What Will Happen to Tenants Unable to Pay Rent Because of Coronavirus?
Landlords and Tenants Should Communicate Compassionately With One Another to Work Out Special Arrangements For Rent Payment, Among Other Things, During the Covid19 Crisis While Being Diligent to Document Any Special Arrangements In a Way That Preserves and Protects Mutual Rights.
Other Questions About Landlord Tenant Issues Include:
- During Covid19 Is a Landlord Allowed to Show a Tenanted Unit?
- Should a Landlord Issue Late Payment Notice During the Covid19 Crisis?
- Is a Landlord Required to Sanitize Rental Units With a Covid19 Affected Tenant?
- Can a Landlord Inspect a Rental Unit During the Coronavirus Crisis?
- What Happens If a Tenant Is Unable to Move Out Because of Covid19?
A Helpful Guide On How to Prepare For the Various Legal Issues Affecting Residential Tenancies As Arising From Covid-19
With millions of people laid off due to closure of businesses, many tenants are finding difficulty in the struggle to pay rent one time. Similarly, landlords are experiencing difficulties; being in particular, the smaller landlords with basement apartments or just a few rental units. Just as tenants are struggling to pay rent, the smaller landlords often have regular jobs and are now also suffering from lay-offs while facing continuing mortgage payments, land taxes, insurance premiums, among other things. Whereas tensions may arise from the respective financial stresses, landlords and tenants should communicate openly within an effort to explore solutions that can balance mutual interests while maintaining harmony that helps foster a respectful continued relationship.
Difficult risk management questions, many of which pose a Catch-22, that may lead to troubling legal issues include, among other things:
- Whether a landlord should negotiate an affordable rent payment plan;
- Whether a tenant should make best efforts to avoid accruing rent arrears;
- Whether a landlord should issue an N4 - Non-Payment of Rent form to create paper trail; and
- Whether a landlord is responsible for extra-special maintenance services within common areas;
- Whether showings of tenanted units should be halted due to distancing and isolation needs.
These are just a few of the issues that landlords and tenants are now contending with and need to cautiously and compassionately address through respectful communication.
Rent Payment Plan
Negotiating An Arrangement
During difficult times, upfront communication is key. A landlord and tenant are only able to maintain a respectful and understanding relationship when there is open talk about the challenges that each face. Where a tenant is suddenly facing the predicament of being unable to make rent payment, the tenant should be contacting the landlord to discuss payment arrangement options, among other negotiable solutions. Equally, a landlord should be contacting a tenant to express openness to discussion and to share in the process of exploring solutions. With this said, it is very important that both the landlord and the tenant appreciate the legal rights of one another. This encouragement for landlords and tenants to work together towards a mutually agreeable solution to the current challenges is encouraged by the Ontario government who have implemented a temporary ban on evictions while also reminding tenants of the importance to pay rent so as to avoid falling into arrears and running into eviction troubles when the ban is lifted. Specifically, the government has said:
"In response to the evolving COVID-19 outbreak, no new eviction orders will be issued until further notice and sheriff’s offices will postpone any scheduled enforcement of current eviction orders. Tenants must pay rent while an eviction order is not being enforced."
Source: Government of Ontario
As a special concern, a landlord and tenant need to remain aware that, to serve any real purpose, a negotiated solution must be legal and enforceable. For example, a negotiated solution where a tenant may agree to take on various maintenance duties in exchange for a temporarily reduced rent is unlawful being contrary to section 20 of the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17 which mandates that the maintenance responsibility is held by the landlord. Furthermore, section 4 of the Act forbids a landlord and tenant from entering into agreements that contradict the Act such as an attempt to shift the maintenance responsibilities.
Additionally, when working out a payment arrangement, it is highly important to memorialize the arrangement using the proper Payment Agreement document as provided by the Landlord Tenant Board. Accordingly, whereas it may be difficult to enforce a payment arrangement that is improper, obtaining the assistance of an experienced lawyer or paralegal, such as United Legal Services, may be highly beneficial.
As a particular concern, the payment arrangement form provided by the Landlord Tenant Board is intended only for use as a settlement document; accordingly, the steps for initiating a late rent proceeding, even if intending to promptly or immediately resolve the late rent proceeding, should be followed. Additionally, where it is unlawful for property managers, real estate agents, among others (other than the landlord), to provide legal advice, assistance with legal forms, or other tasks defined as legal services, to ensure enforceability of any processes initiated at the Landlord Tenant Board, obtain the assistance of a lawyer or paralegal, such as the legal help available from United Legal Services.
