When is the Rent late?

 Determining when rent is late in Ontario.  It's not necessarily obvious.

Much turns on the question of when rent is due and when it may, legally, be considered "late".  If rent is late there are two possible legal claims that will begin to make life difficult for residential tenants.  Those two legal claims are the N4 (Termination for Non-Payment of Rent) and the N8 (Termination for Persistent Late Payment of Rent).

The N4 Form is the formal Notice of Termination that is issued under the Residential Tenancies Act.  It is a voidable Notice of Termination in that a tenant can "void it" if they pay the rent that is owing to the landlord by the termination date that is set out in the N4 Form.  The termination date is a minimum of 14 days after service of the N4 and it is specifically highlighted in the Form.  This 14 day period is often understood to be a grace period.  So long as rent is paid within that 14 day window the tenancy continues and there is no immediate or perceived harm to the tenant.

The key to the N4 Form is that it may only be served when rent is late.  It can not be served in anticipation of rent not being paid nor can it be served at any time prior to the ultimate deadline of the rent being paid.  Also, it is not properly served if the rent is paid, after it is due, but before the N4 is issued.

If an N4 can not be served until rent is officially "late" then it is indeed important to understand when rent is actually late--according to law.  To that end, most rent due dates may be determined by looking at the written lease.  Most leases indicate that rent is due on the first of the month and most leases adopt a calendar month as the rental period.  Even within a fixed term lease of say, 1 year, the year is made up of 12 monthly rental periods.  The lease indicates the date on which the rent is due and that is typically the first of the month.  However, nothing stops a landlord or tenant from indicating in the lease a different rent due date.  A rental period may run, for example, from the 15th to the 14th of the following month.  It is inconvenient, often confusing, but totally legal.  

Some leases fail to indicate the day that rent is due.  Some tenancies don't have formal written lease and instead are oral or implied from the circumstances giving rise to the occupation of the rental unit.  That is perfectly legal too.  Residential leases in Ontario are equally valid whether written, oral, or implied.  These leases can raise an interesting question as to when the rent is actually due.  Section 13 of the Residential Tenancies Act states that a tenancy commences on the day that the tenant is entitled to occupy the rental unit.  Absent a written lease setting out the rent due date, the operation of section 13 may actually create a different rental period---for example from the 27th to the 26th of the following month and therefore create a different rent due date.

If a lease does not follow a calendar month then it is important to figure out if rent is actually late or not in fact yet due.  This timing issue may lurk in the background of a tenancy even if the landlord and tenant subsequently adopt a payment schedule of the calendar month.  While everything in the tenancy is going fine and a tenant is having no trouble it likely doesn't matter, precisely when rent is due, as the rent is paid.  However, if finances are challenging and a tenant is having trouble meeting all financial obligations it may be that the timing of payments (coordinating with times of getting paid) is very important.  A few days sooner or later may indeed be the difference between being on time or receiving an N4 to terminate a tenancy for non-payment of rent.

Another way that the rent due date may be affected is by a standing agreement or terms agreed to at the beginning of a tenancy.  I recall a case where I was representing a tenant who was arguable "always late" or "always on time".  Now, that did not seem to be possible but here is what happened.  The tenant was a single mother who aggregated her income over the course of the month from different sources.  She did not get paid reliably on the same days every month and in that sense her income fluctuated.  At the commencement of her tenancy she told the superintendent who rented her the apartment about her income and that she needed flexibility.  The superintendent, a kind and empathetic person told her it wasn't a problem and that as long as she paid the rent within the month that it was due that it was no problem.  The superintendent kept the books and the arrangement worked well.  That is, until the Superintendent moved on and was no longer employed by the landlord.

The new superintendent was less kind and insisted that the tenant pay the rent, on the first of the month, as her lease stipulated.  On its face, it looked like the rent was late every month.  This case ended up in front of the Landlord and Tenant Board and the issue in the case was "when" is the rent due.  This determination mattered because the Application to the LTB raised the possibility of eviction and the possibility of having to pay the costs of the application.  If the rent was paid "on time" by being paid within the month then the tenant's tenancy was perfectly safe as there would never be a basis to serve an N4 or an N8 if the rent due date was flexible.  If the rent was due on the first well then an N4 would likely be issued every month and eventually the rent would be persistently late and an N8 would be warranted.  Winning the argument on when "rent is due" (or "when is rent late") is therefore critically important.

There are some odd situations respecting rent due times as well.  Some landlords pick up the rent from the apartments and go door to door.  If rent is due on the first does a tenant have to be sure to be home to meet the landlord failing which rent is late if the tenant steps out?  (No).  Can a landlord stipulate that the rent is due by the close of business (i.e. the landlord's business office) on the 1st day of the month after which it is late? (no).  Can the landlord require payment in cash or in some way other than how it was agreed to be paid in the lease failing which it is late or refused? (No).  Can a landlord require that rent be paid early (before it is due) in case of an upcoming holiday and provide no way to pay the rent on the due date? (No).    There is no legal dispute with the fact that rent may be paid by a tenant up until midnight of the day that it is due (regardless of what the landlord may like).  If the landlord offers a drop box then the tenant may pay by drop box up until midnight.  Rent is not late if the landlord doesn't get around to cashing a cheque, money order, or accepting an e-transfer until after the due date.  A landlord can not manufacture a late rent payment to allow the service of an N4 or an N8.  Lateness is not determined by when a landlord cashes a cheque/etransfer/money order.

In the case I mentioned above, the legal argument respecting payment within the month of the tenancy is to cite to the principle of condonation.  The principle, as applied in that case, was that the landlord's "condoning" of payment within the month, without objection, created an agreement changing the due date of the first of the month (if in fact that was ever the agreed upon due date).  The LTB found that the tenant's rent due date was within the month that the rent was due.  I insisted that this flexible rent due date be recognized in the LTB Order as the important to the tenant's security of tenure by having a flexible rent due date was critical.

If a tenant can avoid getting an N4 altogether (based on rent due dates---or rent late dates) then the tenant will also avoid getting an N8 for persistent late payment of rent.  All of this is good for preserving the tenancy.  I mention this because I see enough cases where tenants walk away from the flexibility that they had in place in exchange for dismissal of an eviction application and a certainty that their tenancy will continue in the immediate future.  This can be a mistake as the flexibility as to rent due dates is what allows the tenant to continue to juggle the financial balls and continue the tenancy.  Agreeing to a fixed due date can seal the eventual fate of eviction due to late payment or persistent late payment.

I do think that more thought needs to be given to setting the fixed payment date and to explore what the agreement reflects and what the actions of the parties revealed over time.  The simple words of the lease may not be accurate as to the payment due date in law--and hence the date of when the rent is late remains uncertain.  If a tenant has paid late, but has always paid, over the years and a landlord has not served an N4 each time that rent was technically late then one might argue that the late payment was condoned by the landlord and hence rent was not late nor persistently late.   Where tenants, by virtue of their income, need flexibility, is it incumbent on representatives and tenants themselves to negotiate for that flexibility and to retain any existing flexibility when appearing at the LTB on N4 and N8 applications to terminate the tenancy.

Michael K. E. Thiele

www.ottawalawyers.com