COURT FILE NO.: CV-22-00000086-0000 DATE: 2023-08-02

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2629812 Ontario Ltd. Applicant – and – Beverley Marion Cameron aka Beverly Cameron and Thomas Mullen Respondents

COUNSEL: Natalie Kuehn, for the Applicant No one appearing for the Respondent Beverly Cameron Rolf Piehler, for the Respondent Thomas Mullen

HEARD: June 27, 2023

REASONS FOR JUDGMENT

Justice S.K. Stothart

Overview

[1] The applicant, 2629812 Ontario Ltd (“812”) brings this application seeking judgment against the respondent, Beverley Marion Cameron aka Beverly Cameron in the amount of $340,905.77, plus pre and post judgment interest, in accordance with the terms of a mortgage related to 5 Windmill Lane, Byng Inlet, Ontario the (“subject property”). The applicant also seeks an order for vacant possession of the subject property.

[2] The respondent, Beverly Cameron, has vacated the subject property, has not opposed this application, and did not appear at the hearing.

[3] The respondent, Thomas Mullen (“Mullen”) is opposed to the application for vacant possession. He takes the position that he is a tenant of a portion of the subject property, specifically Lot 6. As such, pursuant to the Mortgages Act, R.S.O. 1990, c.M.40, the applicants are required to proceed under the Residential Tenancies Act, 2006 S.O. 2006 c.17 in order to obtain vacant possession of the subject property.

Factual Background

The Mortgage

[4] The respondent, Beverly Cameron, is the registered owner of the subject property which is legally described as PT BLK B ON BYNG INLET WALLBRIDGE PT 2,4,5,6,7 AND 10 42R17227;S/T RO204981, RO204982, RO204983 AND RO204984; DISTRICT OF PARRY SOUND. It is municipally known as 5 Windmill Lane, Byng Inlet, Ontario. The subject property is described as waterfront property that has a frontage of about 233 feet and a depth of approximately 7.82 acres

[5] On October 29, 2018, a mortgage was registered on the subject property to secure a $235,000 loan from the applicant, 812. This mortgage was registered against the subject property in the Land Registry Office of Parry Sound as Instrument number 161951. The parties to the mortgage were 812 as Mortgagee, Beverly Cameron as mortgagor and John Cameron as guarantor.

[6] Pursuant to the mortgage, monthly payments of $1,400 were to be made on the 26th day of each month, commencing November 26, 2018, up to and including October 26, 2019. Interest was to be calculated semi-annually at a rate of 11.5718836%.

[7] When the mortgage matured on October 26, 2019, monthly payments continued to be paid until the death of John Cameron in August 2021. When John died, Beverly could not keep up with the mortgage payments and the mortgage fell into default in August 2021.

[8] No payments have been made on the mortgage since it went into default and the amount owing under the mortgage for the principal, interest and legal costs is $340,905.77 as of November 8, 2022.

[9] The terms of the mortgage provided that if the Mortgagor sold, transferred, disposed of, leased, or otherwise dealt with the subject property, the mortgage would become immediately due and payable at the option of the mortgagee.

The Land Lease with Option to Purchase Agreement

[10] In the summer of 2018, Mullen observed a “Land for Sale” sign while visiting Ron Abbott who had purchased a lot from the Cameron’s. At the time, Mullen walked around the property with John Cameron and took photographs of Lot 6, which was the land the Cameron’s were selling.

[11] I am satisfied that Lot 6, refers to Part 6 of the subject property. For the purposes of this decision, I will continue to refer to it as Lot 6.

[12] In early January 2019, Mullen approached the Cameron’s to discuss purchasing Lot 6. The Cameron’s told him that Lot 6 had not yet been severed and suggested that they set up a land lease agreement with an option to purchase when the lot was severed. The Cameron’s told Mullen they planned to complete the severance by widening Part 10 and that they were working on this with the township.

[13] The Cameron’s suggested that Mullen have a lawyer draft up an agreement. Mullen retained a law firm in Newmarket to prepare the “Agreement to Lease” and “Option to Purchase” contract documents.

[14] On February 8, 2019, Mullen met with the Cameron’s and the documents were signed by the parties and witnessed. According to Mullen, he understood that the Cameron’s “sold him” the land for $35,000.

[15] The documents signed by the parties were an “Agreement to Lease - Form 400” and an “Option to Purchase Agreement - Form 103”, copies of which were attached to the affidavit of Lin Cameron, sworn November 29, 2022, filed as part of this application.

[16] Both documents refer to the subject property as “5 Windmill Land” in “Bing Inlet”. I am satisfied that this was a typographical error and that the property referred to in these documents is actually “5 Windmill Lane” in “Byng Inlet”.

[17] The Agreement to Lease provided that Mullen agreed to lease “5 Windmill Land, Bing Inlet, Parry Sound” for a period of 20 years commencing January 11, 2018. The Respondent agreed to pay a monthly rent in the amount of $145.83.

