Tenant Who Is 1.5 Years and $13,000 in Arrears Gets One More Chance

A recent decision demonstrates once again that our Province’s residential tenancy laws are in need of an overhaul to give more protection to landlords.

By the time the case (almost) came on for a hearing on April 27, 2015:

(a) the tenant had accumulated arrears of rent from September, 2013;

(b) the Landlord and Tenant Board (“LTB”) had made several orders terminating the tenancy and ordering eviction for non-payment of rent and arrears;

(c) the LTB had also made several orders setting aside the orders mentioned in (b) above and instead installing various repayment schemes;

(d) the tenant breached all of the repayment schemes mentioned in (c) above;

(e) the tenant was appealing the most recent eviction order;

(f) the tenant owed in excess of $13,000 in arrears of rent; and

(g) the tenant had not paid any rent since May, 2014.

 

When the appeal came on for hearing on April 27th, the tenant did not appear. However, she had advised the court that she had a serious medical condition which required her to seek an adjournment to May 26, 2015.

The court granted the adjournment, over the landlord’s objection, but imposed fairly onerous (and in the circumstances quite reasonable) terms of the adjournment. As a condition of the adjournment, the tenant was ordered to pay $2,000 in certified funds by no later than May 19, 2015, failing which the landlord would be at liberty to move before the court without further notice for an order lifting the stay of the eviction order.

The fact that our system permits someone to continue to live in a rental property for 1.5 years after failing to pay rent is demonstrative of how fundamentally broken it is.

 

Comments

  1. This is an extreme example lifted from a system that handles a vast amount of cases every year. For every case like this one, there are hundreds that bear no resemblance to it, some involving people who have lost their homes after brief periods of unemployment, health issues or other hard luck, and which should have been resolvable. There are also many tenants stuck living in substandard conditions or slums due to landlords who fail to comply with LTB orders, or because they are simply unaware of or unable to enforce their rights through the system as it currently exists. Some landlords have been known to overcharge tenants for years before the tenant becomes aware of their rights only to learn of the RTA’s exceptionally-short one-year limitation period.

    Respectfully, I agree that the RTA is in need of ongoing changes and that the system is far from perfect, but to lift a case from the fringes and hold it up as the reason why the system is fundamentally broken – and apparently biased in favour of tenants by implication – does not address the full picture.

    Having worked with many tenants who were themselves on the short end of the stick, I find it counterproductive to push for change in this area of the law from a landlord-centric or landlord-as-victim position alone.

  2. Can it be fair to say RTA legislation is fundamentally broken merely if the administrative law and court systems (jointly) struggle to enforce a balance on these facts?
    How much of the apparent problem here is endemic to RTA rather than the procedures of judicial review, court rules, and other systemic factors independent from the wording in the RTA? Abusive litigants of all stripes may learn to game a system, take petty advantage of rules, perjure themselves, etc. Whether the matter at hand is a basement suite rental, a builders lien, or an insurance breach—a litigant may abuse perfectly good laws by taking advantage of the system which administers their dispute.
    Besides, there is another factor at play here. RTA legislation is as much concerned with consumer protection as it is with achieving balance between landlord and tenant rights. With that in mind, if a court is to err in finding balance—and from time to time courts shall—it should err on the side of tenants, no?

  3. As a landlord I can tell you there is no balance. As a single person earning less than 40 grand a year, and with a back that blew after I bought my house, I would have been forced into bankruptcy by this tenant.

    My last tenants never paid rent on time, did considerable damage to my property as well as skipping out on 2 months rent and leaving their possessions “in storage” in my apartment for an additional 30 days after moving out. What did I get to do about it? Give them paper they could then choose to ignore. Send papers to the LTB which they could then appeal. I can pay for the LTB to do something about them but only if they are still in my apartment. That is my right: I can push paper around.

    The tenant has “rights” too: they get x number of days to pay their arrears rent or move, 6 to 8 notices for late payment before they can be evicted if they pay by the termination date. They can appeal an eviction, wreck my credit rating, drive me into spiraling debt and leave me with an apartment that I can’t afford to repair enough to rent out. That’s just a loss of 3 grand in lost income and counting, plus $1000 or more in repair bills and damage to my personal property.
    In addition to this My enjoyment of the house (Duplex) I live in with them is shattered and my stress levels were and still are maxed.

    Do I get to appeal? Nope. Could I take them to small claims court? Sure, but these lovely tenants weren’t kind enough to leave a forwarding address. So here I am, afraid to go grocery shopping and unable to catch up because I need that rental income to make ends meet.

    Should tenants have no recourse in case of short term pitfalls. Yes!
    Is 547 days short term? No!
    A small landlord like myself likely cannot absorb this kind of loss without going bankrupt.
    We have pitfalls and job-losses and health problems too. Should we have to lose our homes for tenants like these? I shouldn’t even have to ask the question.

  4. The author’s post, much like this prolix response, is long on opinion and short on any constructive suggestions for change. Of course, the opinion of this post is that no change is urgent so I hope to come out the better for that comparison.

