Contra Proferentem or Contradiction

BACKGROUND

1. The property that is the subject of the landlord’s application is a two-storey duplex with a fully self-contained finished basement.
2. The finished basement has a separate entrance from the backyard and contains a one-bedroom with a kitchen, dining room, family room, and a 3-piece washroom.
3. In or about September 2020, the landlord listed a rental unit on the MLS for lease with the following details:
   1. 4 + 1 bedrooms
   2. 3 washrooms (1x2piecexGround, 1x4piecexUpper, 1x6piecexUpper)
   3. Basement: None
   4. 10 rooms (Living, Dining, Kitchen, Breakfast, Family, Master, 2^nd. Bdrm, 3^rd. Bdrm, 4^th. Bdrm, Sitting)
   5. 1 kitchen
   6. 2,800 sq. ft. of living space
4. In October 2020, the landlord signed a lease with the tenants. The lease term commenced on October 7, 2020, for an eight-month term at a monthly rent of $3,200.00 per month.
5. The OREA lease signed by the parties included an atypical term that stated, “the landlord agrees not to rent out the basement separately during the 8-month rental period. Also, the landlord agrees to give one (1) keys to the tenant to enter the basement”.
6. On or about July 6, 2022 in a translated text message between the tenants and the landlord, the tenants acknowledged that they did not rent the basement from the landlord

7. Guideline 8 of the Landlord and Tenant Board Guideline states that the grounds for a review includes an error of law, an error of fact and an unreasonable exercise of discretion which results in an order outside the usual range of remedies or where there are no reasons explaining the result.
8. The landlord submits that the Member erred in law at paragraph 8 of his determinations when he states,
   “I find that the tenancy agreement is genuinely ambiguous.  I find that the doctrine of contra proferentem applied to this ambiguity.  Contra Proferentem refers to a rule in contract law which states that any clause considered to be ambiguous should be interpreted against the interest of the party that included this term.”
9. The landlord submits that the Member erred in law in his application of the doctrine of Contra Proferentem in light of Section 202 of the Residential Tenancies Act, 2006 which states,
    
   Findings of Board

   202 (1)  In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,

   (a) may disregard the outward form of a transaction or the separate corporate existence of participants; and

   (b) may have regard to the pattern of activities relating to the residential complex or the rental unit.