[18] The standard/pre-printed terms of the “Agreement to Lease” included the following provisions:

12. EXECUTION OF LEASE: The Lease shall be drawn by the Landlord on the standard form of lease as prescribed by the Residential Tenancies Act, 2006, as amended from time to time, and shall include the provisions as contained herein and in any attached schedule and shall be executed by both parties before possession of the premises is given. The Landlord shall provide the tenant with information relating to the rights and responsibilities of the Tenant and information on the role of the Landlord and Tenant Board and how to contact the Board. [Information for New Tenants as made available by the Landlord and Tenant Board and available at www.llb.gov.on.ca ]

13. LANDLORD AND TENANT ACKNOWLEDGMENT: The Landlord and Tenant acknowledge and agree that a standard form of lease as prescribed by the Residential Tenancies Act, 2006, as amended from time to time is required.

14. CONFLICT OR DISCREPENCY: If there is any conflict or discrepancy between any provision added to this Agreement [including any Schedule attached hereto] and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provisions to the extent of such conflict or discrepancy. This Agreement, including any Schedule attached hereto, shall constitute the entire Agreement between Landlord and Tenant. There is no representation, warranty, collateral agreement, or condition, which affects this Agreement other than as expressed herein. This Agreement shall be read with all changes of gender or number required by the context.

[19] Schedule “A” to the “Agreement to Lease” set out the following additional provisions:

1. This Agreement and Option to Purchase Agreement should be read together;

2. The lease amount payable by Tenant is to fully go into paying off the $35,000 of the purchase price as stipulated in the Option to Purchase Agreement;

3. Landlord acknowledges that access to the premise is through 10 Main Road;

4. Landlord allows unrestricted access to the boat slip and communal dock, walkway;

5. Landlord allows Tenant to make any and all improvements to the property at Tenant’s full discretion.

[20] Although set out as a term in the “Agreement to Lease”, the parties did not go on to enter into a standard form lease as prescribed by the Residential Tenancies Act.

[21] The “Option to Purchase Agreement” provided that Mullen agreed to purchase “Part 6 of 5 Windmill Land, Bing Inlet Parry Sound, Wallbridge Township Ontario POG 1B0” to be severed for the price of $35,000. The sale of the property was to be completed in accordance with Schedule “A” attached to the “Option to Purchase Agreement”.

[22] Schedule “A” to the Option to Purchase set out the following additional provisions:

1. This Agreement is part of the Lease to Own and should be read together with an Agreement to Lease between the same parties, executed on the same date;

2. Parties agree that all proceeds from the lease ($145.83) will be going towards paying of the $35,000 purchase price;

3. Parties agree that an additional 5% on the remainder of the Purchase Price (recalculated annually) will be paid by the Optionee at the end of each year to the Optionor;

4. Closing date of this transaction will be set within one year from the date of successful severance of the current land;

5. Title search date will be 2 weeks prior to closing;

6. Optionor agrees to pay all cost associated with the severance;

7. Optionor agrees to pay for all property taxes until closing date.

Mullen’s Use of the Subject Property

[23] In the summer of 2019, Mullen began to bring up items to the property. He prepared a small flat spot for his camper and made plans to build a home on the property. In 2020, Mullen purchased an insulated 30-foot camper/trailer to live in while he constructed his residence. In the Spring of 2020, he hired a local contractor to do grading on his driveway and prepare a slip for his camper which was to be his temporary home until he could build his house.

[24] In March 2020, Mullen sold his home in Sunderland and moved up to the subject property where he stayed in his trailer for most of the year;

[25] In August 2020, Mullen changed his address for his driver’s license and with Revenue Canada to 6 Windmill Lane, Byng Inlet.

[26] By September 2020, Mullen had completed further work including placing foundation forms, having a well drilled, and grading an area to place a steel building to house his things and to provide further shelter as he built his home.

[27] According to Mullen, in October 2020, John Cameron approached him and told him that they were selling their property and they had a buyer who was interested who wanted to put up a gate which would prevent Mullen from accessing the water. The two had a heated exchange about this. Mullen was concerned about this change in events and retained a lawyer to register his lease on title in January 2021

[28] Mullen continued to complete construction of a Quonset steel building and moved his items into this structure.

[29] In January 2021, Mullen sent his third annual payment by way of a cheque dated February 1, 2021, to Beverly Cameron. Approximately two weeks later, Mullen received a letter from the Cameron’s lawyer advising that he was to vacate the property. The Cameron’s did not cash the February cheque until April 2021.

[30] According to Mullen, the decision by the Cameron’s to renege on their agreement to sell him the land caused him to delay building his house and necessitated him having to make further alternative living accommodations in the Quonset, where he set up a bed, wood stove, television, and furniture. Mullen accessed water from his well and use a generator for electricity. On occasion he has stayed elsewhere including a local hotel and with family and friends. According to Mullen, Lot 6 is his one and only residence.

