CITATION: Amini v. Blue Stellar Real Estate, 2023 ONSC 2659
DIVISIONAL COURT FILE NO.: DC-459/22
DATE: 20230501
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Firestone R.S.J., Backhouse, and Petersen JJ.
B E T W E E N:
MEHRAN AMINI
Appellant
- and -
BLU STELLAR REAL ESTATE INC.
Respondent
Self-represented
Steven Hong, for the Respondent
HEARD by videoconference at Toronto: April 27, 2023
Petersen J.
REASONS FOR DECISION
Nature of Proceeding
[1] Mr. Amini appeals a Review Order of the Landlord and Tenant Board dated July 25, 2022. The order pertains to his tenancy of a basement unit in a property owned by Blue Stellar Real Estate Inc. The Board ordered him to pay Blu Stellar $18,000 plus interest in arrears of rent for the unit. He seeks to have that order set aside.
[2] Mr. Amini does not dispute the fact that he defaulted on his rent payments. Rather, he takes the position that the Residential Tenancies Act, 2006, S.O. 2006, c.17 (“RTA”) does not apply to his tenancy of the basement unit because his lease was part of a larger commercial transaction, and he never lived in the unit. The Board considered and rejected this argument.
[3] Mr. Amini argues that the Board erred in law by failing to ascertain the real substance of the transaction between the parties, as required by s. 202(1) of the RTA. Blu Stellar submits that the Board’s decision is correct in law and requests that the appeal be dismissed with costs.
[4] For the reasons set out below, I would dismiss the appeal. There is no error of law in the Board’s finding that the RTA applies to the tenancy at issue.
Jurisdiction and Standard of Review
[5] This Court has jurisdiction to hear this appeal under s. 210(1) of the RTA, but only on a question of law. This court does not have jurisdiction to hear the appeal on a question of fact or mixed fact and law: Sterling Studio Lofts Inc. v. Clayton Stel, 2019 ONSC 91, at paras. 32-33; Lerose v. Princess Apartments, 2022 ONSC 7 (Div. Ct.) at para. 29
[6] Questions of law are questions about what the correct legal test is; questions of fact are questions about what took place between the parties; and questions of mixed fact and law are questions about whether the facts satisfy the legal test: Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 35.
[7] The standard of review for a question of law on a statutory appeal is correctness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at paras. 36-38.
Background Facts
[8] The property at issue is a two-storey bungalow with a separate basement unit. It was formerly owned by Mr. Amini, who operated an immigration consultant business on the premises and leased space on the ground and upper floors to third parties who used it for professional offices. The applicable by-law permits both commercial and residential use of the property.
[9] Mr. Amini sold the property to Blu Stellar in 2020. The Agreement of Purchase and Sale (“APS”) contains a term that Mr. Amini will lease back the entire property for one year at the “basic rent” amount of $5,000 monthly “on an absolutely net basis to the landlord” (i.e., Mr. Amini agreed to pay all utilities, maintenance and repair costs, and other expenses associated with the property). The APS also stipulates that, during the term of the lease, the property will only be used for the purpose of the current professional office, and the lease cannot be assigned by Mr. Amini without the landlord’s prior consent.
[10] After the APS was executed, the parties disagreed about whether the $5,000 monthly rental amount was inclusive of HST, and about whether Mr. Amini was required to pay property taxes in addition to rent. The parties resolved this dispute through negotiations between their counsel. Blu Stellar agreed to waive the clause in the APS that stipulated the rent would be on “an absolutely net basis to the landlord” and Mr. Amini agreed to pay HST on part of the rent. The parties then executed two separate leases: (1) a commercial lease for the above-ground office space at $2,000 per month in rent plus HST, and (2) a residential lease for the basement unit for $3,000 per month in rent.
[11] The parties’ commercial lease states that: the premises may only be used for professional office space; the landlord is responsible to pay the property taxes; the tenant must pay a net rent amount of $2,000 per month plus HST, as well as all “additional rent” consisting of all utilities, all operating, servicing and repair costs in respect of mechanical, plumbing and electrical services on the premises, and all outdoor maintenance costs; and the landlord may terminate the lease and re-enter the premises if the tenant defaults on a rent payment for 10 consecutive days.
