COURT FILE NO.: 180/03

DATE: 20040712

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, MATLOW and JENNINGS JJ.

B E T W E E N:

CAROLE ANN BARKER and WALTER E. TOTZEK

Applicants (Respondents in Appeal)

• and -

PARK WILLOW DEVELOPMENTS

Respondent (Appellant)

J.J. Hoffer, for the Appellant/Landlord

Carole A. Barker, In person and

Walter E. Totzek, In person

HEARD at Toronto: May 10, 2004

O’DRISCOLL J.:

I. Nature of the Proceedings

1The appellant/landlord (“landlord”) appeals to the Divisional Court under s. 196 of the Tenant Protection Act, 1997, S.O. 1997, c. 24 (TPA) from the decision of the Ontario Rental Housing Tribunal (“Tribunal”), dated March 13, 2003, which ordered the landlord to pay its tenant, Carole A. Barker, the sum of $1,019.30 and to its tenant, Walter E. Totzek, the sum of $941.62 as reduction in their respective rents for the period from April 15, 2002 to December 5, 2002, because, during that period the tenants were unable to use their balconies during the time of the landlord’s balcony restoration program. The landlord seeks an order allowing the appeal and setting aside the Tribunal’s order and replacing it with an order that Ms. Barker and Mr. Totzek be paid $0.22 per day by the landlord for 234 days. In the alternative, the landlord seeks an order that the appeal be allowed and the matter be referred back to another member of the Tribunal together with the opinion of the Court as envisaged by s. 196(4)(b) of the TPA.

II. Background

2The landlord undertook balcony restoration, found to have lasted 234 days, at its residential complex located at 55 Ellerslie Avenue, Toronto. Both tenants rented apartments with balconies at that address. The residential complex is 30-35 years old; it is a 17-story cement slab structure with 389 balconies.

3Each tenant applied under s. 26 of the TPA to the Tribunal for an order that the landlord substantially interfered with the reasonable enjoyment of the rented unit entitling the tenant to an abatement of rent.

4The Tribunal dismissed the two applications for abatement of rent brought under s. 26 of the TPA holding that the landlord should not be penalized for doing what it was required to do under the statute, namely, restoration work. The Tribunal was of the view that the balcony restoration work, although often disruptive, was done by the landlord to fulfill its ongoing maintenance and safety obligations under the TPA.

5Each tenant also brought an application under s. 142 of the TPA. It states:

142. (1) A tenant of a rental unit may apply to the Tribunal for an order for a reduction of the rent charged for the rental unit due to a reduction or discontinuance in services or facilities provided in respect of the rental unit or the residential complex.

(3) The Tribunal shall make findings in accordance with the prescribed rules and may order,

(a) that the rent charged be reduced by a specified amount; …

(c) that the rent charged be reduced by a specified amount for a specified period if there has been a temporary reduction in a service.

6Before the Tribunal, the landlord conceded that the tenants were entitled to a reduction of rent charged for the rental unit due to a reduction of balconies, said to be “facilities” under s. 142(1) of the TPA, provided with respect to the rental unit. The issue is the amount of the reduction.

III. Calculation of the quantum of reduction under s. 142 of the Act

7S. 30 of Ontario Regulation 194/98 states:

30. (1) The provisions of this section are prescribed as rules for making findings relating to a reduction of the rent charged under section 142 of the Act, based on a discontinuance or reduction in services or facilities.

(2) If a service or facility is discontinued, the rent shall be reduced by an amount that is equal to what would be a reasonable charge for the service or facility based on the cost of the service or facility to the landlord or, if the cost cannot be determined or if there is no cost, on the value of the service or facility.

8The landlord submits that it proved the “cost” of the balconies to the landlord as shown at pp. 59-71 of the Exhibit Book, Tab 10. Counsel for the landlord submits that because the landlord’s “costs” were proved, the Tribunal was obligated to utilize those figures as a basis of computing the reduction payable to the tenants.

9Counsel for the landlord points out that at the hearing before the Tribunal, the tenants did not dispute the figures regarding costs to the landlord. However, counsel for the landlord relies on the fact that at the conclusion of the hearing before the Tribunal, the decision was reserved and, then, without any notice or warning, the Tribunal abandoned its usual practice of basing any reduction on the proven “costs” of the landlord, struck out on a new path in its written decision and made awards to the tenants based on “value” of the facility.

10After referring to earlier cases of the Tribunal, where the “costs” of the facility to the landlord had been accepted, the Tribunal member wrote:

However, while these decisions are of help to me in making my findings, I am not bound by them.

I do not however, agree that this is the definitive method of determining the cost of the service or facility to the Landlord. The Regulation does not spell out which method is to be used to calculate that cost, but only that the reduction is to be based on the cost to the Landlord.

I interpret this section to mean that if the Landlord’s actual cost can be determined, then that is what is to be applied. I do not find that the figures submitted by Mr. Hoffer represent the real or actual cost of providing balconies to the Tenants.

The Landlord has chosen a year prior to the balcony restoration as representative of the cost of the service or facility. The cost of the service or facility in the year of the restoration would be more appropriate, as this is the year in which the Tenant’s are claiming, and costs of this restoration are paid for by the Landlord, albeit subsequently charged back to the tenant by way of rent increase.

What has been submitted here is one method of allocating ongoing costs favorable to the Landlord, and perhaps acceptable for accounting purposes, but I do not accept that it is the actual or real cost of the facility to the Landlord.

I find that the actual cost of the facility to the Landlord cannot be determined from the information submitted. I therefore must determine the value of the facility.

