Friday, October 5, 2012

Resolving Rent Disputes at the LTB Through a S78 Payment Agreement Can Often Be Unwise

As a licensee of the Law Society, I have an obligation to advise and encourage a client to compromise or settle a dispute whenever it is possible to do so on a reasonable basis.  I should also consider the use of alternative dispute resolution for every dispute.  As a regular before the Ontario Landlord and Tenant Board, I guess this would translate into a direction that I should encourage my landlord clients to enter into a conditional payment agreement with a tenant when rent is owed, rather than ask the adjudicator for a standard 11 day pay and stay eviction order.

However I almost never do that.  Am I in breach of the Law Society Rules?  I don't think so, because by mechanically advising my client to enter into these Board agreements or orders, I would be in breach of the more important Rules that direct me to resolutely advise the client as to his best interests, and to obtain the benefit of every remedy and defence authorized by law.

The LTB process for payment plans is terribly flawed.  In fact, a lawyer colleague of mine once mused that to advise a client to enter into a Board consent order or mediated agreement with the traditional remedies would be tantamount to professional misconduct and in breach of the obligation to act with competence.

I agree.  The Ministry policy staff, front-line staff, adjudicators and mediators don't tell the whole story to a landlord when they advise that by entering into a payment plan on an arrears application, that they will have a fully-enforceable remedy if the tenant breaches.  Now that's not a lie if you parse their literature and Member preamble's carefully, but it's certainly a serious error of omission.

As a brief recap of what happens when a tenant breaches a payment plan with the Board's standard s.78 clause included, here's a scenario.  The parties attend the Board on October 5, and at the suggestion of the adjudicator, they go into mediation and enter into a payment plan, with the first payment due October 15th.  The tenant doesn't pay, so on the 16th the landlord files an L4 application to the LTB by fax accompanied by an affidavit setting out the specifics of the breach.  And there it sits, for about 8 days, until it's finally reviewed, and if filled out correctly, an eviction order is generally issued without a hearing.  The landlord and tenant get the order in the mail on about the 26th.  The tenant has until about November 3rd to file a set aside motion and have a hearing.  Tenants have this right for any reasons, even if they admit they haven't paid what they agreed.  The tenant's motion hearing will take place about 4 weeks after the motion is filed, so that's around December 1st.  At the hearing the tenant doesn't even have to show up, but if they do, they can argue for relief EVEN IF THEY ADMIT THEY BREACHED THE AGREEMENT, and the Board has a right to cancel the eviction and re-impose new terms.  If the tenant don't show up at this motion hearing, the Board will issue another order, denying the tenant's motion, which you will get in the mail in about a week.  So if all goes perfectly, you get the order on or around December 8th which you can then file with the Sheriff and the Sheriff will ultimately enforce the order so long as the tenant doesn't file a review.  So more than two months go by after the initial agreement on October 5th until you can file with the Sheriff.

So what good was the tenant's agreement, made in good faith, fully informed, often with the advice of counsel, if the tenant can simply ask the Board to change the order when they fail to meet the terms?  It's a trap for landlords, and its dishonest for the government and the Board to suggest it's an effective remedy.

Landlords are far better off taking their chances with the adjudicator, asking for a standard 11 day remedial order, where if the tenant pays, they stay, and if they don't pay, you can file with the Sheriff on the 12th day.  On this type of order, there is no right for the tenant to have it set aside.

There is an even better way, and I use it all the time.  Landlords and tenants are permitted to enter into an agreement at the hearing that will see them go before the adjudicator and enter into a standard 11 day remedial eviction order.  But then they can also sign a private side-agreement for repayment, with the landlord agreeing to forbear on the enforcement of the standard eviction order, so long as the payments are made as agreed.  The Board order is good for 6 months, so as long as your repayment schedule ends within that 6 month period, the landlord is safe.  If the tenant breaches the private side agreement, then you take the Board order and file with the Sheriff.  No re-application, no delay, no hearing, no set-aside.  In short, no ride on the s.78 Merry Go Round for this savvy landlord.

