COURT FILE NO.: CV-17-581497 DATE: 20181206 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N :
ANTONIA TAURO Applicant – and – KEDAN YU AND BAIGKUA SUN Respondents
Arvid Shahmiry for the Applicant in person HEARD: August 31, 2018
FAVREAU J. :
Introduction
[1] The applicant owns a building, which she leases to the respondent, Kedan Yu. The respondents operate a convenience store on the ground floor of the building, and live in an apartment above the store.
[2] The applicant seeks to terminate the lease on the basis of numerous alleged defaults by the respondents, including a claim that the respondents are behind on the rent, that they have failed to maintain insurance on the building, that they have failed to pay their share of property taxes, that they are renting out rooms in the apartment contrary to the permitted uses under the lease, and that they have failed to make necessary repairs to the building.
[3] The respondents deny that they are in default, and claim that it is the applicant who has failed to keep the building in a proper state of repair. The respondents also argue that the upstairs portion of the building is subject to the Residential Tenancies Act, 2006, S.O. 2006, c. 17, and, therefore, any matters related to the rental of the apartment do not fall within the jurisdiction of this Court.
[4] For the reasons that follow, I find that this Court has jurisdiction over the lease for the whole building pursuant to section 5 (j) of the Residential Tenancies Act, 2006, which exempts properties from the application of the Act where residential premises are attached to a business and are under one lease. In addition, I find that the respondents are in default under the lease in a number of respects. However, as detailed further below, the respondents are to be given an opportunity to remedy the defaults pursuant to section 20(1) of the Commercial Tenancies Act, R.S.O. 1990, c. L.7.
Factual background
[5] The applicant, Antonia Tauro, is the owner of a property at 54 Peterborough Avenue Toronto. At the time the application was argued, Ms. Tauro was 86 years old, and her lawyer candidly indicated that Ms. Tauro would like to sell the property. Ms. Tauro has had no direct involvement with this litigation. Rather, it appears that her daughter, Angela Garisto, and her son, Joseph Tauro, manage the property for their mother, and they have both sworn affidavits in support of the application.
[6] The property consists of a two storey building. The ground floor is occupied by a convenience store with storage space in the basement. The second floor is a residential apartment.
[7] The respondents, Kedan Yu and Baihua Sun (Mr. Sun's first name is misspelled as Baigkau in the style of cause), are husband and wife.
[8] In 2008, Ms. Yu purchased the commercial lease for the property from the previous operator of the convenience store. Since then, Ms. Yu and her husband have run the store and lived in the second storey apartment.
[9] Initially, there was no formal lease between the parties, but, in 2015, Ms. Tauro and Ms. Yu signed a document titled "Commercial Lease Agreement".
[10] The lease provides that:
a. The monthly rent is $3,000 payable at the beginning of each month; b. The tenant is required to pay 50% of the property taxes plus HST "on the commercial portion"; and c. The term of the lease is five years, starting on December 9, 2015 and ending on December 9, 2020.
[11] The lease includes the following provision describing the permitted use of the building:
The tenant shall only use the Premises for the purposes of a Convenience Store (the "Permitted Use"). The Tenant shall not use or permit, or suffer the use of, the Premises or any part or parts thereof for any business or purposes other than the Permitted Use.
[12] The lease requires the tenant to maintain insurance:
The Tenant shall place and maintain in amounts with insurers satisfactory to the Landlord policies of public liability, plate glass and tenants' legal liability insurance insuring the Tenant against all sums which the Tenant may become obliged to pay as damages. All insurance shall be effected with insurers and brokers and upon the terms and conditions satisfactory to the Landlord and copies of all policies or certificates thereof shall be delivered to the Landlord. All such policies of insurance shall contain a waiver of subrogation clause in favour of the landlord and a clause requiring the insurer to not to [sic] cancel or change the insurance without giving the Landlord fifteen (15) days prior written notice.
