Canada's Condominium Magazine

Condominium Act or Residential Tenancies Act: which takes precedence in a tenant issue? Can a condo landlord deny permission to sub-lease or have pets?

Today, there seems to be little incentive for condo owners to “lease” out or rent their condos. In doing so, the condo owner (as a Landlord) places him/herself between the Tenant (who has rights under the Residential Tenancies Act) and the Condominium Corporation (governed by the Condominium Act.)

This difficult relationship was highlighted recently by an owner who wrote to Condo.ca’s “Ask the Lawyer” with a stressful situation. Her tenant wanted to sublease the remaining six months (allowed by the Residential Tenancies Act) — to which the Landlord cannot unreasonably withhold consent. However, the condominium corporation, with bylaws prohibiting sub-leasing, took the position the Condominium Act “overrides” the Residential Tenancies Act, and would proceed with legal action if needed.

[Note: “Overrides” was language used by this particular unnamed property manager.]

 

If a condo owner decides to rent they should be aware of the Residential Tenancies Act. For example, several of Condo.ca’s readers had issues with tenants wishing to sublet when the condominium corporation doesn’t allow it.

 

Although Condo.ca cannot and does not give legal advice, we decided to research this as a topic. We’ve had several reader-requests for this as a feature. Another commonly requested reader comment related to “what happens if the tenant has roommates, then moves out leaving the roommate to assume the lease?” [See Case 6 below.]

Many condo owners may be interested in renting their homes — particularly now, with a shortage of rental units in the Toronto area — but owners should be aware they become Landlords, subject to the Residential Tenancies Act. [Please watch for our forthcoming special feature on the conflict between the two Acts.]

 

Before you hand over the keys to a new tenant, be fully aware of their rights under the Residential Tenancies Act, which may run counter to the bylaws of your particular condominium.

 

Condo corporations can establish bylaws

After some research, it is clear that condo owners are entitled to rent out their units but they are subject to the Residential Tenancies Act. The Condominium Act allows owners to lease out their units but the Condominium Corporation can pass a rule preventing short-term leases. This would be to prevent units from being rented out via Airbnb or other short-term lease services. There is nothing in the Condominium Act that prevents a tenant from subletting and that is an issue between the landlord and the tenant and not the condo.

However, if the condo passes a rule stating that leases cannot be shorter than a year, then that may effectively eliminates subletting — at least for less than a year.

[Please be cautioned, we are not giving legal advice. Consult your lawyer if you are in any of these situations!]

 

Ontario Premier Kathleen Wynn announcing Ontario Fair Housing Plan.

 

Ontario Fair Housing Plan confusion

The Ontario Fair Housing Plan brought in new changes in favour of tenants including caps on rental increases, compensation for eviction for “own use” and standardized rental documents. While this is good news for tenants, it has the effect of removing many incentives for condo owners to become landlords.

In some areas, notably sub-leasing, pets and short-term leasing, the Condominium Act and Residential Tenancies Act can conflict. For instance, as in this case (above) a condominium corporation, under the Condominium Act, can pass a bylaw prohibiting short-term leasing, which may have the effect of prohibiting sub-leasing (if it is short-term). Sub leasing, however, under the Residential Tenancies Act, cannot be unreasonably denied by a Landlord. If taken to the Landlord and Tenant’s Board for a decision, which would prevail?

 

In Ontario, the relevant act that governs the landlord-tenant relationship is called the Residential Tenancies Act.

 

Condominium Act or Residential Tenancies Act — which prevails?

The answer is — depends. From Condo.ca’s own ‘non-lawyerly” research of case histories involving tenants in a Condominium community, the cases seemed to somewhat favour the Condominium Act in disputes where there are bylaws that contradict the Residential Tenancies Act — in some narrow situations, such as pets and short-term leases. Are those decisions consistent? No, not necessarily. There are variables in every case. Will the rules change? Possibly.