[31] In the spring of 2021, Mullen went to see if he could complete the severance for Lot 6. When he contacted the township, he was told that the only way a severance could be completed for Lot 6 was if he owned the adjacent property, Lot 8, which abuts the highway.

[32] Mullen states that in September 2022, he was able to purchase Lot 8, which was a significant expense for him.

[33] According to Lin Cameron, who is the son of the respondent Beverly Cameron, his parents purchased 5 Windmill Lane, Byng Inlet, Ontario in 1997. His parents lived at this property until John Cameron’s death.

[34] Lin Cameron states that his parents entered into a “Rent to Own” arrangement with Mullen for a portion of their property with the expectation that the subject property would be used as a seasonal vacation property.

[35] Lin Cameron states that his mother vacated the property on or about December 5, 2021, and currently lives at his place and his sister’s place, until she can get money from the sale of the property to purchase her own place.

[36] Lin Cameron states that the only person who is currently in possession of any portion of the property is the respondent, Mullen. Lin Cameron states that he has personally observed Mullen using the property seasonally, for about eight months of the year. According to Lin Cameron, Lot 6 is not habitable in the winter months.

[37] Lin Cameron has observed that Mullen stays in a 5th wheel, three season camper trailer. Mullen has put up a Quonset type hut that is used for storage and an outhouse that has no running water. There is no hydro running to Lot 6. It appears that Mullen uses a generator and possibly a couple of small solar panels to power the trailer and has a water well from which he runs cold water to trailer through a garden hose. The water system is therefore not usable in the winter, as the water in the garden hose would freeze. Lin Cameron attached photos that he took recently of Lot 6, which depict the trailer, the water well, the garden hose, the generator and electrical cords powering the trailer, the outhouse, and the Quonset hut.

Discovery of the Notice of Lease

[38] When Beverly Cameron defaulted on the mortgage, the applicant took steps to enforce the mortgage. As part of these steps, the applicant reviewed the property registry and discovered that two subsequent instruments had been registered on title. The first instrument was a “notice” registered by Ronald Abbott on December 4, 2020, and the second instrument was a “notice of lease” registered by Thomas Mullen on January 15, 2021.

[39] The terms of the mortgage provided:

10. Upon default in payment of principal and interest under the Charge or in performance of any of the terms or conditions hereof, the Chargee may enter into and take possession of the land hereby charged and where the Chargee so enters on and takes possession or enters on and takes possession of the land on default as described in paragraph 9 herein the Chargee shall enter into, have, hold, use, occupy, possess and enjoy the land without the let, suit, hindrance, interruption or denial of the Chargor or any other person or persons whomsoever.

[40] The applicant takes the position that not only did the respondent Cameron default in her payments on the mortgage, but that the lease to own arrangement entered into with Mullen constituted a further breach of the mortgage, specifically term 14. The applicant submits that they are entitled to possession of the property without any “let, suit, hindrance, interruption or denial”.

Notice of Sale

[41] On September 30, 2021, the applicant served notices of sale on Beverly Cameron, Thomas Mullen, and Ronald Abbott.

[42] The applicant has attempted to sell the property and at one point entered into an agreement of purchase and sale. The sale did not proceed because the interested buyer required vacant possession and the applicant could not satisfy that term as long as Mullen remained on the property. The applicant advises that the interested buyer has indicated that if the applicant is able to obtain vacant possession of the property, they may still be interested in purchasing it.

Analysis

The Application for Judgment on the Covenant

[43] An action on the covenant is a remedy available to a mortgagee for personal payment on a covenant contained in a mortgage. Because a mortgage is a contract for the repayment of a loan, usually with interest, mortgagees may, on default, sue the mortgagors on their covenant to repay the debt.

[44] An action on the covenant may be combined with an action for foreclosure or judicial sale and possession. Section 20, Mortgages Act, R.S.O. 1990, C.M.40. National Trust Co. v. Fuciarelli, 1980 CarswellOnt 591 (Ont.C.A.) at para. 9.

[45] The applicant has provided evidence as to the existence, registration, and terms of the subject mortgage. The mortgage sets out that the principal advanced was $235,000 and that the true rate of interest was at a rate of 11.5718836%. The mortgage is subject to standard charge terms 200033, which provides that upon default, the full principal amount becomes due and payable.

[46] The applicant states that the respondent, Cameron, has been in default of the mortgage since August 29, 2021, when she stopped making payments. The respondent Cameron has not responded to this application or provided any evidence to dispute this assertion.

[47] On September 29, 2021, the applicant served a Notice of Sale pursuant to s.26 of the Mortgages Act which set out the amount owing as of that date, which was $273,113.57. The Notice of Sale provided that if this amount was not paid by November 5, 2021, the applicant would sell the subject property. The evidence tendered by the applicant is that this amount has not been paid to date. The respondent, Cameron has not provided any evidence to contradict this.

[48] The uncontradicted evidence at this application is that the respondent, Cameron, vacated the property on December 5, 2021, and that Ronald Abbott has also voluntarily vacated the property.