[13] The lease also requires the tenant to make repairs:
During the Lease term, the Tenant shall make, at the Tenant's expense, all necessary repairs to the Leased Premises. Repairs shall include such items as repairs of floors, walls, ceilings and other parts of the Leased [sic].
[14] The lease contains the following termination provision:
If default shall at any time be made by Tenant in the payment of rent when due to Landlord as herein provided, and if said default shall continue for fifteen (15) days after written notice thereof shall have been given to tenant by Landlord, or if default shall be made in any of the other covenants or conditions to be kept, observed and performed by Tenant, and such default shall continue for thirty (30) days after notice thereof in writing to tenant by Landlord without correction thereof then having been commenced and thereafter diligently prosecuted, Landlord may declare the term of this Lease ended and terminated by giving Tenant written notice of such intention, and if possession of the Leased Premises is not surrendered, Landlord may reenter said premises. Landlord shall have, in addition to the remedy above provided, any other right or remedy available to Landlord on account of any tenant default, either in law or equity. Landlord shall use reasonable efforts to mitigate its damages.
History of proceedings and positions of the parties
[15] The application was originally commenced in August 2017, to be heard on December 8, 2017. At the time, the applicant sought an order only with respect to the convenience store portion of the building. The applicant sought to terminate the tenancy on the ground floor, and sought damages for unpaid rent and taxes. In part, the application was based on an allegation that Mr. Sun was living in the basement of the building, which was not a use permitted under the lease.
[16] It appears that the December 8th date was adjourned for the purpose of attempting to resolve the application. However, in May 2018, the applicant renewed her efforts to terminate the lease, by serving a supplementary application record and setting a new date of May 22, 2018 for the hearing. The record included an amended notice of application, in which the applicant again sought to terminate the lease, in this case seeking vacant possession of the ground floor and basement. The applicant also sought damages for unpaid rent, taxes and repairs. In the affidavit in support of the renewed application, Ms. Tauro's daughter stated that the respondents had paid rent and taxes owing when the application was initially started, but that they had fallen in arrears again. In addition, she stated that the respondents had failed to provide proof of insurance, that they were unlawfully operating a rooming house on the second floor of the building and that the respondents had failed to make required repairs to the premises.
[17] It appears that the May 22, 2018 date was adjourned on consent to give the respondents another opportunity to cure the defaults. However, the applicant then rescheduled the application for August 1, 2018, claiming that the defaults had not been addressed. On August 1, 2018, Nishikawa J. adjourned the application to August 31, 2018, on the basis that the applicant had served an additional affidavit that day, and that the parties had failed to file facta as required by the Rules of Civil Procedure on an application.
[18] By the time the application came before me on August 31, 2018, the applicant had amended the notice of application yet again. The final iteration of the notice of application seeks a declaration that no part of the leased premises is subject the Residential Tenancies Act, 2006. In addition, the applicant seeks to terminate the lease and to obtain vacant possession on the basis of unpaid rent, unpaid property taxes, failure to provide proof of insurance, unrepaired damage to the property and a claim that the respondents run an illegal rooming house. In addition, the applicant seeks $17, 266.81 for unpaid rent and taxes, and $22,600 for the cost of repairs. The application is supported by several affidavits sworn by Ms. Tauro's daughter and one affidavit sworn by her son.
[19] In response to the application, the applicants have served a number of affidavits sworn by Ms. Yu. In her affidavits, Ms. Yu states that she was assisted by her son in writing the affidavits as her English language skills are inadequate. It appears that the respondents also received the assistance of an agent in preparing their factum and other materials. In response to the application, Ms. Yu disputes some of the positions and evidence put forward by the applicant. In particular, she claims that rental payments are up to date, that the respondents' practice is to pay property taxes at the end of the year and that she is therefore not behind on taxes for 2018, that she has not maintained insurance on the property due to the uncertainty surrounding the lease, and that the property was in a state of disrepair when she and Mr. Sun started occupying the property in 2008. She also disputes the applicant's position that the upstairs apartment is exempt from the Residential Tenancies Act, 2006, relying in part on the fact that both she and applicant have brought applications to the Landlord and Tenant Board in the past.
