Thursday, November 16, 2017

Long-Term Rentals vs Airbnb is a False Dichotomy

Various committees of Toronto Council are busy debating the future face of Airbnb regulation in Toronto. The proposed rules had suggested the creation of an entirely new zoning category for short-term rentals that would allow home-owners to offer up to three short-term rental rooms or their entire home, plus a basement secondary suite, while also firmly establishing who is permitted to rent out their residences. A home-owner could only rent out a unit under this scheme if the room they were renting out was located in their principle residence.

But this week we learned that Toronto’s Planning and Growth Management Committee’s believes that keeping Airbnbs out of basement secondary units is essential in order to increase the supply of long-term rental units. This despite the recommendation by City staff that basement units be allowed to become Airbnb-eligible under the proposed changes.

The move to eliminate secondary suites was led by Concillor Ana Bailao who before the vote, told her fellow councillors “We have an extremely unhealthy vacancy rate in this city,”.  Well that’s true, but to think that by outlawing Airbnb’s in basements landlords will flock to create tenancies governed by Ontario’s Residential Tenancies Act is misguided. Becoming a residential landlord, renting out a condo, home or basement, is no longer a rational business choice.

As a former adjudicator with Ontario’s Landlord Tenant Board, a paralegal for 12 years, an educator and speaker on all issues "landlord and tenant", I can say with certainty that landlords are leaving the traditional rental market in droves.  The law as it now stands makes traditional renting far too risky. Restricting Airbnbs won’t change that.  The risks of renting out your home in Ontario’s over-regulated oppressive statutory regime just doesn’t make sense.  

The basic framework of the Residential Tenancies Act and its predecessor the Tenant Protection Act is 20 years old. A lot has changed in that time.  Housing prices in Toronto have skyrocketed.  Airbnb has added a new rental class not anticipated by the legislation.  Nor was there any clue that condos would become the new rentals when the law was debated back in 1997. A complete re-think and re-writing of the Act is needed.

Very often the traditional rental paradigm results in an acrimonious marriage that landlords are stuck in forever.  Airbnb is more like a one-night stand; easy to walk away from. What’s needed is a middle ground, allowing prospective landlords and tenants to try living together for a while to see if it works.  

The current system is rife with problems. The lack of absolute fixed term tenancies in Ontario, coupled with the almost impossible eviction process, the lengthy delays in evictions, rent control that ignores the long-term interests of both sides, have all conspired to devastate the creation of rentals by small landlords. 

In order to fix the system, the province must address issues such these, along with the absence of damage deposits, the legally permitted tactic of lease breaking parties that allow a tenant to break a lease with remaining lease term by simply acting badly, the onerous obligations under the Human Rights Code that make the landlord rather than government responsible for societal issues, and the refusal by the government to require tenants receiving Ontario Works or ODSP payments to designate that rent be paid directly to their landlords from the social agency. Only then can the rental supply problem be solved.

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.

Saturday, May 13, 2017

Letter to Minister of Housing - The Honourable Chris Ballard



May 13th, 2017

The Honourable Chris Ballard
Minister of Municipal Affairs and Housing
777 Bay St., 17th Floor
Toronto, ON
M5G 2C8


Dear Minister:

I am writing you as a small landlord  in Ontario, looking to you for assistance in navigating Ontario’s difficult and complicated residential tenancy laws.  The playing field is about to become even more unbalanced following the government's April 20th announcement.

The quasi-judicial agency overseeing rental housing in Ontario, the Landlord and Tenant Board (‘LTB’), is broken.  The heavy load at the provincial Board combined with the automatic right of appeal of a Board decision to the courts routinely delays justice.  The inconsistency of decisions by adjudicators at the Landlord and Tenant Board is shocking.  Most of their mistakes come from the lack of common sense, the overly strict interpretation of the wording of the statute without giving regard to the purpose of the statute or the real substance of the disputes.  The appellate body, the Divisional Court, almost always fixes the problem with common sense decisions but that’s a slow and VERY expensive process that most landlords can’t afford.  Glaring drafting errors and oversights have not been fixed through statutory amendment.  More than once the Divisional Court has suggested that the Tribunal and the government get its act together and fix the problems.

Over the last two decades the appellate courts have made a number of decisions modifying the generally accepted interpretation of the law.  For instance, a recent appellate decision has confirmed that lease-breaking parties are legal, negating the purpose of lease term as a benefit to the landlord.  

