Court File and Parties
DIVISIONAL COURT FILE NO.: 04-012390-00 DATE: 20070523
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
CUNNINGHAM A.C.J., CARNWATH and CUMMING JJ.
B E T W E E N:
1086891 ONTARIO INC.
Tom Halinski, for the Landlord (Respondent in Appeal)
Landlord (Respondent in Appeal)
- and -
JOE BARBER
Timothy O’Driscoll, for the Tenant/Appellant
Tenant (Appellant)
HEARD: January 17, 2007
Judgment
CUNNINGHAM A.C.J. & CARNWATH J.:
[1] Mr. Barber appeals from a decision of the Ontario Rental Housing Tribunal (“Tribunal”) dated November 9, 2004. The Tribunal found that he was in arrears of rent as of the date of the hearing, October 8, 2004. He asks for an order dismissing the landlord’s application to terminate, a declaration that the applicable rent throughout the duration of the tenancy agreement should remain as it was as of April, 2004 and costs on a substantial indemnity basis.
[2] Mr. Barber had been a long-term tenant of the respondent. The Tribunal found as follows:
In 2002, he received a notice of rent increase effective May, 2002;
After discussions with a property manager, the tenant received a letter dated February 11, 2002 stating that the increase for one year, effective May 1, 2002 must stand;
However, in that same letter, the property manager stated that as of May, 2003, Mr. Barber would have reached his previously-approved rent increase and that after May 2003, the ‘rent would be frozen at that amount until you choose to vacate your unit’;
That on the basis of this agreement, the tenant elected to continue his tenancy.
[3] The Tribunal found that the so-called agreement was unenforceable under s. 2(1) of the Tenant Protection Act (“TPA”) which states:
2(1) This Act applies with respect to rental units in residential complexes despite any other Act, and despite any agreement or waiver to the contrary.
[4] As to the appellant’s argument that the doctrine of estoppel should apply to the agreement, the Tribunal found that although the criteria were met, s. 2(1) of the TPA would stand and could not be overridden by estoppel.
[5] As a result, the Tribunal ordered the tenancy terminated, pursuant to the landlord’s application, and the appellant tenant was ordered to pay arrears.
[6] Seppi J. ordered that the following issues be submitted to the Divisional Court:
whether an agreement that the rents payable under a residential tenancy will not increase for the duration of such tenancy is unenforceable under the TPA, s. 2(1); and
whether the doctrine of estoppel can be applied to a residential tenancy, notwithstanding s. 2(1) of the TPA.
[7] Given that decisions of the Tribunal may only be appealed on a question of law, the standard of review is correctness.
[8] The appellant argues that the letter from the property manager is a private agreement and is not unenforceable under the provisions of s. 2(1) of the TPA because it is not “contrary” to the provisions of the Act. The appellant submits that the word “contrary” should be interpreted according to its ordinary meaning within the broader context of legislative intention, the object of the Act and the scheme of the legislation. If so interpreted, the private rent control agreement is not at odds with the TPA. The appellant further submits that the rent increase guidelines as set out in s. 126(1) would not be inconsistent with a private agreement to maintain a particular level of rent.
[9] The respondent disagrees. Section 2(1) specifically prohibits landlords and tenants from entering into agreements which have the effect of waiving rights under the TPA. The respondent says the TPA was enacted to protect the rights of both landlords and tenants and indeed to set out their respective obligations, no component of this core may be removed either accidentally or deliberately. The sole exception to this principle is set out in ss. 181(2) which permits an agreement mediated by the Ontario Rental Housing Tribunal to depart from the provisions of the TPA.
[10] Subsection 2(1) of the TPA has, in a number of cases, been interpreted as preventing both landlords and tenants from agreeing to forego or from waiving the statutory provisions of the Act, even where the benefit is for the tenant.
[11] In Crown Trust Co. v. Rosenberg, [1986] O.J. No. 2683, Galligan J. was invited to find that the words “to the contrary” had the meaning submitted to us by counsel for Mr. Barber. He was dealing with two Acts, each of which contained the words “despite any agreement or waiver to the contrary”, the exact provisions of s. 2(1) of the TPA.
[12] In Crown Trust Co. v. Rosenberg, above, at para. [11], Galligan J. is reported as follows:
In attractive and sophisticated arguments, counsel for the landlord contended that the words ‘to the contrary’ in these sections referred to the mischief which the legislation was intended to redress. They contended that the mischief intended to be redressed by both pieces of legislation was the perceived inequality of bargaining power between tenants and landlords. Thus they contended that the parties could effectively agree to terms, which, so long as they increased tenants’ rights, or at least did not impinge upon tenants’ rights, would not be an agreement or waiver to the contrary, as contemplated by s. 82(1).