[20] At the hearing of the application, Ms. Tauro was represented by counsel. The respondents represented themselves and required the assistance of an interpreter. They both made submissions on different aspects of the dispute.
Proceedings before the Landlord and Tenant Board
[21] From the record on the application, it appears that, until very recently, Ms. Tauro and the respondents have proceeded on the assumption that the second floor apartment is a residential dwelling subject to the Residential Tenancies Act, 2006.
[22] As part of the record, the respondents have included an Order made by the Landlord and Tenant Board on October 6, 2017. The Order was made pursuant to an application brought by Ms. Tauro, who sought to terminate the tenancy in the residential portion of the property on the basis of unpaid rent. A representative appeared before the board on behalf of Ms. Tauro and Ms. Yu represented herself. The Board made an order requiring Ms. Yu to pay unpaid rent by October 17, 2017, failing which Ms. Tauro was entitled to terminate the tenancy and evict the respondents. It appears that Ms. Yu made this payment as part of a global payment she made late in 2017 to pay for all outstanding rent up to that point and other matters.
[23] On January 23, 2018, Ms. Yu brought an application to the Board on the basis that the landlord, who is erroneously identified as Antonio rather than Antonia Tauro, had failed to keep the premises in a proper state of repair. No one appeared for Ms. Tauro on the application.
[24] In its decision, the Board described the property and tenancy as follows:
The rental unit is the second floor above a retail store. A tenancy agreement between the Landlord and the Tenant indicated the entirety of the property was commercial but the Landlord obtained a previous order of the Landlord and Tenant Board (the 'Board') for arrears of rent for the second floor (although that application did not say it) with rent of $1,550.00. This would be just over half of the $3,000.00 monthly rent for the whole building.
[25] Ultimately, the Board rejected some of Ms. Yu's claims but found that she was entitled to $2,000 for costs she had incurred in making some repairs to the apartment plus $50 for the filing fee, for a total of $2,050.
[26] At the time of the hearing of this application, Ms. Tauro had not paid this amount to Ms. Yu nor had any steps been taken to appeal or set aside the decision. In one of her affidavits, Ms. Tauro’s daughter explains that “due to the relatively small amount ordered by the Landlord & Tenant Board (i.e. $2,050)”, she has not brought an application to set aside the order, but that she believe based on advice from her lawyer that she can still do so. During argument, the explanation provided by Ms. Tauro's lawyer for the failure to pay the amount ordered by the Board was that he had advised his client not to pay the amount because, in his view, the Board did not have jurisdiction to make the order.
Issues and analysis
[27] The issues to be decided on this application are as follows:
a. Does the Court have jurisdiction over the residential portion of the property? b. Is Ms. Yu in default under the lease? c. If Ms. Yu is in default, what is the appropriate remedy?
Issue 1 -- Jurisdiction over the residential portion of the property
[28] As mentioned above, while the applicant initially only sought to terminate the lease with respect to the commercial part of the building, namely the basement and ground floor, she now seeks to terminate the entire lease. In order to consider granting this relief, I must first be satisfied that this Court has jurisdiction to make an order affecting the second floor apartment.
[29] As reviewed above, until very recently, both parties proceeded on the assumption that the second floor apartment falls under the jurisdiction of the Landlord and Tenant Board pursuant to the Residential Tenancies Act, 2006. However, in her most recent amended notice of application, Ms. Tauro seeks a declaration that the entire property is exempt from the Residential Tenancies Act.
[30] Pursuant to section 168(2) of the Residential Tenancies Act, 2006, the Landlord and Tenant Board has exclusive jurisdiction to determine all applications under that Act. In addition, section 2 of the Commercial Tenancies Act provides that "This Act does not apply to tenancies and tenancy agreements to which the Residential Tenancies Act, 2006 applies."
