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RTA - Rent Discount. Hazelview Property Services Inc. v. Matsui
In Hazelview Property Services Inc. v. Matsui (Div Court, 2024) the Ontario Divisional Court dismissed a landlord's RTA s.210 appeal, here where the landlord gave a COVID-related - but RTA-unauthorized - discount of rent (which the LL styled as a 'deferral'), and the tenant claimed a rent reduction (for the duration of the 'discount') under RTA s.111 ['Landlord not to charge more than lawful rent'] and General Reg 516/06, s.12 ['Calculation of lawful rent']:[1] The landlord accepted payment of about 50% of the agreed rent for a period of 17 months as an accommodation to the tenant brought about by the pandemic. The Landlord and Tenant Board found that the rent discount became the lawful rent after a year because the parties did not comply with s. 111 of the Residential Tenancies Act, 2006, SO 2006 c. 17 and s. 12 of O Reg 516/06.
[2] The appellant submits that the Landlord and Tenant Board erred in law by failing to find either that the parties agreed to a rent deferral rather than a rent discount, or that the board erred by failing to s. 111 applied in the absence of an express finding that the parties agreed to a permanent decrease in the lawful rent.
[3] In either case the landlord cannot succeed in its appeal.
[4] The board made a clear finding of fact that the parties did not agree to a deferral of rent. That finding cannot be reviewed in this appeal. Section 210 of the statute limits appeals to questions of law alone.
[5] In any event, the board’s finding is supported by the tenant’s evidence below and the paucity of documentary evidence to the contrary. One line in a generic email blast to the entire building is not a contractual term. At least it was not sufficient fo the board to find as a fact that the parties agreed to a deferral of rent as submitted by the landlord.
[6] On the second point, nothing in s. 111 required the board to default to a finding that rent was deferred when it made no specific finding that the parties agreed to a form of permanent rent discount. There is a third option. The landlord agreed to accept a reduced rent for four months and then simply kept accepting it for the next 13 months. Terms were not negotiated or agreed one way or the other.
[7] It is not disputed that once the landlord asked the tenant to revert to paying the original rent, she did so. The issue is about whether the landlord can now go back and claim arrears of over $15,000 for the amounts of rent not paid during the 17-month discount/deferral period.
[8] Section 111 of the statute regulates rent increases and discounts. Under ss. 111 (2), (2.1), and (3) discounts are required to meet prescribed conditions if they are to avoid being deemed to change the lawful rent. That means that if a landlord does not want the maximum lawful rent permanently decreased, he, she, or it must ensure that the discount meets the conditions set out in s. 12 of the regulation.
[9] Under s. 12 (6) of the regulations, if a discount is not provided for in a written agreement, “the largest eligible discount is the largest discount in rent in one rental period in the 12-month period.” That effectively limits the landlord to one discount in a year if the landlord does not want to reduce the discount to a written agreement. Otherwise, the discounted rent becomes the lawful rent.
[10] Had the parties agreed in writing to a discount or deferral plan, it is not at all clear that the regulation would ever allow a 17-month discount without the discounted amount becoming the new rent. The landlord submits that this is a perverse result in which “no good deed goes unpunished.”
[11] The landlord submits that to calculate the annual rent under s. 12 (2) of the regulation, the board was required to consider the rent charged “or to be charged” within a 12-month period. If rent was deferred, then it remained “to be charged.” That may be so. But nothing in the section required the board to find that there was either a deferral agreement or a discount agreement. Neither did the lack of a specific agreement to discount the rent led to a finding in default that rent was to be deferred. Rather, given the board’s express finding that rent was not deferred, there was no error of law in calculating the lawful rent at the discounted amount once it exceeded 12 months.
[12] I agree with Mr. Duggan that the regulation scheme may limit the ability of a landlord to do good deeds. The Legislature amended s. 83 of the statute to encourage landlords to be more lenient during the pandemic. Landlords should be encouraged to do good.
[13] But I also agree with Ms. Jafari that it is the landlord who controls the paper and pen. It was open to the landlord to specify that it was prepared only to defer rent for a brief period of time and to sign tenants to agreements drafted to comply with the statute and regulation.
[14] While encouraging landlord largesse is a valid goal, it cannot be lost that the meat of the statutory scheme is to protect tenants from landlord abuse. I dare say that the latter is a far greater policy priority.
[15] The flip side of allowing a long, unspecified deferral of rent is that here, the tenant received a demand for payment of $15,000 in arrears said to have been amassed over the prior 17-month period.
[16] The demand was then followed by the whammy of an eviction notice.
[17] I see no hardship to landlords who wish to offer their generosity to tenants to ensure that they do so with clarity, in writing, and within statutory or regulatory limits. It was within the landlord’s power to ensure that the tenant knew specifically what the landlord was willing to offer and to decide if she could agree. There is no evidence that the tenant could have saved for the day of reckoning even had she known that the landlord was providing a deferral only (as it now says). But controlling the conditions of deferrals and discounts limits the size of the whammy if and when a day of reckoning comes.
[18] Although the issue before the board was only whether the tenant owed arrears for the 17-month period, the board went on to hold that the reduced rent continued to apply after the landlord asked the tenant to revert to the original rent and she agreed.
[19] The landlord submits that the board erred by failing to apply ss. 135.1 and 136 of the statute. Those sections prevent a tenant from contesting illegal rent increases unless they do so within a year. Here, the tenant has paid the original rent and two rent increases since then. She does not contest the current rent and agrees that the board did not need to make the finding it made. The tenant concedes that as she has been paying the old rent plus increases for several years, ss 135.1 and 136 would preclude her from contesting the lawfulness of the rent (had she done so).
[20] While there is an issue of whether the landlord should be allowed to raise this issue on appeal when ss. 135.1 and 136 were not argued below, neither side wants me to send the issue back to the board. The tenant does not contest the current rent. Accordingly, I find that the board erred in law in resolving an issue that was not properly before it on the landlord’s application. Accordingly, paragraph 14 of the board’s decision is quashed.
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