Saturday, March 24, 2018

Ministry of Housing LTB Standard Form of Lease - It's so Bad, They Should Delay Implementation

I've written already about the new mandatory standard form of lease introduced by the Ministry of Housing that requires all residential landlords (with a few exceptions) to use this lease when entering into a new tenancy with a tenant.  This requirement takes effect on April 30th of this year.  There are serious risks for not using the form or not providing a copy to the tenant, but the entire story can be found here.

Standard Leases Coming to Ontario

Today though I want to examine the lease document itself, as I did yesterday with OREA's new standard offer to lease, their Form 400.

The mandatory standard government lease is a laudable goal.  There were far too many illegal clauses in leases, situations with no written lease, poorly drafted leases, etc.  This new document clarifies some of the most common issues and points out what are illegal clauses under Ontario's Residential Tenancies Act (the "RTA"). 

But the standard form lease tries to be all things to all people, and ends up being suitable for no one.  Because it tries to be generic enough to fit all tenancy situations, it ends up fitting no tenancy situations.

This lease is but a mere skeleton.  Fortunately in Part 15 of the lease and in the RTA it is permissible for a landlord and tenant to sign an Appendix with additional terms provided that they do not contravene the RTA.  I've created such an appendix with dozens of important clauses to protect the landlord and provide clarity.  I would suggest you consider getting it as part of my Forms Package.

Landlord Forms Package

But what of the document itself?  It's a 13 page agreement but in reality it's a 7 page lease with 6 pages of General Information annotating the lease.  The General Information must be attached to the lease.  It's marked as an Appendix although thankfully, the landlord is free to add additional terms in a separate, attached Appendix.  More on that later.  Remember as I critique the lease that it was created to prevent confusion and litigation, not to create it.

So let's begin!

In Part 2 on page 1, it asks for the rental unit address.  But it doesn't describe the demised space within the municipal address.  That's a big problem, for instance in tenancies where a house is shared.  I've seen lots of disagreement over the use of back yards, laundry rooms etc., where tenant A didn't like tenant B using the back yard, front porch or where the lease didn't specifically allow the tenant to use the garage which the landlord, while not living there, was using as storage space etc.

Also in Part 2 on page 1, the landlord of a rental unit located in a condominium is required to tick off the box indicating that it is indeed located inside a condo.  But then the commentary suggests that the tenant must follow the condominium rules only if the landlord has provided them to the tenant.  Now it's true that the landlord is supposed to supply the tenant with a copy of the Rules, Declaration and Bylaws, but even if this is omitted, as it often is, the condominium corporation  has an obligation to enforce the Rules and the tenant may end up evicted as a result of not following them.

Part 3 on page 2 is curious.  This is where you include the contact information for the parties, and that's important...in fact required under the RTA.  But strangely the Ministry included a space for email addresses, to be used "where allowed by the LTB Rules of Practice".  The problem is, the LTB Rules of Practice don't allow email for service of anything.  I've argued for years that at very least, a proper notice of entry should be permitted to be served via email.  So now that the Ministry has included a hint that email may be allowed, I can guarantee you that people won't read through the 36 Rules of Practice to see whether or not they can use email.  I anticipate applications for eviction based on rent to be struck down because a landlord thought they could email an N4 notice for rent arrears for example.  This needs to be fixed quickly.

Part 4 on Page 2 is absolutely frightening.  It describes lease term, and gives the option of a monthly periodic tenancy.  Assuming there is term (there usually is a year),  it says "This tenancy agreement is for a fixed length of time ending on: _____________ Date."  The clear interpretation of the syntax is that the tenancy agreement ends on the end date of the term.  In truth, nothing ends on the end date except the FIXED TERM in the tenancy agreement.  The tenancy and the agreement continue forever, until the tenancy is lawfully terminated in accordance with the RTA.  By wording it as they have, the Ministry risks having people believe that the tenant's right to occupy ends on the last day of the FIXED TERM.

Part 5 on Page 3 has a huge flaw that will create confusion about the lawful rent.  The form shows base rent plus parking summing to total lawful rent.  That's not confusing, and in fact is quite normal.  But they also show other services and utilities under parking, as if a dollar figure should be added, and then the total lawful rent below.  Now there are 3 ways a landlord and tenant can handle utilities.  None of them involve a fixed rate that becomes part of a lawful rent.  Either it can be a gross rent with all utilities in, or the tenant can contract directly with the utility, or the tenant can agree to receive a copy of, and pay for, all or a portion of a landlord's utility bill.   But none of those methods anticipate a fixed amount in advance that is a part of the lawful rent.

In Part 6 on page 3, there are a lot of common appliances or utilities not specified, such as stove, fridge, dishwasher, internet, cable etc.  Yes, they can be added to the form, but it would have been better to include them.  I think this omission and my comments on Part 5 are a result of the drafters conflated things the landlord must provide, versus things the landlord or tenant must pay for.  They should give this some thought.

But it gets worse, as in the second part of Clause 6, it asks who is paying for Electricity, Heat or Water.  That's like the waiter asking if I want Meat, Calories, or Chicken.  Perhaps it should have said Electricity, Water and Gas.  Perhaps it should have said Water, Heat (which can be electric or gas) and Electricity.  Whatever the solution, they have mangled things so badly in all of Clause 6, that it will cause no end of confusion.

Part 8 on page 4 says that the landlord has to pay the tenant interest on their last month's rent deposit annually.  Again, that's a bit confusing as for most institutional and many small landlords, the interest is not paid to the tenant, but is used to top up their deposit to equal the current rent.  By reading the lease, tenants will think that paying interest is the only acceptable method.

In Part 10 on page 5, the Ministry to its credit included a section on smoking.  However with new marijuana laws expected this summer, perhaps they should have made it clear whether or not the landlord will allow marijuana plants to be grown in the unit.  This will become a big issue over the next year.

In Part 11, on page 5, the Ministry decided to create law by suggesting that even if tenants are responsible to have liability insurance, landlords cannot hold the tenant to an agreement to have contents insurance.  This is just not true but will now likely be interpreted as being the law.

In part N of the Appendix, the Ministry details the requirements for entry into the unit, but omits to include the fact that the window of entry must be reasonable in accordance with the circumstances.  They may have just perpetuated the "any time between 8 am and 8 pm" landlord's entry notice that was clarified when the LTB Rules committee wrote Interpretation Guideline #19

LTB Interpretation Guideline on Entry into the Unit

Finally there are so many one-sided statements of law that show bias.  For instance, in Part H on page 10, it says:

"If a landlord is unable to let the tenant move into the rental unit, the landlord must return the deposit, unless the tenant agrees to rent a different unit.".  

Factual, and fair enough.  But then why not include a warning going the other way like:

"If a tenant pays a deposit to rent a unit and the tenant subsequently decides not to move into the rental unit, the landlord may not have to return the deposit, but may apply it as rent until the unit is re-rented".

There are a number of these examples in the lease.  If the effort was to avoid confusion, disputes and litigation, there should have been more balance.

I would strongly suggest that landlords contact a paralegal or lawyer to put together an Appendix that properly protects them. 

I also suggest, hoping that someone from the Ministry reads this blog, that they push back the implementation for a month or two, fix the errors that will only cause confusion and additional litigation, and give us version 2.


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