Thursday, September 21, 2017

Surprise! Rental Fairness Act is Hardly Fair to Landlords

There have been a number of changes to residential tenancy legislation proposed, announced and implemented since April of this year.  While we don’t know the effect of all of them until the Landlord and Tenant Board and appellate courts have spoken, here are some of the changes contained in the amendments.  

Bill 124 – Rental Fairness Act, 2017


In April of 2017, the Rental Fairness Act was introduced by the Liberal government in Ontario to amend certain sections of the Residential Tenancies Act.  It is now mostly in force. It didn't do anything to solve some of the housing problems that exist, either with availability or affordability.  In fact it's just made matters worse.  Here are some of the highlights - or should I say lowlights.

Rent Control – Retroactive to April 20th, 2017 


The controversial section 6 exemption from the rent guideline for post-1991 buildings is now gone, retroactive to April 20th, 2017.  Effective immediately, all buildings are now subject to the provincial guideline, which is 1.5% in 2017 and will allow a 1.8% increase in 2018.  This legislation when enacted was retroactive to April 20th, 2017.

So if you didn't serve the notice of rent increase (the N2) prior to that date, you are out of luck.  This change will be particularly harmful for condominium investors.  This was a slap in the face to developers and investors who made their economic decisions based on the current statutory framework.


Landlord’s Own Use – Came into force September 1st

An N12 notice of termination for the landlord’s (not purchaser’s) own use can only be used if the rental unit is owned in whole or in part by an individual and the landlord is an individual.  So, from this point forward, NO CORPORATE LANDLORDS can evict for their use or the use of a family member.

Additionally, one month’s rental compensation must be paid prior to the termination date in the N12 notice.  If the landlord compensated the tenant under a section 48.1 notice, and the Board refuses to grant the eviction based on the landlord’s L2 application for an order terminating the tenancy and evicting the tenant based on the notice, the Board may order that the tenant pay back the compensation to the landlord.  Strange wording “may” order it returned, and it is not even deemed to be rent.  So how does the landlord recover it.  Is the recovery actionable at the LTB.  That’s still a mystery to me.

Going forward a minimum of 12 months occupation will be required by the person moving in, and it must be explicitly stated in the affidavit which the person requiring the unit is required to submit to the LTB if there is a hearing.

It will be easier for a tenant to sue the landlord after moving out with a T5 application if the landlord does not move in as promised, but instead re-rents the unit.  Going forward, the landlord is deemed to have given the notice in bad faith if, between date notice is served and one year from move-out, the landlord:

(a) advertises the rental unit for rent;

(b) enters into a tenancy agreement in respect of the rental unit with someone other than the former tenant;

(c) advertises the rental unit, or the building that contains the rental unit, for sale;

(d) demolishes the rental unit or the building containing the rental unit; or

(e) takes any step to convert the rental unit, or the building containing the rental unit, to use for a purpose other than residential premises.

Tenant can file a T1, a section 135 application, if LL doesn’t pay compensation by TD in the N12 notice (only if the notice was served after September 1st, 2017)

These changes create a legal reverse onus on the landlord.  At a hearing by a tenant on his or her T5 application, it is the landlord who will have to prove good faith, rather than the tenant having to prove bad faith by the landlord.

N13 to Terminate Tenancy for Renovation

The Act now specifies remedies by way of an application by the tenant if the landlord fails to afford the tenant the right of first refusal to move back in.  These applications are very rare.  Also, the Residential Tenancies Act is badly written with respect to the details respecting how a landlord and tenant work out the return, which must be at the same rent as prior to the tenant moving out.

Post-Termination Rent Arrears

Landlords can no longer collect arrears of rent for short notice once a termination notice has been given.  Section 37 of the Act says that once you give a tenant a notice of termination, the tenancy ends on the date of termination in the notice.  The new wording in the Residential Tenancies Act is as follows and clarifies the rights of a landlord to collect rent as damages after the tenant moves out:

134(1.1) No landlord shall, directly or indirectly, with respect to any rental unit, collect or require or attempt to collect or require from a former tenant of the rental unit any amount of money purporting to be rent in respect of,

(a) any period after the tenancy has terminated and the tenant has vacated the rental unit; or

(b) any period after the tenant’s interest in the tenancy has terminated and the tenant has vacated the rental unit. 2017, c. 13, s. 24 (2).