The Tenants have provided no formula in their evidence for calculating value of the service, but have clearly indicated in their testimony that the value of the balcony is greater than what is being suggested by the Landlord. They have left the actual determination of amount to the Tribunal.

I am required to determine the “degree of reduction of the facility.” The Landlord submits that it is questionable whether there was any reduction in the facility. The Tenants claimed that they were unable to use their balconies at all, as stated above, during the entire period.

The evidence of the Tenants, which was, for the most part, corroborated by the Landlord’s, was that this was a major construction project, involving constant noise, vibration and dust which was ongoing for almost eight months. It would seem that even in the evenings and at night when it was quiet, the accumulated dust and debris from the project would make the balconies unusable.

Section 30(4) of the Regulation requires that, where there is a finding that a facility has been reduced, the amount of the reduction shall be a reasonable proportion based on the degree of the reduction of the facility of the amount determined under subsection (2).

I find on the evidence, that the Tenants were effectively unable to use their balconies at all during the entire period of time the project was ongoing, that the reduction in the service was effectively a discontinuance of the service and therefore find that the Tenants are entitled to a rent reduction abatement of 100% of the value of the balconies, for the entire period April 15, 2002, to December 5, 2002, or 234 days.

Section 30(5) of the Regulation states that, “if the discontinuance of the service or facility is temporary, and its duration is reasonable, taking into account the effect on the Tenants, there shall be no reduction of rent. (underlining mine). This would seem to imply that a subjective assessment of what is reasonable from the Tenant’s position is required.

While the period of time that the Tenants were unable to use their balconies was clearly temporary in nature, I find that the Tenants were essential [sic] unable to use their balconies for the full period of the restoration, or 234 days. I further find that this inability of the Tenants to use their balconies for a period of eight months, commencing in early spring, running through the summer, and continuing into fall and early winter, was not of reasonable duration for the Tenants to endure a loss of a paid for service, taking into account the subjective effect it had on them after reviewing the evidence.

I have therefore determined that the Tenants are entitled to rent reductions. Under the circumstances, after having heard the evidence, I have determined that the appropriate reduction of the rent for each Tenant is 10% of the monthly rent of each Tenant over the period of the restoration, or 234 days.

In the case of Mr. Totzek, his rent for the relevant period as stated on the application was $1224.00 per month. I have therefore determined that he is entitled to a rent abatement of $941.62.

In the case of Ms. Barker, her rent for the relevant period as stated on the application was $1325.00 per month. I have therefore determined that she is entitled to a rent abatement of $1019.30.

IV. Conclusions

11The landlord called evidence of the costs to it of repairing the balconies as provided in s. 30 of Ont. Reg. 194/98.

12The tenants accepted these figures and did not call any evidence to the contrary.

13The Tribunal’s finding that the “appropriate reduction of the rent for each Tenant is 10% of the monthly rent of each Tenant over the period of the restoration, or 234 days” is not based on any evidence of “value” put before the Tribunal.

14In Re Best Rank Investments Inc. and Tenants of 3161 Eglinton Ave. East (1990), 1990 7992 (ON SCDC), 73 D.L.R. (4th) 371, 374 (Div. Ct.), Southey J., for the Court, said:

A finder of fact is under no obligation to accept the evidence adduced by a party, if it finds that evidence to be unreasonable, even though there is no evidence to the contrary.

In this case, however, the board not only rejected the landlord’s interest rate of 16%, but went on to hold that a reasonable rate would have been 13.5%. There was no evidence to support this finding and, in our judgment, this interest rate was not a matter as to which the board was entitled to take notice under s. 16(b) of the Statutory Powers Procedure Act, R.S.O. 1980, c. 484.

15Although it may have been open to the Tribunal to adopt a new interpretation of s. 142 of the Act and s. 30 of the Regulation 194/98, it was incumbent on the Tribunal to give the parties an opportunity to call evidence and make submissions regarding any proposed new interpretation of the regulation. The Tribunal’s failure to call the parties back and give them that opportunity to provide relevant evidence to the Tribunal regarding “value” was a denial of natural justice. See: 355 and 365 Grandravine Holdings Ltd. v. Pacini et al. (1991), 1991 7118 (ON SC), 8 O.R. (3d) 29, 39 (Div. Ct.):

We agree that if the board is to implement a reduction for loss of services or facilities, it must be based on “average monthly cost”. See O. Reg. 440/87, s. 57(3). The board, if it intends to impose a reduction, should have called the parties back to make submissions as to quantum. Again, counsel relies on what was said by this court in the Best Rank case, supra.

V. Result

16The appeals are allowed, the orders of March 13, 2003 are set aside and the matter is remitted to a different member of the Tribunal to hear evidence to determine the amount of rent reductions payable to the tenants.

17Before the Tribunal, counsel for the landlord acknowledged that the landlord was obligated to pay compensation to these tenants for the temporary loss of a “facility”. During the course of the argument of this appeal, questions were addressed to counsel for the landlord as to whether or not a “balcony” is capable of being a “facility”, as defined in s. 2 of the Act. Counsel for the landlord did not seek to resile from his acknowledgement before the Tribunal in March, 2003. However, these reasons should not be taken as an affirmation of the landlord’s position. We leave that legal issue for another time.

18On the further hearing before the Tribunal, the parties will be free to call evidence as to “costs” to the landlord and of the “value” of the balconies. The Tribunal shall then make its awards according to the dictates of s. 142 of the TPA and s. 30 of Reg. 194/98.

VI. Costs

19Although the landlord asks for costs of the appeal, we are of the view that this is not a case for costs.

O’Driscoll J.

Matlow J.

Jennings J.