    Two above me have already pointed to the absurdity of taking an anecdote like this — even a number of them — and making grand claims about our system. So here is a structural observation — residential landlords still abound. It is not too much to assume this is because many of them are profitable. The costs (legal and lost-rent) of the occasional delinquent tenant do not out-weigh the profits from the rest. Any re-calibration of the Act risks denying tenants due process in exchange for somewhat enhanced margins. It might be possible to increase landlord profit margins without denying anyone justice, in which case of course such reforms should be made. Here there have been no suggestions. (ACTO and the Landlord’s Self-Help Centre are making sound proposals.)

    There seem to be many landlords who simply have no awareness of their responsibilities under the RTA. Some landlords do not recognise the ways renting is like any other business. You need a certain amount of investment; you can expect to take losses on occasion. Over time, if you are running your rental well, you will make money. You could get unlucky and never make money if, through no fault of your own, you face a string of bad-faith customers — as with any business. If you are borrowing to finance your rental enterprise and over-leverage, you face serious risks as pointed out by Pam above, and you should not be surprised if these materialize — as with any business. (There are people who cannot safely run a rental business even though they own a house, if they are over-leveraged. This is a thing about capitalism and not about the RTA.) Many “monster tenant” stories are really stories about landlords who do not understand the eviction process and are attempting to run their business without the minimum of legal advice.

    Of course the system is tenant friendly. It is designed to A) partially ameliorate the structural disadvantages faced by tenants compared with landlords (who tend to own property); and B) weigh money against shelter. Take a look at your taxonomy of human needs and tell me how those things compare. To paraphrase Blackstone, it is better that ten delinquent tenants shaft their landlords out of a year’s rent than one innocent tenant be thrown on the street (if that is the choice we must make). Of course there are also landlords who evict tenants because they don’t like them, who cast about the available termination methods and pick whatever seems most likely so that they can up the rent for the next person, who are happy to deceive the Board to get what they want — because after all, it is so biased towards tenants, and seated with bleeding hearts, that lying to it is demonstrating appropriate respect.

    One trend that has grown from the odd anecdote into a statistically relevant charge is the author’s anti-tenant tendency. A look through his archive quickly demonstrates that he is quick to purloin tales of monster tenants and the landlords they have “abused” (generally, by failing to pay rent), and has somehow failed to ever report a landlord unfamiliar with their local building code? Echoing Eric’s enunciation, any call for change should start with an even-handed appraisal of what we have.

    To summarize this ramble: “The fact that our system permits someone to continue to live in a rental property for 1.5 years after failing to pay rent” shows that it is on a par with the court system as it applies to attempts to collect bad debts in any business.

  5. Mr. Koziar failed to recognise that the business of residential landlords is still around because someone does make up for the losses caused by unscrupulous tenants.
    The honest tenant eventually pays an increased rent to cover landlords’ costs. Is this considered to be fair to the honest tenants of Ontario?
    To my mind, manipulating a system to avoid paying rent on an ongoing basis is theft. Theft from any other businesses , service and retail, would be sent to the police and the criminal court system. Unscrupulous tenants should be treated the same.

  6. Thank you all for your comments.

    This blog post was not, in my view, an appropriate forum for me to set out a lengthy article on suggested changes to the RTA. The purpose of the post was to generate a discussion and I welcome opinions on both sides of the issue.

    For those who assert that this is an isolated case, I urge you to review my other postings over the last few years on this site for similar cases, including a case in which the Divisional Court has called for legal reform.

  7. In approximately 10 or so years of being a small-time landlord (i.e. 6 units or less) we’ve had 22 tenancies, of which 4 went south. That’s slightly less than 20%. So far we’re out about $9000, not including our time to deal with the matters, and certainly not taking into account the stress associated with resolving the problems.

    We have done our best to make all our tenants welcome and address their needs. Our philosophy is that a happy tenant is good business. But despite that approach, we have still ended up with a 20% “failure” rate and $9000 out of pocket.

    The system is rigged in favour of tenants. The old days of the slimy landlord awash in tub-loads of cash is long gone, but the stereotype is alive and well and built right into the RTA.

    It seems to me there are very different landlords out there: people like us, slumlords, and corporate landlords. As such, the laws are devised to protect tenants from the two latter, but end up painting the former with the same brush.

    A corporation with 100’s (or 1000’s of units such as the THA) feel nothing when they get hit by the example the writer points out. But to people like us, it’s both financially as well as emotionally devastating.

    Add to this fact, the provincial government legislates maximum annual increases (it was 0.8% for 2014… seriously?!?!) and you have a market that is quickly dwindling. 0.8% barely touches the real inflationary costs associated with owning property these days.

    Governmental bodies are clearly out of touch with the people whose boots are on the ground. A commenter refers to being a landlord as running a business. Indeed, that is true, but how many businesses have rules that legislate how much profit you can make, how you can and cannot run your business, and how you must molly-coddle your employees (i.e. tenants) to a point of putting you out of business and so on. As a result, the rental market has steadily been shrinking since the 1980’s and for clear reasons.

