Save landlord clients from costly mistakes

Having an income property can be financially rewarding, but it can also drain resources if managed improperly.

That’s because most rental legislation is tenant friendly, says Lisa Mackie, partner at Alexander Holburn Beaudin + Lang LLP, who leads the firm’s strata property practice group. Based in Vancouver, she says B.C.’s Residential Tenancy Act holds landlords “to a very high standard, more so than tenants; landlords are often the more powerful of the two parties.”

And in Ontario, Joe Hoffer, partner at Cohen Highley LLP Lawyers in London, Ont., points out that the provincial Residential Tenancies Act is a consumer protection statute. While landlords get a fair hearing, the tenant board applies laws “tilted in favour of tenants,” he says.

When tenants sue, it’s usually because “the landlord has failed to provide good service,” says Hoffer, “which at the Landlord and Tenant Board, can be translated into the landlord failing to meet certain statutory obligations.” These obligations include keeping the premises in good repair and not interfering with the tenant’s quiet enjoyment.

Even if your landlord clients do not wilfully neglect their obligations, they can inadvertently run afoul of provincial tenancy acts. “There are many occasions where landlords have imposed terms that aren’t legal,” says Hoffer. While some tenants may be unaware of the law, savvy ones can use technicalities to nullify everything from rent increases to eviction notices.

We asked Mackie and Hoffer to explain the most common errors landlords make. While their responses are specific to B.C. and Ontario, respectively, the general principles are similar across Canada.

Failing to serve notices properly

Landlord-tenant communication is strictly regulated.

In B.C., “landlords might communicate with tenants day-to-day via email. But email isn’t a valid method of service under the legislation,” says Mackie. Sending a notice via email “nullifies what they’re serving.” If the landlord was serving an eviction notice or notice of rent increase, “they run the risk of delaying their eviction; they can have their eviction dismissed,” she says. “They can [also] have their notice of rent increase set aside. If that remained undetected for a while, there could be a lot of back rent owed to the tenant.”

Landlords must serve notices via regular mail, registered mail, in person, or with an adult occupant who ordinarily resides with the tenant. Practically speaking, landlords can “drop [a notice] in the tenant’s mailbox or post it on the door or a conspicuous place.” If the tenant is being evasive or has skipped town, “you can ask the board for permission to do something called substituted service. And that’s when you can slot in email” as a method for notice.

For more mundane notices, like “if a landlord wants to access a property to do a certain repair, technically they have to serve the notice in one of the required ways,” says Mackie. “But if you have a good relationship, the tenants will accept a phone call or email.” But beware of friendly approaches. In B.C., “tenants (and landlords) have the right to bring claims against one another up to two years after the end of the tenancy.”

Hoffer recommends using a paralegal to serve notices to avoid headaches later. “They’ll do it on a fee-for-service basis,” not hourly, he says. “It might be $25 to file and serve a form. To do a half-day hearing, it’s between $200 and $400; for a full-day hearing, it’s between $400 and $600.”

Improper deposits

First and last month’s rent deposits are not allowed in B.C., but landlords may demand security and pet damage deposits (the latter is disallowed in the case of service animals). The maximum amount is half of one month’s rent, and landlords must fill out a move-in inspection form.

If the landlord doesn’t perform the inspection, or loses the inspection report during the tenancy, “the landlord loses the right to claim to get the security deposit at the end,” says Mackie. If there is no damage, the landlord must return the deposit “within 15 days of the […] tenancy or when the tenant delivers a forwarding address in writing,” whichever is later, she says.

In Ontario, however, landlords are not allowed to collect security deposits (last month’s rent is considered a rent deposit). If a landlord does charge one, “the tenant can apply to the board after they’ve got the tenancy for repayment of the [deposit],” says Hoffer.

In both provinces, landlords must pay interest on any held deposits. In B.C., the interest rate is currently 0%, but in Ontario, it’s 1.5% for 2017—the same as the rental increase guideline.

Non-payment mistakes

In Ontario, “a landlord can only apply the last month’s rent deposit to the last month’s rent,” says Hoffer. Doing otherwise can limit recourse if the tenant later defaults.

When tenants go into arrears, Ontario law doesn’t let you evict them right away. “The act just allows you to apply for judgment for arrears of rent,” Hoffer says. That means the tenancy continues. You can apply for judgment once the tenant is even one day late with rent (via Form L9), which costs $190. “Included in your judgment will be the $190,” says Hoffer. Applying for judgment is a good idea, says Hoffer, “when you know the tenant can pay the rent, but they’re trying to break their lease.”

In B.C., “when a tenant is a day late and a dollar short, you can issue a 10-day notice to end tenancy,” says Mackie. “The law requires that, on receipt of that notice, the tenant either pays the outstanding rent or disputes the eviction notice within five days.” That being said, “I encourage landlords to try to work things out with tenants,” she says. “At any time, you can broker a mutual agreement to end a tenancy. It’s much easier when the tenant agrees to vacate. Trying to get back rent can take weeks or months.”

If a tenant doesn’t leave, the landlord must obtain a writ via the courts so that bailiffs can retake the property—which can cost thousands.

Breaching privacy

In B.C., the Personal Information Protection Act governs what landlords can collect from rental applicants. Mackie says landlords are not allowed to ask for social insurance numbers or copies of drivers licences, even though she often sees people ask for both. She encourages landlords to review the government’s landlord privacy fact sheet.

In Ontario, you can ask for “whatever personal information the landlord needs to assess creditworthiness and that the tenant provides,” Hoffer says. “Usually, the tenant signs a consent […] to the disclosure of personal information.”

However landlords should have privacy policies—and Hoffer says many smaller ones don’t. He adds that the privacy commissioner would like landlords to destroy other applicants’ records the same day that the successful tenant is chosen. But, Hoffer adds, landlords can include a longer window for record destruction in their policies.

Best practices

• When assessing prospects, check the past two landlord references. “The current landlord […] may want to get rid of them” and exaggerate the applicant’s virtues, says lawyer Joe Hoffer. “But two landlords ago? Usually that person is more objective in their assessment.”
• If you decline an applicant, “don’t give them reasons,” says Hoffer. “A lot of times, those reasons will be twisted into either argument or a contention that they were denied for reasons that contravene the provincial human rights code. If they insist, say, ‘I’m not legally obliged to give reasons, and I’m not going to.’”
• Once you’ve chosen your tenant, use a lease template prepared by an industry group, such as a landlord association. “They’re typically compliant,” says Hoffer, with two exceptions: in Ontario, a no-pets clause and the interest rate on late payments are both unenforceable. (In B.C., you can also use a template prepared by the province.)
• Create separate tenant files that contain all tenant records, requests and paperwork, including the move-in inspection form (B.C.).
• Create a tenant welcome package that includes maintenance request forms. That way, you can prove if and when requests were made. When making repairs, take photos of the before and after, and document dates and work. Save all receipts and photos in the tenant file.
• When in doubt, use a paralegal or lawyer. “The legislation expects that, no matter the size of your operation, it’s going to be run professionally,” says Hoffer. “And if you don’t, you do so at your peril.”

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.