[31] In seeking a declaration that the Residential Tenancies Act, 2006 does not apply in this case, the applicant relies on section 5 (j) which provides as follows:
5 This Act does not apply with respect to, (j) premises occupied for business or agricultural purposes with living accommodation attached if the occupancy for both purposes is under a single lease and the same person occupies the premises and the living accommodation…
[32] A number of cases in Ontario have interpreted and applied this provision. Most recently, in Toronto Community Housing Corp. v. Didier, 2018 ONSC 5158 (Sup. Ct.), at para. 29, Sanfilippo J. identified a number of relevant principles that emerge from the cases:
Other courts have reached similar determinations on greater evidence of mixed use of commercial space with residential functions. In Lei v. Crawford, 2011 ONSC 349, [2011] O.J. No. 175 (Ont. S.C.J.), Perell J. upheld the application of the Commercial Tenancies Act to the lease of a property that consisted of a retail store on the main level with residential apartments on the second floor and in the basement. In Hahn v. Kramer (1979), 23 O.R. (2d) 689 (Div. Ct.) and Fiset v. DiGeso (1998), 20 R.P.R. (3d) 86 (Gen. Div.), the courts held that the lease of a retail store with associated living accommodation was not a residential tenancy under the Residential Tenancies Act. My conclusion is supported by the finding in Sigrist v. McLean, 2011 ONSC 7114, 283 O.A.C. 100, at paras. 112-115, that the Commercial Tenancies Act applies to a mixed use property where the "predominant purpose" of the property was for business.
[33] Accordingly, the courts look for the predominant use of the property. In addition, the courts have stated on a number of occasions that the lease of a store with associated living accommodation is a typical situation to which the exemption created by section 5 (j) of the Residential Tenancies Act, 2006 applies. In fact, in Hahn, the Divisional Court held that "the case of a lease of a store with living accommodation combined is relatively easy. That would clearly fall within the definition of premises occupied for business purposes with living accommodation attached."
[34] Accordingly, based on the language in section 5 (j) of the Residential Tenancies Act, 2006 and a review of the cases that have considered the provision, in my view, there is no doubt that, in this case, the exemption applies to the apartment above the convenience store. The convenience store and apartment are under one lease, the convenience store and apartment are attached, and the same person, namely Ms. Yu and her husband, occupy the convenience store and the apartment.
[35] At first blush, it may seem that the complicating factor in this case is that, until recently, all parties proceeded on the assumption that the apartment fell under the jurisdiction of the Landlord and Tenant Board, and the Board has already made two orders dealing with the second floor apartment. However, the parties cannot confer jurisdiction on the Board by their conduct or by agreement, and the Superior Court is not bound by the prior decisions of the Board, which appears to have exercised its jurisdiction in error.
[36] Therefore, I find that the applicant is entitled to a declaration that the whole tenancy is subject to the commercial lease, and that it is exempt from the Residential Tenancies Act, 2006, in accordance with section 5(j) of that Act.
[37] While I am satisfied that the applicant is entitled to this declaratory relief, as reviewed below, in my view the applicant's conduct in first seeking an order from the Landlord and Tenant Board and in later ignoring an order made by the Board may be relevant to consideration of the appropriate remedy in this case.
Issue 2 -- Defaults by the applicant
[38] Given my finding that the Residential Tenancies Act, 2006, does not apply in this case, the Commercial Tenancies Act and the lease govern the relationship between the parties.
[39] As reviewed above, the lease provides that the applicant can terminate the tenancy in the following circumstances:
a. With respect to a failure to pay rent, the tenancy can be terminated if the tenant does not pay the rent within 15 days of receiving notice of the default; and b. With respect to any other default, the tenancy can be terminated 30 days after notice has been provided if the default is not addressed.
