Are there Time Limits when tenants apply for Interest Owing on their Last Month's Rent Deposit?

How many years of unpaid interest can a tenant claim on the Last Month’s Rent Deposit?  The Ontario Landlord and Tenant Board's T1 Form allows a tenant to apply for LMR interest arrears.  That form implies a time limit of 1 year from the date the money was due to the tenant and not paid by the landlord.

The question for this article is to explore if a tenant can require a landlord to pay more than one year of interest owed if the landlord has failed to pay the interest as required under the Residential Tenancies Act.   The issue, and why it is even a question, is that the Residential Tenancies Act is rather thorough in limiting the time in which a tenant can bring an application against a landlord.  The standard time limit (or perhaps I should say the most common time limit) that the Residential Tenancies Act imposes on tenants is one year from the date of the incident or breach by the landlord–meaning a tenant needs to file an application to the Landlord and Tenant Board within the one year following the incident/breach failing which they have very likely lost the right to file an application for any relief or compensation.

How does this question matter for tenants?   It is extraordinarily common for landlords to require a tenant to pay a last month’s rent deposit prior to the tenant entering into possession of the rental unit.  The Last Month’s Rent (LMR) deposit is legally collected and can not exceed one month’s rent as per section 105 & 106 Residential Tenancies Act.

The LMR is mandatorily held by the landlord to be applied to the last month of the tenant’s tenancy.   It is not a slush fund to be applied to ongoing rent and refurnished in subsequent months.  It may only be applied to the last month of the tenancy.  Note, this does not mean the last month of a fixed term lease but instead the actual last month of the tenancy.  In Ontario a residential lease continues automatically on a month to month basis after the expiry of the fixed term lease.  Hence, the LMR continues to be held, even after the expiry of the fixed term lease into the period of the month to month lease.  Only when the tenancy agreement is finally and ultimately terminated does the LMR get applied.

It has been a feature of Ontario Residential Tenancy law since January 1, 1970, that a landlord is only permitted to require a security deposit in the form of a last month’s rent deposit.   From January 1, 1970, a rent deposit (equal to no more than one month’s rent) that was collected by the landlord earned interest at the rate of 6% per annum and had to be paid to the tenant annually.  Prior to January 1, 1970, Ontario law allowed landlord’s to require other deposits from tenants including the most common type of security deposit for damages.  After January 1, 1970, it became illegal to collect damage deposits from Ontario residential tenants covered by the various residential tenancies laws to the present day (year 2023) under the Residential Tenancies Act.

The fact that a landlord is required to pay a tenant interest on the LMR (security deposit) does not mean that the deposit is actually ever paid.  Many years of a tenancy often go by during which a landlord simply never pays and the tenants forget (or don’t know) to ask for the interest money owed to them.  So a little math to put the interest question in context:

YEAR AMOUNT of RENT DEPOSIT    INTEREST OWED

2019 $1250.00                         $22.50

2020 $1250.00                         $27.50

2021 $1250.00                         COVID YEAR–no interest

2022 $1250.00                         $15.00

TOTAL OWED to tenant                 $65.00

So, you can see that in a tenancy that is 4 years in length (and ongoing) a tenant has earned $65.00 in interest.  The interest calculation for each year is a simple interest calculation and the percentage used is the Annual Guideline Interest amount published annually (this is the legal percentage amount that the Ontario Government allows a landlord to increase rents for units that are not otherwise exempted from rent control).

If a tenant hasn’t demanded payment can how many years of rent arrears interest can they claim?  Suppose for the purposes of our illustration that a tenant has discovered on March 20, 2023, that they haven’t been paid any LMR interest since their tenancy began on January 1, 2019.   Does the general one year time limit apply?  If so, arguably the tenant’s claim is limited to the interest of $15.00 only—because this is the amount that became payable within the past 12 months.   If a general one year time limit does not apply, then the full amount of $65.00 is payable to the tenant regardless of when the interest is demanded or deducted from future rent.

Below I have listed the various time limitations and references to various sections of the RTA that establish the time limits on tenant applications.   The time limitation section that seems most likely to apply is that in respect of money illegally collected or retained by a landlord under section 135.  That section allows a tenant to apply for the landlord to pay any illegally retained or collected money.   One may be forgiven for thinking that a landlord is illegally retaining money when they breach the mandatory requirement (section 106(6) RTA) to pay interest, annually, to the tenant.  Further, the failure to pay interest is actually an offence (section 234(e)) under the RTA and therefore it would seem to clearly be an illegal action to which section 135 RTA would apply.

The Application form that tenants use for a rebate of money owed to them by a landlord is the T1 Application.    The current version of the T1 Application and the Instructions on the LTB website make no reference to the section 135(4) RTA time limitation of one year (even though it is clearly provided for in the statute).  It is clear that the T1 Application clearly is the contemplated form under section 135.  Interestingly, it is the T1 Form that provides for a mechanism to claim from a landlord the LMR interest owing (it is Reason 5 T1 Form).   Does it follow then that there is a 1 year time limit on an application for LMR interest to be paid to a tenant?

The answer it appears may be found in an appellate authority–and the answer is “no”.  A tenant is entitled to the entirety of interest owed whether or not an application is brought within 1 year.   The Divisional Court in 626114 & 626115 Ontario Ltd. v. Tirado, 2005 CanLII 35461 (ON SCDC), determined that the one year limitation period as provided in the Tenant Protection Act did not apply. [the section remains the same in the current RTA].   The Ontario Landlord and Tenant Board have followed this appellate authority under the current Residential Tenancies Act in D.D. Acquisitions Partnership v. Savage, 2022 CanLII 80924 (ON LTB).

What is interesting about the Tirado decision is that the Court recognizes that a tenant may deduct multiple years of interest owed (ignoring the 1 year time limit) when the tenant is deducting the interest from a future rent payment that is due to the landlord.   That isn’t quite the same, however, as applying to the LTB for an Order requiring the landlord to pay the money when (for example) a tenancy has ended an no more future rent will be paid.

