CITATION: Sterling Studio Lofts Incorporated v. Clayton Stel, 2019 ONSC 91
DIVISIONAL COURT FILE NO.: 265/17; 266/17; 267/17; 286/17; 287/17; 288/17; 289/17; 290/17
DATE: 2019-01-08
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO, ACJ, MORAWETZ, RSJ, and GORDON, RSJ
BETWEEN:
STERLING STUDIO LOFTS INCORPORATED
Landlord (Appellant)
– and –
CLAYTON STEL, KIMERLY LEMOS, DONNA PILEGGI, JOSH KEREKES, ALEXIS MILLER FABREGAT, BRITTANY NABOUS, ANGOLA MURDOCH, EAMON MacMAHON, DAVID GAVAN BAXTER and EVA NYNKOWSKI
Tenants (Respondents)
Shawna Sosnovich, for the Landlord/Appellant
Eli Fellman, for the Landlord and Tenant Board
David S. Strashin, for the Tenants (Respondents)
HEARD: October 24, 2018
Morawetz, RSJ
Nature of Proceedings
[1] The Appellant appeals from the orders of Member Savoie of the Landlord and Tenant Board (“LTB”) dated April 18, 27 and 28, 2017 finding that the Residential Tenancies Act, 2006, S.O. 2006, c. 17. (“RTA”) applies to the tenancy of the Respondents at various units at 221, 225, and 227 Sterling Road, Toronto (the “Rental Units”). The Appellant argues that the lease agreement between the respective parties was, at all material times, a wholly commercial lease in form and substance. The Appellant requests that Member Savoie’s orders be set aside and this Court order that the RTA does not apply to the Rental Units. In the alternative, the Appellant requests that the matters be remitted to the LTB for a de novo hearing.
[2] Nine similar applications to the LTB had initially been consolidated. By Order dated October 4, 2017, Perell J. ordered that all but one of the Appellant’s appeals (Div Ct File Nos. 265/17, 266/17, 267/17, 286/17, 287/17, 288/17, 289/17, 290/17) be heard together and immediately after hearing the Firm Capital Management and Sterling Studio Lofts Inc. v Heather Tessier appeal (Div Ct File No. 193/17) (the “Tessier Appeal”), which was to be heard separately.
[3] Reasons for judgment in the Tessier Appeal, 2019 ONSC 55 are being released concurrently with these reasons.
[4] The Appellant is the landlord of the property at 221, 225, and 227 Sterling Road. Each of the Respondents entered into a written lease agreement with the Appellant for different rental units at the property. At the time their applications were filed, the Respondents had been tenants at the respective units between several months and 15 years. Aside from Ms. Pileggi who filed her application on December 9, 2015, all of the Respondents filed their applications on February 18, 2016. Each of the leases that were signed by the Respondents are specified as a “Commercial Lease”, with Ms. Pileggi, Ms. Murdoch, Mr. Stel, Mr. Kerekes, and Ms. Lemos personally named as the tenants. Mr. Kerekes entered into the lease as operating under the name “Josh Kerekes Productions”, but was also named as a guarantor/indemnifier. Ms. Nynkowski, Mr. Baxter, and Mss. Fabregat and Nahous were guarantors/indemnifiers of the leases entered into by corporate entities.
[5] Each lease contains a version of the following provisions:
(a) The premises shall not be used for any purposes other than [a] studio without the express consent of the Landlord given in writing.
(b) The Landlord shall, in the event of an act of default, have the right to terminate the Lease and to re-enter the Premises and deal with them as the Landlord may choose (the “Termination and Re-Entry Clause”).
(c) If, when an Act of Default has occurred, the Landlord chooses to waive his right to exercise the remedies available to him under this Lease or at law the waiver shall not constitute condonation of the Act of Default, nor shall the waiver be pleaded as an estoppel against the Landlord to prevent his exercising his remedies with respect to a subsequent Act of Default. No covenant, term, or condition of this Lease shall be deemed to have been waived by the Landlord unless the waiver is in writing and signed by the Landlord (the “No Waiver of Default Clause”).
(d) No one shall use the Premises for sleeping apartments or residential purposes, for the storage of personal effects or articles other than those required for business purposes, or for any illegal purpose.
