Why Landlords are discouraged from maintaining and adding apartments to existing rental complexes
Provincial and municipal governments in the past decade have permitted infill residential development because it allows for high density housing along major transportation corridors, thereby encouraging the use of public transportation by greater numbers of people. However, the positive aspects of infill development for residential landlords are neutralized by competing interests of tenants and the interpretation by the Landlord Tenant Board (LTB) of the provisions in the Residential Tenancies Act (RTA).
Two factors, in the context of residential tenancies law are creating problems for landlords, discouraging infill development on existing multi-residential lands:
- Infill development would result in rent abatements for existing tenants based on interference with their “reasonable enjoyment” of their rental units; and
- The loss of lands of a “residential complex” to infill construction constitutes a “withdrawal” of a “facility” and thereby warrants a permanent rent reduction for all existing tenants.
Interference with their Reasonable Enjoyment
Some tenants and tenant advocates maintain that developments by a landlord of infill housing (construction of an apartment building) in proximity to an existing apartment building constitutes actionable interference with tenants’ “reasonable enjoyment” of the rented premises and is therefore a breach of landlords’ obligations under the RTA. This opinion is held even though the building under construction could be much farther away from the existing apartment building than it is, for instance, to another owner’s building under construction across the street. In the first instance, because the developer is the “landlord”, it is maintained that the noise, dust and inconvenience of the construction activity of the “landlord” is interfering with tenants’ reasonable enjoyment. In the second instance, because the owner of the building across the street is not the “landlord”, no action lies. So, any residential landlord considering infill development is open to the risk that tenants of the existing building could apply to the LTB for reductions in rent for the inconvenience of the construction project, a breach of the covenant for reasonable enjoyment of their rental units. Some housing tribunal and LTB decisions fostered and encouraged such proceedings, while others have not. Thus, conflicting legislative interpretations by the LTB leave infill developers at substantial financial risk, for the legal costs as also the rent reduction that could be awarded depending on the thinking of a particular LTB Member in the matter. Ultimately, the issues would perhaps be finally resolved in a Divisional Court or a higher court in necessary.
Withdrawal of a “Facility”
The tenants also argue against the use of existing “residential complex” lands for infill development by stating that the landlord has thereby withdrawn a “facility”. This is correct when a swimming pool or tennis court or some other tenant amenity is withdrawn, but not so if the lands used are simply open space previously needed to comply with outdated “coverage” requirements.
The tenant point of view is that the “facility” in question is the bare land on which the infill development will occur. That land was a “recreation facility” for the exclusive use of tenants and such a recreation facility has been withdrawn, thus giving rise to entitlement to a rent reduction. Interestingly, the LTB in one instance gave the tenant living on the tenth floor of a high rise apartment building a 2.5% rent reduction and, predictably upon release of the decision, nearly 100 tenants in the same building moved for the same relief. The award was overturned by the Divisional Court; but leave to appeal that decision was given and the case is pending before the Ontario Court of Appeal. Hence, so long as the issue remains unresolved, the prospect of litigation and substantial rent reductions from existing operations constitutes a financial risk to residential infilling by landlords, thus frustrating otherwise sound land use planning policy.
Rules Permitting Rent Reduction for Maintenance of Existing Rental Units
Admittedly, a landlord has a statutory duty to maintain and repair existing rental housing units and a failure to do so will result in penalties, including liability to pay substantial fines and orders to carry out maintenance work within a reasonable time. But, if one effect of meeting the statutory duty to maintain housing units is to interfere with and inconvenience tenants (for example, through balcony restoration), the landlord is in breach of its statutory obligation to provide “reasonable enjoyment” of the rented premises and is exposed to substantial fines and penalties under the RTA. It is not permissible to evict tenants so as to carry out repairs and is also not possible to avoid the liability of causing inconvenience to tenants while repairs are carried out. Such conflicting policies between different statutes are something; but to have direct conflict within the same statute making one liable for offences is not exactly constitutional. Thus, for major maintenance works (maintenance of balconies, parking garages, electrical and plumbing systems and elevator and air conditioning systems), it was historically impossible to comply with conflicting statutory obligations. Before 2002, landlords were subjected to the double penalty of paying for expensive maintenance/restoration projects, while at the same time being subject to payment of rent reductions. Thus, landlords made the decision to do nothing, thereby contributing to a decline in the quality of rental housing units in the Province of Ontario.
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