge rejected the Corporation’s submission that, by remediating to a Level 1 rather than a Level 5 standard, the respondents had created a dangerous situation as contemplated by s. 117 of the Condominium Act. She went on to find that this section of the Act did not empower the Board of the Corporation to impose a particular method of remediation where it could not establish that the method chosen by the respondents had not reasonably dealt with the problem.

[20] The application judge concluded that the Corporation failed to meet its onus of proving that a condition currently existed that was “likely to damage the property or cause injury to an individual”.[3] In the event that she was wrong on this point, and that the Corporation had in fact established the existence of such a condition, she went on to consider whether the Corporation was acting reasonably so as to justify the court granting the discretionary relief being sought. On this latter issue the application judge concluded that the Corporation had not acted reasonably in imposing its standard of remediation. Central to this conclusion was her finding that the Board of the Corporation had failed to consider reasonable alternatives to the requirement that all units carry out a Level 5 remediation. Reasonable lower cost alternatives ought to have been considered, especially in light of there being no evidence of harm to other units.

[...]

b) The decision in Dvorchik

[41] In Dvorchik, the Corporation applied under s. 49(1) of the then Condominium Act, R.S.O. 1990, c. C.26, for an order directing the respondent to comply with a corporation rule that prohibited unit holders from having pets weighing more than twenty-five pounds. Section 49(1) is similar to s. 134(1) of the current Condominium Act.

[42] At first instance, Keenan J. found the rule restricting pet size to be invalid and unenforceable. He did so because the Condominium Corporation had failed to provide evidence proving that the twenty-five pound limit was reasonable.

[43] In allowing the appeal, the Court of Appeal made the following statement about the deference to be paid to condominium corporations:

The condominium board was not obliged to hear evidence in reaching its conclusion that larger pets be prohibited. In making its rules, the Board is not performing a judicial role, and no judicialization should be attributed either to its function or its process. In an application brought under s. 49(1), a court should not substitute its own opinion about the propriety of a rule enacted by a condominium board unless the rule is clearly unreasonable or contrary to the legislative scheme. In the absence of such unreasonableness, deference should be paid to rules deemed appropriate by a board charged with responsibility for balancing the private and communal interests of the unit owners (para. 5).

c) Does Dvorchik apply?

[44] The court in Dvorchik was considering the enforcement of a rule adopted by a condominium corporation pursuant to s. 29(1) of the previous Condominium Act (s. 58 of the current Condominium Act). The rule adopted in that case clearly fell within the scope of the rule-making authority of the condominium board. The operative section of the Act specified that the condominium corporation’s rule-making power was only limited by the requirements that the rules be “reasonable” and “consistent” with the Condominium Act.

[45] The case at bar does not involve a rule, and the sections relied on by the Corporation do not contain language similar to s. 29 of the previous Act. The Dvorchik decision is, therefore, clearly distinguishable on its facts.

d) Should the principles in Dvorchik be extended to apply in the present case?

[46] The Corporation argues that its judgment that, absent a Level 5 remediation, a dangerous situation will be allowed to exist in those units is a reasonable one made with the benefit of expert advice. As a result this decision should be given the same deference as provided in Dvorchik without regard to the fact that it is not a “rule” or “by-law” of the Corporation.

[47] In my view, Dvorchik should not be extended to the present case. I say this for two reasons. First, the decision by the Corporation that it would not seek to structure the remediation requirement as a rule creates an important distinction from Dvorchik. Second, this case raises both different and competing rights and duties under the Condominium Act.

[48] It is important not to lose sight of the fact that the Corporation chose to frame its application as a dispute with respect to the interpretation of ss. 117119 and134 of the Condominium Act and not as “a disagreement between the parties with respect to the declaration, by-laws or rules” of the corporation (see s. 132(4) of the Condominium Act). Whether or not the remediation requirement could be made into a rule, the Corporation appears to have chosen not to make it a rule so as to avoid the s. 134(2) requirement to go to mediation or arbitration as a precondition to any court application. Thus, the Corporation’s failure to adopt the requirement for Level 5 remediation as a “rule” is more than semantics. It reflects a strategic decision by the Corporation. By choosing this route, the Corporation cannot benefit from the statutory provision relied on in Dvorchik.