The Court in Tirado does seem to recognize the limitation problem on application (using a T1 under section 135) when it approves of reasoning in another Ontario Rental Housing Tribunal case [Hash v. Retirement Life Communities, [2000] O.R.H.T.D. No. 12] wherein the Tribunal held that the one year limitation period should not apply to interest payments.   How that reasoning overcomes the provision of section 135 remains unclear.  Nevertheless, the weight of the appellate authority now is that a tenant may apply for the entirety of LMR interest owed irrespective of the time limit in section 135 RTA.  

VARIOUS TIME LIMITATION SECTIONS UNDER THE RTA FOR TENANT APPLICATIONS

Tenant applications against landlords at the Ontario Landlord and Tenant Board (under the Residential Tenancies Act) are generally time limited to one year.  Tenant’s Rights (T2) and Tenants’ Maintenance Applications (T6) are prescribed/limited by section 29(2) RTA to one year.  A bad faith application is time limited to one year by section 57(2) RTA.  A denial of first refusal rights (under an N13) attracts a 2 year limitation at section 57.1 RTA.  Unreasonable denial of sublet or assignment applications are time limited to 1 year in section 98.  Evicting an over-holding sub-tenant requires action within 60 days after the end of the sub-tenancy (section 101(2) RTA).  An application respecting a rent increase agreement that is breached attracts a 2 year time limit in section 122(2) RTA.  An application respecting the reduction or discontinuance of a service or facility as a one year time limit (section 130(5) RTA).  An application to recover money illegally collected or retained, which includes the compensation obligation on N12's and N13's, is limited to one year after the money was collected or retained section 135(4) RTA. 

Illegal Acts and Tenants Committing Crime: Easy or tough to evict?

 

ILLEGAL ACTIVITY BY TENANTS does not obviously mean eviction.  There are many defences and relief from eviction is possible and even likely.  Examples given and discussed.

Tenants committing crime or other illegal acts.  One might think if a tenant is proven to have committed crime in the rental unit or in the residential complex that it would be a rather straightforward termination and eviction of the tenant.  Is there much to talk about even?  In fact, like most things involving the Residential Tenancies Act the devil is in the details and nothing is ever obvious no matter what the circumstances might look like.

 

I thought in discussing this topic that I would go over examples of several cases and give an overview of the allegations and then the outcome of the case at the Landlord and Tenant Board.  Having examples and understanding of what happens is perhaps the most useful way to get an understanding about “illegal activity” and what the Landlord and Tenant Board is likely to do in any given case.  This is a useful perspective for both tenant & landlord regardless of which side of the argument that you are on.  If you are the landlord, you will discover that very serious illegal  activity can still result in the Landlord and Tenant Board granting relief or refusing eviction.  That same knowledge is very useful if you are a tenant and find yourself on the wrong side of an Illegal Act eviction application.   Just because the facts are horrible does not mean that the tenancy will be terminated.

 

Before jumping into the facts of some cases, let me just set out what a Notice of Termination for Illegal Act needs to set out and what needs to be proven at a hearing to terminate a tenancy and evict a tenant who is alleged to have committed such acts.

 

Firstly, the applicable section of the Residential Tenancies Act is section 61.  A landlord can serve a Notice of Termination (Form N6) if the tenant or another occupant of the rental unit commits an illegal act or carries on an illegal trade, business or occupation or they permit a person to do so in the rental unit or the rental complex.  The section makes a distinction between regular illegal acts and drug trafficking and production offences (note that the distinction is often a source of mistakes in issued N6 Forms).  Of note, an “illegal act” does not mean only a “criminal act”, the scope is broader than just the Criminal Code of Canada and in fact, a breach of the Residential Tenancies Act itself can, in some circumstances, constitute an Illegal Act.   It is not necessary that there be a criminal charge or even a conviction in relation to the alleged offence.  The fact that no conviction is necessary is so important that it is stated explicitly in section 75 RTA.  The burden of proof is on a balance of probabilities and not the beyond a reasonable doubt standard.  This means that even though the allegation may be criminal in nature the landlord has the lower civil burden of proof compared to the criminal standard that only the Crown attorney must prove.  This fact allows for the possibility that even if a tenant is charged and acquitted of a criminal code offence a landlord may still succeed on evicting a tenant for that same alleged criminal act (because the burden of proof is lower—and “reasonable doubt” is not the measure).

 

The Illegal act that the tenant commits must occur in the rental unit or in the residential complex.  This means that no matter how horrendous or serious the crime might be; if it did not occur in the rental unit or in the residential complex then it can not be the basis for terminating a tenancy.   And lastly, and this is a big one, the offence alleged must have the potential to affect the character of the premises or disturb the reasonable enjoyment of the premises by the landlord or other tenants.   I note this as a “big one” because it is often forgotten and unexplored by landlords and tenants alike in their evidence—which is a real mistake as the legal test requires this potential to be proven and absent that proof the illegal act eviction application should be dismissed.

 

On that point (potential to affect the character), I recall a case from many years ago where my client was selling a high volume of untaxed tobacco from his rental unit.  This was discovered when Police were called to his unit because he had been robbed and assaulted in his apartment (which was entirely unrelated to his tobacco business) and while making sure the burglar was gone they found a chest freezer full of tobacco in a back bedroom.  My client was charged under the Excise Tax Act and by how the evidence was catalogued and published in handsome evidence books you’d think the police took down a cartel.  Anyway, there was no defence to the tobacco selling and other than my client being a sympathetic character due to health concerns it was hard to imagine how this “illegal act” would not lead to eviction.   Then inspiration struck and I remembered the “potential to affect the character” requirement (which by the way is an appellate authority, caselaw derived requirement in Swansea Village Co-op v. Balcerzak, [1988] O.J. No. 84 (Ont. Div. Ct.) .   How I used this requirement as a defence was by getting the police officers to testify as to how often they attended the property (numerous times a day) and the kinds of activity for which they were called (prostitution, gang violence, guns, drug trafficking).  As crazy as it might seem, the tobacco selling in the context of this particular residential complex was so astonishingly trivial that it couldn’t possibly have the potential to affect the character of the premises in a negative way.  I think I was even cheeky enough to suggest that it improved the place.  The outcome for my client was as hoped and the tenancy was not terminated (but he was prohibited from selling tobacco in the future).   So, whether you are a landlord or tenant, do not discount the “potential to affect the character” piece of the test and try to remember it because it is a caselaw requirement and not reflected in the Residential Tenancies Act itself.

