There are a few ways that I could start today’s blog.
I’ve been attracted to adages, sayings, and other wordplay as of late.
“No good deed goes unpunished.”
That’s definitely one that describes the content of today’s post.
“Nice guys finish last.”
That’s also quite apt.
“Give them an inch, they’ll take a mile.”
Oooh, I like that one! You’ll see in a few moments why that makes sense.
We’ve talked in the past about the rights of tenants in the province of Ontario and how overbearing those rights are. Now, to be fair, there are those on the so-called “other side” of this equation who think that the rules don’t go far enough in favour of tenants, but for the most part here on TRB, over the last few years, the consensus has been more toward landlords being punished.
The “Ontario Fair Housing Plan” launched in 2017 brought in a lot of new protections for tenants but with those protections came punishments for landlords.
Not only that, the Landlord & Tenant Board has overwhelmingly, almost hysterically at times sided with tenants in just about every dispute, no matter what. It is my honest opinion that a tenant could be cooking meth in a landlord’s condo, and the Landlord & Tenant Board wouldn’t approve an eviction.
I’m not exaggerating, folks.
A colleague of mine tried to evict a tenant who blew through the side of the house with a shotgun, and the Board said, verbatim, “He deserves another chance.”
Share your own horror story in the comments upon the conclusion of this post. They’ll go a long way toward showing the non-believers and/or the newer readers that we’re right.
Today’s story is actually quite tame by comparison, but it underscores the problems that exist in our current “system,” and if you allow me to do so, I’ll show you how the current iteration of our landlord/tenant system is setting us up for failure in the long term.
Hell hath no fury like a landlord scorned.
If there were no landlords, there would be a lot less rental housing. Let me connect the dots and you’ll see why and how.
This week, I received a call from somebody who I can only describe as the nicest stranger I’ve spoken to in quite some time.
Do you know the type?
You can just hear it in their voice. From the moment they say, “Hey, how are ya?” you feel a level of sincerity and positivity that gives you comfort.
I can honestly say that within about two minutes of speaking to “Paul,” I had lowered my guard and we were chatting like two friends.
He’s a landlord. He’s been a landlord for twenty years, all with the same downtown Toronto condo.
He’s had multiple tenants over the years, some good, some bad, but after twenty years and with retirement on the horizon, he’s decided to sell his condo to pay for a property in Europe that he’ll be moving to next year.
He told me a little bit about his experience in real estate, his experience as a landlord, and the tenants he’s had over the years.
We talked about the condo market, the recent change from a seller’s market to a balanced market, and eventually, we spoke about marketing.
I explained to him that the way to maximize the sale proceeds of the condo is to maximize the marketability of the condo, and that means taking a vacant unit, repairing, cleaning, painting, and staging.
I asked him, “When is your tenant leaving?”
He said, “He’s not. He hasn’t given notice or anything. He’s been there for five years.”
I knew exactly where this conversation was going. I’ve had this conversation many times before. And while I don’t want to come off as the big, bad wolf who encourages landlords to evict their sweet little tenants, even the most ardent tenants’ rights supporter would agree that explaining the Landlord & Tenant Act to a potential seller is my job.
“You can’t evict him to sell,” I explained. “The buyer of your condo can give the tenant two months’ notice, from the first of the month, to vacate if that buyer intends to live in the condo, or have a member or his/her immediate family live in the condo.”
“But that would mean selling the condo with him inside the unit,” he said.
“There’s a problem with that,” he told me. “I leased this guy the condo five years ago and eventually he found a lady and she moved in with her son, who’s 9-years-old now.”
I told him that my standard lease clauses dictate that “only the individual named on title shall reside full-time in the unit,” and that the tenant should have asked permission.
“Yeah, well that’s one thing. But another thing: they had a child together, and that kid is now 2-years-old. So there’s four of them living in the unit.”
“Isn’t this a one-bedroom condo?” I asked, a little confused.
“Yup,” he confirmed.