[40] Section 19(2) of the Commercial Tenancies Act also imposes specific notice requirements before a landlord can take possession of a property where the tenant is in default:
A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.
[41] Therefore, as a pre-condition to determining whether the lease should be terminated, I must first determine whether Ms. Yu is in default and whether she has been given an opportunity to address the default.
[42] The applicant claims that Ms. Yu is in default in the five following respects:
a. She has not paid rent since December 2017; b. She has not paid property taxes for 2018; c. She has not maintained insurance on the property since 2016; d. She has unlawfully rented out rooms in the second floor apartment; and e. She has failed to make necessary repairs.
[43] I will review each of these alleged defaults in turn.
a. - Unpaid rent
[44] At the time of the hearing, the applicant claimed that Ms. Yu had not paid rent since January 2018. However, she did acknowledge receiving cheques for June, July and August 2018, which Ms. Tauro’s daughter claims were not cashed because of the ongoing dispute.
[45] Ms. Yu claims that she did pay rent for January 2018. She agrees that she has not paid rent for February, March and April. However, she argues that she tried to communicate with Ms. Tauro's daughter to discuss the $2,050 ordered to be paid by the Board, which she said should be applied to some of the outstanding rent.
[46] Accordingly, while there is some dispute between the parties about the amounts owed, there is no dispute that at the time of the hearing of the application there was some outstanding rent to be paid.
[47] In particular, I find as follows:
a. January 2018 rent is outstanding. While Ms. Yu argues that she made this payment, she also acknowledges that the cheque for the December 2017 rent did not go through. Accordingly, I accept the applicant's evidence that the January 5, 2018 cheque was applied to the outstanding December 2017 rent. b. February 2018 to April 2018 rent is outstanding. As indicated above, Ms. Yu argues that she sought to offset the rent owing in this time period against the $2,050 ordered by the Landlord and Tenant Board. I do not accept this excuse. Three months rent is equivalent to $9,000, and therefore the outstanding amount ordered by the Board does not account for the failure to pay rent in this time period. While section 35 of the Commercial Tenancies Act does allow a tenant to offset rent against a debt of the landlord, this does not account for $6,950 of unpaid rent for this period of time. (I note that the applicant cannot argue that she does not owe the $2,0505 to Ms. Yu. While the Board may not have had jurisdiction to make the order, in the absence of an appeal or an application to set the order aside, it is still a valid order.) c. May 2018 to August 2018 has been paid, although the cheques were not cashed. It was the applicant who chose not to cash the cheques, and therefore I do not count this portion of the rent as outstanding.
[48] Accordingly, at the time of the hearing, Ms. Yu was in default of her obligation to pay rent. There were four months of outstanding rent due, for a total of $12,000. ($2,050.00 can be deducted from this amount by way of set off, unless the applicant has successfully taken steps to set aside the Order of the Landlord and Tenant Board.)
b. - Property taxes
[49] When the application was initially commenced in 2017, Ms. Yu had not yet paid the 50% in taxes she is required to pay under the lease for that year. In the updated materials, the applicant acknowledges that Ms. Yu paid taxes owed for 2017, but claimed that she had not paid her share of property taxes for March to May 2018, which were calculated as $2,266.81.
[50] Ms. Yu's position is that she has always pais her share of property taxes at the end of each year. Ms. Yu also states in her affidavit that the property tax bills for March to May 2018 in the applicant's materials were never provided to her.
[51] The lease is silent on when during the year Ms. Yu is required to pay her 50% share of the property taxes. In addition, the applicant has not countered Ms. Yu's evidence that the practice in prior years has been for Ms. Yu to pay her share of taxes at the end of the year or that the applicant has not provided notice of the bills for March to May 2018.