 

So, on with some fact scenarios for you to understand what can happen at the LTB on Illegal Act applications based on Form N6’s.

 

1.   A tenant was arrested and charged with possession of crack cocaine and there was sufficient evidence for this finding even though the criminal charge was withdrawn.  Police testified that a large number of people would come to the apartment building.  The Tribunal held that based on the large number of people coming and going that the tenant’s activities seriously affect the character of the premises.  This was over-turned on appeal as an error in law.  The proven offence was “possession” and not trafficking, and the adjudicator failed to address the issue of whether one act (the proven allegation) of possession of crack cocaine in the parking lot would affect the character of the premises.  The tenancy was maintained when the eviction application was dismissed. 

 

2.   A tenant renting out their rental unit on Air BnB for significantly more than the rent paid by the tenant was breaching the RTA (s. 234), and this was found to be an illegal act which affected the character of the premises because it gave a transient population access to the residential complex. (Tenancy terminated).

3.   A search warrant was issued in the name of the tenant’s brother.  The officer testifying  (at the LTB) was not present at the search and did not have personal knowledge of where the marijuana and scales were found.  The LTB dismissed the application because the landlord did not (or could not) prove that the tenant was aware of her brother’s conduct.

4.   Police told a superintendent that they were removing property from the tenant’s unit as they believed it to be stolen property.  The tenant was incarcerated at the time of the hearing.   Held: A mere suspicion that an illegal act may have occurred was not sufficient to make out the ground for eviction. Tenancy not terminated.

5.   Elderly tenant’s son uttered threat against janitor in front of contractors while holding an air gun that looked like a real assault rifle.  The threatened janitor felt no longer able to live or work in the building and had to move.  The son had a brain injury and other disabilities and had to live with his elderly mother who also had disabilities.  The LTB found that illegal acts were committed, however, it was satisfied that actual safety was not impaired (because it was an air soft gun) and that relief should be granted because of the negative impacts that eviction would have on the tenant and her son.  Tenancy was maintained on the condition that no further illegal acts occur.

6.   The tenant was found with heroin in a taxi and a small amount of crystal meth was found in the rental unit.  The tenant pled guilty to possession.  The RTA did not apply to the heroin in the taxi because it was not on the residential complex.  The tenant explained how the apartment was his first stable housing, that he was almost 2 months sober, and that his apartment was essential to his recovery.  Tenancy was maintained on the condition that the tenant have no drugs in the residential complex in the future.

7.   Tenant was convicted of two charges of attempting to lure a child by the internet and a further charge of attempting to expose his genitals to a minor.  He was sentenced to four months in jail and 18 months probation.  Relief from eviction was granted, his tenancy was not terminated.  The reasoning was that he showed remorse, participated in a treatment program, his psychiatrist said he would not re-offend, and that eviction from his home of 15 years would be devastating to his mental health.  AND, the LTB found that there was no evidence of any impact on other tenants since his return to the rental unit 16 months before (remember the importance of leading evidence on the “potential to affect the character” discussed above).  Tenancy maintained and continued.

8.   Tenant possessed prescription drugs for trafficking.  Although the actual sale (trafficking) of these prescription drugs was away from the residential complex no relief from eviction was granted as this was a large scale drug operation that put other tenants at risk. Tenancy terminated and no relief from eviction.

9.   Subsidized tenant lived in apartment for 22 years.  Pled guilty to possession of drugs.  This was an isolated incident and eviction was determined to be a disproportionate penalty to the conduct.  The Court (1991 case) granted relief from eviction without any conditions.

10.Tenant with a four year old child, no criminal record, and no previous difficulties with the landlord, had a prohibited weapon and ammunition on the premises.  Granted relief and tenancy maintained.

 

There are of course many hundreds more cases involving Illegal Acts so the above is just a sampling.  My intention in reciting the facts of the above cases is to demonstrate that some rather serious allegations that are indeed proven will not result in eviction and that some less serious allegations (depending on perspective) can lead to eviction.   Whether you are the landlord or tenant or representing the landlord or tenant, the key to the illegal acts (Form N6) termination and L2 application is to have a clear understanding of the illegal act being alleged and what specifically needs to be proven (ex. trafficking or possession are not the same thing). Knowing what needs to be proven if you are the landlord and making sure you have that evidence knowing the essential elements to be proven is critical.   If you’re on for the tenant and can point out that the essential elements of the offence have not been proven then you should indeed win---I can't even begin to tell you how many times that I successfully defended tenants where I knew the legal requirements that needed to be proven in relation to the alleged offence and the landlord did not.  The shock value of an allegation will not alone win a landlord a case.   Further (and remember) knowing that not every illegal act is a basis for eviction and that the offence needs to have the potential to affect the character of the premises is extraordinarily valuable as a defence (and for the landlord to make sure that such evidence is led).  See case #7 above to be reminded of how important such evidence is.

