LTB RULES THAT LANDLORDS AND SUPPORTIVE HOUSING PROVIDERS ARE
“CO-LANDLORDS” AND THE OCCUPANTS ARE RTA “TENANTS”:

HERE ARE SOME IMPLICATIONS FOR PRIVATE LANDLORDS
The Landlord and Tenant Board (LTB) has just released a decision by a special three Member
panel which articulates the legal relationships between landlords, supportive housing providers
(SHP’s), and subsidized housing occupants (Occupants) where landlords have entered into “head
lease agreements with SHP’s which, in turn, enter into occupancy agreements with their clients.
Landlords and SHP’s are declared to be “co-landlords” and the Occupant is declared to be an
RTA tenant. LTB Members will follow these legal principles in proceedings involving head
lease/sub-lease arrangements; consequently the decision has significant implications and will
require adjustments for landlords who have entered into head lease agreements with SHP’s.

THE DECISION
A private landlord and an SHP entered into a standard form of residential lease which
specifically stated the Residential Tenancies Act (RTA) governed their relationship, and named
the housing provider as the sole tenant. Despite this, the Board determined that the SHP was not
a “tenant” under the RTA because it did not, and did not intend to, “occupy” the rental unit. The
lease between the landlord and the SHP is a commercial lease agreement.

The rental unit was actually occupied under an “occupancy agreement” made between the SHP
and an individual (“Occupant”), and the private landlord was not a party to it. The LTB held that
the Occupant was an RTA tenant and both the landlord and the SHP were “co-landlords” under
the RTA. The Board explicitly considered and rejected submissions that relationships at issue
constituted an “upper tenancy” and a “lower tenancy”, or that the Occupant was a sub-tenant.
The bottom line is that where there is a head lease with an SHP, which in turn enters into
separate leases with subsidized “sub-tenants”, the LTB will treat the Occupant as an RTA tenant
in a legal relationship with two RTA landlords: the landlord and the SHP (“co-landlords”). Here is a link to the decision. 

IMPLICATIONS FOR PRIVATE LANDLORDS
In light of this decision, private landlords should reassess whether it is desirable to enter into
housing agreements with SHP’s at all, but if they do, they should know the implications of such
agreements, and how to modify them to minimize landlords’ risk. Note that if the SHP
occupancy is for a purpose which falls within an exception under s. 5 RTA (short term care,
therapeutic services, etc.), then there is less risk, but the terms and administration of the head
lease and occupancy agreement should specifically ensure the exceptions apply.

“Occupants” can apply directly to LTB against both “co-landlords”: A significant
implication of the decision is that the “Occupant”, being an RTA tenant, is now competent to
make applications for relief directly to the LTB, whereas non-tenants generally cannot. There is,
therefore, increased liability exposure for landlords. There is very little cost to filing applications
against landlords, and no cost consequences for tenants who file frivolous applications. It is
likely that in any dispute between the SHP and the Occupant, the landlord will also be brought
into the fray or, alternatively, an application may be made against the landlord when, under the
terms of the lease, it should be against the SHP.

SPH legal obligations and risk will transfer to the Private Landlord: If the tenant is in breach
of statutory covenants such as “interference with other tenants’ enjoyment”, impairment of
safety, etc., the landlord and SHP are both “landlords” but problems will arise if there is
disagreement between the two landlords as to whether the tenant should be evicted. The risk is
that proceedings will become mired in procedural delays; preliminary disputes about issues; and
the potential that one of the “co-landlords” sides with the tenant and opposes eviction sought by
the other co-landlord. If the SPH offers care services, particularly to seniors, then the landlord
and not just the SPH is bound by requirements of the Care Home provisions of the RTA and
regulations imposed under the Retirement Homes Act.

So: what to do?

Amend the “head lease” to recognize its commercial nature: Ensure there is still a head lease
for a unit or block of units with the SHP, but eliminate any pretext that the head lease is
governed by the RTA as it is a commercial lease. The head lease should, however, include a
term that requires the SHP to enter into RTA leases with the Occupant, specifically
acknowledging that the Occupant is an RTA tenant (or exempt if an exemption applies), but
subject to certain exceptions relative to income assessment, reporting requirements, exceptions to
notice of rent increase requirements, etc.. The SHP lease to the Occupant should list the SHP
name and address as the “name and address for service of documents” under s. 12 (1) RTA.

Allocate legal responsibilities and indemnity for private landlord: The head lease should
make it clear as to who has responsibility for taking action against the Occupant, including
securing evictions. The head lease should generally require the SHP to take all proceedings to
enforce the terms of the tenancy agreement and to bear the costs of same, but where the direct
interests of the landlord are affected, the landlord should be named as a “party” to the
proceedings. There should be provisions to provide for indemnification in the event the landlord
is named in an order requiring payment of money to the tenant, when the breach of the RTA was
by the SHP. Questions of liability regarding “accommodation” in relation to Human Rights Code
obligations should also be addressed since it is likely the Human Rights Tribunal will follow the
reasoning of the LTB.

Where an Occupant/tenant brings a proceeding against the landlord or the SHP, decisions will
have to be made as to whether to ask the LTB to remove the landlord as a party if the conduct
complained of is that of just the SHP, or remove the SHP if the conduct in question is that of the
landlord. Some of these questions can be addressed in the head lease, but others may not be
resolved until LTB proceedings have started. The head lease should have provisions to
indemnify the landlord in the event the landlord is forced to incur legal costs in removing itself
from a proceeding started by the SHP or is otherwise prejudiced by RTA liability which should
be borne by the SPH.

Modify tenant selection protocols and/or insurance and indemnity provisions: Ordinarily,
the SHP selects a tenant and enters into an occupancy agreement with that tenant in respect of
the rental unit. The landlord has no input into the selection of the Occupant, but in the wake of
this LTB decision, the landlord assumes full risk of the consequences of any statutory breach by
the tenant, including liability where the tenant causes damage or injury to other occupants of the
building. Insurance and indemnity issues tied to the tenant selection process should be addressed
in the head lease. Alternatively, the head lease could provide that both “co-landlords” be
permitted to screen and approve tenants.

Name both “landlords” when giving RTA Notices and know who your tenant is: Notices of
Termination or Notices of Rent Increase must name and be served upon the Occupant who
should be named as “Tenant”. Since both the landlord and the SHP are Landlords, it would be
prudent to name both Landlords when giving notices of any kind under the RTA. In addition, the
head lease should require notification to the private landlord of the name and contact information
for the occupant so that the landlord can properly name that person(s) when giving notices.

Ultimately, the terms of the head lease are largely dependent on the nature of the unit
occupancies and services to be delivered by the SHP to the Occupant.

In summary, the LTB decision poses complex challenges and risks for landlords who enter into
head leases with SHP’s for the purpose of facilitating access by Occupants to subsidized and
supportive housing. The risks and issues raised in this Bulletin are not an exhaustive list. To
mitigate the risks which arise from SHP/Occupant arrangements, landlords should review their
existing head lease documents and engage in discussions with SHP’s to ensure that SHP’s are
responsible and accountable for operations at landlords’ properties and that liability of SHP’s is
not transferred to landlords or, where it is, that proper indemnification is provided for.

For information and advice concerning risk mitigation in leasing documents or legal proceedings
between landlords and SHP’s contact Joe Hoffer,