There’s no judgment here, or at least that’s not my intention. Toronto is expensive and people have to make do however they can. But from a legal perspective, an individual who rents a condo in his or her sole name can’t have ten people move in! Tell me I’m a jerk for suggesting that this pleasant family can’t live in here, but it’s a slippery slope, and one that can lead to the next individual renting a property in his name moving in a dozen people and building army barracks in the living room.
That aside, the second issue here was the rent.
“He’s paying $1,700 per month,” the landlord explained. “He came to me during the pandemic and said he couldn’t afford the $2,100 anymore. I told him I didn’t want to reduce it, but he said that the government was telling people not to pay their rent if they needed to put food on their table, so what the hell was I supposed to do?”
I asked him why the tenant was still paying $1,700.
“Once I reduced it, I couldn’t raise it back! I came to him sixteen months later and said ‘It’s time,’ but he told me I had no legal recourse to raise it back.”
This condo would probably rent for $2,300 per month today, and given the strength of the rental market, I believe there would be multiple offers.
“So what do I do?” Paul asked me. “How do I get him out of there?”
“You can’t,” I told Paul. “Legally, there’s nothing you can do.”
Paul was silent. He seemed to be collecting his thoughts and eventually, he said, “I don’t understand this. I own this condo. It’s mine. I want to sell it. I’ve been a nice guy here. I’ve got no problem with him having a family of four in there, and I gave him a break on the rent. I’ve bent over backwards for him. What am I supposed to do here?”
I told Paul, “You can list the property on the market, as is, give twenty-four hours’ notice for showings, and sell to an end-user who will evict the tenants.”
Paul asked, “But I wouldn’t get the same price though, in this current condition, and with them living in there on top of each-other, right?”
I told Paul the unfortunate truth: “Nope. Not even close.”
I explained that I’m a big believer in buyer psychology and that in today’s market, even though we’re talking about the same 500 square foot condo either vacant, gussied-up, and staged, or tenanted and lived-in, we’d see a massive difference in sale price; likely $50,000 or more.
He believed it. He’s no dummy.
No buyer walks into a 3-bedroom family home condensed into a 500 square foot 1-bedroom condo and comes out thinking, “That’s my dream home!” Buyers want pretty, shiny things. Buyers want clean, bright, and light!
I explained the difference between forms N9, N11, and N12 to Paul, and how each form worked.
I told him that if he wanted to think outside the box, he could use N11 – Agreement To Terminate Tenancy, or N12 – Landlord’s Notice To End Tenancy.
Paul could end the tenancy by serving the tenant with N12, but Paul or a member of Paul’s immediate family would have to occupy the unit for 12 months.
Paul could use N11 and come to an “agreement” with the tenant, however possible.
It turned out, Paul was one of two owners on title and that Paul’s sister had a son who needed a place to live in September. Paul asked, “Could we evict the tenant and have my sister’s son move into the unit?”
I confirmed that this was possible, so long as his nephew stays there for twelve months.
“So I could get my sister’s kid in there for a year then sell the condo in the fall of 2023?”
I confirmed that this was the case.
“This sucks,” Paul said. “It’s my condo, and yet I have to jump through hoops and keep the condo a year later than I want, all to satisfy these rules?”
Paul was correct!
Paul told me how he had treated this tenant incredibly well over the last five years. He never raised the tenant’s rent, he lowered the rent, as mentioned, during the pandemic, and was hands-on the entire time.
“The tenant told me one day that the fridge was making a noise. I thought, ‘He’s been great, I wanna do right by him,’ so I bought him a brand-new stainless steel fridge even though the one in the condo worked just fine.”
Paul told me all sorts of stories that started and ended with him being an incredible landlord over the years, and I gave him the unfortunate and hard truth: none of this affects the laws within the Landlord & Tenant Act.
I suggested that Paul call the tenant and have a conversation with him, just to feel him out.
Paul did exactly that.
And then Paul called me the next day.
“This guy, honestly! Paul began. “He’s telling me I have no right to sell his home and that he’s not going to allow me to displace his family,” Paul explained.