 

And lastly, if you are the tenant or representing the tenant, these kinds of cases are not at all destined to be lost even if the facts seem outrageously horrible.  Section 83 (the discretion section), is extraordinarily powerful and a tenancy can be preserved if you can collect and lead evidence that supports the exercise of such discretion.  The LTB is not an eviction machine and preserving a tenancy, if possible, does generally appear to be the objective of the adjudicators deciding these cases.  So, take the time to explain life circumstances, treatment, help obtained, and explore and explain why the circumstances are now different and that other tenants in the building have no cause to worry if the tenancy continues.  This is hard work—gathering this evidence—and it may be necessary to work with 3^rd parties to put supports and services in place for tenants or to obtain medical reports to explain personal circumstances that put the incident in a different light.   I think, as some of the above cases demonstrate, if you do that work a tenancy can be maintained even if the nature of the alleged Illegal Act makes it seem hopeless.

 

For landlords, don’t be so sure and cocky to think that an ugly allegation will carry the day or rely on the sense that where there is smoke there is fire.  The LTB will not just terminate because of suspicion or because it is better to be safe than sorry.  It is important to realize that an N6 (Illegal Act) is actually a difficult application to prove and that there are numerous defence strategies.   Hence, if you are unsure that you have the ability to prove the essential elements of the offence, are unable to prove that the offence has affected the character of the premises, then it might be better to meet the tenant half way and enter into a mediated consent Order preserving the tenancy but prohibiting certain conduct with a section 78 breach clause.  It is like probation with a penalty only if the activity happens again.  The tenant gets a chance and you get an Order that should quiet down the activity at the building.

When landlords need to referee fighting tenants: What do you do?

 

What does a landlord do if tenants complain about each other? (Noise, music, smoking, shouting, etc.)

Residential Landlords often find themselves in a peculiar spot when tenants in different apartments can not get along.  While the landlord may have a reasonable relationship with all of the tenants it is entirely possible that different tenants do not get along with each other.  It may be the fault of one tenant, both tenants, or a little bit the fault of each.   The troubling part is that the landlord is called upon to be the referee and to “do something” about the behaviour of one or more tenants.  The trouble, of course, is that the different tenants make different allegations about each other such that it is difficult to know what is true, what is made up, and what may be an exaggeration or wrong headed view of what is actually happening. 

Perhaps it would be useful to describe a scenario that I was recently confronted with.  A landlord client contacted me to advise that they have a duplex with a unit above and one below.  The upstairs tenant was complaining that the downstairs tenant was treating the backyard like it was entirely their own backyard and was leaving patio furniture, a gazebo, and a barbecue out there and then telling the upstairs tenant that they could not use the backyard.   The downstairs tenant was also leaving her dog loose in the backyard and was failing to pick up after it.

The downstairs tenant, when approached by the landlord said that the upstairs tenant was being a nasty person (not the word actually used) and was only complaining because the downstairs tenant complained about her smoking in the building and had asked her to stop.  The downstairs tenant denied telling the upstairs tenant that they could not use the backyard and that normal use of a backyard includes leaving yard furniture in the backyard.   The downstairs tenant said that the dog was only off leash, in the backyard, when accompanied and that they picked up after the dog soon afterward and always during the same playtime.

The upstairs tenant responded to the allegation of smoking by saying that she has never smoked in the unit and that the smoking issue was only raised when she tried to go to the backyard to have a cigarette and was told that she couldn’t.

The above facts were just the beginning of many months of complaints received by the landlord from each of the tenants.  As the landlord tried to speak to each of the tenants the landlord received more complaints about the other tenant and denials or explanations about the complaints received.   Asking the tenants to try to get along was pointless and it seemed like the interpersonal conflict was escalating with increasing demands from the each of the tenants to evict the other of the tenants.

The landlord was tired of trying to referee and was especially frustrated at trying to find a way to resolve the problems.  The landlord did not live on the property and never had any first hand knowledge or evidence of the issues.  

The landlord was looking for advice on what to do and how to solve the problem of the sniping tenants.   The problem is real because the landlord does have a duty to ensure that all of the tenants have quiet enjoyment of the property.  This is an implied term into every residential lease in Ontario.  The ResidentialTenancies Act (the statute that sets out the law respecting residential tenancies) refers to “quiet enjoyment” as “reasonable enjoyment” and section 22 of the Residential Tenancies Act provides that “a landlord shall not at any time during a tenant’s occupancy of a rental unit and before the day on which an order … substantially interfere with the reasonable enjoyment of the rental unit or the residential complex in which it is located for all usual purposes by a tenant or members of his or her household”.

The landlord becomes the referee of tenant disputes because of section 22 cited above.  How so? Well, if a tenant is harassing another tenant, or saying or doing something that is interfering with a tenant’s reasonable enjoyment then it is the landlord’s duty to investigate and take legal steps to stop the harassment.  A failure to do that is a breach of section 22 RTA, and then the tenant who is being harassed by another tenant can end up having a legal claim against the landlord for that other tenant’s behaviour.

Therefore, while it might be tempting to tell fighting tenants to sort out their own problems or “grow up” the reality is that the fighting is the landlord’s problem because that fighting can lead to claims for a rent abatement, fines, damages, and “other” orders upon application by the tenant to the Ontario Landlord and Tenant Board in Form T2 (tenant’s rights).   Why does the landlord suffer the having to deal with the claim?  Because the Residential Tenancies Act and the Ontario Landlord and Tenant Board do not give tenants a right of direct action against each other.  A tenant can’t file an application to get another tenant evicted.  A tenant can’t file an application to force another tenant to behave or suffer the consequences.  Tenants can only file an application against the landlord, its agents, and the superintendent (not other tenants).   Therefore, when a tenant is harassed and nothing is done to stop it, the tenant’s only legal recourse is to sue the landlord.

SO WHAT SHOULD the landlord do?

The first thing that you, as landlord, should do is to establish a formalized complaints process.  Typically, the bickering tenants are happy to share their complaints by talking with the landlord.  Little is put in writing.  That needs to stop.   As a landlord you should require all tenants to put their complaints, demand for service and anything else in writing to you.  You can produce a form, have a special website to receive complaints or requests or have a pre-printed form for tenants to fill out and hand in at the office.   How you get the complaint in writing does not really matter.  The key is to get it in writing.

