What is the correct test for bad faith?

Posted: September 08, 2015
By: Global Legal Services

ARGUMENT

1.         In Wakula et al v. Yaoutsis, TST-58317-14, the Member determined that,  

            “……the issue before the Board is whether at the time it was given, the notice was given in bad faith.”

2.         In the Wakula case, the tenants were pensioners and had resided on the main floor and in part of the basement of the rental unit for over 14 years. 

3.         In or about June 2014, the landlord provided the tenants with verbal notice that he was going to move into the rental unit and bring his elderly mother with him.  He granted the tenants an extension until October 31, 2014 to vacate the rental unit.  The rental unit was located in the High Park area and as a result of the increased property values over the period of 14years, the tenants were unable to find a comparable rental unit and were forced to vacate the rental unit on August 30, 2014 and move to Hamilton.

4.         The Member accepted the landlord’s evidence that when the landlord’s mother heard that the tenants were moving on August 30, 2014 instead of October 31, 2014, she decided not to move into the rental unit.  No consideration was given by the Member to the fact that despite knowing that his mother had no intention of moving into the rental unit well in advance of August 30, 2014, the landlord did not advise the tenants of his change in plans and allow them to remain in the unit.

5.         At the hearing, it was determined that the landlord did not occupy the rental unit for the purpose of residential occupation and instead, advertise the unit for rent in September 2014.  In or about November 2014, new tenants rented the main floor of the rental unit that did not include part of the basement and paid at least $350.00 more per month in rent.

6.         In her reasons, the Member determined that the test to be applied under Section 57 of the RTA was,

            “…….at the time the notice was given the landlord’s intention that his mother would move into the unit.  That this has changed around the time the tenants were moving out, does not negate that the notice was given in good faith.”

7.         In other words, the Board must determine what was in the landlord’s mind at the time the notice was given and an examination of the actions of the landlord subsequent to the notice is unwarranted.

8.         In their review of the Member’s decision, the tenants relied upon Fava v. Harrison, 2014 ONSC 3352 case in their submission that the actions of the landlord subsequent to the notice should be the decisive factor in determining bad faith. 

9.         At paragraph 17 of the Fava case, the Divisional Court stated,

            “…..the motives of the landlord in seeking possession of the property are largely irrelevant and that the only issue is whether the landlord has a genuine intent to reside in the property.  However, that does not mean that the Board cannot consider the conduct and the motives of the landlord in order to draw inferences as to whether the landlord desires, in good faith, to occupy the property.”

10.       At paragraph 18 of the Fava case, the Divisional Court stated,

            “…..In or view, Board Member Van Delft’s conclusion restricts the meaning of the term ‘good faith’ to an unreasonable degree,  By excluding any consideration of the landlord’s motives in deciding whether the landlord has acted in good faith, she has unduly restricted the consideration the Board must give to that time .”

11.       The Reviewing Member upheld the decision and determined that there was no serious error.  The Reviewing Member considered the Divisional Court’s decision in Fava v. Harrison, 2014 ONSC 3352 and decided that the proper test was to “……minimizes the importance of a landlord’s motivation in the face of the more important question of “whether the landlord has a genuine intent to reside in the property.”

12.       In his reasons, the Reviewing Member did not address the central issue raised by the tenants with respect to the subsequent actions of the landlord and instead focused on the events that occurred prior to the notice and in doing so, the Reviewing Member unduly restricted and excluded considerations of the landlord’s motives in deciding whether the landlord has acted in good faith.  

13.       In Gill et al v. Johnson, the Member who reviewed the Wakula case was again faced with the question of applying the correct test to determine that the Landlord gave notice of termination for her own use in bad faith pursuant to Section 48 of the Residential Tenancies Act, 2006.

14.       In this case, the fact situation closely mirrored the events that transpired in the Wakula case.  The landlord was employed as a nurse in the USA for many years and intended to return to Canada.  The landlord gave notice under Section 48 of the RTA but prior to the termination date of the notice, the landlord became aware that she would not be able to occupy the rental unit due to her inability to secure employment as a nurse in Canada.  As a result, the landlord failed to occupy the rental unit for the purpose of residential occupation after the tenants vacated the rental unit. 

15.       After the tenants moved out of the rental unit, the landlord proceed to complete renovations to the rental unit and re-rented the unit soon thereafter for a higher rent.

16.       In his determinations, the Member stated,

            “……good faith intentions has to be a reasonable one.  It has to be more than a whim…….because the landlord did not do the bare minimum to determine whether her plan for which she evicted the tenants could become reality.  Very simple inquiries could and should have been made before displacing the tenant in this way.  My review decision was not inconsistent with that order [Wakula case] nor is it inconsistent with this one.”

17.       It is interesting to note that if we applied the Reviewing Member’s test of very simple bare minimum inquiries to the Walkua case the tenant’s application would likely have been granted.  A simple inquiry prior to the notice would have informed the landlord of his mother’s expectation with respect to the time lines in occupying the rental unit and therefore, it could have been determined that the notice was given in bad faith.

18.       In the cases referred to herein, Board Members have relied upon the following test,

  1. Landlord’s intention at the time the notice was given;
  2. Landlord’s very simple bare minimum inquires prior to notice; and
  3. Landlord’s actions subsequent to the notice.

19.       Notwithstanding the discretion granted to Members under the RTA, it should be incumbent upon the Board to ensure that its decisions maintain a high degree of consistency so that not only is justice done but also the appearance of justice is preserved in the public domain. 

20.       Failing to adopt a single test in deciding cases prevents the proper administration of justice and runs contrary to the legal principles set out by the Divisional Court in the Fava case which in our view is the proper test to determine that the Landlord gave notice of termination for own use in bad faith pursuant to Section 48 of the Residential Tenancies Act, 2006.

Posted under Residential Tenancies Act
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