[49] The applicant has taken steps to attempt to sell the property. In February 2022, the applicant entered into an agreement of purchase and sale with a purchaser, however the sale of the property fell through when the applicant was not able to provide vacant possession of the subject property.

[50] Based on the totality of the evidence presented at this application, and upon review of the terms of the mortgage, I am satisfied that the applicant is entitled to judgment against the respondent Cameron, in the amount of $340,905.77 owing for the principal and interest as of November 8, 2022. I am also satisfied that pursuant to the terms of the mortgage, the applicant is entitled to an order that the amount owing is subject pre-judgment interest at the rate of 11.5718836% calculated semi-annually from November 8, 2022, to the date of this judgment. Further, the applicant is entitled to post-judgment interest at a rate of 11.571886% calculated semi-annually, not in advance, in accordance with the terms of the mortgage.

The Application for Vacant Possession

[51] The applicant has, in effect, taken possession of the subject property pursuant to the Mortgages Act. I am satisfied that the applicant is a mortgagee in possession.

[52] In this application, Mullen, does not claim an interest in the subject property. Rather, he submits that he is a residential tenant and cannot be required to vacate the property except in accordance with an application under the Residential Tenancies Act.

[53] The issue to be determined in this application is whether the applicant is entitled to vacant possession in accordance with the terms of the mortgage or whether the applicant is required to comply with s.48(1) of the Mortgages Act which provides that no person exercising rights under a mortgage may obtain possession of a rental unit from the mortgagor’s tenant except in accordance with the Residential Tenancies Act.

[54] This requires me to determine two issues:

a. What is the true nature and effect of the “Agreement to Lease” and “Option to Purchase” contracts; and

b. At the time the applicant became a mortgagee in possession, was Mullen a “tenant” of a “rental unit” as defined in Part V of the Mortgages Act and s.2(1) of the Residential Tenancies Act.

What is the effect of the “Agreement to Lease” and the “Option to Purchase”?

[55] The applicant submits that when one reads the “Agreement to Lease” with the “Option to Purchase” together, it is reasonable to conclude that the parties intended to create a contract for the sale of Lot 6. The applicant points to the Mullen’s own evidence that in his mind the agreement was always about the purchase of land.

[56] The respondent submits that the “Agreement to Lease” created a tenancy relationship between the parties that would continue until (a) Lot 6 was severed and he chose to exercise the option to purchase it, or (b) upon the expiration of twenty years.

[57] The goal of contract interpretation is to determine the intent of the parties and the scope of their understanding at the time the contract was made. To do so, the contract must be read as a whole. Words are to be given their ordinary and grammatical meaning. The contract and the words are to be read in a manner consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53 at para. 47.

[58] I agree that both contracts, the “Agreement to Lease” and the “Option to Buy” should be read together. Indeed, both specifically require this.

[59] The document entitled “Agreement to Lease” refers to Mullen as “Tenant” and the Cameron’s as “Landlord”. The contract goes on to state “The Tenant hereby offers to lease from the Landlord the premises as described herein on the terms and subject to the conditions as set out in this Agreement”. For the purposes of this Agreement to Lease “Tenant” includes lessee and “Landlord” includes Lessor”.

[60] Although the “Agreement to Lease” refers to the premises as “5 Windmill Land, Bing Inlet Parry Sound”, when I read both documents together, I am satisfied that the parties intended the leased premises to be Lot 6 (or Part 6) of 5 Windmill Lane, Byng Inlet and not the entire property.

[61] The document entitled “Option to Purchase Agreement” refers to Mullen as “Optionee” and the Cameron’s as “Optionors”. The contract goes on to state at paragraph 1:

In consideration of the sum of: $1.00 dollars paid by the Optionee to the [Consideration Holder] by negotiable cheque the receipt whereof is hereby acknowledged the Optionor grants to the Optionee the sole and exclusive Option, irrevocable within the time for exercise herein limited, to purchase the property described above and owned by the Optionor, for the following purchase price. “35,000, Thirty-Five Thousand Dollars.

[62] Paragraph 2 of the contract states:

the sale arising from this Option shall be completed by no later than 6:00 p.m. on the “See Sched A”. Upon completion, vacant possession of the property shall be given to the Optionee unless otherwise provided for in this Agreement.

[63] Paragraph 8 of the contract states:

The Option hereby granted may be exercised by the Optionee until “See Schedule A” and shall be exercised in accordance with the notice provisions set out in this Agreement. In the event that such Option is not exercised in the manner aforesaid, this Option and everything contained shall be null and void and no longer binding upon any of the parties hereto and the Optionor shall be entitled to retain the said sum given as Consideration for the granting of this Option. Upon the exercise of this Option by Optionee in the manner aforesaid, this Option shall then become a binding Agreement between the parties and the same shall be completed upon the terms hereinbefore and hereinafter set forth.