10. The landlord submits that in taking this narrow approach in determining the intention of the parties, the Member closed his mind to the direction outlined in Section 202 of the RTA, and in doing so, applied an incorrect test in coming to his conclusion in paragraph 12 of the order that the rental unit included the basement unit.
11. It is submitted that the Member, in focusing on the ambiguity of the contract and interpreting the ambiguity to the detriment of the landlord, failed to apply the direction set out in Section 202 to, “…ascertain the real substance of all transactions and activities relating to the residential complex or a rental unit and the good faith of the participants”.
12. In Elkins v. Van Wissen, 2023 ONCA 789 (CanLII), the Court of Appeal of Ontario address a similar error in statutory reasoning where the Board Member failed to apply the direction outlined in Section 202 of the RTA. At paragraph 31 of Elkins, the Court of Appeal reviewed the first part of the three-part test under Section 57(1)(b) that restricted a Members’ inquiry to the intention of the landlord at the time the N12 notice was given and at paragraph 40, the Court of Appeal found that this was an unduly narrow approach in determining bad faith that amounted to an error of law.
13. At paragraph 43 in Elkins, the Court of Appeal states,“…the Board must consider all of the evidence before it that is relevant to the landlord’s bad faith under s. 57(1)(b).  It is an error of law for the Board to restrict its consideration to the evidence at the point in time when the landlord gives the tenant a s. 49 termination notice”.
14. At paragraph 45 in Elkins, the Court of Appeal further states,
    “it could be argued that s. 57(1)(b) implicitly limits Board scrutiny to the landlord’s knowledge when it gives s. 49 termination notice.  However, such an interpretation runs afoul of s 202(1) of the RTA.  Under S. 202(1), the Board is required, when making finding on an application to ascertain the “real substance” of all transactions and activities relating to…. a rental unit and the good faith of the participants.
15. Although Elkins relates to the good faith test under Section 57(1)(b) of the RTA, the reasoning set out in Elkins denotes the broader approach that must be taken by Members in determining the true intentions of the parties when adjudicating applications. Contrary to Elkins, the Member erred in law by restricting his approach solely to the terms within the tenancy agreement that could be construed against the landlord rather than taking a broader approach to determine the real intention of the parties.
16. With respect to the determinations relied upon by Member Quattrociocchi in Sertic v. Mergarten, 2017 ONSC 263, the landlord further submits that the Member erred in law in his interpretation of the Sertic.
17. In Sertic, the Divisional Court addressed the question of whether the use of a rental unit for storage constituted residential occupation. The fact situation although somewhat dissimilar from the case at bar, relates to a landlord who resided in the upper floor of the property that brought an application under Section 48 of the RTA to occupy the basement for personal use. At paragraph 8, the Divisional Court found that the Vice-Chair’s interpretation that requiring the premises for the purpose of storage and “other uses” was a reasonable one.
18. The landlord submits that the Member erred in law by misinterpreted the Divisional Court finding when he dismissed the landlord’s application based upon the tenant being allowed by the landlord to store his belonging in the basement. Contrary to the Member’s interpretation of Sertic, the Divisional Court found that a residential purpose must include both components, storage and other uses. The tenants’ oral testimony confirms that when they discovered that the basement was vacant, they requested the landlord’s permission to store their belongings in the basement to which the landlord agreed.  The tenants did not request and was not granted access to the basement unit for any “other use” which the landlord submits is the missing component required to establish residential purpose.
19. At paragraph 11 of his determinations, Member Quattrociocchi states,
    Although the tenant’s own testimony confirms that they did not physically reside in the basement unit, the tenants did state that they used the basement for storage of their belongings, which constitutes residential use as confirmed by the Divisional Court in Sertic
20. The landlord submits that the Member erred in law in his interpretation of the legal doctrine set out in Sertic v. Mergarten and as a consequence of his error, the Member incorrectly determined that the tenants use of the basement solely for storage purpose was for a residential purpose and therefore the basement was a part of the rental unit.
21. The landlord further submits that using the basement solely for storage and not also for “other uses” is not a residential purpose and by giving the tenants a key and allowing them to use the basement solely for storage purposes is not a residential purpose and could not be interpreted that the landlord intended to rent the basement to the tenant for a residential purpose. In light of this fact, the basement cannot be defined as part of the rental unit that was leased to the tenants for residential purposes.
22. Further, no evidence whatsoever was put before the Member that the parties intended to make the basement accessible to the tenants for “other uses” other than storing their belongings and in fact, the tenants stated that they almost never went into the basement when they were questioned why they were not aware that water was continually leaking into the basement and causing substantial water damage.
23. The landlord submits that the Member made material errors of law in his determination that the basement was part of the rental unit and in doing so, has granted the tenants a result outside the usual remedies granted by the LTB which includes granting the following additional benefits to the tenants when compared to the rental unit details in paragraph 3,
    1. An increase from 4 + 1 bedrooms to 5 + 1 bedrooms
    2. An increase from 3 washrooms to 4 washrooms
    3. An increase from no basement to a full basement space
    4. An increase from 10 rooms to 14 rooms
    5. An increase from 1 kitchen to 2 kitchens
    6. An increase from 2,800 sq. ft to 3,600 sq. ft. of living space
24. The landlord submits that these additional benefits granted to the tenants by the Member were never intended or contemplated by the landlord or the tenants in their negotiations before, after the signing of the tenancy agreement or at any time prior to the issuance of the order and that the Member’s in failing to take a broad approach as directed in Elkins has resulted in an order outside the usual remedies granted by the LTB.
25. Further to this, a review of the Member’s decision is in the public interest as it extends the jurisdiction of the Board to include rental units that are provided solely for storing belongings and not for residential purposes.
26. As a result of the foregoing, the landlord respectfully requests that the order of the Member dated September 11, 2024 be set aside and the application of the landlord be granted or in the alternative, that the review be granted and a hearing de novo be scheduled.