To complicate matters further, the Condominium Act is also flux after an extensive 18-month collaborative public engagement on the Protecting Condominium Owners Act, so legal decisions will adapt — and we’re only looking at past history in our research. It’s very dynamic — which is why we recommend a lawyer for any doubtful situations. [See our separate story on the Act here>>]

 

Do you rent that vacant condo? With Ontario’s shortage of rental homes, it is obviously enticing, as long as you are aware that you, as Landlord, have to enforce condominium bylaws on your tenant. At the same time you, as Landlord, are also subject to the Residential Tenancies Act.

 

New “fairness” rules from Ontario reduce Condo-owners incentive to rent

So, new rules all round, but where does that leave landlords, stuck in the middle between the demands of tenants (and the Residential Tenancies Act) and the Condominium corporations (and the Condominium Act)?

Specifically, what’s the landlord to do when a tenant asks to sub-let, but the condominium corporation not only has a prohibitive bylaw — it enforces it?

With a sub-lease request, under the Residential Tenancies Act, the Tenant must ask permission of the Landlord — but, the Landlord cannot unreasonably withhold permission. But, under the Act, you cannot with-hold permission generally, only for a specific applicant.

Meanwhile, under the Condominium Act, if the condominium corporation prohibits via bylaw subletting, or pets, and so on, this tends to make it very difficult for the Landlord. They can enforce the bylaws on the Landlord — who in turn is expected to enforce these rules on the tenant.

So, the first reason many condo owners can cite for with-holding permission could be condominium bylaws. However, this runs counter to the spirit of the Residential Tenants Act, which — based on past decisions of the LTB — only allow Landlords to withhold permission for a specific sub-tenant applicant.

Aside from this specific issue, we set out to discover what other reasons, in past case histories, would be considered reasons to deny permission. After all, if there is not good reason to deny, why do Tenants even have to ask permission?

 

 

What is “unreasonable with-holding of permission”?

What are the “unreasonable” reasons to withhold permission? Two days of pouring over case histories (a lawyer would have better access!) have revealed some common and repeating themes:

  • Prohibiting sub-leasing generally: it should not be a policy or a rule. Denial of permission has to be based on the specific sub-lease applicant presented. However, this doesn’t apply (or does it?) if the Condominium has a bylaw prohibiting sublease and backs it with the authority of the Condo Act. (But that’s subject to challenge — and we could find no case history on this in the LTB)
  • You should not prohibit sub-leasing just because the tenant is now month-to-month (i.e. their main lease has expired) — however, Tenants can only present applicants for month-to-month sub-leasing in this case, not an extended term.
  • You should not deny permission because you suspect the sub-tenant will default because you have the remedy of the tenant who is “on the hook.” (See Case 3 below.)

[Note: See our detailed cases below.]

Importantly, under the Residential Tenancies Act:

“Subsection 98(1) of the Residential Tenancies Act, 2006 (the ‘Act’). That section says: “A tenant or former tenant of a rental unit may apply to the Board for an order determining that the landlord has arbitrarily or unreasonably withheld consent to the assignment or sublet of a rental unit to a potential assignee or subtenant.” [Emphasis added.] This section is meant to address the situation where a landlord consents to the idea of assigning the lease in principle but refuses consent with respect to the particular person that the tenant has proposed as the new occupant.”

 

 Historical decisions of the LTB

It’s helpful to look at the past decisions of the Landlord and Tenant’s Board with regard to Landlords refusing permission to sublet.

Note: Bear in mind this feature is written by a feature writer, not a lawyer. Refer to the actual cases cited for details (links on the file numbers). Condo.ca and its writers/editors/associates are not responsible for any actions taken as a result of this summarized “laymen’s” information. Consult a lawyer.

Case 1: Tenant asked permission to sublet without an actual sub-tenant in mind

File number EAT-65287-17

Background: In this case, the Tenant was seeking consent from the Landlords to the general concept of an assignment before he began searching for any potential assignee. The Tenant’s own application confirms this. No actual person or potential assignee was ever presented to the Landlords. This is undisputed.

Decision: “The Tenant’s application is dismissed.”

Layman’s summary: Tenants do not have the right to request a sublet unless they have a specific sub-tenant in mind, and on the basis of that specific tenant the landlord can consider permission.

