Divisional Court Calls for Reform of Ontario’s Residential Tenancy Laws

Residential tenancies are governed in Ontario by the Residential Tenancies Act, 2006 (the “RTA”). Whether you are pro-landlord or pro-tenant it is hard to argue with the fact that the RTA heavily favours the rights of tenants over the rights of landlords as property owners and service providers. In Ontario, it is illegal for a landlord to, among other things, require (or even obtain on consent) a damage deposit, require the tenant provide post-dated cheques, or prohibit a tenant from owning a pet. If a tenant vandalizes a rental property and up and leaves in the middle of the night, the landlord has no recourse except to try to track down the tenant and sue. However, perhaps a bigger problem is not what happens when a tenant disappears without paying rent, but rather what happens when a tenant will not pay rent and will not leave the property.

Given how heavily the legal deck is stacked in the tenant’s favour, it is possible for those who know their legal rights as tenants to abuse the system and live rent-free for months on end. In a Divisional Court decision released earlier this month, Justice Matlow noted the “growing practice by unscrupulous residential tenants to manipulate the law improperly, and often dishonestly, to enable them to remain in their rented premises for long periods of time without having to pay rent to their landlords” and called on the Ontario Government, the Landlord Tenant Board (the “LTB”) and the Courts to respond.

The “condensed” version of the facts of the case are as follows.

In 2005 the landlord purchased a small building that contained one commercial unit and one residential unit. Up until 2010 she lived in the residential unit herself. This building is the landlord’s only income property.

On October 11, 2011, the landlord entered into a lease to rent the property to Rony Hitti and his company Toronto Bespoke Inc. A written lease was signed for a one year term. The tenancy was supposed to begin on October 15, 2011 and the agreed upon rent was $3,600 per month. Hitti and his spouse moved into the unit immediately after signing the lease.

Hitti refused to pay the rent on October 15,2011. On October 21, 2011, the landlord served the necessary paperwork to end the tenancy early as a result of non-payment. Proceedings before the LTB were commenced on November 8. The LTB scheduled the hearing to take place on November 28. Hitti showed up on November 28 and convinced the landlord to withdraw the proceeding in exchange for him providing a cheque for the full outstanding amount. The landlord, unfortunately, agreed.

Less than a week later the landlord found out that Hitti put a stop payment on the cheque. She retained professional help and paperwork for another hearing was served on Hitti on December 20. The LTB scheduled the hearing for January 23.

On January 25 the LTB gave an Eviction Order that required the tenants to move out by February 25 unless the tenants voided the Eviction Order by paying rental arrears and court fees which totaled over $12,000 to the landlord. In February, Hitti provided a cheque for over $11,000 (enough to void the Eviction Order). The cheque was returned NSF. When the landlord went to enforce the eviction order using the Sheriff, she discovered that Hitti had already brought a motion without notice to the landlord to void the Eviction Order as a result of him having paid over $11,000. As such, there was no longer any Eviction Order for the Sheriff to enforce.

On February 7, the landlord filed the paperwork to have the Eviction Order reinstated as a result of Hitti bouncing the $11,000 cheque. The LTB scheduled this hearing for March 7, 2012.

Hitti’s lawyer showed up on March 7 and asked for an adjournment to March 12. As a condition of granting the adjournment, Hitti agreed to pay the full amount owed to the LTB in trust pending the outcome of the hearing. The adjournment was granted, Hitti never paid any money and as a result the Eviction Order was reinstated on March 16.

However, on March 16 the tenants filed an Appeal of the Eviction Order and as a result the Eviction Order became automatically stayed pending the Appeal.

The landlord brought her motion before Justice Matlow to dismiss Hitti’s appeal. That motion was heard on July 26, 2012. Justice Matlow found that the Appeal raised no bona fide question of law, was totally devoid of merit, vexatious and an abuse of process. In addition to dismissing Hitti’s appeal, Justice Matlow also awarded the landlord over $13,000 in legal fees. This put the total amount that Hitti was required to pay the landlord at almost $40,000.

