When a Lease is Rent plus Reimburse the Landlord For Utility Bills, Where Does the Landlord Sue for Payment If Necessary?
The Law Is Now Clearer With Bill 184. Within the Changed Law a Landlord Is Now Able to Pursue Unpaid Utilities Within Landlord Tenant Board Proceedings.
Understanding Whether Utilities Disputes Are a Landlord Tenant Board Issue or Small Claims Court Issue
With the passing of, and Royal Assent of, and therefore the coming into force and affect of Bill 184 as the Protecting Tenants and Strengthening Community Housing Act, 2020, S.O. 2020, Chapter 16, Schedule 4, such makes various changes to the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17, some of which clarify, alter, and even confuse, many of the legal understandings of the past.
The New Law, clarity
With regards to former unpaid utilities confusion as to whether such was an issue within the jurisdiction of the Small Claims Court or the Landlord Tenant Board, Bill 184 adds a new section to the Residential Tenancies Act, 2006 which says:
88.2 (1) A landlord may apply to the Board for an order requiring a tenant or former tenant to pay costs described in subsection (4) if,
(a) while the tenant or former tenant is or was in possession of the rental unit, the tenant or former tenant failed to pay utility costs that they were required to pay under the terms of the tenancy agreement; and
(b) in the case of a tenant or former tenant no longer in possession of the rental unit, the tenant or former tenant ceased to be in possession on or after the day section 20 of Schedule 4 to the Protecting Tenants and Strengthening Community Housing Act, 2020 comes into force.
(2) An application under subsection (1) may be made,
(a) while the tenant is in possession of the rental unit; or
(b) no later than one year after the tenant or former tenant ceased to be in possession of the rental unit.
(3) If the Board makes an order requiring payment under subsection (1) and for the termination of the tenancy, the Board shall set off against the amount required to be paid by the tenant the amount of any rent deposit or interest on a rent deposit that would be owing to the tenant on termination.
(4) The costs referred to in subsection (1) are reasonable out-of-pocket expenses that the landlord has incurred or will incur as a result of a tenant’s or former tenant’s failure to pay utility costs that they were required to pay under the terms of the tenancy agreement.
(5) This section applies with respect to, (a) a failure described in clause (1) (a), even if the failure occurred before the day section 20 of Schedule 4 to the Protecting Tenants and Strengthening Community Housing Act, 2020 comes into force; and (b) out-of-pocket expenses described in subsection (4), even if the expenses were incurred before that day.
(6) Despite subsection 168 (2), the enactment of this section by section 20 of Schedule 4 to the Protecting Tenants and Strengthening Community Housing Act, 2020 does not affect any court proceeding for an order for the payment of compensation for a tenant’s or former tenant’s failure to pay utility costs that is commenced before the day that section comes into force and has not been finally determined before that day.
As shown, under new section 88.2(1), a landlord may pursue a tenant or former tenant for unpaid utility costs at the Landlord Tenant Board. Interestingly, section 88.2(1)(b) states that a former tenant may be pursued at the Landlord Tenant Board if the tenant ceased possession of the rental unit on or after this newly added section of the Residential Tenancies Act, 2006 takes effect. Accordingly, it seems that the lack of clarity within the old law is now coincidingly clarified whereas with the new law saying that these issues now should proceed at the Landlord Tenant Board, such inherently implies that these issues were previously within the jurisdiction of the Small Claims Court.
The Old Law, confused
Previously the issue of jurisdiction for unpaid was quite confused whereas in the case of Luu v. O'Sullivan, 2012 CanLII 98396 at paragraphs 55 to 58, it was stated by Deputy Judge Winny that legislative instruction or appeal court clarification for the question of proper jurisdiction was necessary. With the new section 88.2 provided via Bill 184, it seems that the government heard, and answered, the wishes of Deputy Judge Winny. Here specifically is what Deputy Judge Winny previously said about the issue:
55. The question of the Board’s jurisdiction over the utilities component of rent payable in residential tenancies cries out for appellate resolution. One avenue for such resolution would be on appeal from this judgment.
56. The other avenue would be for the Board to make a decision on this issue which could then be appealed as a question of law under s. 210 of the RTA. However if the practice of the Board’s staff is to turn away applications based on the contents of Interpretation Guideline 11, this creates an unfortunate obstacle to clarification of the law for residential landlords and tenants in Ontario. My view is that Interpretation Guideline 11 is seriously flawed and internally inconsistent, but it is clearly not a legally-binding instrument. The Board’s ability to adjudicate this issue should not be compromised by its own staff; nor should the ability of the Divisional Court to clarify this issue be so compromised.
57. It also appears plain that there is no aspect to this problem which could not be addressed by amendment to the RTA or its regulations.
58. The Small Claims Court, like any other court or tribunal, must apply the current law. My determination is that this matter falls within the exclusive jurisdiction of the Landlord and Tenant Board. Accordingly, both parties’ claims are dismissed for want of jurisdiction.
Interestingly, whereas In Luu, Deputy Justice Winny did state that clarification was required, the final decision made by Deputy Justice Winny was that the issue fell within the jurisdiction of the Landlord Tenant Board; however, in the Landlord Tenant Board case of Various Tenants v. Landlord, TET-56570-15-RV-IN2 (Re), 2016 CanLII 52841, the Landlord Tenant Board disagreed with Deputy Justice Winny of the Small Claims Court and said:
41. For the same reason, and although it is not mentioned in the exclusions in the definition of rent, the Board has consistently stated that fluctuating amounts for utility charges paid by a tenant to either a utility company or to reimburse a landlord cannot be considered “rent”. (See: Interpretation Guideline #11 Eviction for Failure to Pay Rent.) This is why I disagree with the analysis of Deputy Judge Winny relied on by the Landlord in the request for review in the Small Claims Court case of Luu v. O’Sullivan, 2012 CanLII 98396. It fails to take into account the entire scheme of the Act with respect to rent set out in sections 110 through 133.
In the case of SOC-01295-17 (Re), 2017 CanLII 47397, the Landlord Tenant Board ruled that unpaid utilities are an irregular charge, meaning variable each month (or billing period) rather than a regular charge, and that as an irregular charge utility bills are outside the adjudication powers of the Landlord Tenant Board. Specifically, it was said:
17. Given my determination that unpaid utilities are irregular charges that may be housing charges but NOT “regular monthly housing charges”, the inclusion of these charges on the N4C notice of termination means that the N4C notice of termination is fatally flawed. For this reason, the application must be dismissed.
18. The Co-op’s Legal Representative urged me to consider Luu vs. O’Sullivan, 2012 CanLII 98396, as authority for the proposition that utilities are included within the definition of “rent” in Section 2 of the Act, and by analogy within the definition of “regular monthly housing charges” in Section 94.1. The decision is not binding on the LTB, nor is it helpful to the Co-op. Whether utilities are included in rent is an issue that falls within the expertise of the LTB and is decided on a case-by-case basis. With regard to whether the term “regular monthly housing charges” includes utilities, I am bound by the express provisions of the Act which exclude irregular charges from the definition of “regular monthly housing charges”.
Bill 184 provides for various changes to the Residential Tenancies Act, 2006 including the addition of section 88.2 which clarifies the previously confusing issue of jurisdiction for unpaid utilities. With the new change, landlords and tenants are now assured that the Landlord Tenant Board is the proper venue for disputes arising from arrears of utilities.