[52] Accordingly, I am not prepared to find that Ms. Yu is in default of her obligation to pay property taxes for 2018. However, this finding should not be taken as an excuse to avoid paying taxes owed at the end of this year. On the contrary, on her own evidence, Ms. Yu should be making payments for her share of the taxes around this time of year.
c. - Insurance
[53] There is no doubt that Ms. Yu is in breach of her obligations to maintain insurance on the property. She admits that she has not maintained insurance on the property since May of 2015.
[54] Her explanation for this default is that she has not maintained insurance on the property "due to the constant fear of losing the store". This is no excuse for a serious breach of a clear term of the lease.
[55] Accordingly, I find that Ms. Yu is in default of her obligation to maintain insurance on the property.
d. - Room rental
[56] At the time the application was originally commenced, one of the applicant's complaint was that Mr. Sun was sleeping in the basement of the building, and that this was not a permitted use. By the time of the hearing, it appears uncontested that Mr. Sun no longer sleeps in the basement. However, the applicant now claims that the respondents are in breach of the lease because they rent out some of the bedrooms in the second floor apartment, which is not a permitted use under the lease.
[57] Ms. Yu does not dispute that she rents out some of the rooms. However, she relies on a provision in the lease that states that "Tenant shall have the right to sublease the Leased Premises" to argue that she has a right to do so.
[58] The problem with this argument is that the subleasing provision has to be read in conjunction with the provision dealing with the permitted use of the premises. As referred to above, the permitted use is limited to the operation of a convenience store. Given that the respondents live in the second floor apartment and that they did so at the time the lease was entered into, it is implicit that they are entitled to live in the apartment as part of the operation of the convenience store.
[59] However, in my view, renting out rooms to third parties goes beyond this permitted use and constitutes a different commercial use of the premises than provided for by the terms of the lease. There is no doubt that Ms. Yu is entitled to sublease the premises, but she is only entitled to do so if the use of the property under the sublease continues to be the operation of a convenience store. For example, she and Mr. Sun could move out of the building and sublet the convenience store and apartment to someone else for the purpose of operating a convenience store.
[60] Accordingly, I find that Ms. Yu is in default of the lease by renting out rooms in the apartment.
e. - Property damage
[61] The applicant claims that Ms. Yu is in default under the lease for failing to make necessary repairs to the property. Ms. Yu agrees that the building requires significant repairs, but she argues that the applicant is obligated to make these repairs.
[62] It is evident from the record before me, including from looking at a number of photos filed by both sides, that the property is in a serious state of disrepair. In order to address this issue, it is necessary to review how it arose.
[63] As indicated above, Ms. Yu brought an application to the Landlord and Tenant Board, seeking reimbursement for the cost of some repairs she had made to the building. In addition to this step, in 2017, Ms. Yu contacted the City of Toronto Department of Property standard about the state of the building, on the assumption that the applicant was responsible for making repairs.
[64] The City conducted an inspection, and, on February 2018, it made an order finding a number of violations of Municipal Code property standards. The order was made against Ms. Tauro, as the owner of the property. The City found 24 violations throughout the building, including such things as holes in the walls, water damage in the basement, and leaks in the plumbing.
[65] Following receipt of the order, the applicant obtained an estimate for the cost of making the repairs. The estimate is for $22,600, inclusive of HST. The estimate does not break down the cost of repairing the various deficiencies listed in the City's Order.
[66] The applicant claims that Ms. Yu is in default of her obligations under the lease which she claims require the tenant to make all the repairs. Ms. Yu claims that the repairs to the second floor are the applicant's responsibility because it is a residential unit, and that, in any event, the defects identified by the City were already there in 2008 when she took over the convenience store from the previous owner.
[67] The applicant relies on the lease to argue that Ms. Yu is responsible for all repairs. In addition, the applicant's daughter in one of her affidavits states that, when the lease was signed in 2015, there was a small reduction in rent to account for the fact that Ms. Yu had agreed to make needed repairs to the building. She also says that the damage to the building has happened over the course of Ms. Yu's tenancy since 2008.