[64] Schedule A to the “Option to Purchase” states:

1. Parties agree that all proceeds from the lease ($145.83) will be going towards paying of the $35,000 purchase price.

2. Parties agree that an additional 5% on the remainder of the Purchase Price (recalculated annually) will be paid by the Optionee at the end of each year to the Optionor.

3. Closing date of this transaction will be set within one year from the date of successful severance of the current land.

4. Title search date will be 2 weeks prior to closing.

[65] At the time the parties entered into the two contracts, it was not possible to purchase Lot/Part 6, as it had not been severed. The circumstances in this case are unlike the classic “Rent to Own” agreement where one party moves into a premises that is capable of being purchased, with a firm agreement that rent payments will be applied towards the purchase price. In my view, the circumstances in this case are more accurately described as a “rent with the option to buy” agreement. The option to buy in this case was always conditional upon the Cameron’s severing Lot/Part 6. To date, a severance has never occurred and as such there has never been an opportunity to purchase the land.

[66] When I read the “Agreement to Lease” together with the “Option to Purchase” I find that the most reasonable interpretation of the parties’ intention is that Mullen would rent the property up until the Lot/Part was severed. When the Lot/Part was severed, Mullen had up to one year to exercise his option to purchase the Lot/Part for the agreed upon price, with all amounts paid to the Cameron’s as part of the lease applied to the purchase price.

[67] Based on the terms of the contract, Mullen could have chosen not to purchase the property after it was severed. Further, based on the terms of the contract, once the property was severed, if Mullen did not pay the remainder owing within one year, the Cameron’s were no longer required to sell the property to him. The contracts are silent on what would happen to the rent payments received by the Cameron’s if this happened.

[68] Further, according to Mullen, he later discovered that the municipality would not agree to sever Lot/Part 6 because it does not abut a highway. As such, it appears that the “Option to Purchase” was frustrated from the very beginning.

[69] I find that the two contracts created a lease agreement with the option to purchase if certain conditions arose. Given those conditions never arose, and the option was never exercised, the ongoing contractual relationship between Mullen and the Cameron’s was that of lessee and lessor.

[70] Having found that the relationship between Mullen and the Cameron’s was that of lessee and lessor, I must go on to determine whether the lease related to a “residential complex”, such that the Residential Tenancies Act would apply.

Does the lease between Mullen and the Cameron’s relate to a “residential complex”?

[71] Section 47(1) of the Mortgages Act provides:

47(1) A person who becomes the mortgagee in possession of a mortgaged residential complex which is the subject of a tenancy agreement between the mortgagor and a tenant or who obtains title to the residential complex by foreclosure or power of sale shall be deemed to be the landlord under the tenancy agreement.

[72] In this case, if the applicant is deemed a landlord, then section 48(1) of the Mortgages Act applies, which prohibits any person exercising rights under a mortgage from obtaining possession of a rental unit from the mortgagor’s tenant except in accordance with the Residential Tenancies Act.

[73] The Mortgages Act provides that the terms “tenant”, “residential complex” and “rental unit” have the same meaning as set out in s.2(1) of the Residential Tenancies Act.

[74] The term “residential complex” is defined in the Residential Tenancies Act as follows:

(a) a building or related group of buildings in which one or more rental units are located,

(b) a mobile home park or land lease community;

(c) a site that is a rental unit, a care home and,

includes all common areas and services and facilities available for the use of its residents.

[75] The term “tenant” is defined in the Residential Tenancies Act as including a person who pays rent in return for the right to occupy a rental unit. The term “rent” is defined as including the amount of any consideration paid or given or required to be paid or given by or on behalf of a tenant to a landlord for the right to occupy a rental unit.

[76] The term “rental unit” is defined as any living accommodation used or intended for use as rented residential premises and includes: (a) a site for a mobile home or site on which there is a land lease home used or intended for use as rented residential premises, and (b) a room in a boarding house, rooming house or lodging house and a unit in a care home.

[77] The applicant submits that “Agreement to Lease” does not relate to a “residential complex” because:

a. The lease agreement entered into between the Cameron’s and Mullen was an agreement to lease a portion of the Cameron’s property which consisted of land;

b. Mullen does not occupy or rent a “rental unit” on the portion of the subject property because he only uses the property seasonally and does not live there permanently and year-round;

c. The “Option to Purchase” agreement provided that the money paid to the Cameron’s would be applied to the purchase price of Lot 6. As such, the money Mullen paid to Cameron is not “rent” as defined by the Residential Tenancies Act because it was not paid in exchange for the right to occupy a rental unit;

d. The amount to be paid is well below what one would expect if Mullen was renting two acres of land; and

e. The parties did not enter into a lease document, as set out in paragraph 12 of the “Agreement to Lease” which is evidence that this was not a tenancy arrangement.