[6] Later leases also contain versions of the following provisions:
(a) The Premises shall be continuously and actively used and occupied only for the purpose of commercial studio space, and for no other purpose whatsoever… Tenant shall not use or permit to be used the Premises for residential purposes as defined in the applicable zoning by-law or, [or[ any future replacement Act (s) in the Landlord and Tenant Act, the Residential Tenancies Act, or the Rental Housing Protection Act. (emphasis in original)
(b) Entire Agreement: Tenant agrees that, if it has been in occupancy of the Premises prior to the execution of this Lease, this Lease supercedes any other tenancy, agreement, arrangement or understanding relating to the Premises and the Building, and hereby creates a new tenancy between Landlord and Tenant. Tenant acknowledges that there are no representations, warranties, agreements or conditions, express or implied, collateral or otherwise, forming part of or in any way relating to this Lease save as expressly set out in this Lease, and that this Lease constitutes the entire agreement between Landlord and Tenant with respect to the Premises. No amendment, alteration or addition to this Lease shall be binding on Landlord or Tenant unless it is in writing and signed by both parties (the “Entire Agreement Clause”).
[7] In addition, five of the Respondents obtained business licenses and four were paying HST to the Appellant. Mr. Baxter and Mss. Fabregat and Nahous also provided a credit approval form to the Appellant that indicated commercial use of the rental unit. As well, Ms. Fabregat and Ms. Nahous signed a Commercial Lease Renewal Agreement. Member Savoie also found that Mss. Fabregat and Nahous, Ms. Murdoch & Mr. MacMahon, Mr. Baxter, and Ms. Nynkowski used the Rental Units for commercial purposes.
LTB Decisions
[8] The reasoning in each of Member Savoie’s decisions is largely the same. He begins by noting the zoning history of the property:
… the complex was constructed as a commercial complex and was originally zoned for industrial and commercial use. In the 1990’s some of the buildings that form the complex were converted to live/work units without building permits or zoning approvals from the City. The previous landlord obtained a minor variance from the Committee of Adjustments to permit sixty live/work units. In 2003, the property was rezoned permitting residential use and continuing the pre-existing industrial and commercial uses.
[9] At the hearings the Respondents provided evidence that various superintendents over the years had been aware that the Respondents intended to use, and indeed did use, the Rental Units for residential purposes. Several of the Respondents testified that they were assured by the superintendent that their residential use of the Rental Units would not be an issue and that the signing the commercial lease agreement was a mere formality. This was confirmed by Mr. Chris Medeiros, who had worked as a superintendent of the property for approximately eight years.
[10] The Landlord’s position at the hearing was that it is clear from the leases that the intention of the parties that the sole purpose of the tenancies was for commercial uses. Mr. Scott Singer, the current manager of the property, was a witness for the Landlord at the hearing and testified that he had no personal knowledge of discussions and representations made by previous superintendents to the Respondents.
[11] Member Savoie considered the following sections of the RTA in his decisions:
2(1) In this Act,
“rental unit”/[”residential unit”] means any living accommodation used or intended for use as rented residential premises,
“tenancy agreement” means a written, oral or implied agreement between a tenant and a landlord for occupancy of a rental unit and includes a licence to occupy a rental unit
- 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;
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.
[12] Member Savoie concluded that the signing of a commercial lease agreement was not determinative of the mutual intentions of the parties at the commencement of the tenancies. He was satisfied that the Appellant’s authorized representatives (superintendents) had made representations to the Respondents that residential use of the Rental Units was their mutual intention in signing the lease. As well, having regard to the case law on s. 5(j) in Fiset v Di Geso, 1998 CarswellOnt 3401 and Hahn v Kramer, 1979 CarswellOnt 1360, he determined that the onus was on the Appellant to prove that the Rental Units were exempted from the application of the RTA by showing that the predominant purpose of the tenancies was commercial. Member Savoie concluded that the predominant purpose test had not been met, and therefore the Rental Units did not fall within the exception laid out in s. 5(j). Accordingly, Member Savoie determined that the RTA does not apply to the Rental Units.
Issues
[13] The Appellant submits that the sole issue to be determined in each of these appeals is whether the Member erred in law in finding that the RTA applies to the Rental Units.
Jurisdiction
[14] The Court has jurisdiction to hear this appeal under s. 210(1) of the RTA which reads, “Any person affected by an order of the Board may appeal the order to the Divisional Court within 30 days after being given the order, but only on a question of law.”
Standard of Review
[15] The Appellants submit that this appeal raises an issue of central importance to the legal system and outside the adjudicator’s specialized area of expertise, therefore demanding a correctness standard. The Appellants argue the issue at the core of this appeal relates to interpreting leases and contracts, which is of central importance to the legal system and the LTB may not have expertise in contract law. The Appellants rely on Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 62 and Onyskiw v. CJM Property Management Ltd., 2016 ONCA 477, 132 O.R. (3d) 295, at paras. 28-29.