[12] The parties’ residential lease is in the standard form of a Residential Tenancy Agreement. It contains an Appendix that sets out protections afforded to tenants under the RTA, including restrictions on rent increases, the landlord’s obligation to maintain the property in good repair, and the landlord’s obligation to ensure the provision of vital services to the unit such as hot and cold water, heat, and electricity.
[13] Both leases commenced upon the closing of the real estate transaction in April 2020. Mr. Amini made his rental payments for several months, but the COVID-19 pandemic caused financial hardship for his sub-tenants, whose immigration businesses suffered due to lockdowns. They were no longer able to pay him, so he in turn became unable to afford his rent payments to Blu Stellar. He requested a reduction in rent, which was denied. He continued to pay the monthly rent under the commercial lease but stopped making payments under the residential lease, which prompted Blu Stellar to file its application for eviction with the Board.
Proceedings before the Board
[14] The Board ruled in the landlord’s favour on February 28, 2022, but that initial order was stayed on March 28, 2022, pending a Request for Review filed by Mr. Amini. The Request for Review was granted, and a fresh hearing was conducted by the Board on April 27, 2022.
[15] At the re-hearing of the application, Mr. Amini and the landlord’s representative testified and were cross-examined. They gave conflicting evidence about whether the basement unit was equipped with a functional kitchen and 3-piece bathroom, and about whether Mr. Amini resided in the basement unit at any point during the term of the lease. Mr. Amini denied living there. He testified that the oven in the basement was not operational and that there was no shower. The landlord’s representative testified that the basement unit had sleeping quarters, an operational kitchen, as well as a toilet, sink and shower. He also testified that he frequently observed Mr. Amini coming out of the basement, from which he inferred that Mr. Amini was residing there.
[16] Multiple documentary exhibits were adduced and admitted into evidence, including (but not limited to) the MLS listing for the property, the APS between the parties, correspondence between their counsel, and the executed commercial and residential leases.
Decision of the Board
[17] In its Review Order, the Board outlined Mr. Amini’s position and noted that he was relying on s. 202(1) of the RTA. The Board cited the relevant statutory provision in full:
202 (1) In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,
(a) may disregard the outward form of a transaction or the separate corporate existence of participants; and
(b) may have regard to the pattern of activities relating to the residential complex or the rental unit.
[18] The Board briefly summarized the evidence and highlighted the following admissions made by Mr. Amini, namely that: (1) He executed a residential tenancy agreement for the basement unit in order to receive a discount on his monthly payments; (2) He did so voluntarily; (3) He understood it to be a residential tenancy agreement when he signed it; and (4) He and others who were working in the upper floors of the property used the basement for storage of unwanted items.
[19] The Board concluded that the RTA applies to Mr. Amini’s tenancy in the basement unit. It articulated its reasons for this conclusion as follows:
In these circumstances, whether anyone resided in the rental unit, whether the rental unit was legal or habitable, and whether the rent agreed to was above market value is not relevant to the question of whether the Act applies.
I accept and agree with the Landlord’s Representative’s submission that an individual cannot rely on an agreement for one purpose and then seek to resile from this agreement when it is no longer convenient. The Tenant freely and knowingly entered into a residential tenancy agreement.
Issue
[20] The only issue before this Court is whether the Board correctly applied s. 202(1) in reaching its decision that the RTA applies to Mr. Amini’s tenancy of the basement unit.
Analysis
[21] Section 3 of the RTA provides that the Act “applies with respect to rental units in residential complexes”. Section 2(1) of the RTA defines “rental unit” as “any living accommodation used or intended for use as rented residential premises.” The Court of Appeal for Ontario has ruled that this definition must be interpreted liberally to promote the remedial objectives of the statute, namely, to protect residential tenants from unlawful rent increases and evictions: Matthews v. Algoma Timberlakes Corp., 2010 ONCA 468, at paras. 22-23.
