Demolition or Renovation, that is the Question

Background

1. On or about March 27, 2023, upon a request by the tenant, the City of Toronto completed an inspection of the rental complex.  The City inspector determined that occupancy of the single-family residential dwelling has been changed to that of a residential single-family dwelling with two self-contained suites in the basement without the benefit of a permit(s). 
2. The rental unit that is the subject of the landlord’s application consists of a single room in the lower residential unit.  There were two tenants on separate leases occupying two rooms located in the basement. The tenant resided in Room L1 and the other tenant resided in Room L2.  The other tenant vacated her rental unit after the landlord received an Order to Comply from the City of Toronto. 
3. The Order to Comply by the City of Toronto provided the landlord with two options to avoid being fined by the city.  Option 1 required the landlord to apply for a permit and complete the work to bring the property into compliance and Option 2 allowed the landlord to revert the unauthorized use back to single family dwelling by August 15, 2023.  Option two was the most cost effective.
4. The rental complex as described by the Toronto Fire Services inspection order dated May 30, 2023, is a one storey detached house with a basement.  The upper residential unit is operated as a single-family residence and the lower residential unit (basement) is also operated as a separate single residential unit.  No building permit was issued for the lower residential unit.
5. The inspection order issued by the Toronto Fire Services noted 6 violations of the Fire Protection and Prevention Act, 1997 and directed the landlord to bring the property into compliance on or before August 22, 2023, or face fines in the amount of $20,000.00 per day until the property is brought into compliance. 
6. On or about April 25, 2023, the landlord served a Form N13 on the tenant seeking a termination of her tenancy and informing the tenant of the landlord’s intention to demolish the rental unit to bring the property into compliance.  
7. On January 8, 2024, the Member dismissed the landlord’s L2 application for the following reasons:

The Landlord has not been ordered by any other Act to demolish the rental unit but has been ordered to correct infractions so that the basement meet city bylaw standards. By issuing a notice of demolition to forgo expensive renovations does not constitute a project that is considered to be demolition where the unit will not exist in its current form, even though it may be considerably altered where the unit may be unrecognizable. I am not satisfied, therefore that the Landlord identify the correct reason for terminating the tenancy. As such, the Landlord has not established that the Landlord in good faith intends to demolish the rental unit. The Landlord has also not obtained the necessary permits for this work and the rental unit does not need to be vacant for the landlord to obtain the permits. As a result, the Landlord’s application must be dismissed.

