LTB AND COVID-19: EVICTIONS, “NO”; RENT ARREARS, “YES”! …AND LTB SAYS COVID-19 NO EXCUSE FOR BREAKING A LEASE

June 2020

Landlords have been hard hit by the Province’s moratorium on evictions and are struggling to find ways to mitigate the losses resulting from that moratorium. The Eviction Moratorium in Ontario has meant that landlords who apply for both arrears and eviction are left with no remedy: these applications are not being processed at all and won’t be for the foreseeable future. By contrast, landlords who apply to the Landlord and Tenant Board (LTB) for “rent arrears only” (L9s) are having their applications processed and the LTB is issuing judgments plus the landlord’s filing fee.  In cases where the landlord has good reason to conclude that the defaulting tenant has the means to pay rent, use of the L9 has resulted in collected judgments; furthermore, the LTB decisions make it clear that COVID-19 is not grounds for refusing to pay rent or for breaking leases.

Two recent cases obtained by Paralegals from our firm set out some important principles applied by the LTB when it comes to tenants using COVID-19 as an excuse for breaking a lease or refusing to pay rent. Both cases result from the application filing an “arrears only” application.

The first case involved a student tenancy where 4 tenants had entered into the standard industry lease, the terms of which bind all tenants on a “joint and several” basis. Prior to the lease commencement date, 2 of the 4 tenants informed the landlord that due to COVID-19 and the prospect of on-line classes, they would not require the tenancy and would not be moving in. Two tenants agreed to honour the lease and paid rent for the commencement of the tenancy. The defaulting tenants took the position that the application should be dismissed since they never moved into the unit: they were not “in possession” and an L9 application, like an eviction application, can only be brought if the tenant is in possession. They argued, in the alternative, that the lease was “frustrated” due to COVID-19 and so there was no valid lease in place.

The landlord filed an L9 application in the name of all 4 tenants and obtained judgment against all 4 tenants for the rent arrears owed. The LTB stated that the tenants were “in possession” even though they had not moved in and further declared that the lease was not “frustrated” due to the fact that COVID-19 protocols eliminated the need for the tenancy. In the legal analysis of its decision the LTB confirmed, first, that a lease begins on the commencement of the term, regardless of whether the tenant actually moves in. Secondly, that a tenant is “in possession” of the rental unit in circumstances where the landlord is ready to deliver the keys to the tenant and the terms of the lease give the tenant full control over occupancy of the rental unit, which the standard lease does.  Thirdly, the LTB confirmed that a lease is not “frustrated” simply because the rationale for the parties entering into the lease is destroyed, in this case, by COVID-19 factors: the “subject matter of the lease”, which is the rental unit, is not destroyed.

Since a judgment naming all 4 tenants in a joint tenancy can be enforced against any or all of the tenants, the landlord was free to engage in enforcement proceedings against the 2 defaulting tenants; furthermore, it is open to the landlord to continue to require those 2 tenants (or ultimately their guarantors) to pay rent for the rest of the lease term. The onus falls to the tenants, rather than the landlord, to mitigate their loss resulting from their decision not to honour the lease.

The LTB analysis of “possession” and “frustration” has far broader and beneficial implications for landlords. First, assuming none of the tenants decided to move in, the analysis of “in possession” by the LTB warrants a determination that the tenants could still be the subject of an L9 application; however, unlike the situation where one or more of the joint tenants move in, where no tenants move in there will be an onus on the landlord to assist the tenants in assigning the lease to a new tenant.  Regardless, until the tenancy is assigned, or the tenants decide to move in anyway, the landlord is entitled to be paid rent by the tenants who are on the lease. 

The LTB analysis of “frustration” is also helpful in circumstances where tenants point to the unforeseen consequences of the pandemic as justifying breaking the lease early or refusing to move in.  Even where a rental unit is severely damaged by fire or must be vacated due to the loss of a vital service, the fact that the unit can be repaired means the lease is not frustrated or and the tenant is still required to pay rent…the lease remains in full force and effect even while the tenant is out of the rental unit.  The full analysis in the decision will be helpful to landlords and their legal advisors and can be found at this link: SWL-43557-20

 In the second case, a tenant proposed to vacate without proper notice on the basis of his fear that the risk of COVID-19 in a multi-res building was very high and he wished to move his family into a lower risk environment. The tenant stopped paying rent and, since L9 applications don’t require advance notice, the landlord immediately applied to the LTB for judgment for arrears. In an L9 application, the LTB’s only function is to determine whether there are rent arrears; furthermore, in contrast to eviction applications where the LTB has a discretion to delay or deny eviction and force the landlord into a repayment plan for arrears, in an L9 application there is no “overriding discretion” to refuse or delay a remedy, the only issue is whether rent is owing. In its analysis, the LTB Member stated:

“With respect to the health risks arising out of Covid 19, I am sympathetic to the fear this pandemic has placed on everyday living practices. However, once I have made a finding that the rent for May 2020 is owing, I do not have the jurisdiction to tell a Landlord that he must forfeit rent that is validly owing.”

Again, the full analysis in the decision will be helpful to landlords and their legal advisors and can be found at this link: SWL-43555-20

As for eviction applications, there is no end in sight to the COVID-19 moratorium on enforcement of eviction orders and such applications are not even being started for processing by the LTB (although it will happily take your filing fee); consequently, where there are rent arrears owed in the context of a simple default or in the context of a tenant refusing to take possession and pay rent, if there is a reasonable prospect for enforcement of a judgment against a tenant or guarantor, an L9 is a viable option.

Questions about L9’s, “possession” or “frustration of lease”?  Contact kiekens@cohenhighley.com or hoffer@cohenhighley.com

Author

Joe's main areas of practice include residential tenancies, municipal planning and zoning, expropriations, and property tax assessment appeals. Joe has a wealth of litigation experience before a variety of boards, tribunals, and appellate courts. He is author of "A Practical Guide to the Tenant Protection Act". More →