A decision in 2007 from the Ontario Court of Appeal, Price v. Turnbull's Grove Inc., 2007 ONCA 408 (CanLII) struck down a section of the RTA that deemed unlawful rent to be lawful if a year had passed and the tenant had not disputed the lawfulness of the rent.  This was a result of inadvertent drafting.  This decision has thrown rent disputes into disarray.  Evictions for non-payment can’t happen unless the lawful rent can be determined.  Successive governments have had over 10 years to fix the problem and to this point have ignored it despite the occasional updating of the Act.

Serious confusion now exists between the jurisdiction of the Landlord and Tenant Board and the Ontario Small Claims Court with regards to utilities as well as for damage or rent owed after a tenant has moved out.  The issue of a landlord’s claims for damages that are legal in nature, not physical damage where something could be repaired or replaced, is also a grey area in terms of the LTB’s jurisdiction.  

Now this April, this government has further shifted the balance, discouraging small landlords and driving us out of the business of creating housing, much of it affordable through basement second suites.  The Ontario government and non-profit agencies practically beg landlords to rent out units despite the terrible risk landlords take and the unattractive rental environment the government has created.  The 2011 Strong Communities Through Affordable Housing Act, and the recently passed Promoting Affordable Housing Act, 2016 which promote inclusionary zoning are honest efforts to create more accessory suites and affordable housing. But it won’t work and landlords won’t open up their homes until some of the risk is mitigated, the playing field levelled and the confusion eliminated.

The LTB’s Rules of Practice need amendment related to serving notices of entry.  Email is not allowed.  Fax is permitted.  Currently, a landlord with a home in Burlington and a rental in Oshawa wanting to change a furnace filter on the weekend, would have to drive from Burlington to Oshawa on Thursday or Friday to serve a notice of entry, return home, and then make the trip again on the weekend to change the furnace filter.  In a day and age when most faxing is done via email and e-fax, it is ludicrous that the RTA Rules permit service of notices of entry to tenants by fax and not by email.  Our tenants generally do not have fax machines, and they all have email.

We urge you to re-consider the elimination of the s.6 exemption on rent increases.  Those of us who are investors in condominiums will have no choice but to charge higher rents to mitigate the risk of increasing condominium fees or special assessments which cannot be recovered.  Above Guideline Increases can not recover costs incurred through these types of aggregated expenses.

I am asking specifically for eight changes to the Residential Tenancies Act that would assist landlords, restore some balance and create efficiencies:

1.       Reconsider the proposed elimination of the s.6 guideline exemption

2.       Streamline the LTB process to have matters resolved more quickly, ensuring that rent is paid into the Board by the tenant if disputes are protracted

3.       Fix the confusion currently existing between the Small Claims Court and the LTB regarding jurisdiction for utilities and post-occupation claims at Small Claims Court for damage and rent.

4.       Amend the RTA provisions regarding “damage” to make it clear that the LTB is the forum for legal, monetary damages, not just physical damage, arising in the rental complex.  That will go a long way in resolving the LTB vs Small Claims Court confusion.

5.       Allow service of notices of entry (not termination notices) by email if the parties agree in the lease that communication may be by email and if they have provided their respective address in the lease. 

6.       Lease term has become meaningless.  Jurisprudence since the Act came into force has confirmed that lease-breaking parties are legal, negating the purpose of lease term as a benefit to the landlord.  This needs fixing.  A notice to terminate that can be remedied (rent N4’s for instance) should not end the tenancy thereby ending any statutory or common law obligations related to term.

7.       Fix the problem caused by Price v. Turnbull's Grove. Governments never intended sections 136 and 116(4) of the Act to operate in this conflicting manner. 

8.       While theoretically tenants with a non-smoking lease can be evicted for smoking, the legislation should be more specific.  This is especially important with the impending legalization of marijuana.  In addition, Ontario should specifically ban the proposed “4 plant” rule from all rentals.

In summary, I am asking that the government consider fixing, clarifying and modernizing the Act to make it more balanced, instead of just amending with the April 20th amendments which will simply drive more landlords out of the business.

Yours very truly,


cc:              Premier Kathleen Wynne
                   PUT LOCAL MPP NAME HERE AND COPY THEM AS WELL