I strongly urge you, in demanding that complaints be received in writing that you set out certain minimum information requirements in any complaint.  For complaints about other tenants you will want the complaint to include at least the minimum following information:

1. Their own name and unit number
2. The date of the complaint
3. The name of the tenant they are complaining about
4. The unit number of the tenant they are complaining about
5. Identifying information if they do not know the name of the tenant or the guest or family member who is causing the problem
6. The date and time of the incident
7. A thorough description of the incident and identify witnesses
8. The impact of the incident on the complaining tenant
9. Information about what the complaining tenant did about the incident (i.e. call police? Bylaw? Confront the tenant? Confront the guest? Nothing?)

If every complaint you receive has at least the foregoing information you will have a base level of detail needed to efficiently investigate the complaint.  Without the base level of detail being provided with a complaint you may find that you are running around, asking questions, and trying to investigate issues that you do not understand in the first place.  This is a frustrating situation (you will eventually want to scream) and you will basically waste your time trying to collect information that you should have at the start of every complaint.  Hence, require all complaints to be in writing (or after receiving an oral complaint tell the tenant they need to put the complaint in writing so that you can take action).

INVESTIGATE

You are required to investigate complaints and to take appropriate action.  The trick will be to decide what is "appropriate".  Some complaints may be frivolous, vexatious, or just made up and others can be exactly right, precise, and serious.  There will be a range of seriousness in the complaints and by receiving the complaints in writing you will be able to judge the seriousness of the complaints and let that inform your response and speed of it.  Some complaints may be resolvable by you simply calling the tenant who was complained about.  Some complaints may require you to attend at the property, inspect the property, speak to other tenants, staff and witnesses, or make inquiries with 3^rd parties (police, City officials), to resolve the complaints.

You are, as a landlord, required to take complaints seriously and to address them promptly.   There is indeed hard time consuming work involved and some tenants may of course occupy a lot of your time.  That is part of the job of being a landlord-- to take complaints seriously and deal with the what is being alleged.

RESULTS of investigation

It is important that you maintain some notes of what steps you took in relation to the complaints received.  It is valuable to record the date and time of receiving the complaint, what you did with the complaint, who you spoke to and when, what you observed, what evidence was available (for example security camera footage) and what conclusions you drew from your investigation.  If the complaint is well founded then of course you may have collected evidence too—video, photos, voice recordings, text messages (from other people), emails (including from other people), witness statements etc..  It is important to collect this evidence and preserve it for use if you need to take legal action.

It is also possible that you conclude that the incident complained about can not be proven.  Or, you might conclude that it never happened.  Or you might conclude that the complaint was made maliciously.  Whatever you conclude, you should make a record of what you concluded and why you reached that conclusion.

The value in recording your conclusion is that through a proper investigation you are fulfilling your duty as a landlord under the Residential Tenancies Act.  Your records setting out what you did is evidence of fulfilling your duty.   Section 22 of the RTA does not make a landlord a guarantor of quiet enjoyment/reasonable enjoyment—meaning you are not responsible for the impacts of other tenants’ misbehaviour on other tenants—so long as you take reasonable action to investigate and determine whether the complaints are well founded or not and to take action where the circumstance require it.

WHAT TO DO WITH the conclusions of your investigations?

When you have reached your conclusions you should report back to the complainant about what you have concluded.  This does not mean sharing the nitty gritty details that perhaps were shared in confidence by others nor does it mean that you disclose confidential information shared with you as the landlord.  However, it does mean that the complainant should receive some kind of indication of what has become of the complaint.  Even if that means that you are closing the complaint without taking further action.

When you reach a conclusion that a complaint is well founded and that “something” did happen you have discretion and flexibility on how to respond.  Just because a complaint may be well founded does not mean that you need to serve legal papers and pursue eviction of the tenant.   You have discretion to determine a reasonable outcome of a complaint and to deal with the wrongdoing tenant in a way that solves the problem or likely resolves the problem. 

For example, say the complaint is that the upstairs tenant was shouting, screaming, and partying until 3 in the morning and that guests were vomiting in the bushes and the downstairs neighbours planters were destroyed.  That kind of behaviour, if proven, could indeed justify serving a Notice of Termination in Form N5—in fact, some people (especially the downstairs tenant) may feel that it is absolutely mandatory for you to serve the Notice of Termination and take all necessary steps to evict the tenant.

That being said, what if you discover in your investigation that the incident/party was the result of the tenant’s high-school aged child having a party while the parents were out of town.  You discover that the tenants had told their child to have only a few friends over and to be “careful”.  The parents tell you that the child has never been in trouble and they thought he could be trusted.  The parents then explain how the party got out of hand, that they have disciplined their child and that they have approached the complaining tenant to compensate the tenant for the damaged property and further that they have instructed their child to apologize to the neighbour.

Perhaps you conclude that the explanation is sincere and that you believe there is little risk of anything happening again.  In these circumstances it would not be unreasonable to decide to close the investigation with a decision to simply do nothing other than to provide an oral warning to the parents that this can not happen again.   Some might find your response wrong and inadequate.  However, you have the discretion to make this decision if you can demonstrate a logic and rationale for your decision.   It is not always necessary to seek the harshest outcome (termination and eviction).  In fact, the Landlord and Tenant Board itself exercises discretion and gives numerous second chances to tenants who have made mistakes.

SERIOUS conclusion of complaints being well founded

If your investigation does result in your determining that the incidents occurred, that there is no good excuse and that there is a risk of the incidents occurring again then it may be necessary to deal with the issue as provided in the Residential Tenancies Act (RTA).

The RTA has a series of forms—N5, N6, N7 that are the main “behaviour and misconduct” forms.  These forms start the legal process to terminate and evict a tenant for bad behaviour (including damage to property).   If through your investigation you have gathered information and evidence that would justify the serving of a Notice of Termination then you need to seriously consider doing that.