[68] Given my finding that the whole building is exempt from the Residential Tenancies Act, 2006, the respondents cannot rely on that statute to impose repair obligations on the landlord for the second floor defects in the building.
[69] Therefore, in deciding who is responsible for the repairs, it is necessary to turn to the wording of the lease, which, as referred to above, requires the tenant to "make, at the Tenant's expense, all necessary repairs to the Leased Premises. Repairs shall include such items as repairs of floors, walls, ceilings and other parts of the Leased [sic]."
[70] The Premises are defined very broadly in the lease as including the "Lands, the Existing Improvements, the Additional Improvements and the Leasehold Improvements municipally known as 54 Peterborough Ave Toronto, ON".
[71] The tenant's obligations to make repairs is therefore very broad. It appears to apply to all aspects of the building, and it does not appear to include any temporal limitations such that prior defects would be excluded from the tenant's obligation to make repairs. In any event, the respondents have been occupying the building for ten years, and, at the time the lease was signed, they had already been occupying the building for seven years. It is hard to believe that the defects identified by the City were all in place in 2008. In fact, on Ms. Yu's own admission in one of her affidavits, many of the defects have gotten worse since she and her husband took over the lease, including water damage from leaks in the basement and from the roof has increased over the years. Given that the lease was signed in 2015 and that it provided that the tenant was to make “all necessary” repairs, it is clear that what was intended was that Ms. Yu would make repairs to the existing and future damage to the property.
[72] Accordingly, I find that Ms. Yu has an obligation under the lease to make repairs to the premises. Having said that, given that the applicant only recently took the position that the second floor apartment is not covered by the Residential Tenancies Act, 2006, and because the record does not appear to contain a formal notice to Ms. Yu requiring her to make the repairs within 30 days, I am not prepared to find that Ms. Yu is in default in this respect.
[73] However, this finding does not excuse Ms. Yu from meeting her obligation to make necessary repairs. Rather, in my view, it cannot form the basis for a finding that Ms. Yu is in default under the lease for the purpose of determining whether the applicant has a right to terminate the lease in this case.
Issue 3 - Remedy
[74] The applicant seeks to terminate the lease based on Ms. Yu's defaults under the lease. As indicated above, I have found that Ms. Yu is in default for failing to pay rent from March to May, 2018, for failing to maintain insurance on the property and for renting rooms to third parties in the second floor apartment.
[75] Section 20(1) of the Commercial Tenancies Act gives the Court broad powers to relieve a defaulting tenant from re-entry or forfeiture:
Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rent or for other cause, the lessee may, in the lessor's action, if any, or if there is no such action pending, then in an action or application in the Superior Court of Justice brought by the lessee, apply to the court for relief, and the court may grant such relief as, having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.
[76] In this case, while Ms. Yu's breaches are serious and not isolated, there are a number of factors that lead me to conclude that this is an appropriate case for relief under section 20(1) of the Commercial Tenancies Act.
[77] First, until August 17, 2018, which is less than two weeks before the hearing of the application, when the applicant amended her notice of application yet again to a declaration that the Residential Tenancies Act, 2006, does not apply, the parties have proceeded under the assumption that the residential portion of the property was subject to the protections offered by that statute. Until the issue was raised before me and addressed in this decision, there has been some uncertainty regarding Ms. Yu's rights and obligations as they relate to that portion of the property. Terminating the lease immediately in circumstances where the respondents live in the building and have been under the impression that they were entitled to the protection of the Residential Tenancies Act, 2006, seems especially harsh and unjust.
[78] Second, Ms. Tauro's hands are not entirely clean. She has been aware of the Board's order requiring her to pay $2,050.00 for some time, and certainly before her lawyer has taken the position that the Board did not have jurisdiction over the matter. Yet, she has not paid this amount to Ms. Yu nor has she taken steps to appeal the decision or set it aside.
[79] Third, Ms. Tauro has refused to cash the cheques provided by Ms. Yu for the months of June to July, 2018, thereby preventing Ms. Yu from at least partially curing some of the defaults identified in support of this application.
