April 1st, 2014

Can tenants voluntarily pay the landlord extra rent or a deposit for pets?

A recent column in the Toronto Star has caused a lot of excitement for residential landlords all over the province.

Ontario landlords often complain about the challenges caused by not being able to charge tenants a damage deposit.

It’s common for landlords to face a big clean up job or lots of needed repairs when tenants move out.

This not only costs landlords a lot of money, it also has a negative impact on new tenants who move in and expect a clean and well maintained property as this The Grid article explains.

To recoup the costs of cleaning the rental unit or fixing the property landlords have to pursue their former tenants and take them to Ontario Small Claims Court.

Some landlords are successful at this, as you can see at this story ‘Ontario Landlords and Small Claims Court‘, it can be a difficult and time-consuming process.

Some landlords simply cannot find their ex-tenants to serve them court papers to get the process even started.

Background

The Toronto Star story explained the background to their story.

Mississauga landlord Tanveer Bumbia rented to a tenant who was in Canada on a visitor visa.

At first Bumbia had concerns the tenant would be able to continue to fulfill the terms of the lease and keep paying rent.

However, he rented to her because the tenant paid one year of rent up front and a security deposit.

After moving in the tenant filed to get the extra rent and security deposit back because the Residential Tenancies Act states landlords can only request ‘first and last months’ rent.”

During the case an email from the tenant’s Realtor was disclosed.

The email clearly stated the tenant would pay all twelve months of rent.

Since the tenant offered the money voluntarily the judge decided it was legal (while the damage deposit was not because the tenant hadn’t offered it).

The tenant appealed the verdict and in February 2014 another decision was made a Superior Court judge.

This new decision (which can be read here) agreed with the first one. 

Judge Marrocco explained:

1. A landlord cannot require the tenant to pay anything more than just ‘first and last   

   month’s rent’ in order to agree to rent t the tenant.

2. If the tenant offered to pay more rent money upfront the landlord could accept it and it  

    would be legal

3. The landlord would be required to pay the tenant interest on this extra rent according

     to the Act

What Does This Mean For Ontario Landlords?

According to the Toronto Star story, the decision will have an impact on how tenants and landlords do business together.

For example, you can’t put in your rental advertisement that you will require anything more than just first and last months’ rental payment.

You also can’t advertise you will charge a security or pet deposit.

If the tenant voluntarily offers to pay the landlord extra rent the landlord can accept it.

Also, if the tenant volunteers the landlord can accept a deposit for things such as potential pet damages.

Landlords Speak Out

The Star story has caused a stir for landlords.

You can see this on some of the post at the Ontario Landlord Forum.

Some landlords are excited about giving tenants more options to negotiation with them.

“This could really be a game changer and help landlords and good tenants.

Tenants who might have bad credit or pets and are having a hard time finding a landlord to rent them because of the risks for the landlord…”

An new Ottawa landlord is confused about what the real rules for landlords are:

“What’s going on? I called the Landlord and Tenant Board 1-888 telephone number and asked about this. The customer service representative informed me landlords can only collect ‘first’ and ‘last’ months’ rent.”

An Alberta landlord finds the who situation bizarre because it doesn’t make sense to ever deny tenants the right to negotiate to rent from a landlord:

“Many of us out there think it’s insane landlords in Ontario can’t charge a damage, security or pet deposit.

This means the tenants don’ t have any ‘skin in the game’ and won’t treat your property right.

The fact that a person who wants to rent from you offer you more money might not be able to do so is just bizarre.”

Tenants Should Have the Right To Freely Negotiate

We support a tenant’s right to negotiate with a potential landlord.

We also feel it’s time to change the Residential Tenancies Act to allow landlords to ask for security and pet deposits.

With some protection against damages more people will invest in residential rental property in Ontario which will lead to more high quality rentals and more choices for tenants.

We will follow this carefully to help Ontario landlords navigate an ever more confusing legal environment.