[13] After reviewing some English jurisprudence on the subject, Galligan J. is further reported at paras. [14], [15] and [16], as follows:
[14] It is my opinion however, that there is no ambiguity in the provisions of ss. 82(1) and 2(1) of the Acts which would entitle me to engage in the exercise of searching out the mischief addressed by the Legislature when it enacted the two pieces of legislation. Indeed the proposition advanced on the landlord’s behalf, when followed to its logical conclusion, proposes that I should rewrite the sections so that they read that the legislative provisions are to apply notwithstanding any agreement or waiver to the contrary, entered into by the tenant. In my opinion, I can do no such thing.
[15] I am unable to find anything in either Act that would lead me to think that a landlord can bargain away his statutory rights, but that a tenant cannot. It is interesting to compare ss. 126 and 127 of the Residential Tenancies Act, because very similar language is found in both of them. Section 126 says that where a landlord desires to increase the rent permitted under the statute he may make an application for certain relief. Section 127 says that a tenant who desires to dispute any intended rent increase, may make an application for relief. I don’t think that anyone would suggest that an agreement by a tenant to forgo [sic] his s. 127 rights for a given period of time would be enforceable in the light of s. 2(1) of the Act. I am quite unable to conceive how the rights given to the landlord in the preceding section in very similar language could be treated differently.
[16] I have come to the conclusion that the words ‘to the contrary’, when used in the two sections, do not refer to the mischief sought to be redressed by the Legislature, but refer to the application of the legislation. Thus an agreement to the contrary cannot affect the application of Pt. IV of the Landlord and Tenant Act or the application of the Residential Tenancies Act.
[14] Galligan J. concluded by observing in para. [19]:
…While a failure to abide by the terms of the proposed agreements might well be regarded with disfavour, I am of the opinion that to the extent that they conflict with, restrict, waive or modify the provisions of the Residential Tenancies Act, they are legally unenforceable.
[15] In Pallagrosi v. Hrynyk, [1944] O.J. No. 1812, J. Jenkins J. came to the same conclusion as Galligan J. Despite a contractual arrangement benefitting the tenant, J. Jenkins J. found that the clear intention of the Legislature was to prevent landlords and tenants from contracting out of the provisions of the Rent Control Act, 1992, because of the public policy component in that Act.
[16] Killeen J. came to a similar conclusion in Pinheiro v. Bowes, [1994] O.J. No. 115. He expressed “some discomfiture” at permitting a landlord to rely on the statutorily-created invalidation of that landlord’s own lease proviso, but concluded his decision as follows:
[13] Judges must accept statutes as they find them if they are clear and unambiguous and catch the factual situation under consideration.
[14] In my view, while s. 99 was largely created to protect tenants, it cannot be said to be contrary to public policy to enforce it in favour of a landlord. Section 99 provides a broadly-gauged protective rule for landlord-tenant relationships and must be enforced as it plainly reads and provides. On its face, it invalidates the lease proviso in issue and makes the tenant liable for one month’s additional rent.
[17] In the present case, the effect of the so-called agreement on which the tenant seeks to rely would be to forever prohibit the landlord from exercising his right to a rent increase as long as the tenant remained in possession. Because the so-called agreement would amount to a contracting out of the landlord’s right to increase rent in accordance with the TPA, it runs afoul of ss. 2(1) of the statute. While there is provision in the TPA permitting landlords and tenants to negotiate increases and decreases in specific circumstances, none of those circumstances apply here and indeed no provision of the TPA permits a “rent free” agreement.
[18] The policy rationale behind ss. 2(1) is to treat tenants and landlords equally. The subsection is designed to prevent parties from bargaining away or waiving their statutory rights no matter what the circumstances. Both Crown Trust Co. v. Rosenberg and Pinheiro v. Bowes found that the provision was meant to operate as a blanket prohibition. To permit a departure would create a significant loophole which could dramatically impair the entire scheme of the Act.
[19] The appellant submitted the landlord was estopped from resiling from its bargain. Estoppel cannot override statute (see Harzuz Holdings Ltd. v. Peel (Regional Municipality), [2006] O.J. No. 1830). There is no need for the subsection to make specific reference to the doctrine of estoppel. In any event, it would be illogical to conclude that, although the TPA prohibits in very clear terms any agreement to the contrary or waiver of rights, it leaves open to the parties to accomplish the same thing through the doctrine of estoppel. In any event, the Tribunal does not have the jurisdiction to apply the principle of estoppel in the absence of specific statutory authority (see Klymko v. Lem, [2001] O.J. No. 156).
[20] Accordingly, the appeal is dismissed, but under the circumstances, there shall be no order as to costs.
CUNNINGHAM A.C.J.
CARNWATH J.
CUMMING J.: (Dissenting)
[21] I would allow the appeal. I differ, with respect, with the majority opinion of the panel, and the Tribunal, in their conclusion that s. 2(1) of the Tenant Protection Act renders the tenancy agreement at hand unenforceable.
