Archive for February, 2014

When Does Residential Tenancy End?

Thursday, February 20th, 2014

Normally I don’t deal with residential tenancy issues.  And normally I wouldn’t include a post on residential tenancy issues in a blog dedicated to small business.  However, I have a few clients who, on the side, own additional properties and rent them out.  One of them called me a little while ago and had a question that sent me on a merry chase to ultimately find what appears to be the only case in Ontario to address the issue.  Since it’s a relatively obscure case (not in the reasoning but in the sense that it wasn’t easy to track down), I thought I would “share the wealth” in case anyone else ever had to look into this issue.

For my clients, they are usually renting to higher net worth individuals.  In this case, the lease was with a professional for property in the Rosedale area at a quite hefty rent per month.  The tenant wanted a long-term lease but also wanted some flexibility.  The longer the term, the better for the landlord because then the landlord gets the benefit of a good tenant and a consistent income stream.  The resolution of their divergent interests was to have an initial term and then have renewal clauses that permitted the tenant to renew on giving notice at least 3 months before the current lease term expired.

Now comes the rub.  My client had a married child who, with the child’s spouse, was about to have their first child (my client’s grandchild).  The children (and their baby on the way) needed a larger home and my client wanted to let them stay at the house that was rented.  The current term of the lease was to expire in 4 months and the baby was due in 5 months, so my client wanted to terminate the tenancy and then have the children move in and prepare for the baby’s arrival.  The Residential Tenancies Act has a provision that allows a landlord to terminate a tenancy if the landlord needs the property for his/her needs – including the needs of any children.  This is found in Section 48.  Notice of termination of the tenancy must be given at least 60 days before termination and termination is effective, if the tenancy is for a fixed term (as opposed to a month-to-month tenancy), on “the end of the term”.

So, what is “the end of the term”?  Was it 4 months away or, because there were two remaining options to renew for one-year terms, 2 years and 4 months away?  The only case that appears to have addressed the question is from 1996 and a decision of Justice Sutherland in Landlord and Tenant Court (back in those days, judges still handled landlord and tenant matters – now it is the Landlord and Tenant Board).  The case looked at similar wording under the old Landlord and Tenant Act and Justice Sutherland came to the conclusion that “the end of the term” includes not only the current term but also all renewal periods – if they are exercised.  So, the answer to the question appears to be 2 years and 4 months – IF the tenant exercises the renewal options.  The case, Wise v. Frankel can be found here:  http://canlii.ca/t/1w5hm (sorry, the link function on WordPress seems to be acting up today).

This is an old decision and could be distinguished by the Landlord and Tenant Board if a similar case went before it today.  But, for the moment at least, it stands for the position that you have to include renewal periods in determining when the term ends – and thus when the landlord can terminate the tenancy.  Landlords who are concerned about this type of situation may wish to add wording to their renewal clauses that the renewal cannot be enforced in the event that the landlord needs the property for his/her use or that of his/her family and gives notice to this effect before the tenant exercises any right of renewal.

Something to think about.

CALC