Rent-To-Own

TEL-24151-12 (Re), 2012 CanLII 98032 (ON LTB)

1. The tenancy began February 1, 2008. The Tenants are a mother and daughter. The parties entered into a lease agreement/rent- to-own provided in evidence indicating that the parties agreed to a monthly payment of $1,600.00, $300.00 of which was paid towards the purchase price/down payment of the rental unit located in a condominium complex.

17. Rent is defined in the Act (section 2) as the amount a tenant is required to pay in return for occupying a rental unit. With this in mind, the evidence shows that that the rent amount the parties agreed to at the start of the tenancy was $1,300.00; despite the fact that the Tenants were also required to pay $300.00 each month towards the purchase of the property.

18. Section 136 or the Act also states that “rent charged one or more years earlier shall be deemed to be lawful rent…” Section 136 further states that an increase in rent shall be deemed to be lawful unless an application has been made within one year after the date the increase was fist charged and the lawfulness of the rent charged is in issue in the application.”

19. In keeping with the above definition of “rent”, and considering that the amount of $1,300.00 that the Tenants paid for the initial 12-month period was exclusively for occupying the rental unit, I find the lawful rent for the first 12-month period is $1,300.00. Furthermore, contrary to the Landlord’s claim, I find the Tenants’ evidence, supported by subsequent purchase and sale/lease agreements tendered, that the offer to own the rental unit continued beyond February 2009; and that they continued to pay the Landlord $1,600.00, $1,300.00 of which constituted “rent” and $300.00 towards the purchase of the property. There is no indication that the parties agreed to increase the “rent” portion of the monthly payment to $1,600.00 or that the required Notice of Rent Increase (NORI) was issued.

20. For the above reasons, and in keeping with the above sections of the Act, I find that the lawful rent remained at $1,300.00.

21. Notwithstanding, in the Form N4 Notice of Termination, the Landlord claims a monthly rent of $1,600.00 contrary to the above finding of the amount of the lawful rent, as it complies with the Act. For this reason, I find that the Notice is invalid, and therefore, while the application can be amended to consider arrears only, termination of the tenancy cannot be considered in this application.

NOL-22623-16-RV-IN-2 (Re), 2016 CanLII 99694 (ON LTB)

At the hearing, the parties attempted mediation; there, they raised the issue of the Board’s jurisdiction to hear the matter and they asked for a consent order stating that the parties agree that the Board does not have jurisdiction to hear the case because it deals with a rent-to-own contract. In return for agreeing to the consent order, the Landlord agreed to drop the claim for unpaid rent from the Tenants. The Landlord also agreed to the review hearing.

I refused to endorse the consent order arrived at by mediation.

7. The parties allege that because their agreement is a “rent-to-own” contract, the Act does not apply. I find that this issue has already been canvassed by the Divisional Court in a few cases. In the end, the Court has decreed that the Board must undertake an analysis of all the circumstances leading to the agreement pursuant to section 202 of the Residential Tenancies Act, 2006.

9. In the case at hand, the Tenants stated that they wanted a determination from the Board that the Board did not have jurisdiction so they could go to Small Claims Court in order to get back the money they paid under the “Option to Purchase Agreement” entered into by the Tenant BB and his father, CBB. It is noted that JJ, the other Tenant listed in the original order issued on March 23, 2016, is not a party to the Agreement. Unless another document lists JJ as a party to the tenancy agreement, this Tenant should not be subject to an order from the Board. There is no evidence before me of any other agreement between these parties.

10. While the Option to Purchase starts off with the possibility of exercising an option to buy the property where the Tenants reside 60 days before the end of the 12-month term ending on May 31, 2016, the balance of the agreement reads like a standard rental agreement where the “occupation payment” of $950.00 is payable by the Tenants for the right to occupy the premises subject to the “option to purchase”. The Option also adds an extra payment of $287.50 towards the option to purchase; this payment is in addition to the “monthly occupation payment” and is 50% non-refundable. It is clear from a plain reading of the Option to Purchase that there are two distinct parts to the agreement: one for occupancy of the premises and one for the possibility of purchasing the premises if certain conditions are met. I find that the $950.00 payment meets the definition of “rent” as defined in s. 2 of the Residential Tenancies Act, 2006. Therefore, I find that the relationship dealing with occupancy of the residential premises is one of Landlord/Tenant and is subject to the Residential Tenancies Act, 2006.