[80] Having said that, I wish to emphasize that Ms. Yu's breaches are not insignificant. In particular, the failure to maintain insurance on the property is especially serious. In fact, section 20(8) of the Commercial Tenancies Act explicitly provides that the Court does not have the power to relieve a commercial tenant from an obligation to maintain insurance:
Where the right of re-entry or forfeiture is in respect of a breach of a covenant or condition to insure, relief shall not be granted if at the time of the application for relief there is not an insurance on foot in conformity with the covenant or condition to insure except, in addition to any other terms that the court may impose, upon the term that the insurance is effected.
[81] Accordingly, I am going to exercise my power under section 20(1) of the Commercial Tenancies Act to relieve the respondents from termination of the lease and re-entry by the applicant. However, in doing so, I am also going to use my broad powers to impose terms that I see as just and appropriate in this case. In particular, the conditions imposed on this relief are meant to give Ms. Yu an opportunity to comply with her obligations under the lease, while giving the applicant the ability to terminate the lease if she fails to do so.
[82] Accordingly, in order to avoid the termination of the lease, the respondents must comply with the following conditions:
a. Ms. Yu must provide proof of insurance to Ms. Tauro’s lawyer by no later than December 31, 2018; b. All rent arrears must be paid in full by no later than December 31, 2018; c. All outstanding property taxes must be paid in full by no later than December 31, 2018; d. The respondents are to stop renting out rooms in their apartment, and ensure that all rooms are free of renters by no later than December 31, 2018; and e. Ms. Yu is to make the necessary repairs or reimburse the applicant for the cost of making repairs required to comply with the City's Order by no later than January 31, 2019.
[83] If the respondents fail to comply with these conditions, the applicant may give the respondents thirty days' notice to vacate the premises and/or apply to this Court for further relief in respect of the respondents' non-compliance with this order or defaults under the lease.
Conclusion
[84] For the reasons above, the application is granted and the following orders are made:
a. A declaration that that the tenancy at 54 Peterborough Avenue, Toronto, is subject to a commercial lease, and that it is exempt from the Residential Tenancies Act, 2006, in accordance with section 5(j) of that Act; b. A declaration that Ms. Yu is in default of her obligations under the lease, but that she is relieved from the applicant's right of re-entry under the lease on the following conditions: i. Ms. Yu must provide proof of insurance to Ms. Tauro’s lawyer by no later than December 31, 2018; ii. All rent arrears must be paid in full by no later than December 31, 2018; iii. All outstanding property taxes must be paid in full by no later December 31, 2018; iv. The respondents are to stop renting out rooms in their apartment, and ensure that all rooms are free of renters by no later than December 31, 2018; and v. Ms. Yu is to make the necessary repairs or reimburse the applicant for the cost of making repairs required to comply with the City's Order by no later than January 31, 2019, failing which the applicant may terminate the lease on thirty days' notice and/or apply to the Court for further relief.
[85] At the conclusion of the hearing, the applicant sought $10,000 in costs for the application. In my view, this is a case in which it is appropriate to make an order that no costs are payable. Again, a central issue in this case is the application of the Residential Tenancies Act, 2006. The issue was only raised two weeks before the hearing. Up to that point, all parties had proceeded on the assumption that the Act applied to the residential portion of the building, and this assumption informed many, albeit not all, of the respondents' conduct. In addition, the applicant chose to ignore the Board's Order. Finally, while the applicant was partially successful, with my determination that this is an appropriate case for relief from re-entry, she has not obtained the ultimate relief she is seeking. In all of the circumstances, I find that no costs are appropriate in this case.
[86] The applicant is relieved from the requirement to obtain the respondents' approval on the form of the Order to be taken out. A draft order can be sent to my attention through my assistant, with a copy to the respondents, after which I will sign the order.
FAVREAU J.