[22] The parties agree that s. 202(1) of the RTA applies when determining whether a unit satisfies this statutory definition: Matthews, at para. 24. Substance, not form, governs the determination of the true nature of a tenancy: OnTheGoShipping Inc. v. Khan Medical Corp., 2020 ONSC 2789, at para. 22; Sterling Studio Lofts, at para. 35.
[23] Mr. Amini argues that, although the Board referred to s. 202(1) in its decision, it failed to apply the section. He submits that the Board reached its decision based solely on the form of the lease and failed to consider the actual use of the basement unit as storage space for the businesses operated on the upper floors, the clause in the APS that restricts use of the property to “current professional office use,” and other factors that suggest the space was uninhabitable as living quarters.
[24] The plain language of the RTA (i.e., the definition of “rental unit”) and the relevant jurisprudence make it clear that a living accommodation will satisfy the definition of “rental unit” if it is intended for use as rented residential premises, even if it is not actually used for that purpose. The Board therefore did not err when it decided that, in the circumstances of this case, it did not matter whether anyone resided in the basement unit.
[25] Section 202(1)(b) of the RTA provides that the Board “may have regard to the pattern of activities” relating to the rental unit in ascertaining the real substance of a transaction (emphasis added). However, those activities are not determinative. Other relevant factors may also be considered. In this case, the Board examined the Residential Tenancy Agreement and the circumstances surrounding its execution. It looked at the substance of the transaction, which changed after the APS was executed. It determined that the parties agreed to enter into two separate lease agreements, including a residential lease for the basement unit, for the purpose of reducing the amount of HST payable by the tenant. The parties’ intentions, the fact that a Residential Tenancy Agreement was executed, and the fact that the landlord did not charge HST on the rent for the basement unit are all circumstances relevant to the determination of the “real substance” of the transaction under s.202(1) of the RTA: OnTheGoShipping, at para. 24. The Board did not err when it took these factors into account in deciding that the RTA applies to Mr. Amini’s tenancy.
[26] Moreover, s.202(1) of the RTA states that the Board “shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants” (emphasis added). In this case, the Board found that Mr. Amini “cannot rely on an agreement for one purpose and then seek to resile from this agreement when it is no longer convenient.” The Board thereby implicitly considered the good faith of the parties, as required by the statute: Akelius Canada Ltd. v. Barrett, 2018 ONSC 7144 (Div. Ct.), at paras. 29-30.
[27] Mr. Amini benefitted from the execution of a Residential Tenancy Agreement, which spared him the obligation to pay HST on $3,000 monthly in rent. He also benefitted from the protection of the RTA when he defaulted on his rent payments for the basement unit. Indeed, during the appeal hearing, he stated that the reason he continued to pay rent under the commercial lease is because he knew that the landlord could come onto the property and evict him and his subtenants if he defaulted. He exploited the fact that Blu Stellar could not evict him so swiftly from the basement unit because of the protections afforded to tenants under the RTA. In the circumstances, his assertion now that the RTA does not apply constitutes bad faith.
[28] For the reasons set out above, I find no error of law in the Board’s decision.
Conclusion
[29] The appeal is dismissed.
[30] Blu Stellar seeks an order for its costs to be paid on a substantial indemnity basis. I am not persuaded that costs should be awarded on an elevated scale. The appellant, Mr. Amini, is therefore ordered to pay the respondent’s costs on a partial indemnity basis in the amount of $3,740, inclusive of fees, disbursements and HST.
Petersen J.
I agree: ____________________________________
Firestone R.S.J.
I agree: ____________________________________
Backhouse J.
Released: May 1, 2023
CITATION Amini v. Blu Stellar Real Estate, 2023 ONSC 2659
DIVISIONAL COURT FILE NO.: DC-459/22
DATE: 20230501
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Firestone, Backhouse and Petersen JJ.
B E T W E E N:
MEHRAN AMINI
- and -
BLU STELLAR REAL ESTATE INC.
REASONS FOR DECISION
Petersen J.
Released: May 1, 2023