Wednesday, July 11, 2018

Landlord's personal use N12 Notices need some scrutiny


The Landlord Tenant Board’s (the ‘LTB’) N12 notice of termination has been around since June of 1998.  The N12 notice is served to a tenant to advise them (among other things) that the landlord or a family member intends to move in 60 days later.  The tenant does not have to move out when they receive the notice, but the landlord may file an application to the LTB for a hearing and prove their genuine intentions.

The N12 has always been the Board's problem child.  There are loads of phony N12’s served and lots of dishonest applications filed.  Yes, people lie in Court.  This has been happening since 1998.  But things got a lot dicier in September of 2017 when the Liberal’s inaptly named Rental Fairness Act came into force.  There is still the requirement for the landlord or family member to legitimately move in.  But there were several changes to the law including:
  • The requirement to pay a month’s compensation to a tenant once the N12 is served
  • The extension of rent control to ALL buildings; those built after November of 1991 are no longer exempt from the annual rent guideline
  • The requirement for the person moving in to live there for at least a year…prior to the 2017 amendments there was no time period in the RTA
For condo investors the changes were disastrous, since they are almost all post-1991 buildings. Prior to these changes, landlords could raise the rent to keep up with inflation and the skyrocketing rental market.  However, landlords cannot control condo common expenses or assessments as they could in a rental free-standing rental.  So, with the rent guideline exemption gone and the guideline now set at 1.8%, many condo investors are finding themselves cash-flow negative very quickly.  

Put plainly, since the 2017 amendments to the RTA, there are now additional incentives to act badly.  There is no other way to evict a tenant who is behaving but who is paying a very low rent.  However, there are consequences for serving a bad-faith N12, and serious ones.  These include fines against the landlord of up to $25,000, an order to pay the tenant’s increased rent for a year in their new rental, plus the tenant’s moving and storage costs.  

So, a new technique is developing.  It is underhanded, wrong, insidious and dangerous for the landlord.  Instead of serving the N12 notices, landlords are hoping that the tenant has never heard of the N12 notice, and instead they send them an email or letter saying “Sorry, you’ve been a great tenant, but my son is moving in, you have to move out by September 30th, but I will pay your moving costs”.

An unsuspecting tenant takes the offer of $600 and moves on, not aware they were entitled to contest the landlord’s intentions and receive a full month’s rent as compensation for moving out.  This technique is happening a lot.  The N12 remains hidden in the landlord’s back pocket, with the landlord hoping the tenant won’t ask for it.  Remember that the remedies I spoke of earlier, plus the one month’s compensation, can only be recovered at the LTB if the landlord has served them with the N12.  No N12 served…no compensation or requirement for the landlord to move in.  At least that’s what the Residential Tenancies Act (the ‘RTA’) says.

Fortunately the story doesn’t always end there.  Landlord and Tenant Board adjudicators are suspicious of these “own use” applications, and are finding ways to award compensation anyway, both when a tenant files what’s called a T5 application based on the landlord not moving in, or when a tenant files a T1 application based on the landlord not paying the month’s rent as compensation.

I read a 2017 LTB decision today in which the adjudicator found that an email sent by the landlord saying he was moving in substantially complied with the contents of the N12 notice.  By making that finding, the adjudicator was able to award compensation to the tenant despite the fact that an N12 had not been served.  The tenant got their compensation, and the landlord got the punishment that they deserved.  

Despite the fair outcome, I think the adjudicator’s “substantial compliance” reasoning in the order was weak and likely an error in law.  A notice of termination cannot substantially comply unless it first complies with the RTA’s requirements, which includes having a signature, identifying the rental unit, naming the parties etc.  But there are certainly tools in the adjudicator’s arsenal that would permit them to make such an order.  If I was still sitting on the bench, I would find that an abuse of process had occurred when the facts suggest the landlord has failed to serve the N12 hoping to circumvent paying compensation and to prevent potential tenant applications after the tenant has moved out.  You see, LTB proceedings are conducted under a law called the Statutory Power Procedures Act (the ‘SPPA’).  Under s.23(1) of the SPPA, an adjudicator at the LTB can make ANY order (nominally within its jurisdiction) in order to prevent an abuse of its process.  

I hope this post finds its way to the LTB.  The Board needs to develop a consistent approach to this practice, otherwise landlords will continue to use this sneaky and underhanded method of avoiding the RTA’s requirements.  As most of my readers know, I’m not a fan of much of the RTA, and that includes how difficult it is for a landlord to get their home back.  But I’m also not a fan of those who use nefarious methods to circumvent the law.  Instead landlords should be using political pressure to bear to bring about change.

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