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