Fact and Law

8. The landlord submits that Guideline 8 of the Landlord and Tenant Board Guideline states that the ground for a review includes an error in law.  The landlord submits that the Member erred in law in determining that,
   a. the landlord did not identify the correct reason for terminating the tenancy; and
   b. that the landlord did not obtain the proper permits for the work.
9. At paragraph 4 of her Determinations, the Member states, “By issuing a notice of demolition to forgo expensive renovations does not constitute a project that is considered to be demolition where the unit will not exist in its current form, even though it may be considerably altered where the unit may be unrecognizable”.
10. Although not expressly stated, it appeared that the Member erred in law in her determination that the intended work described by the landlord is not a demolition but rather a renovation.
11. With respect to the question of demolition or renovation, in TSL-04700-19, it is stated that the Divisional Court upheld the Board’s approach to the definition of demolition at paragraph 26-27 which states,
    Accordingly, a project will be defined as a renovation under the Act in a case where it is possible for the tenant to move back into the unit and a project will be defined as a demotion where it is not possible for the tenant to move back into the unit.
12. At paragraph 19 in TSL-04700-19, the landlord removed three units located in the basement and converted it into a large communal kitchen. Similarly, at page 30 of the Landlord’s Evidence Book, the Member was provided with a description of the Option 2 work that included removing all the interior wall studs and electrical and declading all interior walls to revert the rental complex back to a residential single-family dwelling. The description of Option 2 work included the complete removal of both secondary rental units (Room L1 and Room L2) from the basement where they would no longer exist. Once the work was completed, the tenant would not be able to re-occupy the rental unit because it would not be possible for the tenant to move back into her unit.
13. Guideline 8 of the Landlord and Tenant Board Guideline states that a ground for a review includes an unreasonable exercise of discretion which results in an order outside the usual range of remedies or results and where there are no reasons explaining the result. The landlord submits that the Member made a serious error in dismissing the landlord application and in doing so, has granted a result outside the usual remedies of the LTB.
14. The Members relied on Option 1 of the Order to Comply in her determination that, “The Landlord has not been ordered by any other Act to demolish the rental unit but has been ordered to correct infractions so that the basement meet city bylaw standards”. This reliance on Option 1 and disregard for Option 2 supported the Member’s determination that, “I am not satisfied, therefore that the Landlord identify the correct reason for terminating the tenancy”.
15. The landlord submits that the Member’s sole reliance on Option 1 and her disregard for Option 2 is an unreasonable exercise of discretion which results in an order outside the usual range of remedies or results and where there are no reasons explaining the result. The landlord submits that a consideration of both Options available to the landlord would have resulted in a decision that the landlord was well within her rights to choose Option 2 instead of Option 1.
16. Section 50 of the Residential Tenancies Act, 2006 states,
    50 (1) A landlord may give notice of termination of a tenancy if the landlord requires possession of the rental unit in order to,
    (a) demolish it;
    (b) convert it to use for a purpose other than residential premises; or
    (c) do repairs or renovations to it that are so extensive that they require a building permit and vacant possession of the rental unit. 2006, c. 17, s. 50 (1).
17. The landlord submits that Section 73 of the RTA does not require the landlord to obtain a demolition permit or be issued an order to demolish the rental unit. This is an optional requirement under this section of the Act as it state, “all necessary permits or other authority that may be required…”. It is submitted that the correct test required under Section 73 of the RTA is whether the landlord, in good faith, “intends to carry out the activity on which the notice of termination was based”.
18. In SWL-11978-18, 2018 CanLll 42751 (ON LTB), the City of Windsor issued an order against a landlord for repairs to a rental complex that consisted of less than 5 units. At paragraph 3 of the order it states,
    The Landlord’s board of directors have discussed at length the comparative merits of paying for the major renovations required to resolve the maintenance defects in the building versus its demolition. The board relied upon contractor estimates and other expert evidence to conclude that the cost to repair the structure far exceeded its value and that preferable economic course of action would be to demolish the residential complex. For instance, the entire electrical system would require replacement at a prohibitive cost to the Landlord. As well, the cost of utility consumption for the structure had become excessively high due to the inefficiency of the building. M.H. testified that to incur the high cost of repairs would undermine the Landlord’s mandate as a charitable organization and unduly tax its modest financial resources. As the Ontario Divisional Court held in Puterbough v. Canada (Public Works & Government Services, a landlord is entitled to make rational economic choices that may lead to eviction for the purpose of demolition.
19. At paragraph 12 and 13 in SWL-11978-18, 2018 CanLll 42751 (ON LTB) it states,
    12. The Landlord logically would require the rental unit to be vacated in order to demolish it. While the Tenant’s Legal Representative noted that the Landlord had yet to obtain a permit for demolition, subsection 50(1) of the Act does not require that the Landlord obtain such a permit before the Board can issue an order terminating the tenancy
    13. Where a landlord intends to demolish the rental unit, the Act is silent on the issue of permits. The only mention of building permits appears in paragraph (b), irrelevant to the current situation and even then only serves as measure of the extent of required repairs or renovations
20. In the case at bar the facts are consistent with the facts that were before Member Kevin Lundy in SWL-11978-18. In both cases, the landlord was issued an order to undergo expensive repairs to the rental complex and in both cases, the landlord made a rational economic choice that led to the application to evict the tenant for the purpose of demolition of the rental unit. Further to this, Member Lundy determined good faith of the landlord’s application was based upon an order to Comply by the City of Windsor and not by confirmation that the landlord had obtained the necessary permits as stated at paragraph 4 of this Member’s Determinations.
21. In Feeney v. Noble (1994), 19, O.R. (3d) (Div. Ct.), the test of good faith is genuine intention to demolish the residential unit and not the reasonableness of the landlord’s proposal as confirmed in subsequent decisions, the “good faith” requirement simply means a genuine intention to demolish the rental unit and not the reasonableness of the landlord’s proposal.
22. Notwithstanding the Member’s failure to address the question of “good faith”, it is submitted that in light of the facts herein, the landlord has proven her “good faith” intention to demolish the rental unit.
23. The landlord submits that by dismissing her claim, the landlord is left with only three options,
    a. Concede to the tenant’s demand for payment in the amount of $50,000.00 as compensation for the tenant to agree to terminate her tenancy.
    b. Remain in non-compliance of the City of Toronto order and risk being assessed fines in the amount of $20,000.00 per day; or
    c. Notwithstanding the doctrine in annunciated in Puterbough v. Canada (Public Works & Government Services, and Option 2 provided by the City of Toronto in its order to comply, pay the high cost to complete all the required fire code construction and administrative cost to obtain permits to change the use of the residential complex from a single family dwelling to a two family residential property.
24. The landlord submits that either of these options would be outside the usual remedies of the LTB as they would unjustly prejudice the landlord’s right to choose Option 2 being the most cost-effective option to comply with the City of Toronto order.
25. In light of the arguments submitted herein, it is respectfully requested that the order of this Member be set aside and the application of the landlord be granted or in the alternative, that a hearing de novo be ordered.
26. Due to the pending fines that could be levied against the landlord by the City of Toronto, the landlord respectfully requests that this request to review be decided on an expedited basis.