    (Rental) housing should be viewed as a privilege, not a right. Abuse the privilege, and pay the consequences. But that’s not how the current RTA or justice system functions. Judgments are not worth the paper their written on nor the time wasted by the bureaucracy. It’s all a farce.

  8. I read the author’s post as calling for a change in the “system”, where the “system” is the Residential Tenancies Act. There are many problems in the world, but I don’t think any mentioned here can be safely addressed by changing the procedural mechanisms of that act.

    1. Responding to Donna Flynn — The entire justice system is funded in large part by people who do not use it directly. Not only do I think it is fair, I think it is fundamental for (eg) our criminal prosecutions to be funded by everybody rather than the “users” of the system (defined as the criminals or the victims). There is a debate to be had about whether failure to pay rent is theft or is more like breach of contract, which is not generally greeted with the same opprobrium. Either way, perhaps there should be better criminal mechanisms against those tenants who are essentially committing theft or fraud, as you suggest, but that does not have much to do with the procedural protections in the RTA.

    2. To respond to Matt Maurer — no one asserted this is an isolated case — rather an extreme one. It is illogical to turn an anecdote or series of anecdotes into a structural claim about a large system, as you have done. It could be that 80% of tenancies are problem-free (Steve’s number), or 50%, or 99%. In any of these cases, one would be able to find and report the problems. The existence of some problems tells us very little about the over-all incidence of those problems, or how it is changing with time. As for Matlow J’s oft-quoted dicta on the subject — he was making the same error of turning anecdote into statistic. It was not an issue appropriate for judicial notice, and he (himself implies he) lacked the sort of social science evidence which could ground his claim that the incidence of problem tenants is rising.

    3. To respond to Steve — you don’t give us all the figures (understandably), but over ten years as a landlord with an unspecified number of units, you likely had hundreds of thousands of dollars in gross rental income. Nine thousand dollars out of such a sum might be on a par with the sorts of unavoidable losses seen in other businesses (the overall question being the profitability or not of your enterprise considering all your other costs).

    What does this have to do with the RTA? There will always be delinquent tenants (even among those who are supposed to be covered by social security),so there will be some losses. It is likely that the procedural protections in the RTA, eg the willingness to grant adjournments, allow some of them to stay longer than they otherwise should, resulting in additional cost. I am suggesting that the additional cost involved (whether or not “passed on” to “honest tenants”) is a reasonable cost to ensure those tenants with good faith need of the procedural protections get them.

    As to rent control, it is being phased out in Ontario. I am intrigued by the Québec system. In that province, there is no de-regulation between tenants as we have here. On the other hand, allowable rents are calculated based on a formula meant to take all of a landlord’s costs into account, so that a certain amount of profitability is (supposedly) ensured. I am sure there are others more familiar with whether this has proved an effective system.

    Last, you say “(rental) housing should be viewed as a privilege, not a right”. The parentheses do not help — shelter is a basic need, and the only realistic option for those who cannot afford to own is to rent. Housing is complex, and this is another area of law where government has essentially out-sourced a social safety net to the people who appear most readily able to provide it — landlords. If a tenant is facing homelessness, the Board will grant a delay in their eviction though they are paying no rent, so that the landlord is acting like a homeless shelter. It’s not unlike our family law system where spousal support can be ordered on the basis of need so that ex-s do not go on welfare. Personally, I am in favour of scrapping most or all of these privatised social safety nets in favour of a guaranteed annual minimum income, though even that will not likely solve the problem of housing by itself.

  9. This is a great discussion. If the question is, “are landlords ill-served by the system, or are tenants ill-served by the system,” then the answer seems to be “yes.”

    Must we really choose between “delinquent tenants shaft[ing] their landlords out of a year’s rent” and “innocent tenant[s] be[ing] thrown on the street” (in John’s evocative phrase)?

    Or can we reform this system in a way that actually responds to the legitimate expectations of BOTH
    landlords and tenants?

  10. John mentioned Blackstone, who wrote extensively about the laws of England some 250 years ago. He described a rudimentary concept of property as “that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe.” But that rudimentary concept is really not what the law affords landlords. The law of property affords a “unitary conception of ownership”, where the “bundle of rights” in rental property is divided between tenants and owners based on the function that the rental property serves for each. For a tenant the function is home, physical security for him/her and his/her family—it is no mere privilege. It is, in ancient fact, a right. So a comment like “(Rental) housing should be viewed as a privilege, not a right” is off the mark. For over 500 years at common law a tenant has been able to enforce the right of possession.
    For a landlord, the function of rental property is its “exchange value” as an economic interest, whether that be sale (hopefully after it has appreciated) or by rent. And I guess an easy, perhaps overly simple, way to put it is that we as a society have long favoured the rights of people and their families to live with assurance of shelter or the means to access shelter, over the naked economic interests of banks (foreclosure law), creditors (bankruptcy laws) and landlords (residential tenancy laws).
    Certainly there is a point where the housing rights of tenants in a calibrated system can become so prejudicial to the economic interests of landlords that the economic incentive is lost and the supply of housing suffers. However, most would probably agree with John that any conclusion to the question “has this point been reached?” is only a very weak one if the evidence is just anecdotal.