[49] More importantly, in the present case, the court is being called upon to enforce a decision of the Corporation that, unlike Dvorchik, is not within the Corporation’s exclusive area of responsibility. Here there are competing obligations and duties. The Condominium Act provides that unit holders are responsible for the maintenance of their units.[6] The Corporation only has authority to interfere with and override these unit holders’ responsibilities and obligations where the unit holder has failed in his obligation to such a degree that a risk outlined in s. 92(3) or a condition likely to damage the property or cause injury to an individual as described in s. 117 is allowed to exist and continue. [7]

[50] As the statutory rights and obligations of both parties are engaged, a careful balancing is required. There is no statutory or principled reason why deference should be afforded to the Corporation’s decision on the facts of this case.

CONCLUSION

[51] For these reasons, I would dismiss the appeal. I would award the respondents their costs on a partial indemnity basis fixed at $10,000 inclusive of GST and disbursements.

Authorities

Condominium Act, 1998, SO 1998, c 19

Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194 (CanLII)

Rahman v. Peel Standard Condominium Corporation No. 779, 2021 ONCAT 13 (CanLII)

Metro Toronto Condominium Corporation No. 545 v. Stein, 2006 CanLII 20838 (ON CA)

Wednesday 14 June 2023

Complaining tenant dies. What happens to eviction proceedings?

Does the death of a complaining tenant void the eviction of the perpetrator?

What a weird topic for an article on residential landlord and tenant law.  However, it seems like an increasingly current and real issue given how the Landlord and Tenant Board is scheduling and hearing cases.  The LTB is taking many months if not years to resolve cases.  Circumstances change over that time and yes, complaining tenants some times pass away.  Does the extended passage of time, the death of the complainant, play to the favour of the tenant who is being evicted?

While I have introduced this issue with the "death" of the complainant, the fact is that there are similar issues to "death" that are being argued as relevant and dispositive of eviction applications.  What is "similar" to death?  In the unique context of Landlord and Tenant law I would say that the stopping of a negative behaviour for months and months and months before an eviction hearing is similar to the "death" of a complainant.  The stopped negative behaviour (screaming, fighting, swearing, anti-social actions) is similar in that no one is being bothered by the offending tenant any longer.  Similarly, if the offending actions were caused by a specific person in the offending tenants household and they have moved out, are no longer living there, or no longer visiting, that has the effect of no one being bothered any more by the offending tenant.  The "no one" being bothered is, in a sense, the tenant who died.   Therefore, if the deceased tenant is no longer complaining or being bothered (i.e. no one is being bothered), should the Landlord and Tenant Board entertain a termination and eviction of the offending tenant?   

Put another way, should a tenant (or someone in their household) who was raising all kinds of hell and making life miserable for some other tenants or the landlord be able to take advantage of procedural delays and the passage of time (or the death of the complainer) to say that the issue is ancient history and is now irrelevant.   The legal concept that is often argued is that the passage of time has made the case "moot".  "Moot" being defined as a circumstance that has little or no practical relevance.

This issue tends to come up in the following way.  A tenant commits an anti-social action (say--smoking in the hallways).  The smoking bothers a neighbour and triggers her asthma.  The landlord serves an N5 and says the smoking in the hallways must stop.   The tenant complies for a few weeks and then a month later starts smoking in the hallways again.  The landlord serves a second N5 and files an application to the Landlord and Tenant Board.   That application is not scheduled for hearing for 14 months (not an uncommon timeline these days---but the exact timing isn't the key to his article).  Assume that prior to the hearing date the tenant who was complaining about being bothered by the smoke passes away.  Alternatively, assume that shortly after the hearing the complaining tenant passes away.   Assume also in the first scenario that the tenant stopped smoking "cold turkey" 4 months before the hearing.  In the second scenario the smoker tenant wants to review or appeal on the basis that the person bothered is now deceased so why evict?

The passage of time between objectionable behaviour and the ultimate hearing and whether anyone is still around to be bothered by the behaviour is a difficult issue.  What if, instead of the complainant dying, the persons bothered decided to simply move out.  Maybe because of the objectionable behaviour or maybe just because their life took them elsewhere.  Does their moving out and being unaffected by the smoking tenant change what should happen at the hearing of the case?

I know that in my current practice that I am spending a lot of time on three parts of an N5 application.  I seek to prove at least one serious issue in the first N5, then the serious issues in the 2nd N5, and then I spend some serious time proving negative behaviours between the second N5 and the actual hearing date (which, as indicated, can be months to years).   The reason for addressing the time between the 2nd N5 and the hearing date is to challenge the idea that the issues have become moot, meaningless, or pointless.  The objective is to establish that things have not gotten better and hence, the idea that the offending tenant should only be evicted if the objectionable actions are still ongoing is avoided.   