Hitti was contacted by the press after Justice Matlow released the reasons for the decision. Hitti said that he had not yet read the decision, but nevertheless he had instructed his lawyer to appeal Justice Matlow’s decision.

10 months, $40,000 and counting.

 

 

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Comments

  1. Susan Anderson Behn

    Interesting to compare this Ontario situation, to the current arrangements in B.C. Here the balance strongly favours the landlord, and with the cutbacks in service from the B.C. Government, tenants are left with a seriously defective system of hearings scheduled by phone, with no mechanism in place to know in advance of the hearing that the Government adjudicator has actually RECEIVED documents filed by either party. If the adjudicator does not have the materials necessary to deal with the case, it is deemed to be the responsibility of the tenant,and there is no mechanism for an extension of time.
    The REAL issue is that there is no inexpensive Court process which can be used by a tenant, who can prove that the documents were delivered to the Rentalsmans office on time, to appeal these decisions. Several years ago there was an eviction order which was appealed using Small Claims, and after several hours of hearings, the Judge agreed that the eviction order should be overturned,and costs, including damages paid to the tenant. He recessed, and came back to announce that he had been advised that given the wording of the Rentalsmans Legislation, issues relating to Landlord and Tenant in BC could only be raised by going to the BC Supreme Court, a course of action which few tenants could afford.

  2. I think it’s a bit of a canard to talk tenants not paying rent being a “bigger problem”

    in the past three years, I think our office has had at two calls from landlords p’oed at tenants and both of them were very situation specific issues.

  3. KJ,

    Just because your office has had two calls in three years does not mean it is not a problem. If you read the decision, Justice Matlow says this is just one of many cases recently he has seen like this.

    I know a lot of residential landlords who routinely have issues with tenants. Usually they don’t retain counsel because the amount at issue (a month or two of rent or $1000 in damage as they move out) does not make it cost effective for the landlord to retain counsel.

  4. @ Matt

    You’re right, the world does not revolve around my office, but that is my personal experience. We do a lot of business for parties that are landlords for commercial and residential properties.

    Any Landlord has an opportunity at the time of signing to vet a potential renter, if they are on top of things and don’t rush to rent, they are going to come out on top.

  5. KJ – Can you clarify that your practice is actually in Ontario? From our previous discussions I had the understanding that it was in another jurisdiction in Canada.

    Matt – In my experience, the bulk of represented work before the Tribunal is done by paralegals and not lawyers.

    The monetary jurisdiction of the tribunal is limited to that of small claims court, and with the increase in the ceiling of that venue in recent years it has allowed larger claims to proceed before the tribunal. Typically though, files in this quantum would be representing the landlord and not the tenant, who frequently tends to be unrepresented.

    I have successfully brought claims in the tribunal for sizeable amounts, but the larger challenge has been in enforcement. When dealing with problematic tenants who refuse to provide forwarding addresses, it becomes very difficult to serve them with subsequent court documents when attempting to collect on tribunal orders. These challenges have resulted in several clients being very frustrated about the remedies provided under the current statutory regime.

    The Toronto Star has done a wonderful series following the case of a problematic tenant who has been able to game the system perfectly, stringing cases along without actually paying the landlord in full.

    The protections provided to tenants are important, but when property owners routinely fail to collect on rent and spend more in legal fees for some units than they receive in rent collections, there’s certainly room for reform. It’s in this context that Justice Matlow’s opening remarks in the case you cite is quite apposite:

    [1] My recent experience sitting as a single judge of this Court to hear motions has convinced me that there is a growing practice by unscrupulous residential tenants to manipulate the law improperly, and often dishonestly, to enable them to remain in their rented premises for long periods of time without having to pay rent to their landlords. It is practice that imposes an unfair hardship on landlords and reflects badly on the civil justice system in Ontario. It calls for the Government, the Landlord and Tenant Board and this Court to respond.