[16] The LTB submits that the issues on appeal should be reviewed on a standard of reasonableness, with deference to be afforded to the LTB due to its expertise in adjudicating residential tenancy disputes. The LTB submits that at issue is whether the RTA applies to the Rental Unit, which involves interpreting the LTB’s home statute and falls squarely with the LTB’s specific expertise
[17] The LTB submits that Member Savoie appropriately considered all of the evidence and applied s. 202 of the RTA, as mandated and deference should be afforded to the LTB’s determination.
Position of the Parties
- Did the Member err in law in finding that the RTA applies to the Rental Units?
[18] The Appellant submits that the LTB failed to properly apply principles of contract interpretation in assessing the lease agreement. The Appellant argues that at the time of signing the lease, the parties had turned their minds to a commercial tenancy, evidenced by the signing of the lease which is explicit as to the commercial nature of the tenancy. Thus, based on the principle in contract that one should “determine the intent of the parties and the scope of their understanding,” the Appellant argues that it is unreasonable and incorrect for the Member to have found that the intention of the parties was to enter into a residential tenancy agreement despite the written commercial lease agreement. The Appellant relies on Borg v. Borg, 2016 ONSC 526, at para. 17 to support its position.
[19] The Appellant further submits that the Member erred in law by allowing surrounding circumstances of the tenancy to overwhelm the written contract. The Appellant argues that the Member allowed the Respondents’ evidence that they did not use the Rental Units for commercial purposes, or only part of the Rental Units for commercial purposes, to overwhelm the other highly relevant circumstances that demonstrated a commercial tenancy.
[20] The Appellant submits that Member Savoie erred in applying the predominant purpose test from s. 5(j) of the RTA. The Appellant’s position at the hearing was that the tenancies were wholly commercial and not that they fell within the exception in s. 5(j).
[21] The Appellant argues that the Member neglected the fact that the Respondents were required by their respective leases to only use the Rental Units for commercial purposes. As well, the Appellant notes that several of the leases contain unambiguous language that commercial tenancy legislation, not the RTA, applies; several of the Respondents did carry on business in the Rental Units; several Respondents obtained a business license and/or paid HST to the Appellant; several Respondents had been tenants for many years before bringing their applications; there is no evidence that the Respondents were under duress when they signed the leases; and several of the leases included acknowledgement by the Respondents that no other representations outside of the lease were made to them.
[22] The Appellant argues that the Respondents cannot unilaterally change the nature of the lease that they voluntarily signed. The Appellant relies on a previous decision from the LTB in Steele v. Sterling Studio Lofts Inc., TST-62470-15(LTB), January 18, 2016, involving a rental unit on the same property and with a similarly drafted lease agreement, in which it was decided that the rental unit was not subject to the RTA. In that case, Member Wronecki found that the lease the parties signed was explicitly commercial, and the LTB could not condone the illegality of the tenant using the space for residential purposes. Moreover, the Member found, “That the Tenant chose to live in the premises despite the agreement he solemnly entered into and was not challenged by the Landlord for a long period of time does not create an irreversible fait accompli.”
[23] The Appellant argues that Member Savoie erred in law by failing to give effect to overriding principles of contract interpretation, thereby completely nullifying the validly formed commercial lease agreement.
Analysis
[24] We disagree with the thrust of the submissions put forth by the Appellants and for the following reasons the appeal must be dismissed.
[25] The LTB has exclusive jurisdiction to hear and determine all applications under the RTA with respect to all matters in which jurisdiction is conferred on the LTB under the RTA (RTA, s. 168(2)).
[26] Further, the LTB has the authority to deal and determine all questions of law and fact with respect to all matters within its jurisdiction (RTA s. 174).
[27] The RTA applies to all “rental units” despite any term in a tenancy agreement that suggests otherwise. “Rental Unit” is defined in s. 2(1) of the RTA as “any living accommodation used or intended for use as rented residential premises.” The LTB has exclusive authority to determine whether a premise is a “rental unit” and hence subject to the RTA.
[28] In addition, any term in a tenancy agreement that is purported to exclude the application of the RTA is not determinative. Section 3(1) of the RTA provides:
Application of Act
3(1) This Act, except Part V.1, applies with respect to rental units in residential complexes, despite any other Act and despite any agreement or waiver to the contrary.