So short notice by a tenant and existing lease term become even more meaningless than they were previously.  Lease breaking parties, or even the service of an N4 notice by a landlord for unpaid rent will effectively end the tenant’s obligation to pay rent if they move out pursuant to that notice.

Fixed the 2nd N5 Issue / Didn’t fix the lawful rent issue

The first N5 notice of termination no longer needs to have been voided by correcting the behaviour in order to serve a second N5.  It’s sufficient that the landlord simply didn’t file the L2 after the 7 days.  This was a drafting oversight that caused all sorts of problems.

Quite telling is the fact that the government clearly worked at fixing technical amendments and drafting issues, but ignored the drafting problem that was exposed when Price v. Turnbull’s Grove was decided by the Ontario Court of Appeal in 2007.  

(https://www.canlii.org/en/on/onca/doc/2007/2007onca408/2007onca408.html)

A simple 3-word change could have fixed the issue, but the government ignored the problem.  We still have the terrible problem that if a landlord has ever, even once in the tenancy failed to give a notice of rent increase on an LTB approved form, or has failed to give 90 days or more, then all rent increases from that day forward are invalid, and the rent being charged to the tenant is not lawful.  

This perverted the clear intention of the Residential Tenancies Act and the Tenant Protection Act before it which provided a one-year period for the tenant to contest the new rent or the recent increase, after which time the illegal rent was deemed (considered) to be legal.

Standard Leases

This provision was proclaimed on May 30th, but the prescribed classes of tenancies have not been described.  You will be required to use a prescribed lease form for that class of tenancy.  I can’t imagine how this will work.  The government is now looking for input into the final version of the lease.  There will be standard mandatory clauses as well as sections where landlords can insert their own details.

Another change once the standard leases arrive, is that the lease must be signed prior to the move-in date under the agreement.  A tenant can make a demand for the lease if it is not delivered prior to the tenancy starting.  After 21 days from the date of the demand, the tenant can withhold up to one month’s rent if it is not provided.

When the landlord finally delivers the lease, the landlord may require the tenant to re-pay to the landlord any rent payment withheld, but only if the landlord complies with the tenant’s demand for a proposed tenancy agreement no later than 30 days after the date the first rent payment withheld.  If more than 30 days has gone by, the tenant may keep the money.

But there is more bad news for landlords if they don’t provide the lease on time.  A tenant may terminate a tenancy that is a yearly tenancy or a tenancy for a fixed term by giving notice of termination to the landlord that they wish to move out.  They have to serve this notice within 30 days of receiving the lease from the landlord.  They can do this if either one of the following conditions applies,

(i) at least 21 days have elapsed since the day the tenant made the demand and the landlord has not complied with the demand, or

(ii) the landlord has complied with the demand and the tenant has not entered into the proposed tenancy agreement provided to the tenant by the landlord

Above Guideline Applications

A landlord may no longer apply for increases based on increased utility costs, but this is not yet in force.  The Premier smugly says that it’s up to the landlord to be careful about energy efficiency of appliances they install…that’s her solution to the skyrocketing utility rates that she has caused.

Also, an AGI order amount would exclude, for an application filed on or after April 24, 2017, any amount paid by the landlord for carbon costs in respect of operating costs for heat provided by gas;

L4 Orders on a breach

An L4 re-application is filed if the landlord and tenant have been to the Board on an eviction application, and conditions about money or conduct were agreed to in mediation or imposed on the tenant by the adjudicator.  In a positive change, on the filing of an L4 application by the landlord, the LTB can now order physical damage amounts as well as rent arrears, if the original application was for damages and the mediated agreement required the payment for the damage.  The L4 could always order eviction and unpaid rent if there was a breach; now it can order the unpaid money as well.


