by Joe Hoffer
Ontario's new Residential Tenancies Act, 2006 (RTA) takes effect January 31, 2007. This legislation contains draconian new laws designed to create financial risk for residential landlords.
Housing Stock at Risk
Much of the existing rental housing stock in Ontario predates the introduction of rent controls in 1975; consequently, major repairs are required for such things as balconies, parking garages, elevators, heating systems and exterior surfaces. The RTA, for the first time, authorizes “Rent Strikes” and has regulations which will make it far easier for tenants to band together to seek substantial rent abatements (25%!) and “Rent Freezes” while necessary capital repair work is being carried out. Multi-residential landlords will need to strategize carefully when implementing a capital expenditure program to protect themselves from rent reductions and rent freezes for the foreseeable future.
Procedural Changes Adversely Impact Multi-Residential Landlords
The RTA also introduces procedural changes which will significantly increase the costs for landlords applying for eviction orders. Right now landlords can obtain “default” orders for both eviction and non-payment of rent but the RTA scraps default orders and every landlord application must now go to a hearing, whether the tenant disputes it or not.
At the eviction hearing, the tenant will be permitted, without any notice to the landlord, to raise “any issue” the tenant wants to and the Board must hear the evidence and give relief to the tenant. Thus, “Trial by Ambush”, unheard of in any other legal process in Canada, is authorized by legislation. “Professional Tenants” will easily capitalize on this new process. Landlords may go into a hearing thinking they will get an eviction order and a judgment for arrears of rent and walk out of the hearing with a rent abatement order against them as well as a rent freeze. In addition, by sending everything to a hearing, delays in obtaining evictions are virtually guaranteed: another windfall for professional tenants.
Landlords will now have to carefully prepare in defending against any allegations that may be raised by a tenant at an eviction hearing. This means more preparation work and the landlord will have to ask for an adjournment if new issues are raised on the day of hearing and the landlord does not have evidence on hand to respond to them. All of this means more cost, more lost time and, in the case of adjournments, more lost rents.
New “Tenant-Friendly” Rules
1. The definition of “tenant” has been expanded to include a person claiming to be a “spouse” of the tenant. Landlords are forced into contractual relationships with strangers. This new right is only triggered at the end of a tenancy thereby depriving the landlord of the right to increase rent to “market” on turnover.
2. Where an evicted tenant has abandoned property in the rental unit, the tenant can apply to the Board claiming that the landlord improperly disposed of the property. Most such applications will greatly inflate the value and nature of items disposed of so it is imperative that landlords carefully document the disposition of tenants' property.
3. Landlords must issue rent receipts to former tenants for up to a year after the former tenant has vacated the rented premises and a failure to comply with this rule exposes the landlord to $25,000 and $100,000 fines.
4. Landlords who apply for above guideline rent increases based on capital work are also exposed to liability for “any issue” the tenant wants to raise in response. If the Board believes the landlord has seriously breached maintenance obligations, a rent freeze will be imposed until such time as the landlord applies for and receives clearance that the maintenance issues have been corrected. Another example of legalized “trial by ambush.
Some Positive Changes
1. A few crumbs were tossed to the landlord by the Government: for example, landlords will no longer have to pay 6% interest on last months rent (LMR) deposits. The interest rate, effective February 1, 2007, will be equal to rent increase guideline: 2.6%.
2. Landlords will now be able to get possession of a rental unit for a person who provides or will provide “care services” to the landlord or a member of the landlord's immediate family.
3. An expedited eviction process is available in situations where it can be shown that the tenant is causing willful damage and/or using the premises in a manner inconsistent with that of a rental unit (i.e. a marijuana grow-op). Such eviction orders can also contain a direction to the Sheriff to enforce the eviction in priority to all other eviction orders.
These are just a few of the changes contained in the new Residential Tenancies Act. For more information about the new laws you may visit the Board website at www.LTB.ontario.ca or go to www.e-laws.gov.on.ca under “Statutes and Associated Regulations”, “R” and Residential Tenancies Act. For further information regarding this article you may also contact Joe Hoffer at [email protected]