[78] The Respondent submits that the “Agreement to Lease” does relate to a residential complex because:

a. He considers his trailer and Quonset to be his permanent residence;

b. He sold his residence in Sunderland and moved up to Byng Inlet permanently in March 2020;

c. He has changed his permanent address with government agencies to this subject property;

d. He has completed and paid for significant improvements to the property including grading and filling the land, placing foundation forms, installing a well and constructing a Quonset in furtherance of his intention to build a home and live at the subject property permanently;

e. The Cameron’s were fully aware that he was residing on the property, that he made significant improvements in furtherance of his intention to build a permanent home, and that he built the Quonset. The Cameron’s raised no objection until they wanted to sell the property; and

f. He currently lives in a fully insulated 30 feet camper/trailer that has a furnace, holding tanks, fresh water, and kitchen facilities, and in the Quonset where he has set up a bed, wood stove, television, and furniture. He stores most of his belongings at the property. He resides at this location as his permanent residence most of the year, staying only with others on occasion.

[79] As noted above, the term “residential complex” as defined in the Residential Tenancies Act includes a site that is a rental unit. A “rental unit” is defined in the Act as “any living accommodation used or intended for use as rented residential premises” and “includes (a) a site for a mobile home or site on which there is a land lease home used or intended for use as a rented residential premises”.

[80] In Matthew v. Algoma Timberlakes Corp., 2010 ONCA 468, leave to appeal refused [2010] S.C.C.A. No. 369, Justice Lang J.J.A. held that seasonal recreational cottages built on leased land were “rental units” such that they fell within the definition of land lease communities governed by the Residential Tenancies Act.

[81] In Matthew v. Algoma Timberlakes Corp., the appellants had leased lots that were roughly one acre in size in a lake area north of Sault Ste. Marie. The lessees were expected to construct structures of a permanent nature on the leased lots at their own expense. The lessees paid a modest rent that was subject to an annual increase in keeping with the annual inflation rate. The structures were referred to as residences, camps, or cottages. The respondent provided no road maintenance, road access, dock maintenance, sewage or garbage disposal, snow plowing, electrical or water infrastructure or potable water. The leased sites were largely accessible only by railway, logging road, boat, or all-terrain vehicle. The buildings were described as “constructed for long term to be used all year”. Each had an outhouse that was compliant with township requirements.

[82] The cottages were used at all times of the year for vacations, holidays, weekends etc. The respondent did not restrict access, seasonally or otherwise. The sites could become inaccessible during the period of spring break-up or fall freeze up. Virtually all of the appellants maintained a principal residence elsewhere and used the cottages as secondary homes.

[83] The issue in that case was whether the cottages were “rental units” as defined by the Residential Tenancies Act. Specifically, whether the cottages fell within s.2(1)(a) which includes “a site for a mobile home or site on which there is a land lease home used or intended for use as rented residential premises”.

[84] In reaching the court’s conclusion that the cottages were ‘rental units”, Justice Lang J.A. noted that the definition of “rental unit” in s.2(1) of the Residential Tenancies Act contained two components: (1) the unit must be “living accommodation” and (2) it must be used or intended for use as a “rented residential premises”.

[85] Justice Lang J.A. noted at para. 25 that all of the cottages were used as living accommodations. The cottages had sleeping and living quarters, along with kitchen facilities. Some had outhouses. Families would attend the cottages for varying period of time at different times of the year.

[86] Justice Lang J.A. found at para. 26 that the cottages met the second requirement that they be “rented premises” because the lessees paid rent to “occupy” the land on which they constructed their cottages.

[87] Justice Lang J.A. made the following findings at para. 28:

In my view, occupants of residential units are entitled to the protection of the Act, whatever they do inside or outside of their premises during their waking hours. The Act applies whether the occupant spend their days at work or at leisure, whether they live in their accommodation 52 weeks of a year or some lesser amount of time, and whether the unit in question is their primary or secondary residence.

If it were, otherwise, a person primarily residing elsewhere who rents a city apartment for convenience, as a pied-a-terre, or as any type of secondary residence would be denied the tenant protection that would be available to his or her neighbour across the hall. As well, Ontario tenants who “reside” in warmer locations as “snowbirds” during the winter months could lose the tenant protections available to them under Ontario law. Moreover, individuals who rent premises in locations such as Collingwood for golf and skiing would be denied the protections provided by the Act because they would be occupying the premises for “recreational” rather than “residential” purposes. In my view, there can be no difference between the Collingwood residential and “recreational” rental apartment from which the occupant has access to fishing and hunting. The recreational attributes of the particular area do not mean that the rental units are not residential within the meaning of the Act.

[88] Justice Lang J.A. turned her mind to the exclusion found in s.5(a) of the Act, which excludes premises “provided to the travelling or vacationing public or occupied for a seasonal or temporary period in a hotel, motel or motor hotel, resort, lodge, tourist camp, cottage or cabin establishment, inn, campground, trailer park, tourist home, bed and breakfast vacation establishment or vacation home”.

