Property Manager (Standard of Care)

Moosa v Hill Property Management Group Ltd., 2014 ONSC 3717 (CanLII)

[68] In order to succeed in a claim for negligence, the Plaintiffs must prove on a balance of probabilities that Hill Property owed a duty of care that it breached and that that breach caused the Plaintiffs' injuries.

(a) Was there a duty of care?

[69] In my view, the relationship between the Plaintiffs and Hill Property was sufficiently proximate to render the damages reasonably foreseeable and to justify the imposition on Hill Property of a duty of care to the Plaintiffs. It acknowledged in its brochure that a less than quality tenant could cause losses and damages. The parties were dealing directly with each other. The Plaintiffs looked to the Defendant to be their eyes and ears, to stringently screen potential tenants and to competently manage the property for them. There are no sufficient policy reasons to limit the duty of care beyond the limit contained in 3(c) of the Sample Contract. Damages caused by Hill Property's breaches of its duty of care were foreseeable. There is no concern about indeterminate liability here.

(b) Standard of care

[70] Counsel for the Plaintiffs called Mr. John Gelston ("Gelston") to give evidence on the standard of care of property managers and risk management practices. He was qualified as an expert in risk management for property managers. He has been teaching risk management to property managers for approximately 20 years at the Building Owners and Managers Institute, an educational institute for property managers.

[71] Gelston opined that Hill Property breached the standard of care of a reasonably prudent property manager in the screening of the Whites and in managing the ongoing relationship with them.

[72] Gelston also highlighted the importance of continuing to exercise proper diligence when red flags such as the frequent payment of rent in cash and mounting arrears arise. He stated there were several steps that a prudent property manager should take in the circumstances. None of those steps were taken by Hill Property.

[73] Gelston opined that Hill Property’s actions with respect to the screening of the Whites and the ongoing management of the tenants did not meet even a minimal standard of care. He opined that Hill Property fell below the required standard of care in screening the Whites as tenants. He highlighted the importance of obtaining a credit history, employment history and verifying income as critical elements in determining whether to accept a prospective tenant. He mentioned the failure to canvass their previous landlords to obtain references, and the failure to obtain the Whites' employment history. Although he obtained a letter from Meadowvale Ford, on its face, White's employment was conditional on his being able to work legally in Canada. The letter did not set out White's expected earnings. Before signing the lease, Hill Property did not confirm that White could legally work in Canada or that White was indeed working at Meadowvale Ford.

[74] Once the Whites occupied the property, their rent was routinely late. Gelston opined that a prudent property manager would have looked into the reasons for the tenants’ late payment.

[75] When paid, the rent was often paid in cash. Gelston opined that cash payments can be a red light for proceeds of crime. At the very least, the circumstances should have triggered further inquiries: a credit report, more frequent inspections, confirmation of employment, etc. Hill Property did not sufficiently react to the warning signs, including late payment and payment in cash, and take appropriate steps to evict.

[76] Gelston gave evidence that after the Whites' tenant's policy expired on April 23, 2005, Hill Property failed to ensure that they maintained tenants insurance as required under clause 12 of the lease. After April 23, 2005, Hill Property did nothing to ensure that the Whites had obtained appropriate replacement coverage.

[77] Counsel for Hill called Lucille Yates to give evidence about the standard of care owed by property managers in the selection and screening of tenants. She opined that Hill Property acted reasonably in securing the Whites as tenants. She said it is more difficult to find tenants in Mississauga than downtown Toronto. Workers with stable incomes in Mississauga can often afford to buy. When tenants are coming from another country, there are instances when credit checks cannot be obtained. In 2004-2006 she said she could often, but not always, obtain credit checks from Equifax on tenants coming from the United States. She would sometimes rent without credit checks. She said she would be leery, if, before the lease was signed, tenants advised they would be paying rent by cash. She opined that the letter from Meadowvale was a reasonable confirmation of employment and said she generally does not follow up on personal references. She testified that she generally interviews prospective tenants and exercises her own judgment.

[78] However, she said before she agreed to rent to the Whites, she would have emailed the owners and informed them of the situation.

[79] She admitted that in situations where there are few documents or sources of information available, she would monitor a tenant more closely. If payment were sporadic, she would try to find out why. She would be quick to take steps towards eviction.

(c) Was the Duty Breached?

[80] I accept the evidence of Gelston. In my view, Hill Property fell below the standard of a reasonable property manager in failing to adequately screen the tenants or discuss the risks of leasing to the Whites [given the dearth of information from and about them], and in not advising the Plaintiffs to evict the Whites as tenants in October 2004 when eviction was legally possible. After continuing rent arrears, it should have evicted the Whites when in a legal position to do so in 2005 and 2006.

(d) Was there sufficient causation?

[81] In my view, Hill Property's negligence caused the harm suffered by the Plaintiffs. Had Hill Property properly screened the tenants and discussed the absence of information on the Whites and the associated risks, the Plaintiffs would not have accepted them as tenants. The loss would not have occurred. Had Hill taken adequate steps and pursued eviction when legally entitled to do so, the loss would not have occurred.

[82] Had Hill Property followed up to ensure renewal of a $1 million policy of tenant's insurance [with no exclusion for illegal activity], the loss would not have occurred.

[83] Although both experts supported a duty to be more vigilant, to do more inspections, there is no evidence as to when White started his illegal meth lab and it is impossible to know whether more frequent inspections would have prevented the loss.

Conclusion

[84] For the aforementioned reasons, I have found the Defendant Hill Property's mismanagement, breaches of contract and negligence specified above caused the damage to the Plaintiffs' property.

[85] Damages were agreed in the amount of $575,000.