Court File and Parties

Court File No.: CV-24-00716704-0000 Date: 2024-05-13 Ontario Superior Court of Justice

Between: RFA BANK OF CANADA, Applicant

– and –

SARGUNJIT SINGH BAWA, CALVIN MUI, and all other Tenants/Occupants of the premises known municipally as 101 PETER STREET, SUITE 612, TORONTO, ONTARIO, M5V 0G6, Respondents

Counsel: James A. Butson, for the Applicant Unrepresented, for the Respondents

Heard: May 13, 2024

Before: Akazaki J.

Reasons for Judgment

[1] This is a default application by a mortgagee for an order setting aside a tenancy agreement between the named respondents and any other subtenants of a condominium suite, and for granting possession to the mortgagee.

[2] The applicant is the assignee of a mortgage debt secured against the property identified as Suite 612, 101 Peter St., Toronto. The respondent Sargunjit Singh Bawa (“Bawa”) is the unit owner and has been in default of his mortgage payments since September 27, 2023. The applicant has exercised power of sale pursuant to a Notice of Sale dated December 13, 2023. Personal service on Bawa has not been effected due to his relocation to India and presumed abandonment of the property to the tenant. Since the mortgage provided that Bawa could be served at the unit and since the nature of the relief sought apart from costs is in rem, personal service can be dispensed with in the circumstances.

[3] In addition to the default in payment, the applicant discovered that Bawa entered into a five-year lease with the respondent Calvin Mui (Mui). Mui in turn sublets the unit to subtenants for short-term rentals of several months at a time. The mortgage contains a Standard Charge Term, which, at para. 5.1(m), required Bawa to be in actual possession of the unit and prohibited any lease of the unit without the lender’s prior approval. No such approval was ever provided.

[4] Neither the default of payment nor the unlawful leasing of the unit were contested by any evidence from the respondents, who did not respond to the application. It was not clear the extent to which Bawa was aware of the proceedings, but the respondent Mui has interacted with the applicant’s lawyers regarding this matter. The only issue distinguishing this case from any other mortgage enforcement pursuant to default is the status of the unauthorized tenancy and subtenancies.

[5] Section 52 of the Mortgages Act, R.S.O. 1990, c. M.40, provides:

Application to set aside tenancy

52 (1) The Superior Court of Justice may on application by the mortgagee vary or set aside a tenancy agreement, or any of its provisions, entered into by the mortgagor in contemplation of or after default under the mortgage with the object of,

(a) discouraging the mortgagee from taking possession of the residential complex on default; or

(b) adversely affecting the value of the mortgagee’s interest in the residential complex. 1997, c. 24, s. 215 (13); 2000, c. 26, Sched. B, s. 14 (5).

Idem

(2) In considering the application, the judge shall have regard to the interests of the tenant and the mortgagee. 1991, c. 6, s. 3.

[6] The purpose of s. 52 of the Mortgages Act is to permit a mortgagee to apply for an order setting aside a tenancy, where the tenancy breaches the standard mortgage term against leasing the property without the mortgagee’s permission and where the lease has the effect of impeding statutory mortgage remedies: Toronto-Dominion Bank v. Hosein, 2016 ONCA 628, at paras 22-24. Setting aside tenancies differs from termination, in that s. 52 allows the lease to be treated as invalid from the start. At para. 22, the Court of Appeal adopted the description of the policy behind it as stated in Sutherland J.’s decision in Compcorp Life Insurance Co. v. Divitcos, [1997] O.J. No. 186, 12 R.P.R. (3d) 122 (Gen. Div.), at para. 41:

It represents an awareness on the part of the Legislature of the vulnerability of a mortgagee of property that can be leased out by a mortgagor under a “sweetheart” deal between the mortgagor, who is in default under the mortgage, and a tenant who will in the ordinary course, under relatively recent amendments, be “inherited” by the mortgagee in possession, whether or not the mortgage was in place before the “sweetheart” tenancy agreement was entered into.

[7] Whatever the dealings were or are between Bawa and Mui, and whatever short-term rental arrangements are with unknown parties, it is clear that the unit is not being used as a permanent residence of any party. Setting aside the lease(s) will therefore not prejudice any party apart from preventing Mui from continuing to profit extrajudicially from the situation.

[8] The application is therefore granted, with costs of $7,352.38 as demanded.

Akazaki J. Released: May 13, 2024