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Bad Faith - RTA
COMMENT
As noted in the 'bad faith' topic home page, the terms 'bad faith' and 'good faith' are corollaries - opposite sides of the same concept. Below I harvest prominent uses of both these terms in the RTA.
The term "bad faith" occurs in the Residential Tenancies Act, 2006 (RTA) primarily in s.57 ['Former tenant’s application where notice given in bad faith'], and the term 'good faith' occurs in the s.57-related provisions of:. s.48 [Notice, landlord personally, etc., requires unit],
. s.49 [Notice, purchaser personally requires unit],
. s.58 [Notice at end of term or period, additional grounds], and
. s.72 [Landlord or purchaser personally requires premises]. 'Good faith' also occurs in the RTA in several unrelated provisions:. s.73 [Demolition, conversion, repairs],
. s.197 [Where Board may dismiss]
. s.202 [Findings of the Board] As well, 'good faith' occurs in these government or government agent liability provisions (considered again in the 'bad faith' topic homepage):s. 223 [Immunity], and
s. 226.3 [Protection from personal liability]. As neither the terms 'good faith' nor 'bad faith' are otherwise defined in the RTA, there meaning may be drawn from common law usage [Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp. (SCC, 2020), para 39]:The common law forms part of the context in which a legislature enacts statutes, and the legislature is presumed not to have intended to alter or extinguish common law rules in doing so ... In addition, when the legislature uses a term that has an established legal meaning, it is presumed to have given the term that meaning in the statute in question. [Citations omitted.]
CASE DICTA
. Elkins v. Van Wissen
In Elkins v. Van Wissen (Ont CA, 2023) the Court of Appeal considers (and allows) an appeal from an earlier Divisional Court RTA s.210 appeal on an RTA 57(1) ['Former tenant’s application where notice given in bad faith'] compensation application, resultant from an earlier s.49(1) purchaser possession Notice of Termination.
In these quotes the court focusses on the temporally-variable aspect of the mandatory s.49 'bad faith' assurances:[1] In Ontario, the law permits landlords to evict tenants to allow the landlord, or certain members of the landlord’s family, to move in. The law extends such “own use” eviction power to purchasers, but the eviction must be made in good faith.
[2] Section 49(1) of the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (the “RTA”), empowers a landlord who has entered into an agreement of purchase and sale to, in certain circumstances, give a tenant a notice terminating the tenancy on behalf of the purchaser, if the purchaser “in good faith” requires personal possession of the residential rental unit. And, pursuant to s. 57(1)(b), the Landlord and Tenant Board (the “Board”) may make certain orders if it determines, among other things, that the landlord gave a s. 49 termination notice “in bad faith”.
[3] This appeal addresses the following questions. Where a landlord terminates a tenancy pursuant to s. 49(1) of the RTA: (1) how is the Board to determine whether the landlord acted in bad faith within the meaning of s. 57(1)(b); and (2) must the Board assess the purchaser’s good faith requirement in s. 49(1) when making that determination?
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III. THE RELEVANT STATUTORY PROVISIONS
[23] As noted, the Vendor Landlords gave the Tenants a notice terminating their tenancy pursuant to s. 49(1) of the RTA.
[24] Section 49(1) stipulates that a landlord may, “on behalf of the purchaser”, give notice terminating the tenancy, “if the purchaser in good faith requires possession” of the rental unit for residential occupation. It reads as follows:49(1) A landlord of a residential complex that contains no more than three residential units who has entered into an agreement of purchase and sale of the residential complex may, on behalf of the purchaser, give the tenant of a unit in the residential complex a notice terminating the tenancy, if the purchaser in good faith requires possession of the residential complex or the unit for the purpose of residential occupation by,
(a) the purchaser;
(b) the purchaser’s spouse;
(c) a child or parent of the purchaser or the purchaser’s spouse; or
(d) a person who provides or will provide care services to the purchaser, the purchaser’s spouse, or a child or parent of the purchaser or the purchaser’s spouse, if the person receiving the care services resides or will reside in the building, related group of buildings, mobile home park or land lease community in which the rental unit is located. [Emphasis added.] [25] The Tenants’ T5 Application was made pursuant to s. 57(1)(b) of the RTA, the relevant parts of which read as follows:57(1) The Board may make an order described in subsection (3) if, on application by a former tenant of a rental unit, the Board determines that,
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(b) the landlord gave a notice of termination under section 49 in bad faith, the former tenant vacated the rental unit as a result of the notice or as a result of an application to or order made by the Board based on the notice, and no person referred to in clause 49 (1) (a), (b), (c) or (d) or 49 (2) (a), (b), (c) or (d) occupied the rental unit within a reasonable time after the former tenant vacated the rental unit;
... [Emphasis added.] [26] Under s. 57(3), the Board may make orders that include requiring the landlord to pay the tenant certain sums, abate rent, and pay administrative fines to the Board. Section 57(3) also empowers the Board to make any other order it “considers appropriate”. It reads:(3) The orders referred to in subsection (1) are the following:
1. An order that the landlord pay a specified sum to the former 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.
1.1 An order that the landlord pay a specified sum to the former tenant as general compensation in an amount not exceeding the equivalent of 12 months of the last rent charged to the former tenant. An order under this paragraph may be made regardless of whether the former tenant has incurred any actual expenses or whether an order is made under paragraph 2.
1.2 An order that the landlord pay a specified sum to the former tenant for reasonable out-of-pocket moving, storage and other like expenses that the former tenant has incurred or will incur.
2. An order for an abatement of rent.
3. An order that the landlord pay to the Board an administrative fine not exceeding the greater of $10,000 and the monetary jurisdiction of the Small Claims Court.
4. Any other order that the Board considers appropriate. ....
B. The Board Errors
[39] In my view, the Board made the following three errors on questions of law: (1) it erred in its approach to determining whether, pursuant to s. 57(1)(b) of the RTA, the Vendor Landlords acted in bad faith in giving the s. 49 Termination Notice; (2) it erred by failing to consider the Purchasers’ good faith, as required by s. 49(1); and (3) it failed to grapple with the evidence and the issues necessary for resolution of the T5 Application.
(1) Incorrect approach for determining bad faith under s. 57(1)(b)
[40] The Tenants’ T5 Application was brought pursuant to s. 57(1)(b) of the RTA. Section 57(1)(b) required the Board to determine whether the Vendor Landlords gave the s. 49 Termination Notice “in bad faith”. The Board decided that matter based on a single consideration: at the time the Vendor Landlords served the s. 49 Termination Notice, the Vendor Landlords said they had “no reason not to believe it was the [Original] Purchasers’ intention for a family member to move into the unit”. This is an unduly narrow approach for determining bad faith under s. 57(1)(b) and, in my view, amounts to an error of law. My view rests on a contextual interpretation of ss. 49(1) and 57(1)(b). It is buttressed by a consideration of Board jurisprudence on this matter.
(a) A contextual interpretation of ss. 49(1) and 57(1)(b)
[41] The modern approach to statutory interpretation requires that the words of ss. 49(1) and 57(1)(b) “be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21, quoting Elmer Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at p. 87.
[42] The RTA and its predecessor are remedial legislation with a tenant protection focus: Honsberger v. Grant Lake Forest Resources Ltd., 2019 ONCA 44, 431 D.L.R. (4th), at para. 19; Price v. Turnbull’s Grove Inc., 2007 ONCA 408, 85 O.R. (3d) 641, at para. 26. The purposes of the RTA are set out in s. 1. The first purpose listed is “to provide protection for residential tenants from…unlawful evictions”. To ignore events after a landlord gives a tenant a s. 49 termination notice limits the Board from fulfilling its responsibility to determine bad faith under s. 57(1)(b) and undermines the RTA’s stated purpose of providing tenants with protection from unlawful evictions.
[43] On a plain reading of ss. 49(1) and 57(1)(b), the landlord’s conduct is linked to the purchaser’s good faith. Section 49(1) permits the landlord to, on behalf of the purchaser, give the tenant a termination notice so long as the purchaser, in good faith, requires possession of the rental unit for the purpose of residential occupation. Section 57(1)(b) requires the Board to determine, among other things, whether the landlord gave the s. 49 termination notice in bad faith. When ss. 49(1) and 57(1)(b) are read together, it is clear that the object of those provisions is to prevent the sale of a property from being used to unlawfully evict a tenant. Accordingly, the Board must consider all the evidence before it that is relevant to the landlord’s bad faith under s. 57(1)(b). It is an error of law for the Board to restrict its consideration to the evidence at the point in time when the landlord gives the tenant a s. 49 termination notice. This case makes that point.
[44] As a result of artificially narrowing the assessment of bad faith to when the s. 49 Termination Notice was given, the Board failed to consider that, after the notice was given but before the sale of the Property closed, the Vendor Landlords and/or their lawyer knew that title to the Property would be taken in the name of Embleton Homes Inc., a corporation. A corporation cannot personally occupy a residence for residential purposes. This information must surely be relevant to the Board’s determination of the Vendor Landlords’ bad faith under s. 57(1)(b).
[45] It could be argued that s. 57(1)(b) implicitly limits Board scrutiny to the landlord’s knowledge when it gives the s. 49 termination notice. However, such an interpretation runs afoul of s. 202(1) of the RTA. Under s. 202(1), the Board is required, when making findings on an application, to ascertain the “real substance of all transactions and activities relating to…a rental unit and the good faith of the participants”. Limiting the assessment of a landlord’s bad faith to that single point in time when the s. 49 termination notice is given precludes the Board from both ascertaining the true substance of the transaction between the landlord and the purchaser and conducting a fair assessment of their good faith.
[46] As Board member Lynn Mitchell stated in CET-67272-17 (Re), 2017 CanLII 70040 (Ont. L.T.B.), at para. 20:20. [L]imiting the question of good faith to an exploration of the mind of the Landlord at the instant of serving the N12 notice, and to ignore all the surrounding circumstances, would lead to results inconsistent with the objects of the Act. To require the Tenant to establish what was in the mind of the Landlord at the instant of the N12 notice service, without regard to the surrounding circumstances and to the behaviour of the Landlord between the service of the N12 notice and the termination date, would upset the balance of interests which the Act aims to achieve. The good faith obligation attaching to an N12 notice must surely survive the instant of its service. (b) Board jurisprudence
[47] Other Board decisions similarly demonstrate a broader approach to the bad faith inquiry under s. 57(1)(b), one that considers the parties’ conduct prior to, at the time of, and subsequent to the giving of the s. 49 termination notice. As I have explained, this broader approach results in a fairer, more meaningful assessment of bad faith in s. 57(1)(b) and accords with the purpose of the RTA to prevent unlawful evictions.
[48] One such case is TST-94914-18 (Re). There the Board found bad faith on the part of the landlords on facts arising after the s. 49 termination notice had been given. The tenants contested their eviction, and the Divisional Court issued a stay of eviction. The purchaser then advised that she could not complete the sale. Despite this, the landlords had the sheriff enforce the eviction when the stay was lifted. The landlords ultimately sold the property to a different buyer. The Board found that, while the landlords had not acted in bad faith when they served the s. 49 termination notice, they did act in bad faith in enforcing the eviction order with knowledge that the sale to the original purchaser had no prospect of closing.
[49] Below, the Divisional Court considered TST-94914-18 (Re) but declined to apply its reasoning on the basis that it could be distinguished from this case. I agree that the two cases differ factually. However, those factual differences do not account for the different legal approaches taken in determining bad faith under s. 57(1)(b). For the reasons given above, in my view, the approach taken by the Board in TST-94914-18 (Re) in determining bad faith is correct in law whereas the approach taken in this case is not.
[50] At para. 22 of Duarte v. 2132338 Ontario Ltd., 2021 CanLII 146522 (Ont. L.T.B.), a Board decision issued after the decision was rendered in this case, the Board stated:22. [I]n relaying the Purchaser’s intentions to terminate the tenancy, the Landlord does not serve as a mere messenger with no duties or obligations to the Tenants. By conveying the Purchaser’s stated intention to occupy the rental unit, the Landlord initiated events that had the serious consequence of ending the tenancy and compelling them to relocate their family…As a result, I find that the Landlord had a duty to the Tenants to exercise some due diligence to confirm the good faith intentions of the Purchaser before putting the eviction in motion. Otherwise, an unscrupulous purchaser would be free to use a landlord as a straw man to divest tenants of their housing and thereby evade the statutory protections afforded to them under the Act. [51] I agree.
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