Serving a Notice of Termination is your “duty” as a landlord if the circumstances call for it.  Failing to take this legal action can lead to legal action against you.  Complaining tenants, who feel you are doing nothing, can file an application against you.  Interestingly (based on recent cases decided by the Condominium Authority of Ontario), a condo corporation (or other owners) can take action against you and your tenant for breaches of rules and bylaws of the condo.  Those cases lay the blame at your feet (for the tenant’s behaviour) where you do nothing to deal with the problems caused by your tenant.  These cases have resulted in Orders of several thousands of dollars in legal costs being levied against the Owner (i.e. Landlord) and those costs are liened against your unit which means you are paying those costs one way or another.  

Hence, the conclusion to be drawn is that you have an obligation to take legal action when the circumstances demand it—based on the reasonableness standard.   Yes, you have flexibility, but that flexibility and discretion needs to be judged in the context of reasonableness.  If you fail to take action it could be very costly to you.

THE FORMS—the action

Can you fill out the Notices of Termination on your own?  Can you shepherd your case through the Ontario Landlord and Tenant Board system on your own?   The answer is most certainly “yes” though it is highly advisable that you don’t.  Once you get to the Forms stage of proceedings you are into highly technical legal requirements that will very likely “catch you out” at least once if not more times.   You may take a look at the Forms on the Ontario Landlord and Tenant Board website and you may say to yourself—“this doesn’t look all that complicated”.  And in a sense you are correct.  It doesn’t look complicated and you would think that with a little reading all should go well.  There could be nothing further from the truth.  Notices of Termination need to be perfectly correct.  The slightest error and they are void--void means start again, lose your application fee, and do all the work again.  If you attend hearings you will hear landlords exclaiming frustration at what they describe as minor, petty, technicalities, that should be overlooked because what was meant was “obvious”.   Sorry, case dismissed (like it or not).

Licenced paralegals and lawyers are available for drafting and serving Notices of Termination and for appearing at hearings to represent you.  While no one likes to spend money on legal fees you may find that the average cost of representation is well worth it relative to the headaches and wasted time that may come with representing yourself.  With experienced paralegals and lawyers you are likely to have a smoother experience and hopefully only have to attend an LTB hearing once to solve the problem.  

The LTB, while it in theory represents a friendly process where you are encouraged to just “tell your story and all will be fine” the reality is that it is a highly adversarial process full of technicalities, loopholes, and procedural niceties that will turn the novice inside out and spit you out if you encounter an opposite party who understands the law, the technicalities and the legal processes of the Landlord and Tenant Board.   Do yourself a favour (at least the first few times) and retain an experienced legal representative at the drafting of the Notice of Termination stage and follow their good advice.  Whether you win or not, starts with what you write in the Notice of Termination and it is the right stage at which to seek legal advice.  

Non-Payment of Rent. What should a residential landlord do?

 

WHEN A RESIDENTIAL TENANT DOES NOT PAY RENT---what do I do?  A landlord's guide.

You would think that there is only one course of action, one legal answer, one path to dealing with a tenant who has failed to pay rent for their apartment.  It happens to landlords every day, in fact it happens to many landlords regularly with many of their tenants.  Non-payment of rent is a serious, ongoing and significant problem for landlords and tenants alike.  So what do you do if you are a landlord?

I encourage landlords to keep in mind their legal rights under the Residential Tenancies Act and I strongly encourage and advise landlords to exercise immediately and without delay their legal rights under the law.   There are a number of reasons for this but these days, the number one reason is that legal proceedings are inordinately delayed—i.e. slow, slow as molasses going up-hill in the winter kind of slow.  You are looking at many months of delay in getting a hearing at the Ontario Landlord and Tenant Board.  By months I mean possibly years.  The reason for the delays, first hearings, rescheduling, continuation of hearings are numerous, unpredictable, and often times just plain bizarre.   Ultimately though, it doesn’t matter why legal proceedings are slow—the fact is that they are.  Hence you need to exercise your legal rights immediately and efficiently so that you can get in line—as quickly as possible to wait for your turn.

Aside from the excruciatingly slow proceedings at the LTB, what other reasons are there to take legal action quickly and follow up on your rights under the Residential Tenancies Act fully and completely?   My experience is that having pending legal proceedings is the number one way to encourage a tenant to be reasonable and to work with you in resolving whatever the issues might be that are causing the late or non-payment of rent.   Starting the legal process in no way stops you, as a landlord, from being compassionate, empathetic, understanding, and generous with your tenants.  You retain the power and remain able to make deals, maintain the tenancy, enter into payment plans, and basically cut the tenant a break if you wish.  Nothing about starting the legal process prevents you from being generous and understanding.   What the legal process does, however, is formalize your generosity and it puts in place (ultimately) an enforceable legal agreement that if the tenant breaches the agreement (or consent Order) then you have the option of enforcing termination and eviction of the tenancy.

Why not start with generosity, working with, and co-operatively examining the problem with the tenant?  I think the simple answer is that the non-payment of rent is not something that is within the ultimate control of the tenant.  If your tenant is not paying rent then it is likely that they have no money or not enough money to meet their ongoing expenses.   Simply being empathetic and wanting to “help” does not result in the tenant having the money to pay the rent.  Sometimes, the reality of the situation is that a tenant will never be able to pay the ongoing rent, nor the rent arrears, and the tenancy needs to come to an end.  It isn’t because the tenant is a bad person, mean or vindictive (though it could be that too), that rent isn’t being paid.  Sometimes people/tenants lose jobs, separate/divorce, get sick, or suffer some other life event that makes payment of rent impossible.   When that happens even the best tenants may, with regret, live without paying rent in your property for as long as they can.   They may state, with the best of intentions and they will promise that the rent arrears will be paid back and they may beg you to trust them.  Unfortunately, down the road the reality of their personal hardship will hit home and sometimes they take the only remaining route open to them and declare bankruptcy thereby effectively wiping out the debt owed to you. 

