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.