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Ontario’s Bill 184 poses risks to honest landlords, sellers and purchasers

At the risk of being chased with pitchforks, I’ll say it: Bill 184 is not an unapologetic piece of pro-landlord legislation. I say this as someone who worked and volunteered at Parkdale Community Legal Services in the landlord and tenant division. I defended tenants exclusively in and out of the Landlord and Tenant Board and, without hesitation, I assert – the ethics of the landlord and tenant are more important than any legislation. Nonetheless, understanding Bill 184 is imperative for anyone selling or buying a tenanted property and it is imperative for real estate agents to understand it too.

Bill 184 contains a variety of amendments to the Residential Tenancies Act, 2006 that are beyond the scope of this article. This article focuses on what you need to know if you have a client buying or selling a rented unit.

Compensation for terminating a tenancy on behalf of a purchaser

While sellers in Ontario are already used to compensating tenants if the seller wants to terminate a tenancy early because a purchaser is moving in, section 49.1 adds a few more options. Under the new section, the seller is required to compensate the tenant in an amount equal to one month’s rent or to offer the tenant another rental unit acceptable to the tenant.

Compensation for terminating a tenancy for purposes of demolition, repairs, renovation or conversion

In the past, compensation for giving notice to a tenant due to demolishing, repairs, renovations or conversion of the unit applied only if the residential complex in which the rental unit is located contained at least five residential units. Going forward, these financial obligations extend to all complexes, even if the complex has only one unit.

In other words, a small landlord looking to renovate his basement apartment will have to compensate the tenant “an amount equal to one month’s rent or offer the tenant another rental unit acceptable to the tenant” (Bill 184, Schedule 4, Residential Tenancies Act, 2006). Certainly, the extension of such compensation is a win for tenants and an attempt to stop renovictions.

Affidavits now required when filling applications to terminate a tenancy

A common complaint that Bill 184 attempts to solve is the fact that some purchasers or landlords claimed that they would be moving into a unit, thereby requiring the unit to be vacant. The purchaser or landlord, however, would not move in; rather, they’d repair or upgrade the property and then re-let it for a much greater amount.

Such “renovictions” are caught by the new requirement that the landlord, seller or purchaser, as the case may be, must include in its application to terminate a tenancy a sworn affidavit. The affidavit sets out the reason for termination and, more importantly, if the person filing the application has filed a similar application within the last two years. This affidavit will be used against the applicant if they have a history of moving into tenanted units for a suspiciously short period of time.

While I understand the need to prevent renovictions, I can imagine circumstances in which an applicant can be unjustly denied the ability to move into a unit they own and truly intend to occupy. Buyers should be aware of this set back and the possibility that, if they’ve moved into tenanted units in the past and have filed applications for such evictions, they could be denied the ability to take possession.

Nefarious behaviour will come back to haunt you

Bill 184 takes another step to ensure that landlords, sellers and purchasers are not lying about their intention to actually live in a tenanted unit. Going forward, the Landlord and Tenant Board can consider the landlord’s previous use of notices of termination under Sections 48, 49 and 50 to determine the intentions and good faith of the landlord. If the landlord seems to have a nefarious history and the board finds the landlord to be acting in bad faith, it will cost the landlord a lot more than it has in the past.

Acting in bad faith will cost more

Critics of the act claimed that the fines imposed on landlords who behaved badly were not harsh enough to dissuade renovictions, slumlords or fudged increases in rent. The penalties have been increased from $25,000 (in the case of a person other than a corporation) and $100,000 (in the case of a corporation) to $50,000 and $250,000, respectively.

In addition to the increase in fines, if the board finds that a landlord has acted in bad faith in terminating a tenancy under Sections 48, 49 or 50 (applications for a landlord’s personal use, a purchaser’s personal use or for demolition, conversion or substantial renovation), the board may now order that the landlord compensate the former tenant “in an amount not exceeding the equivalent of 12 months of the last rent charged to the former tenant”.

This amount holds firm even if the actual rent paid was less than what the landlord charged. This 12-month rent compensation is in addition to the imposition of an administrative fine of up to $35,000 and compensation to the tenant for “all or any portion of any increased rent that the former tenant has incurred or will incur for a one-year period after vacating the rental unit” and/or any “reasonable out-of-pocket moving, storage and other like expenses that the former tenant has incurred or will incur”.

Given all of these changes, purchasers and sellers alike should be extra cautious. If you represent a buyer who has evicted tenants in the past in order to move into a unit, they may have problems with the board if they plan to move into a unit that is tenant occupied.  Landlords or sellers should also factor in the various new costs associated with evicting a tenant for legitimate reasons such as renovations to a basement unit, for example. While punishing those who act dishonestly is highly endorsed by this writer, it also appears that acting honestly just got more expensive.