[29] In addition, s. 202 of the RTA also has application. In Matthews v. Algoma Timberlakes Corporation, 2010 ONCA 468, 102 O.R. (3d) 590, the Court of Appeal stated that s. 202 is to be applied when determining whether a unit is intended for use as a residential premises. At paragraph 24 the Court states:
Definition of a “Rental Unit” in s. 2(1) contained two components. First, the unit must be “living accommodation”. Second, it must be used or intended for use as “rented residential premises”. As I have indicated, s. 3(1) provides that the Act applies despite any term in the Lease to the contrary and s. 4 provides that “a provision in a tenancy agreement that is inconsistent with this Act or the regulations is void”. Section 2.2 requires the Board to “ascertain the real substance of the activity” relating to the rental unit and to do so disregarding “the outward form of [the] transaction”. Accordingly, a term in the Lease providing that a site is not residential nor a rental unit will not have the effect of avoiding the application of the Act, provided that the premises otherwise fit within the statutory definition of a “rental unit”.
[30] Accordingly, we are of the view that determinations respecting the application of the RTA falls squarely within the LTB’s area of expertise (RTA s. 2(1), s. 4(1) and s. 9): First Ontario Realty Corporation v. Deng, 2011 ONCA 54, 330 D.L.R. (4th) 461, at paras. 16-22; and Onyskiw, supra at paras. 29 and 31.
[31] In our view, the issue of whether or not the RTA applies to a given rental unit lies squarely within the expertise of the LTB and should be reviewed on a standard of reasonableness.
[32] The Appellants take issue with how the Member assessed the evidence. The Member found that various superintendents working for the Appellant over the years had been aware that the Respondents intended to use, and indeed did use, the Rental Units for residential purposes. The Member accepted the Respondent’s evidence that the parties agreed that the true nature of the tenancy was residential, and concluded that the RTA did apply to the Rental Unit.
[33] In our view, the foregoing are findings of fact or findings of mixed fact and law, which are not reviewable by this court because the Court’s jurisdiction is pursuant to section 210 of the RTA confined to questions of law.
[34] A correctness standard may apply in rare cases where the questions of law at issue are both of central importance to the legal system and outside the adjudicator’s specialized area of expertise. Yet, the issue in this case concerns the application of the RTA – the LTB’s home statute – and this determination, in our view, falls wholly within the LTB’s specialized expertise as the adjudicative tribunal explicitly mandated to adjudicate applications under the RTA.
[35] In accordance with s. 202, the terms of the agreement signed by the parties are not determinative with respect to the application of the RTA and, in our view, the LTB was entitled to find upon consideration of all the evidence that the true nature of the agreement was for use as a rented residential premise. To hold otherwise would result in a triumph of form over substance.
[36] In our view, the Member gave due consideration to each party’s position on the matter and the applicable jurisprudence, and came to a reasonable conclusion.
Conclusion
[37] In conclusion, we are of the view that the LTB was entitled to find the Rental Units were predominantly used by the Tenants for residential living, not business or commercial activities, and such findings of fact cannot be challenged in an appeal of an LTB order. The Appellants appeal seeks merely to interfere with the LTB’s fact finding and discretionary powers, both of which fall outside the scope of s. 210 of the RTA.
[38] In the result, the appeal is dismissed. By agreement of the parties, the costs of these appeals and the appeal in Firm Capital Management and Tessier, 2019 ONSC 55 are payable in the total amount of $8,000 inclusive, to all Respondents.
G.B. Morawetz, RSJ
I agree _______________________________
F.N. Marrocco, ACJ
I agree _______________________________
R.D. Gordon, RSJ
Released: January 8, 2019
CITATION: Sterling Studio Lofts Incorporated v. ClaytonStel, 2019 ONSC 91
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO, ACJ, GORDON, RSJ, MORAWETZ, RSJ.
BETWEEN:
STERLING STUDIO LOFTS INCORPORATED
Landlord (Appellant)
– and –
CLAYTON STEL, KIMERLY LEMOS, DONNA PILEGGI, JOSH KEREKES, ALEXIS MILLER FABREGAT, BRITTANY NABOUS, ANGOLA MURDOCH, EAMON MacMAHON, DAVID GAVAN BAXTER and EVA NYNKOWSKI
Tenants (Respondents)
REASONS FOR JUDGMENT
MORAWETZ, RSJ
Released: January 8, 2019