You owe it to yourself to treat your rental property and the income it generates as a business.  While business decisions need not be devoid of empathy you do need to protect yourself from unreasonable loss and harm.   To that end you should be aware that even if you follow the law to the letter you will likely suffer some financial loss with a tenant who is unable to pay rent arrears and future ongoing rent.   The Residential Tenancies Act provides the tenant with numerous opportunities to pay rent arrears, void Notices of Termination, and to void eviction Orders by catching up with rent arrears.   Whether you agree or not, the Residential Tenancies Act gives the tenants many many opportunities to void any of your efforts to terminate the tenancy for non-payment of rent.   This is the case regardless of the financial impact of the non-payment of rent on you.  The Ontario Landlord and Tenant Board is not required to take into account your financial hardship, that you need the rent to pay the mortgage, or anything of the sort.  The Ontario Landlord and Tenant Board is not an eviction machine there to assist landlords in evicting tenants—it is important to recognize this fact.

So what are the steps that a landlord should follow when a tenant does not pay rent?  Here they are:

1. On the first day after rent is due and remains unpaid a landlord should fill out a Form N4.   This   form is a Notice of Termination for Non-Payment of Rent.  You can find the Form on the Ontario Landlordand Tenant Board website.   It is absolutely critical that you fill out this form in a way that is PERFECTLY correct.  The slightest error is likely to void the form and you would have to start all over again.   The Landlord and Tenant Board website has a guide to filling out the form and there are many websites (and in fact another blog article on this site with a video) setting out the steps to filling in the Form N4.    While the Landlord and Tenant Board is set up with the intention of landlords representing themselves you might want to consider retaining a lawyer or paralegal to assist you in preparing and serving the forms as the forms are deceivingly technical.
2. Once you fill out the Form N4 (Notice of Termination for Non-Payment of Rent), you need to serve it on the tenant (remember to keep an exact duplicate copy for yourself).   There are numerous ways that you may lawfully serve the N4 Form.  Ideally your standard form lease provides that you may serve Forms by email (check closely to make sure it does if you serve this way).  Other ways include serving by handing it to the tenant, sliding it under the door, placing it in a mailbox where mail is ordinarily delivered, or even by mailing it.   What is most important to recognize is that HOW you serve the form impacts the termination date that you inserted in the Form when you filled it out.   Different methods of service change the date that the tenant is deemed to receive the N4.  Hence, you need to adjust the termination date based on the manner of service.   So, once you have served the N4 you need to fill out a Certificate of Service (also available on the Landlord and Tenant Board website).
3. Once the N4 is served you will then, from a legal perspective, have to wait 14 days to see if the tenant pays the rent arrears.  If the tenant does pay all of the rent arrears then the N4 becomes void.  If the tenant does not pay the rent arrears owing (which includes any new rent that became due) then you are in a position to file an application to the Ontario Landlord and Tenant Board.   That Application is called a Form L1 (Application to terminate a tenancy for Non-Payment of Rent).   In the modern Landlord and Tenant Board take a look at the “Portal”.  You will find the link on the Landlord and Tenant Board website.  Through this portal you will be able to file your application electronically.   Note that you will need a digitized copy of your N4 and the Certificate of Service.
4. While you are waiting for the 14 day period to pass, and even after you have applied to the Landlord and Tenant Board, it is worthwhile for you to reach out to the tenant to see what the issue might be.  Perhaps you can work out a deal, perhaps you can come to some sort of agreement.  There is no need to be nasty or rude as this will accomplish nothing and may in fact put you in breach of your obligations under the Residential Tenancies Act.  It is important to be aware that a tenant’s non-payment of rent does not relieve you of your obligations under the Residential Tenancies Act.  In fact, if you retaliate against a tenant for non-payment of rent you might find yourself facing charges in the Provincial Offences Court.
5. After you have filed the L1 application with the Ontario Landlord and Tenant Board you will simply wait (and wait, and wait, and wait) for the Landlord and Tenant Board to issue a Notice of Hearing.  The Notice of Hearing will be sent to you and to your tenant.  The Notice of Hearing sets out the information needed to attend the hearing (via ZOOM) and further provides instructions for both you and the tenant for filing of additional documents.
6. A week before the hearing (7 days), the landlord will be required to serve and file the L1/L9 Update Sheet.  This form is available on the Landlord and Tenant Board website.  It is a form that asks you 10 questions.  The LTB needs the answers to these questions to write the Order that you will be requesting.
7. When the day of the hearing comes you should sign onto the ZOOM early (if you can) and get signed in.  This will be a useful time to see if the tenant has shown up and perhaps to see if the tenant is prepared to mediate if they have shown up.   Mediation is typically offered by the Landlord and Tenant Board and it is a no risk proposition.  If you successfully mediate—well then you can sign off and be done!  If you do not successfully mediate your case will proceed to hearing that same day.   Mediation is a great opportunity to negotiate a resolution with the tenant.  A mediated agreement may include a payment plan, a consent termination, enforcement of eviction, and a host of other issues that the parties may wish to deal with.  The LTB mediators are able to record any consent agreement into an Order or if necessary, they can take you into a hearing room (to the front of the line) and get an adjudicator to write an Order in accordance with your consent terms.
8. The other thing that you may see, on the day of the hearing, is that your tenant may sign on and then disappear into a breakout room to meet with duty counsel.   Tenants are offered free legal advice from Ontario Legal Aid.  This can be beneficial to you in that many tenants informed of their legal rights will then be more willing to reach an agreement with you.   Of course, the opposite can also be true in that duty counsel may identify errors or issues in your application or determine that the tenant needs an adjournment to retain counsel.  Either way, you have no control over whether the tenant sees duty counsel or not.
9.  If you end up in the hearing the adjudicator will prompt you about your claim.  The L1/L9 update sheet that you served and filed should be completely current to the day of the hearing.  If (by chance) the tenant has made some payments before the hearing but after you filed the L1/L9 update sheet you should fill out another form that is completely current.  It can be very helpful to attach to the L1/L9 update sheet a rent ledger showing the exact amounts owing and being up to date.   Have this updated L1/L9 Update Sheet scanned to your computer and on your desktop (I like to already attach it to an email and leave it open).  During the hearing the Adjudicator may invite you to email the most up to date L1/L9 update sheet to an email address that the member will provide to you (you enter the LTB file Number and the Adjudicator’s name in the subject line).  Once invited to email it, you can send it and the adjudicator will open the document in real time so that the most current information is available. [note that this email method is how information is exchanged most commonly during hearings—you should always copy the other side with any email that you send to the LTB and the Adjudicator].
10. On the assumption that the Adjudicator is satisfied with your documents and agrees with the math that you have done, the adjudicator will likely ask you what it is that you are seeking.  The easiest answer is to state that you are seeking a “standard order”.   This is a term of Art that only means something to people who are involved in this area of law.  The phrase appears no where in the Residential Tenancies Act.   What it means is that the adjudicator will grant you an order terminating the tenancy for non-payment of rent plus the application fee (presuming you asked for it).  The Order will specify that the tenancy will terminate in 11 days from the date of the Order.  Until that 11 days passes the tenant is given the opportunity to pay the full amount owing so as to void the Order and maintain the tenancy.   After the 11 days the Order becomes enforceable and the tenant’s opportunity to “void” the Order becomes more constrained (though not impossible).
11.  You have no choice about the tenant receiving a further opportunity to void the Order and maintain the tenancy.  The Residential Tenancies Act mandates that the tenant be given such an opportunity.
12. Once the Order is issued and presuming the tenant has not paid it and has still refused to move out you will need to file the Order with the Sheriff for enforcement.  The Sheriff is located at your local courthouse (in the jurisdiction where the rental unit is located).  The Sheriff at the Court Enforcement Office (at the Courthouse) in the various districts around the province all operate a little differently and in accordance with local practice.   You will want to familiarize yourself with the local practice once it becomes clear that you are going to need the Sheriff to enforce the eviction.   Familiarize yourself by either going to the Courthouse OR I highly recommend that you find a local lawyer or paralegal who regularly enforces Orders.  Watch and learn from their system of filing the eviction.   The Sheriff will ultimately give the tenant a Notice to Vacate and in that Notice to Vacate give the tenant a number of days to move out (in Ottawa that is typically 7 days depending on workload).  On the time appointed in the Notice to Vacate you will need to attend at the rental unit (or send a representative) to meet the Sheriff.  You should bring a locksmith or be prepared to open the door and change the locks yourself if you have those skills at the direction of the Sheriff.
13. Once the Sheriff has completed the eviction the sheriff will give you a sheet of paper confirming that the rental unit has been delivered to you.  This piece of paper is worth its weight in gold as this is your proof that the tenant is no longer entitled to be on the property.  Retain a copy to show police should the tenant show up and enter the unit after the eviction has been enforced. 