The tenant had sent Paul an email with numbered points referring to areas of discussion in their phone call.
This is the point that really got me:
“Our life is currently built around living at this unit so we have no plans to vacate and will not do so.”
It’s totally fair but it just shows you how some tenants think.
This tenant seems to feel that this condo is his.
More the point, there’s a large portion of society that believes in landlords as these evil-doers who exist on title only and should have zero rights to the property. People believe that a tenant’s house is his home and that the landlord comes second.
But where are the rights for the landlord in all of this?
Is possession nine-tenths of the law? The person making the house a home is the defacto owner?
A subsequent discussion with Paul and the tenant revealed that the tenant would likely object to any attempt to evict him, legal or not, and the tenant went on to regale Paul with stories about how their lives are intertwined with this condo, this building, and this neighbourhood. The tenant told Paul all about their favourite attractions, restaurants, and activities, and how uprooting them from this unit would negatively impact their lives.
But is this really on Paul?
Does a tenant have a right to link his lifestyle and happiness to the lease agreement upon signing?
I don’t think this has anything to do with Paul. But a lot of folks out there think that it does.
Paul tried to appeal to the tenant’s softer side, and he explained that the $1,700/month rent was supposed to be discounted for only a few months, but it had been 2 1/2 years. He told the tenant that he was buying a property in Europe to retire to and that he needed the sale proceeds from this condo to pay for that.
None of this had any effect on the tenant, who simply ignored the good deeds that Paul had done for five years, and let it be known that he wouldn’t let Paul’s retirement plans get in the way of his family of four continuing to live in a one-bedroom condo for significantly under-market rent.
You might say, “David, can you blame him?” And on that, you might not be wrong.
But if that’s the case, then we have seriously messed up our system.
We have built a system in this city where the government has essentially absolved itself of any liability to construct and oversee a large segment of the housing market.
The government, at some point in the last two decades, has shifted the public burden to the private sector.
Instead of building and maintaining housing, whether that housing is at or below market, the government has allowed developers in the private sector to determine everything in our market, from where to build, to what to build. As a result, we’re seeing the size of condos shrink (did you ever think we’d see 250 square foot units?) and some developments are seeing 70-80% of units constructed as one-bedrooms.
As a result, the perfect buyer for small, one-bedroom condos has become investors.
And the result of that, of course, is that individual investors are now playing landlord to a large percentage of Torontonians, where we might argue that in another day, at another time, in another world, this would be the job of the government itself.
Whether this was the plan all along or whether this was a convenient round-about, the result is the same: the government has tasked the private sector with a job that, in most places, falls under the public purview.
And over the last few years, the government has made it so incredibly punitive to be a landlord in this province that more and more people are getting out of the game.
Paul told me, “I’m a nice guy, I’m just not cut out for this. I’m not a killer. And you need to be one, out there today, with all this happening.”
Some of you will say, “Good riddance! People ‘getting out of the game’ is great for the tenants!”
But somebody has to own the condo that somebody else wants to rent. And if the government doesn’t want to own, maintain, and oversee a large chunk of our housing stock, then who?
I believe that the government has dumped a public sector responsibility on the private sector, and then enacted cumbersome and punitive laws on those in the private sector who are choosing to pick up the tab.
Yeah, I know: people make money investing in real estate. We’re not going to cry poor for “investors” who profit.
But we’re almost at the point where the person who lives in the property has more right to the property than the person who owns it. And the protections for tenants continue to ramp up, each and every time, minimizing the benefit of owning that property, and increasing the risk.
I kid you, not. If we reach a point where we drive all the landlords away, we will not be better off in this city. The informed folks know this. The naive want to make up their own logic tests.
With 400,000 people coming into Canada every year from here on out, and most of them ending up in Toronto and Vancouver, where are all of these people going to live? And with the government making it so hard to get a tenant out of a property, once they’re inside it, just how much more stringent and selective do you think landlords are going to be?
As for Paul, I have no clue what he’s going to do.
What would you do, if you were Paul?