Note that ensuring the 'rent payment plan' process is done correctly is highly important. If done incorrectly, the landlord could unwittingly the rent amount that is legally remains due after the Covid19 crisis ends whereas the law, generally, allows a landlord to decrease a rent; however, the law imposes strict limits on an amount of a subsequent increase. Accordingly, the manner in which a temporary rent leniency arrangement is made must be done in a way that is indeed only temporary. If a landllord fails to make the temporary arrangement properly, the arrangement could become permanent.
Documenting the Arrangement
As above, once a payment solution is negotiated, so to preserve and protect future rights to collect outstanding rent, if necessary, at the Landlord Tenant Board, a landlord must carefully follow specific administrative processes involving the preparation and service and issuance of mandatory documents. Additionally, and also as above, a landlord will want to ensure that the process is followed so to avoid accidentally amending the rent rate in a manner that becomes permanent as a new rate legally enforceable by the tenant. To protect the rights of the landlord only the processes of, and documents of, the Landlord Tenant Board must be used. Accordingly, any 'written on napkins' type deals should be avoided.
To begin, and even when a payment arrangement is agreed to and the tenant is abiding by the payment arrangement, the landlord will need to create the paper trail usual to that of a defaulting tenant. Said another way, to ensure that the landlord may pursue a further defaulting tenant, if the negotiated payment arrangement is subsequently defaulted upon, the landlord must follow the usual administrative processes. Of course, the landlord should communicate clearly with the tenant so to help avoid any misinterpretations. The tenant should be informed and helped to understand that the formality of issuing and serving various documents is merely a necessary formality that will become moot and irrelevant if the tenant abides by the agreed payment arrangement.
The necessary formalities that preserve and protect the rights of the landlord involve the issuance and filing of the Landlord Tenant Board documents, the N4 Form and L1 Form, in the same manner as would be done during normal circumstances without the Covid19 crisis; however, whereas the Landlord Tenant Board is on hold and will, currently during the crisis, be refraining from actually moving forward with eviction hearings, the documents merely create a record with the Landlord Tenant Board rather than initiating a hearing that could be conducted any time soon. Accordingly, by issuing and filing the usual documentation, all that the landlord is accomplishing is creation of an official documented record for the status of the rent due as well as establishing a spot in the queue of backlogged matters for the Landlord Tenant Board to address when the crisis is over. The backlog of matters for the Landlord Tenant Board to handle will surely be very lengthy.
Step 1: Issue and Serve the N4 Form
Step 2: Issue and File the L1 Form
Step 3: File the Payment Agreement Form
The N4 Form is issued as the mandatory document that is, after fourteen (14) days, generally followed by an L1 Application document submitted to the Landlord Tenant Board as the steps for initiating a failure to pay rent proceeding. For the full protection of the rights of the landlord, the landlord should follow these steps, even if a payment arrangement is expected including where a tenant already agrees to the payment arrangement. The exacting requirements imposed by the Landlord Tenant Board processes mandate the following of certain procedures so to ensure rights remain available. Again, the assistance of an experienced lawyer or paralegal, such as United Legal Services, may be highly beneficial.
Refrain From Contact
Performing Maintenance Only When Absolutely Necessary
It should go without saying that during the Covid19 crisis avoiding contact whenever possible is imperative for the health and safety of the landlord as well as tenant, among others. Of course, various situations may still arise that do require some interaction. When these situations do arise, follow the advice and guidance of health practitioners as to how to limit potential exposure and thereby how to best protect yourself and others. Where direct interactions are absolutely necessary, take all appropriate precautions very seriously.
As the Covid19 crisis is unprecedented and little, if any, information is therefore available to confirm how the Landlord Tenant Board or appeal courts will decide these newly unique legal issues, clearly 'black and white' legal information is impossible to provide or obtain; thus using common sense appears as the best rule of thumb. Accordingly, it seems logical that minor repairs and unimpairing maintenance issues should be postponed. For serious issues genuinely requiring prompt attention, landlords should dispatch only contractors who understand and appreciate the severity of the coronavirus and who are taking, and will take, the appropriate precautions when entering the rental unit of a tenant. Additionally, tenants should make every effort to appreciate that availability of certain services may be difficult for the landlord to obtain. This effort should include the tenant avoiding presumptions. For example, a tenant should appreciate that just because a type of service is listed as an essential service and is currently permitted to operate despite the Covid19 shutdown, such fails to mean that a landlord is able to reach and hire maintenance services in the same timely manner that would usually occur.