It is oft argued under section 83 RTA (discretion section), that the stopping of negative behaviour for long periods of time, or no one who is bothered still being in the surrounding rental units or in the building, is a reason to refuse eviction.  Is that the correct way to be thinking about this?

To inform my thinking on this issue I've recently read the Divisional Court's decision in Holland v. 149732 Ontario Inc., 2023 ONSC 3377 (CanLII), a case that seems to have been ably argued by Mr. John Dickie here in Ottawa.  In that case, the relevant time line appears to be:  LTB hearing began March 23, 2021 and finished June 8, 2021.  A decision on that case was issued November 9, 2021, terminating the tenancy for November 20, 2021.  The evicted tenant filed an appeal on November 20, 2021 (thereby stopping the eviction until the hearing of the appeal).  The tenant who suffered at the hands of the evicted tenant died on May 12, 2022.   The appeal was heard on May 31, 2023.

As you can see from the above dates, the time line runs over more than 2 years.  What is missing from the timeline is the date that the landlord applied to the LTB and how long it took to get to the hearing that started in March 23, 2021.  The appealed decision that would contain this information does not appear to be reported (yet).  However, it is entirely fair to presume that the case at the LTB would have been pending for at least a year before the hearing started in March 2021.   Hence, the life of the case is just over 3 years long.

What the Divisional Court in Holland tells us is that the "appeal is not moot because H.D. has died" (H.D. was the complaining tenant).  The Court goes on to say that the "the fault is not wiped out or cancelled because the victim of the interference has died".   This, I think, is a rather significant direction from the Divisional Court on how to look at the changing circumstances of cases due to the passage of time.   The fact that the complainant has died (and therefore is no longer bothered) does not make the case pointless and moot.

The Court goes on to make another very important point.  A landlord in pursuing an eviction against a tenant, even where the complaining tenant has died, is obligated to future new tenants to make reasonable efforts to ensure that those new tenants are not subjected to substantial interference by the offending tenant.   This, I think, is a very valuable direction from the Court as it is very often the case that by the time a landlord gets to hearing the neighbours who have been harassed and stressed out have moved out of the building to get away from the offending tenant.   Their moving out does not create a pass for the offending tenant.

The Court, in Holland, further cites a decision in North Avenue Road Corporation v. Travares, 2015 ONSC 6986, also a Divisional Court decision.   This case actually finds that the LTB errs in using section 83 to determine that an issue is "moot" because the tenant complaining had moved out by the time of the hearing.   The Court indicates that the finding that the issue is moot is in fact incorrect and that the LTB erred by failing to consider that the landlord has a duty to future tenants.  While the Court does not overturn the Board's decision to maintain the tenancy and evict the tenant, the Court does set aside the decision and sends it back to the LTB for a fresh determination.

CONCLUSION

The passage of time, the stopping of activity for a long period of time before the eventual hearing, or the moving out of the persons who suffered from the offending activity, is not a basis to argue that an issue has become moot.  A landlord has a continuing obligation to not only the tenant (who died or who has moved out) but to all future tenants who may be affected by the offending activity.  


Michael K .E. Thiele


Monday 12 June 2023

Refunding Compensation to Landlord if N12 or N13 is refused

 What are the Rules for Compensation Refunds under the RTA?

Landlords who seek to terminate and evict tenants on the basis of an N12 become aware that it is a requirement of these termination notices that the tenant must be paid compensation equal to one month's rent (presuming a monthly tenancy) (Section 49.1 RTA).   The N12 form is used to terminate a tenancy for landlord's own use (or the other permitted users related to the landlord) or for a purchaser's own use (or the other permitted users related to the purchaser).  The compensation is payable before the termination date that is listed in the N12.  This date is required to be a minimum of 60 days after service of the N12 and must be for the end of term (rental period).  If the compensation is not paid then it is possible that the N12 will be void and any application brought by the Landlord to terminate and evict the tenant will be dismissed.  [Note that the law has evolved a bit and it should no longer be an automatic dismissal if the compensation is not paid by the termination date--see the blog article prior to this one for caselaw].

