When Does A Landlord Need To Provide Compensation During An Eviction?

TorontoRealtyBlog

There is a LOT of incorrect information floating around on this topic, and as a result, buyers and sellers in the real estate market are misinformed.

Many are making mistakes, as evidenced by the clauses we're seeing included in offers dealing with compensation for tenants who are being evicted upon the sale of a unit.

Let's take a look at "Form N12" which clearly specifies when compensation applies, but first, we'll trace the legislation back to where it began…

In case you've been living in a cave…………on the moon………………with your eyes closed and your hands over your ears (Simpsons quote, I believe?), you've heard about the Liberal government's "Fair Housing Plan" and the associated changes to the Residential Tenancies Act.

There are many notable changes, but the one I want to explore today is regarding the compensation for tenants who are legally evicted.

Once upon a time, a landlord could serve a tenant, who was on a month-to-month term, with Form N12, and evict the tenant for "personal use."

We all know that "personal use" clause was a farce.

Tenants all over the city would say that their brother, mother, or sister was going to move into the unit, and then simply re-rent it, or put it on the open market.

Going back a few revisions ago, the "personal use" clause wasn't even detailed on the Form N12.  The form used to be a lot simpler, and a lot easier to manipulate.

After stories broke in early 2017 about landlords increasing rents by 80%, and during the real estate boom/crisis/peak/insanity, the Liberal government decided they needed to step in and make things more "fair."

Enter: The Fair Housing Plan, much of which was deemed, by people who own real estate, to be unfair.

The Liberal government was very, very slow to detail what they had planned.

Their "16 Point Plan" contained few specific measures to be implemented, but rather made references to areas that would be explored, committee's that would conduct studies and provide findings, and the usual government red-tape rhetoric.

The section regarding "protecting renters," specifically their #3 point of sixteen, referred to legislation, but made no specific promises:

"Introduce legislation that would, if passed, strengthen the Residential Tenancies Act…"

It looked as though, as was the case with most of the points, nothing had firmly been decided.

"Adequately compensated" could have meant absolutely anything, and of course, the government could have just ignored the whole idea, and moved on.

But in September, they implemented the "adequate compensation," which was determined to be a full month's rent:

Many of us were shocked.

Fair or unfair, perhaps it's a topic for another day.

But the penalties – up to $25,000, would surely scare away any landlords that thought about trying to play outside the rules.

But somewhere along the way, the market and its participants – landlords, tenants, buyers, sellers, real estate agents, and even lawyers, became confused about when the compensation applies.

This idea that "Once a tenant is in the unit, you can never get them out" began to circulate, which simply wasn't true.

The mistake at hand, is predicated on the idea that ALL tenants must be compensated during ALL evictions, and that's not the case.

Bill 124, Rental Fairness Act, 2017, contains amendments to the Residential Tenancies Act, 2006.

You can read the bill in full HERE.

Scroll down a few paragraphs, and you'll see the following:

Notice of termination by landlord under section 48

Currently, subsection 48 (1) allows a landlord to give a termination notice if the landlord requires possession of the rental unit for the purpose of residential occupation by the landlord, a member of the landlord's family or other specified persons.  Under subsection 48 (1), as amended, the landlord must require possession for the purpose of residential occupation for at least one year.  Under new section 48.1, a landlord who gives a termination notice under section 48 is required to compensate the tenant in an amount equal to one month's rent or to offer the tenant another unit acceptable to the tenant.

Notice what isn't present there?

Anything about the buyer of the property paying compensation.

The new "Form N12" is exactly the same as the old Form N12, save for the inclusion of the highlighted box below:

Notice that "Reason 1" is bolded.

What is reason 1?

Refer back to the first page of Form N12, and you'll see two reasons, as follows:

Notice that Reason 1, refers to ending the tenancy so the landlord and/or family can occupy the unit.

Reason 2, refers to ending the tenancy because the landlord is selling the unit, and the buyer intends to occupy the unit.

Here's where the confusions sets in for many people.

Because while I see this as pretty cut and dry, I've spoken to tenants who believe they need to be compensated when the unit in which they reside is sold, and they're provided with a legal eviction on behalf of the buyer.

I've also spoken to a lawyer who believes that "all month-to-month tenants being evicted" need to be compensated, and who suggests that this Form N12 is flawed!

Is it possible that this is what the Liberal government had first intended?

Because from where I stand, the seller of a condo, with a month-to-month tenant, shouldn't be punished for wanting to sell his or her asset.

But maybe it doesn't matter if it's the current owner who is evicting, or the future owner who has contracted to purchase the property.  An eviction is an eviction, right?  And the government is trying to help evicted tenants, correct?

I'll be very interested to see if there are any cases at the Landlord & Tenant Board in this regard.

There are so many people out there that are under the impression, either because it's what they've heard, or what they feel is just, that ALL tenants are due compensation regardless of the situation, that I almost feel as though the legislation is unclear.

 

But if you're a landlord, make sure you know what the Form N12 says!

The post When Does A Landlord Need To Provide Compensation During An Eviction? appeared first on Toronto Real Estate Property Sales & Investments | Toronto Realty Blog by David Fleming.

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