[89] Justice Lang J.A. adopted the analysis in Putnam v. Grand River Conservation Authority (2006), 210 O.A.C. 191 (Ont.Div.Ct.) where the Divisional Court concluded that this exclusion applied to situations where individuals require temporary accommodations provided by someone other than themselves.

[90] At para. 37, Justice Lang J.A. concluded that the term “residential” in the Act referred to the residential use of the premises and the Act does not provide a blanket exclusion for recreational properties.

[91] As such, in accordance with the decision in Matthew v. Algoma Timberlakes Corp., permanent cottage structures built on leased land that are used recreationally are considered “rental units” and as such fall within the definition of a “residential complex” in the Residential Tenancies Act.

[92] The term “rental unit” also includes “any living accommodation used or intended for use as a rented residential premises” and “includes” a site for a mobile home. “Mobile home” is defined in the Act as a dwelling that is designed to be made mobile and that is being used as a permanent residence.

[93] The term “residential complex” also includes a “mobile home park”. Under the Act a mobile home park includes the land on which one or more occupied mobile homes are located and includes the rental units and the land, structures, services, and facilities of which the landlord retains possession and that are intended for the common use and enjoyment of the tenants of the landlord”. Unlike a “land lease home”, a mobile home is required to be used as a permanent residence. The term “permanent residence” is not defined in the Residential Tenancies Act.

[94] In my analysis of whether the lease in this case relates to a “residential complex”, I rely on the following facts which I find have been established on a balance of probabilities by the evidence provided in this application:

a. The Cameron’s were aware in the summer of 2019 that Mullen planned to sell his home in Sunderland and build his retirement home on the property. They helped Mullen lay out the location of his driveway, garage and prepare a spot for his trailer. They discussed where a well would be drilled and where the house would be placed so that it did not encroach on anyone else’s property;

b. In March 2020, Mullen sold his home and moved up permanently to the subject property. Mullen has had no other permanent residence since that time;

c. In and around March 2020, Mullen placed a 30-foot trailer permanently on the property and it has remained there to date;

d. By September 2020, Mullen had a well drilled, the land graded, foundation forms in place, ordered concrete for the foundation forms and had commenced constructing the 40’ by 30’ Quonset building. During this time, John Cameron and Mullen discussed the Quonset building and where it should be positioned. No objection was raised by the Cameron’s to the construction of the Quonset building;

e. The Quonset building was constructed over the fall of 2020 and into the winter of 2021;

f. In February 2021, the Cameron’s told Mullen to vacate the property. By then Mullen had finished constructing the Quonset building and was building a loft area inside the Quonset in anticipation of creating another living space that he could live in while he built his house;

g. Since the spring of 2021, Mullen has resided in both the Quonset building and the trailer. It is uncontested that the trailer unit and Quonset building contain kitchen facilities, sleeping quarters, a water source (from a drilled well), heating (wood stove), electricity (from a generator) and sanitation facilities (an outhouse); and

h. I find that it is likely that Mullen stays elsewhere during the colder winter months when access to the property is limited by snow and when his ability to draw water from the well is limited by the cold weather.

[95] The issue in this case is whether a 30-foot trailer and Quonset building, permanently placed on a piece of leased land and used for most of the year as a full-time residence, falls under the definition of a “residential complex” as defined in the Residential Tenancies Act.

[96] I find, based on the totality of the evidence led at this application, that the both the Quonset building, and the 30-foot trailer meet the definition of “rental unit” as defined by the Residential Tenancies Act and also meet the definition of “residential complex” as defined both by the Residential Tenancies Act and Mortgages Act.

[97] In my view, the Quonset building is no different than the seasonal cottages that were built on leased land in Matthew v. Algoma Timberlakes Corp. It is a permanent building affixed to the property that is used for residential purposes. It has sleeping and living quarters inside, an outhouse, and access to water.

[98] I find, as per the reasoning in Matthew v. Algoma Timberlakes Corp., that the fact that Mullen uses the Quonset building seasonally does not detract from its regular residential use. As noted by Justice Sharpe J.A., if recreational properties were to be excluded from the Residential Tenancies Act, they could have been added to the list found in s.5 of premises to which the Act does not apply. I find that the Quonset hut is a “rental unit” as defined by the Residential Tenancies Act.

[99] In addition, I am satisfied that the 30-foot trailer meets the definition of “mobile home” as set out in the Residential Tenancies Act, as it is a living accommodation that is used as a residential premises and is used by Mullen as his permanent home.

[100] I find the circumstances in this case to be different than that of a seasonal trailer site where individuals reside in trailers seasonally and are required to leave during the off-season. There is no evidence that Mullen has ever been required to leave the property by the Cameron’s during any season.

[101] The evidence led at this application is that the Cameron’s were aware that Mullen installed a camper trailer and then built a Quonset building that he resided in while he made preparations to build a permanent home on the lot. There is no evidence that the Cameron’s objected to this arrangement or took steps to prevent this. According to Mullen, the Cameron’s were initially supportive of his residency. They only took objection when they wished to sell the property.

