Cosmetic and Prestige (AGI)

Caselaw.Ninja, Riverview Group Publishing 2021 ©
Date Retrieved:	2024-04-28
CLNP Page ID:	2026
Page Categories:	AGI Applications
Citation:	Cosmetic and Prestige (AGI), CLNP 2026, <https://rvt.link/1w>, retrieved on 2024-04-28
Editor:	MKent
Last Updated:	2022/11/30

Homestead Land Holdings Limited v Abdelmalak, 2020 CanLII 117955 (ON LTB)

17. As I explained at the hearing, the Landlord must lead evidence to establish that each of the capital expenditures claimed meets the definition of “capital expenditure” as set out in s. 18(1) of the regulation. It says:

“capital expenditure” means an expenditure for an extraordinary or significant renovation, repair, replacement or new addition, the expected benefit of which extends for at least five years including,

(a) an expenditure with respect to a leased asset if the lease qualifies as determined under subsection (2), and

(b) an expenditure that the landlord is required to pay on work undertaken by a municipality, local board or public utility, other than work undertaken because of the landlord’s failure to do it,

but does not include,

(c) routine or ordinary work undertaken on a regular basis or undertaken to maintain a capital asset in its operating state, such as cleaning and janitorial services, elevator servicing, general building maintenance, grounds-keeping and appliance repairs, or

(d) work that is substantially cosmetic in nature or is designed to enhance the level of prestige or luxury offered by a unit or residential complex;

(...)

Number 29 Corridor renovations

102. The Landlord says all of the finishes in the corridors showed signs of wear and lack of maintenance. Some of these deficiencies had been noted by the local municipality in its work order including in the lobby area. Photographs entered into evidence show badly stained carpets that had been taped down along seams that were lifting, and some damage to walls that were typically wallpapered. The Landlord replaced floor tile, carpet tile, and wall tile. It installed chair railing halfway up the walls with wall paper above and painting below in order to make maintenance cheaper and easier; covering up scuff marks on a painted surface is easier to do than replacing or repairing wallpaper.

103. At the elevator landings some work had been done over time as a result of repairs and plumbing blow outs, that resulted in visible repairs where the repair did not match the existing surface or tiles. The local municipality indicated that it required all surfaces to be continuous and matching. Given the age of the building that meant that the surfaces in the elevator landings needed to be re-done as old tiles and surfaces could not be matched.

104. Evidence led at the hearing supports the assertion that the finishes chosen were of mid-range quality.

105. This work has resulted in cosmetic improvement to the residential complex but that does not mean it fails to meet the definition of capital expenditure. I say this because the purpose and nature of the work done was not “substantially” cosmetic in nature or “substantially” designed to enhance the level of prestige or luxury offered; rather the improved cosmetic appearance was a by-product of work that was done to meet the requirements for necessary repair set by the municipality.

(...)

Number 5 Exterior and interior signage

116. In additional to the illuminated large sign outside the building, the Landlord also replaced and added additional signage both inside and outside the residential complex.

117. According to the materials filed with the application this was “standard signage” for a new acquisition. Those same materials suggest that all of the signage was replaced regardless of whether or not it was missing. According to the Landlord, there were a number of required signs that were missing, and the VP of Operations provided two examples in his oral testimony involving maintenance closets. Some of the signage supplied is required by law; for example, the fire route outside must be marked; and fire equipment and escape routes must be properly identified inside a residential complex.

118. There can be no doubt that this work constitutes an extraordinary or significant renovation and replacement that is expected to last five years or more. But one question that does arise here is whether or not the work was substantially cosmetic in nature or designed to enhance the level of prestige or luxury offered by a unit or residential complex. I say this because the Landlord’s evidence suggests that the replacement of all of the signage was in large part a rebranding exercise whereas only a handful of signs were actually missing. No evidence was led to suggest that because a handful of signs were missing, all of them had to be replaced.

119. So it seems to me more likely than not that the additional signage here was substantially cosmetic in nature or designed to enhance the level of prestige or luxury offered by a unit or residential complex. It therefore does not meet the definition of capital expenditure.

120. I would also observe that even if the work did meet the definition of capital expenditure, except for the two examples provided of missing signs on maintenance closets, no evidence was led that the new signage constitutes an eligible capital expenditure. The missing signs were not related to fire equipment, escape plans, or the fire route, and replacing any that were missing would have been a very small fraction of the work done. It cannot be said the work was necessary to protect or restore the physical integrity of the residential complex, or to comply with subsection 20(1) (except to supply and replace the handful of missing ones), or necessary to maintain the provision of a plumbing, heating, mechanical, electrical, ventilation or air conditioning system. There was also no evidence led to suggest the new signage provided access for persons with disabilities, promoted energy or water conservation, or maintained or improved the security of the residential complex (although it might have).

121. Given all of the above, the claim with respect to new and additional signage is denied.

TSL-49263-14 (Re), 2014 CanLII 76198 (ON LTB)

Capital Expenditure# l - Balcony Repairs:

6. It was the Tenants' position that the portion of the Landlord's application based on balcony repairs should be dismissed because this item would fail to meet the definition of a capital expenditure as defined in Ontario Regulation 516/06 (the 'Regs 516/06') because the work resulted in a more "cosmetically pleasing appearance" to the complex. In other words, the work unde11aken by the Landlord was substantially cosmetic in nature.

7. For the reasons provided below, I am not satisfied that the work was substantially cosmetic in nature or was designed to enhance the level of prestige of the residential complex.

8. Subsection 18(1) of the Regs 516/06 defines a capital expenditure as an expenditure for an extraordinary or significant renovation, repair, replacement or new addition, the expected benefit of which extends for at least five years. However work undertaken by the Landlord that is substantially cosmetic in nature or is designed to enhance the level of prestige or luxury offered by the residential complex would not be considered a capital expenditure.

9. The Landlord's Witness # I, a professional engineer and the contractor who oversaw the balcony restoration project testified as to the scope and why the work needed to be completed.

10. It was the Landlord's evidence that the work to the concrete balcony slabs was undertaken to restore the physical integrity of the slabs which involved removing loose concrete around the edges, removing the deteriorated base plates and installing reinforcing rods in the slabs.

11. It was the evidence before me that the balcony railings throughout the complex were rusted as were the anchor assemblies that attached them to the concrete balcony slabs. In some cases the degree of damage caused by the rust had place the physical integrity of some railings into question. In addition, the height of the old balcony railings did not comply with the current building codes. Given the condition of the balcony railings and anchors, it was decided that the railings should be replaced as opposed to attempting to repair and then retrofit them to comply with the building codes.

12. The contractors also applied a membrane/coating to the slabs that permits water to exit the concrete but resist water penetration as a preventive measure to ensure the integrity of the concrete would not be compromised in the future.

13. Tenants' Witness #1 and #2 testified that the appearance of the concrete balcony slabs and railings were a substantial improvement over the old balconies. It was their opinion that the work resulted in a more "cosmetically pleasing appearance" to the complex for which the Landlord would benefit by attracting new tenants to the complex.

14. While a capital improvement has an inherent cosmetic component in that the new balconies and railing would have a more "cosmetically pleasing appearance" than the old rusted, deteriorating ones that they replaced, the test that must be applied is whether the work "substantially cosmetic" in nature. Based on the evidence before me, I do not find that to be the case in this instance. I am satisfied that the work undertaken to the balcony slabs and railings was necessary to ensure the integrity of the concrete balcony slabs and to address the rusting railings. As a result, I find that this item meets the definition of "capital expenditures" as set out in Regs 516/06.