Case 2: Landlord denied permission since tenant was month-to-month

File number TST-67334-15-RV

Background: By way of background, the Tenant has a month to month tenancy. The Tenant sought to sublet his unit for a three month period for which the Landlord refused to consent. The Tenant filed the application seeking an order that the Landlord had arbitrarily or unreasonably withheld consent to sublet the rental unit.

Decision: “There must be a reversionary interest when it comes to subletting and the specified date must be before the end of the tenant’s term. The fact that a tenant on a month to month tenancy has security of tenure and the tenancy can be terminated only in accordance with the Act does not change the fact that, in terms of a tenant’s ability to sublet, the term of the tenancy is only one month, and, to sublet the tenant would have to have the right to occupy the unit before the end of the month.”

Layman’s summary: in other words compromise. This reason was not deemed sufficient to deny, but the maximum allowance was a sublet of one month.

Case 3: Tenant asked permission to sublet with a tenant in mind, who was a homemaker/student (husband lived in a different country)

File number TNT-25678-11

Background: The Tenant asked for the Landlord’s consent to sublet the rental unit to M. G., who wanted to continue the lease, which ends on July 20, 2012. The Landlord refused the assignment because M. G. is a homemaker/student, whose husband is a physician working in another country and the Landlord assumed that because she is making monthly payments for a BMW and did not disclose all financial records she had requested from her, apart from her credit rating, she is financially unreliable.

Decision: ” I find that here the Landlord did not take into consideration that when refusing the subtenancy the Residential Tenancies Act, 2006(the ‘Act‘) provides remedy in case the sublet does not work out. Here the Tenant is very well aware of the remedies and was fully prepared to assume responsibility if the subtenacy does not work out.”

Layman’s summary: Because the tenant remains responsible to the landlord for the sub-lessor, there is a remedy for any issues that arise with the sub-lease. Therefore, they found the Landlord to be unreasonable.

Case 4: The Landlord’s “policy” cannot conflict with the law: policy is not sufficient grounds for denial of sub-let or assignment

File number TST-06049-10

Background: “The tenancy began on June 1, 2010 and according to the rental application submitted was to last for 36 months. Immediately after moving in, on June 3, 2010 the Tenants informed the Landlord by letter that family obligations in Alberta require them to terminate the lease on July 31, 2010.  The letter stated “We formally request that you allow us to assign unit 303, located at [Address removed] to another person (thereby transferring the tenancy)”. They asked for a reply by e-mail and provided their e-mail address. Seven days later, in the absence of any response, they gave a notice, so-called Form N9, terminating the tenancy on the date indicated earlier.

The Landlord responded in a short letter sent by regular mail and received by the Tenants on June 14, 2010.  The response did not deal with the issue of assignment and stated “If it is your intention to terminate the lease prior to the completion of the term we will hold you responsible for any loos of revenue …”.  In his post-hearing submission P.M. stated that it is the company’s policy generally not to “allow apartment to be assigned or sublet”.

Decision: “In Ontario assignment of a tenancy is a right established in section 95 of the Residential Tenancies Act. 2006 (the Act) and a landlord’s policy cannot conflict with the law… It is clear the Tenants complied fully with what the Act requires.”

Layman’s summary: Establishing a policy as landlord does not supercede the law. The law specifically states: “A landlord shall not arbitrarily or unreasonably refuse consent to an assignment of a rental unit to a potential assignee under clause (3) (b)”

Case 5: The tenant presented a sub-lessor properly but specified sub-leasing for 12 months (the remainder of the lease) when she was month-to-month

File number TNT-29088-12

Background: “On November 5, 2016, the Tenant wrote an e-mail to the Landlords saying in part:

… I would like your agreement to assign my lease for the next 12 months to my long-time friend and an excellent tenant: [NH]. This request is made in accordance with … [subsection] 95(1) [of the Residential Tenancies Act, 2006(the ‘Act‘)].

[NH] is a responsible hard-working professional at … hospital. … [NH] is very keen to meet with you and provide you with his references.