It's important that you fully explain to the tenant the risks they are taking by having this side agreement to forbear on Sheriff enforcement.  Be honest with the tenant, explain why you don't want a s.78 order or mediated agreement, and explain to them that if they do breach the private side agreement, that they will have no right of set aside or review at the LTB.  When the tenant and I are in front of a Member getting the consent to the standard order, I always advise the adjudicator that the tenant and I have come to a side-agreement requiring the landlord to forbear on the enforcement of the Board order so long as payments are made.

There is one Board adjudicator who when you advise her honestly that there is a side agreement to conditionally forbear, she refuses to do the consent to the standard 11 day order.  The irony is, when that Member is sitting, I don't make deals with tenants, but push for a standard 11 day order where my client can instruct me to evict if the entire amount is not paid in 11 days.  Hardly in the tenant's best interest, but that's the law of unintended consequences.

There are those who are critical of this process saying it circumvents procedural protections set out in the Residential Tenancies Act.  But I see nothing wrong with this practice either ethically or legally.  You are not agreeing to terms that require a tenant to give up any substantive procedural rights.  In fact, the side agreement allows more generous and permissive terms than the Board's 11 day order.  Also important, just because you have a side agreement, the tenant still has their s.74(11) rights to file a void motion with the LTB if they breach the agreement and you then file with the Sheriff.  That's an integral part of every standard remedial 11 day order.  The tenant can do this once in the life of a tenancy IF they have paid the landlord (or the Board) everything owing including rent, costs, NSF fees etc. before the Sheriff actually gets to the door to return vacant possession to the landlord.

So think twice before you enter into the Board's traditional conditional payment order with a s.78 remedy on a breach.  It is not quick, easy or fair if the tenant breaches, and you can double your losses waiting for the process to run its course.


amit said...

Thanks for such a simple yet SWEET idea! I’m enjoying playing with my punches right now…thanks for

Residential Real Estate for Rent

wits end said...

great blog very informative wish you would write more.
So I took your advice and pushed for the standard 11 day remedial order and of course I was refused because tenants claimed hard times and they also said they would not be able to pay because they wanted to have a nice Christmas.
SO they were ordered to pay rent and a portion of the arrears on Dec 1st...if they do not pay on the first or are late I can file L4 the next day LLTB makes an order for eviction I receive it in the mail and go to file with sheriff ? then the tenant files an order having it stayed .LLTB sets another hearing possibly a month from that date wich brings us into January .if they show up at the hearing they can then claim relief again hard times, maybe recovering from christmas, to many vet bills for their pitbull or whatever they come up with this time.
If the adjudicator grants it to them this time then I guess I have to wait again to have them not pay me again and then try to file another L4...THAT THEY CAN HAVE SET ASIDE AGAIN??? Can this really go on in perpetuity?? Is it likely to?
also they are starting to gather tons of garbage and random objects all over the property. And they have consistently not allowed me to have an electrician in to inspect and repair it is at there request for repair that I am trying to resolve but they will not allow me or the electricain access. I have given them notice in print each time at least 24 hrs sometimes up to a weeks notice and then I give them another notice the day before and they still will not allow me in.Obviously if it was not for their giant dog I would just have the electrician go in to the unit but I have the tenant on voice mail saying that the dog is a guard dog and will probably attack you if you try to come in. And that is not it they also broke the door to their unit and (they claim someone tried to break in)I boarded it up so it is secure ,until I can get a replacement installed...and they have left me messages with lots of F-words and veiled threats in it telling me to replace their friggin door. I dont know if I can prove it but I am sure that they were the ones who broke I have to replace it?? I TAKE FULL RESPONIBILTY FOR LETTING THESE PEOPLE IN BUT DOES THAT MEAN I HAVE TO TAKE CARE OF THEM FOR EVER?? any comments in regard to any of this would be greatly appreciated thank you