11. I also find that the option to purchase is a contract that is separate from the “rental agreement”; should the option have been exercised, then this would have become a separate offer to buy the residential property.

12. Any amount of money that the Tenants have paid to the Landlord towards the “Option to Purchase” is therefore outside of the Board’s purview; any claim by either party should be brought before another forum.

2324692 Ontario Inc. v. Stephane Savard ONLTB SWL-13588-18

4. Paragraph 3 of the Option to Purchase Agreement sets out that for each month that rent is paid pursuant to the Tenancy Agreement, the Tenant would earn a "Monthly Option Credit" of $380.00 towards the down payment of the purchase price of the property. The Monthly Option Credits would not bear interest, and would accrue to a maximum of $13,680.00 to be used .as a down payment. This paragraph expressly sets out that if the Tenant does not exercise this option, or in the event of a breach of either agreement, the Monthly Option Credit is to be forfeited, and the Monthly Option Credit is non-refundable.

5. This type of arrangement is known as a "rent-to-own" arrangement, and both parties agreed that they entered into the tenancy specifically because they wanted the rent-to-own option. The Tenancy Agreement and the Option to Purchase Agreement have entire agreement clauses, which set out that the total agreement is set out in the document.

9. The facts of NOL-22623-16-differ significantly from the facts before me. In this case, there are two separate agreements: a Tenancy Agreement and the Option to Purchase Agreement. The Tenancy Agreement clearly sets out the monthly rent at $1,898.00. The Option to Purchase Agreement is worded to say that for every month that rent is paid, the Tenant will earn a credit towards the down payment for the rental unit. In this case, the Tenant did not exercise his option to purchase the rental unit, and as per the Option to Purchase Agreement signed by the parties, he forfeited the monthly option credits. This forfeiture has no impact on the assessment of monthly rent which is clearly set out in the Tenancy Agreement, and is not subject to any caveats, conditions or reductions.

10. The Landlord's N4 Notice is therefore valid, as it correctly identifies the monthly rent as $1,898.00.

Jegasundaram v. Malhotra Holdings Inc., 2021 ONSC 4144 (CanLII)

[4] The respondent commenced proceedings against the appellants before the LTB for non-payment of rent. The appellants’ defence was that, under a “rent to own” agreement, they were in fact owners of the property with an equity interest, not tenants.

[5] The LTB found otherwise. Even accepting the potential for an equity interest, the LTB found, interpreting the purported “rent to own” agreement, that it stipulated two forms of payment: $1,522.50 per month for “rent” and $2,844.24 per month as a “purchase reserve” fund to be held in trust by the owner/former landlord. Claims in relation to funds advanced to Vadivale as a purchase reserve were not within the jurisdiction of the LTB and were only properly advanced in civil proceedings against the former landlord. The LTB also considered evidence that Vadivale had, at the appellants’ request, issued a receipt for “rent” on at least one occasion. The LTB also considered s. 202 of the Residential Tenancies Act, requiring the LTB to ascertain “the real substance” of all transactions and activities relating to a rental unit. Rent arrears owing on August 4, 2020 totaled $22, 725.87.

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[10] The notice of appeal, on its face, discloses no error of law. Although denial of natural justice, if proved, could qualify as an error of law, the record before me is devoid of any particulars which could possibly rise to the level of a legal error. The claim that the appellants were owners, not tenants, is conclusory in nature and, again, is, without more, incapable of constituting a legal error. In any event, the essence of the LTB decision involves the interpretation of the purported rent to own agreement. It is clear since Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, para. 50, that the interpretation of an agreement is a question of mixed fact and law. No appeal lies from the LTB on a question of mixed fact and law.