[22] The issue is whether a tenancy agreement by which the landlord has agreed to freeze the rent is unenforceable. Section 2(1) provides:
This Act applies with respect to rental units in residential complexes despite any other Act and despite any agreement or waiver to the contrary.
[23] There is common ground that the TPA applies to the subject tenancy agreement and the agreement cannot be contrary to the TPA or the agreement is rendered unenforceable.
[24] The policy underlying the enactment of the TPA and its predecessor legislation seems straightforward. People have an essential need for housing/shelter. Hence, there is relatively inelastic demand for housing, including rental housing. If there is short supply and a tight rental housing market, landlords will be able to raise the price for rental housing significantly.
[25] Given this societal concern, the TPA was enacted to protect the rights of both landlords and tenants and set forth their respective obligations in ensuring this protection. (It is noted incidentally as an aside that many economists would assert that the problem of short supply is exacerbated by rent controls.) Section 2(1) disallows any contracting out of the rights afforded by the TPA or of the obligations imposed by the TPA to protect those rights.
[26] The TPA clearly imposes limits upon rent increases. However, the essential question for the unusual instant situation is – does any provision of the TPA state that a landlord and tenant cannot freely agree to a lesser rent than the landlord would otherwise be entitled to bargain for within the circumscribed limits to rent imposed by the TPA?
[27] Section 126(1) of the TPA provides:
A landlord who is lawfully entitled to increase the rent charged to a tenant for a rental unit may do so only if at least 12 months have elapsed,…[emphasis added]
[28] A landlord would not be “lawfully entitled” to increase the rent if either the TPA prohibited such increase or if the lease contract, i.e., tenancy agreement, itself so prohibited, as in the case at hand.
[29] Persons have the freedom to contract, i.e., the right to private-law making through enforceable contracts, unless and until that freedom is circumscribed by public statute.
[30] I do not find any provision in the TPA which mandates that the landlord has a statutory “right” to increase the rent in contradiction of a freely-negotiated tenancy agreement which fixes indefinitely a frozen rent. In particular, I do not read those sections of the TPA under the heading “General Rules Concerning Amount of Rent Charged”, being ss. 121-129, or under the heading “Agreements to Increase, Decrease Rent”, being ss. 130-134, as limiting the freedom of the landlord and tenant to freeze the rent so long as that fixed rent is itself in the first instance within the circumscribed quantitative limit imposed by the TPA. (I note that s. 135 – inapplicable to the tenancy agreement under consideration – as a transitional provision permits a limited increase to rent for the purpose of determining the “maximum rent” for those tenancy agreements moving from being under the previous Rent Control Act, 1992 to being under the ambit of the TPA).
[31] I appreciate that the case law under predecessor legislation (cited by my colleagues on the panel) interpreted that legislation (with provisions similar to those under present consideration in respect of the TPA) with the conclusion that a tenancy agreement freezing the rent like that seen in the instant situation was contrary to the legislation and hence, unenforceable. I have given my reasons for my decision. To the extent that the earlier cited case law did not deal with the TPA I do not consider myself bound even though arguably those decisions dealt with the same substantive issue under the predecessor legislation.
[32] The decision of the Divisional Court in Putnam v. Grand River Conservation Authority, [2006] O.J. No. 2217 (Div. Ct.) did deal with the TPA. The Court stated at para. 29 “[t]he courts have prohibited contracting out even if it is for the benefit of the tenant”, noting with approval the Crown Trust Co. v. Rosenberg, [1986] O.J. No. 2683 (H.C.J.) and Pallagrossi v. Hrynyk, [1994] O.J. No. 1812 (Gen. Div.) cases. However, Putnam dealt with a factual situation other than a frozen rent. Hence, I do not consider that case to be binding precedent governing the case at hand.
[33] I conclude with the following observation. It would not seem uncommon in a period when the vacancy rate for residential rental housing is significant (given increased supply) for landlords and tenants in the competitive marketplace to negotiate and agree upon increases of rent on lease renewals that are less than the maximum rent allowed under the TPA. In my view, it would be contrary to the TPA, its underlying policy, and the reality in practice, to conclude that a landlord would have the statutory “right” (because of s. 2(1)) to later renege upon this agreed-upon rent (if the market later changed such that a higher rent- up to the maximum rent allowed under the TPA-could now be obtained from a prospective new tenant) within the still continuing renewal term at the agreed-upon fixed rent.
CUMMING J.
Released: 20070523
DIVISIONAL COURT FILE NO.: 04-012390-00
DATE: 20070523
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
CUNNINGHAM A.C.J., CARNWATH and CUMMING JJ.
B E T W E E N:
1086891 ONTARIO INC. Landlord (Respondent in Appeal)
- and –
JOE BARBER Tenant (Appellant)
JUDGMENT
Released: 20070523