The Tenant was absolutely correct in that she had the right to make this request to the Landlords. The only mistake she made was to say she wanted to assign her tenancy for 12 months. Assignment means that a new tenant takes the place of the Tenant and the tenancy agreement remains exactly the same; the new tenant steps into the place of the old and the tenancy agreement itself simply continues. Here the Tenant has an indefinite month to month tenancy so assigning it for twelve months makes no sense. The assignment could only be for a month to month indefinite term because that is what the Tenant has under the tenancy agreement.

Subletting is not something that we would want to be getting involved with. There are too many problems that can be created by it. Mostly with regards to any repairs, arranging access to the mechanical room, or issues with other tenants.

… all we ask for is a standard 60 day notice… We would be happy to meet your friend [NH] at the time we would be showing to other prospective tenants.

This reply by the Landlords reflects a common problem with a lack of understanding about the difference between assignment orsubletting. To put it simply, assignment is where the tenancy continues unchanged except for the identity of the tenant; subletting is where the tenant remains in control of and responsible to the landlord for the rental unit but someone else lives there for a fixed period of time and is responsible to the tenant until the fixed period ends and the tenant moves back in.

Decision: “Here, although the Landlords stated he was welcome to apply at the same time as other prospective tenants, they were not willing to consider him as a potential tenant until the Tenant gave the full 60 days’ notice and terminated her tenancy. As the primary purpose of the assignment provisions is to help tenants avoid that result, this was not a reasonable response on the part of the landlords. Rather they should have asked the tenant to get NH to fill out their standard application form and screened him as a potential tenant… So given all of the above, I am satisfied that the Landlords unreasonably refused consent to assign to NH.”

Layman’s summary: Don’t confuse assignment with sub-leasing. Landlords can only reasonably refuse a specific applicant, not the concept of sub-leasing.

Case 6: Tenant moved out leaving a roommate behind (who was not on the lease) who effectively became an unauthorized sub-lessor

File number TSL-57998-14

Background: “C.C.F. (the ‘Landlord’) applied for an order to terminate the tenancy of K.N.B.A.(the ‘Tenants’) because he transferred occupancy of the rental unit to E.O.(the ‘Occupant’)…This application is about what happens when a tenant moves out of a rental unit leaving an occupant behind. The relevant provisions of the Residential Tenancies Act, 2006 (the ‘Act‘) are found in Part VI, in sections 96 to 104.

The starting point for understanding Part VI of the Act is to understand that it has nothing to do with a tenant’s right to have guests or roommates. A tenant has the right to have guests or roommates. Rather the issue that arises is what happens after the tenant moves out?

In March of 2014 a similar request was made. This time RO wanted to move out and assign his part of the joint tenancy to the Occupant. The Landlord did not agree to this assignment. Instead, RO moved out; the Tenant continued as the sole Tenant of the rental unit; and the Occupant moved into the rental unit without being accepted as a tenant in his own right. The Landlord was fully aware of the Occupant’s occupancy; it provided him with keys and accepted payments he made towards the rent…

If a tenant transfers the occupancy of a rental unit to a person in a manner other than by an assignment authorized under section 95 or a subletting authorized under section 97, the landlord may apply to the Board for an order terminating the tenancy and evicting the tenant and the person to whom occupancy of the rental unit was transferred.

A big BUT:

“A person’s occupation of a rental unit shall be deemed to be an assignment of the rental unit with the consent of the landlord as of the date the unauthorized occupancy began if,

(a) a tenancy agreement is not entered into under subsection (1) or (2) within the period set out in subsection (3);

(b) the landlord does not apply to the Board under section 100 for an order evicting the person within 60 days of the landlord discovering the unauthorized occupancy; and

(c) neither the landlord nor the tenant applies to the Board under section 101 within 60 days after the end of the subtenancy for an order evicting the subtenant.

Decision: “Given all of the above I am not prepared to find that the Landlord entered into a tenancy agreement with the Occupant.”

Layman’s summary: in other words by letting the unauthorized occupant continue — without filing under section 101 — the landlord was deemed as having authorized the occupant.

Caution: You should not act or rely on the information provided in this column.  It is not legal advice.  To ensure your interests are protected, retain or formally seek advice from a lawyer. 

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