Lease Term – What is it good for?  Absolutely  nothing!

Prior to the Rental Fairness Act, there was confusion about lease term, short notice, legal damages arising out of short notice of failure to fulfill lease term etc.

Section 37 of the Residential Tenancies Act says that If a notice of termination is given in accordance with this Act and the tenant vacates the rental unit in accordance with the notice, the tenancy is terminated on the termination date set out in the notice.  So, the tenancy is effectively over.

So, what happens if no notice is given?  Section 88 of the RTA says that rent continues to be owing, but that mitigation is required and no double-collecting is allowed.

Arrears of rent when tenant abandons or vacates without notice
88 (1) If a tenant abandons or vacates a rental unit without giving notice of termination in accordance with this Act and no agreement to terminate has been made or the landlord has not given notice to terminate the tenancy, a determination of the amount of arrears of rent owing by the tenant shall be made in accordance with the following rules:

1. If the tenant vacated the rental unit after giving notice that was not in accordance with this Act, arrears of rent are owing for the period that ends on the earliest termination date that could have been specified in the notice, had the notice been given in accordance with section 47, 96 or 145, as the case may be.

2. If the tenant abandoned or vacated the rental unit without giving any notice, arrears of rent are owing for the period that ends on the earliest termination date that could have been specified in a notice of termination had the tenant, on the date that the landlord knew or ought to have known that the tenant had abandoned or vacated the rental unit, given notice of termination in accordance with section 47, 96 or 145, as the case may be. 

And now the new Section 134 says:

134(1.1) No landlord shall, directly or indirectly, with respect to any rental unit, collect or require or attempt to collect or require from a former tenant of the rental unit any amount of money purporting to be rent in respect of,

(a) any period after the tenancy has terminated and the tenant has vacated the rental unit; or

(b) any period after the tenant’s interest in the tenancy has terminated and the tenant has vacated the rental unit. 2017, c. 13, s. 24 (2).

So, what is the purpose of s.88?  Would it still apply for tenants who have not given notice, who have not been given a notice, but just picked up and left?

Remember landlords, LEASE TERM SUCKS!  If a tenant is in term, you can’t evict for an N8 notice based on persistent late payment of rent, or an N12 or N13 for landlord’s own use, purchaser’s use, demolition or conversion.  

And be careful of any clauses that may give a tenant perpetual lease term through a right to renew term annually.  You may lose the right to recover the property forever, depending on how the lease wording is drafted. 

So worse and worse it gets.  While the government claims they need housing for low income people, they keep making it more and more impossible for people looking to rent out space in their homes.

BILL 144 – REAL RENT CONTROL ACT, 2017

This was a private members bill introduced by NDP member Peter Tabuns, and it has passed 1st reading.  If the bill is passed as it stands, it would:

1.   Repeal and replace the rules relating to the landlord’s responsibility to maintain a residential complex under section 20 of the Act.

2.   Set out new rules for rent that can be charged by a landlord to a new tenant.

3.   Expand the circumstances in which a tenant may apply to the Landlord and Tenant Board for an order determining the maximum amount of rent that the tenant may lawfully be charged.

4.   Limit existing grounds on which a landlord can seek an above guideline rent increase to circumstances in which a landlord incurs an eligible capital expenditure and amend the current rules around what constitutes an eligible capital expenditure and when a landlord is eligible for an above guideline rent increase.

5.   Establish a rent registry to be maintained by the Landlord and Tenant Board and set out rules requiring that landlords file statements with the Board for inclusion in the registry, providing for consequences for failing to file the statement and governing the disclosure of information in the registry.

The most severe change that would hurt landlords the most are the new rules for rent that can be charged by a landlord to a new tenant. If passed, Bill 144 would require that Ontario landlords charge new tenants the same rent that the previous tenants were paying.  However, it is unlikely it will be passed and will likely die on the order paper.

No comments: