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

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