[102] In my view, once Mullen moved permanently to the subject property in 2020 and began residing there, with full knowledge of the Cameron’s, the lease became a residential lease.

[103] In 1030553 Ontario Ltd. v. Pieckenhagen (2000), 51 O.R. (3d) 763 (Ont.C.A.), Justice Sharpe J.A. explained the purpose of Part V of the Mortgages Act at paras. 14-15:

In my view, it is apparent that the “mischief” addressed by the Mortgages Amendment Act was the vulnerability of tenants in residential complexes to being disrupted in their tenancy by changes in possession and title resulting from mortgage default by the landlord or owner of the property. Before the Mortgages Amendment Act, tenants lacked security of tenure as against mortgagees in possession, those who obtained title by foreclosure, and subsequent purchasers who acquired title in power of sale proceedings…Accordingly a party who obtained possession or title by virtual of mortgage default could obtain vacant possession despite the existence of a landlord and tenant relationship between the mortgagor and its tenants.

The purpose and intent of the Mortgages Amendment Act was to overcome this state of affairs and to provide tenants with security of tenure in the event of mortgage default by the landlord. The Mortgages Act, s.47 specifically puts those persons described in the position of landlord under the tenancy agreement.

[104] In my view, the circumstances facing Mullen in this case fall within the purpose of Part V of the Mortgages Act. I am satisfied that Mullen entered into a lease agreement with the Cameron’s for the purpose of leasing and with the hope of purchasing Lot 6. In reliance on this lease and option to purchase, Mullen sold his home and moved permanently to Byng Inlet where he spends his time living at the property most of the year and making improvements at his own expense. Mullen is now faced, due to no fault of his own, with the consequences of the Cameron’s defaulting on their mortgage.

[105] In my view, this is the mischief addressed by the Mortgages Act that requires mortgagees in possession to comply with the Residential Tenancies Act.

[106] I am satisfied that the money Mullen paid to the Cameron’s on a regular basis, in accordance with the “Agreement to Lease”, was “rent” paid in order to occupy the land on which he resided. On all of the evidence, I am satisfied that if Mullen stopped paying these regular amounts he would have been told to leave. Further, the “Option to Buy” did not provide for these moneys to be refunded to Mullen if he chose not to purchase Lot 6.

[107] The Mortgages Act only provides a mortgagee in possession the ability to seek to terminate a tenancy if the evidence establishes that mortgagor leased the property in a deliberate attempt to discourage the mortgagee from taking possession of the property on default or to adversely affect the value of the mortgagee’s interest in the residential complex pursuant to s.52 of the Mortgages Act. There is no evidence that this took place in this case.

[108] The Mortgages Act does not provide a remedy for the type of circumstances in this case, where the mortgagor, unbeknownst to the mortgagee, leases the mortgaged property in contravention of the terms of mortgage.

[109] It is clear that the Cameron’s failed to comply with their contractual obligation to not sell or lease the mortgaged property without the consent of the applicant as mortgagee and that this created an immediate default of the mortgage. The consequences of this default are set out in the terms of the mortgage and include immediate payment of amounts owing and payment of costs associated with taking, recovering, and keeping possession of the mortgaged property.

[110] However, Mullen was not a party to the mortgage contract and cannot be held to its terms. The applicants cannot rely on the terms of the mortgage that provide for vacant possession to force Mullen to vacate the premises.

Conclusion

[111] For these reasons, I find that, the applicants are deemed to have become landlords pursuant to section 47(1) of the Mortgages Act because they became mortgagees in possession of a subject property which was subject to a tenancy agreement related to a residential complex.

[112] Further, I find that the applicants are precluded pursuant to section 48(1) of the Act from obtaining possession of the portion of the property leased by Mullen, except in accordance with the Residential Tenancies Act.

[113] Given my findings that the tenancy is governed by the Residential Tenancies Act, I find that I do not have jurisdiction to make an order requiring Mullen to vacate the premises. In my view, only the Landlord and Tenant Tribunal may make such an order terminating the tenancy and requiring Mullen to vacate the property. Beach v. Moffatt, 2005 CarswellOnt 1693 (Ont.C.A.) at para. s15.

[114] In this case, the applicant will have to comply with the provisions of the Residential Tenancies Act before applying for a Writ of Possession under Rule 60.10 of the Rules of Civil Procedure. New Haven Mortgage Corporation v. Biobasholuwa, 2020 ONSC 8018 at para. 38-39.

Orders

[115] For the reasons set out above, I make the following orders:

a. Judgment as against the respondent Beverly Cameron in the amount of $340,905.77 owing for principal and interest as of November 8, 2022;

b. Pre-judgment interest shall be paid at the rate of 11.5718836% per annum, calculated semi-annually, from November 8, 2022, to the date of judgment;

c. Post-judgment interest at the rate of 11.5718836% calculated semi-annually, from the date of judgment.

The Honourable Madam Justice S.K. Stothart Released: August 2, 2023