The steps above are a broad outline of the process and explains what you should do if your tenant does not pay the rent.  Your tenant may, at almost any time in the above process, cancel the proceedings and void whatever you have done by paying the amounts owed.   This is the tenants’ right under the Residential Tenancies Act.    It is definitely worthwhile for you to follow this process as repeated service of N4’s (that are voided by payment) may ultimately be used to terminate a tenant’s tenancy for persistent late payment of rent (Form N8).   Most importantly though, starting the legal process when the law allows results in you minimizing the amount of money that you may lose with a tenant who never intends or is unable to pay the rent arrears to you.

The steps described above are just an outline and there are a few additional steps that could be added and which can complicate the proceedings.   What is not mentioned above is that a tenant may choose—in the sense that a good defence is a good offence—to file as a defence a claim against your for a rent abatement.  This can be done under section 82 Residential Tenancies Act.  It is a complete shortcut process and the tenant can make the assertions without filing a proper application.  You will see a reference to this right in the Notice of Hearing.  If the tenant does plan to assert a section 82 claim they are required to give you a form and 7 days notice of this intention (the 7 days being 7 days before the hearing).  You then have 5 days to file responding materials to the tenant’s claims.

Also, not mentioned in great detail is the right of tenants to seek relief from the strict requirements of your lease.  The tenant can explain how the rent arrears happened, that circumstances have changed, and that they would like a delayed termination or an opportunity to maintain the tenancy with a payment plan for the arrears.  The legal authority for this is under section 83 of the Residential Tenancies Act.  The adjudicator is empowered under the RTA to include such terms as are considered just in the Order.   This discretionary power is for the benefit of the tenant and while you may be asked to give your view about such requests the LTB will be inclined to grant some relief if the tenant asks in the right way.  As a landlord your response to such requests needs to focus on why the relief requested would be unfair or unrealistic and unlikely to solve the underlying problems.  Failing that, a tenant is likely to get a chance.

If the LTB issues a conditional Order, giving the tenant another chance to maintain the tenancy, then you as the landlord will be told that you can file an L4 Application (section 78 RTA) if the tenant breaches any of the conditions in the Order.  It will be imperative that you read the Order closely for the conditions and for you to file immediately if the tenant breaches.

 

CONCLUSION

Non-payment of rent and termination of a residential tenancy for non-payment is highly technical and a detailed process under the Residential Tenancies Act.   You may be inclined to think that it isn’t so difficult a concept as what could be simpler—that determining that rent wasn’t paid.   Hopefully from the above you can see that there is actually nothing simple about it at all.  As a landlord you are held to a standard of perfection in relation to N4 Forms.  Tenants are given numerous opportunities to void termination and maintain tenancies.  It would be wise for you to seek legal help for at least the first few of these applications before venturing out on your own.  Watch and learn the process from an experienced paralegal or lawyer so that you can avoid the kinds of errors that will have your starting over again.