N12 Form Image from the Landlord Tenant Board


What ends up happening, that often angers (or perhaps even enrages) landlords is that they serve the N12 in accordance with the rules and then pay the compensation as required and then the tenant refuses to move out.  That leaves the landlord down the equivalent of a month's rent, likely frustrated at being unable to move into the unit or frustrated at being unable to close the real estate transaction to sell the unit for the purchaser to move in.   At this stage, all that a landlord can do is file an application to the Ontario Landlord and Tenant Board, in Form L2, and wait for a hearing at which they can argue that the tenancy should be terminated and the tenant evicted.

It might seem that getting an eviction Order is automatic if the proper form is served and the compensation is paid.  In reality, that is not necessarily the case.   A tenant is permitted to challenge the good faith of an N12, challenge the assertion that the landlord actually intends to move in or that the purchaser actually intends to move in.   There can be indicia of "bad faith" and certainly the Landlord and Tenant Board can refuse and deny the termination and eviction application.   There are circumstances where human rights considerations come into play and if the landlord's use seems less necessary compared to the tenant's need then a refusal is possible (though exceedingly rare).

There are then a whole slew of technical defences that may also result in a dismissal of the application.  Notices of Termination need to be "perfect" and what many often consider minor technicalities are actually fatal defects and the application is necessarily dismissed.   The Notice of Termination process, is an involuntary termination of a tenancy and we can't forget it is the removal of someone from their home.  It is a unilateral act.  Hence, the Court of Appeal (from so long ago you could say from time immemorial), has held that the termination provisions are mandatory requirements that can not be overlooked.

So, what happens to the already paid compensation if the Landlord serves the N12 (for landlord's own use or purchaser's own use), and for some reason the application is denied/refused/withdrawn?   

The Residential Tenancies Act contemplates this at section 73.1 RTA where it states as follows:

    73.1(1) If the landlord compensated the tenant under section 48.1, 49.1, 52, 54, 55, as the case may be, in connection with a notice of termination under section 48, 49, or 50 and the Board refuses to grant an application under section 69 for an order terminating the tenancy and evicting the tenant based on the notice, the Board may order that the tenant pay back the compensation to the landlord. [emphasis added]

Many people have interpreted this section in such as way as to imply that the compensation may only be kept by the tenant if the tenant is evicted by the N12 and the Application.   The suggestions is that the compensation is a payment for leaving or being removed from the property and that if the tenant gets to stay in the unit then the compensation needs to be returned to the Landlord.   This view, I think you will find is the dominant view in the reported caselaw (though the LTB has not been reporting/releasing its caselaw since October 2022) and most cases show an automatic order for the tenant to return compensation where eviction is refused.

In my opinion, this view of the compensation (as payment for moving out) is not the correct interpretation of the section.  The cases in which tenants have been ordered to return compensation have been decided in an analysis that seems rather binary.  If evicted, compensation kept by tenant.  If not evicted, compensation ordered returned.  Such an automatic and binary approach does not do justice to the word "may" as written in section 73.1 RTA.   The word may, in my opinion, implies a broader flexibility and discretion that needs to be exercised.  I say this because if the proper interpretation is that compensation must be returned if termination is not granted then the section would say that in a straight forward manner.   The section could be written as a simple yes or no directive based on whether termination was granted.   The fact that the section was not written in this way implies that the return of the compensation is a "possibility" but that there is a legal test, factors, and discretion that needs to be applied in determining whether the compensation should be returned to the landlord.

I was pleased to argue this position in Board File EAL-92824-20 (Order issued August 31, 2021).   The adjudicator did consider the word "may" as it appears in section 73.1 and had this to say:

    12.  Section 73.1 says the Board “may” order the compensation to be repaid to the landlord. By using permissive language, the legislature anticipated situations where it would be unfair for the tenant to    return the money. I see such a situation as where the landlord has done something wrong, as in this case where a mandatory requirement was not met. To order the money back to the landlord when the landlord has not followed the mandatory requirements of the legislation is not holding them accountable, therefore I find it fair and reasonable for the Tenants to retain the compensation.

As you can see from this decision, the adjudicator created a legal test around the work "may" and analyzed whether the compensation should be returned based on the conduct of the parties.  In this particular case, even though the landlord was unsuccessful in terminating the tenancy, the tenant was not required to return the compensation that was paid.

It will be interesting to see if the LTB adopts this reasoning in a broader way than the current caselaw reflects.  In my opinion, the adjudicator in this case (Ms. Wade), gave a proper interpretation to the word "may" as it is applied in this section of the Act.

Michael K. E. Thiele



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