Other than genuinely necessary maintenance and urgent repair concerns, common sense dictates that interactions be avoided and that unless entry is crucially necessary, entry into a rental unit be avoided. Accordingly, showings, inspections, among other things, should sensibly be postponed.
Specific to realty showings, the Ontario Real Estate Association ("OREA") recently issued an urging to realtor members to stop showing tenanted properties wherein OREA specifically stated:
"The Ontario Real Estate Association (OREA) is urging Ontario’s REALTORS® to stop all face-to-face business, including open houses, agent and public office hours, and in-person showings, particularity of tenant-occupied homes, during the Province’s COVID-19 State of Emergency. In these unique situations, where a property listed for sale is occupied by tenants, the health and safety of those tenants, the Realtors and their clients is of utmost priority."
Source: Ontario Real Estate Association
Similarly, and specific to inspections, among other things, the Government of Ontario is urging that landlords seek to enter a rental unit only where urgently necessary. Specifically, the government says:
"During this unusual time, patience and understanding from landlords and tenants is necessary to help stop the spread of COVID-19. Landlords are encouraged to request entry only in urgent situations and to follow physical distancing guidelines."
Source: Government of Ontario
Special Maintenance Duties
Potential for Sanitizing and Sterilizing
A landlord is statutorily required to maintain common spaces within a residential building such as a lobby, elevator, halls, shared laundry rooms, among other areas. This mandate is specified within section 20 of the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17. Interestingly, the Act describes the maintenance mandate in vague terms that may be somewhat subjective and for which the interpretation is perhaps left fully open and arbitrary. Specifically, the Act states:
20 (1) A landlord is responsible for providing and maintaining a residential complex, including the rental units in it, in a good state of repair and fit for habitation and for complying with health, safety, housing and maintenance standards.
As per the wording of the Act, whether the mandate to maintain the complex includes maintenance rising to a 'white glove' level of sanitization and sterilization during a pandemic is undefined and, whereas the law is without precedent cases, currently unknown. Furthermore, whereas the Act does clearly state that the landlord is responsible for maintaining the rental units in a state that is, "fit for habitation" and that complies with "health" standards, for which health standards is undefined, the section 20 mandate appears to show that a landlord may have the responsibility for sterilizing a rental unit contaminated by a tenant, or a guest of the tenant, carrying the coronavirus. For many small pocket landlords, the costs of such extreme efforts may be a very significant expense if such a circumstance actually arises.
Of course, where the above suggests that a landlord may be responsible for sterilizing a rental unit exposed to coronavirus is purely speculative, it is fully unknown whether the Landlord Tenant Board would actually declare so. However, and regardless, there are concerns that go beyond the potential for an interpretation of section 20 of the Act to impose the duty upon the landlord. These additional concerns include the potential for liability to others, such as other tenants within the building, or guests of such other tenants, as well as other persons who may enter upon the premises. For example, if a tenant in a multi-tenanted unit comes down with Covid19, it is a genuine legal concern to consider that the landlord would be unable to say, "Well, cleaning the unit is the responsibility of the tenant and should be done by the tenant if and when the tenant recovers", and then simply leaving the unit to remain contaminated. The tenants in other units may, and perhaps most likely, be extremely concerned about residing within a building where a contaminated unit is left unaddressed by the landlord. Furthermore, if any of those other tenants become, somehow provably, infected via air circulated from the contaminated unit through the HVAC system, or other means, the landlord could become subject to very serious liabilities. Accordingly, even if a landlord perceives that section 20 of the Act fails to impose a duty upon the landlord to clean up a contaminated unit, the risk of other legal issues may arise.
The world is experiencing unprecedented times. Unprecedented legal issues are surely to occur. Just how the law will address these legal issues remains unclear. By being proactive, communicating respectfully, and extending courteous accommodations, landlords and tenants will best ensure that legal issues are avoided or minimized and that quality relationships are maintained.
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