[11] Further, there has been no satisfactory explanation of the delay in perfecting the appeal or the lengthy period of non-payment of rent. The appellants say they were concerned that, if they paid “rent” it would undermine their claim against Vadivale for ownership of the property. I cannot accept that argument. In the face of the respondent’s claims and the LTB decision, the appellants could easily have (and should have) paid to the respondent the rent owing for occupation of the property without in any way prejudicing their civil claims against Vadivale based on their alleged purchase reserve payments.

[12] In any event, as Corbett J. noted in his April 30 endorsement, the appellants have actually more rights to remain in the premises as tenants that they would as “owners”. In mortgage enforcement proceedings, the lender is prima facie entitled to vacant possession as against the owner of the property on which the mortgage is registered. That is not the case when the mortgagee becomes a landlord and the occupant is a tenant.

[13] The appellants claim to have arranged financing to “buy out” the respondent’s mortgage but cannot close the deal because they do not have clear title. That may be so, but the appellant’s dispute with Vadivale is no excuse for their failure to meet their obligations to the respondent under their tenancy arrangement. If they can arrange hundreds of thousands in potential financing, why can they not raise $30,000 to fulfill their obligations to the respondent?

[14] For these reasons, the motion is granted: the appeal is quashed.

TEL-97007-18 (Re), 2020 CanLII 61329 (ON LTB)

1. At the beginning of the hearing, the Tenant sought an adjournment because his lawyer was in the process of filing an application at the Superior Court with respect to the rent-to-own agreement.

2. The Landlord opposed the request to adjourn as the Tenant’s arrears stood at $5,000.00 and that the matter was previously adjourned for the same reason but that there has not been a change since then.

3. The Board’s records show that this matter was previously adjourned in August 2019 for the same reason – the Tenant was asserting a rent to own agreement in Superior Court. The Tenant stated that as of the date of the hearing he had not filed an application in Superior Court but that it would be filed within two weeks.

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16. On or about September 2, 2011 the parties signed two documents: an occupancy agreement and an option to purchase agreement. The parties testified that these documents formed a rent to own agreement between them for the rental property.

17. A rent to own agreement is essentially two agreements. One is a tenancy agreement that is subject to the Act. The parties agree the tenant will pay rent to the landlord in exchange for the right to occupy the rental unit. The second agreement that provides that the Tenant has the right to purchase the property at some future date. The tenancy agreement and the landlord and tenant relationship continues until the property in fact is sold and title passes to the tenant. At that point the tenant ceases to be a tenant and becomes an owner. In this case, the parties agreed that as of the hearing date, the Tenant was not yet an owner of the residential premises.

18. The Board has jurisdiction with respect to disputes that arise over the tenancy agreement, but no jurisdiction with respect to disputes that arise under the purchase and sale agreement.

19. Here, there appears to be a dispute between the parties with respect to the purchase and sale agreement but that is not relevant to the issues before the Board. This matter must be pursued at the Superior Court

20. What is relevant and before me is the application for arrears of rent for the period between September 2018 and December 2018.

21. The parties do not agree on what the lawful monthly rent is. Section 2 of the Act defines rent as:

“rent” includes the amount of any consideration paid or given or required to be paid or given by or on behalf of a tenant to a landlord or the landlord’s agent for the right to occupy a rental unit and for any services and facilities and any privilege, accommodation or thing that the landlord provides for the tenant in respect of the occupancy of the rental unit, whether or not a separate charge is made for services and facilities or for the privilege, accommodation or thing …

[Emphasis added.]

22. The evidence before me was that the Tenant was paying $1,230.00 every month, before he fell into arrears. This is stipulated in the occupancy agreement which lists, in paragraph 2, under Occupancy Payment

…a monthly payment of $1,230.00 payable in advance on the first day of each calendar month to the Owner …in the event the payment is not received on time, Occupant is considered in default. …

23. However, it is also stipulated in the Option to Purchase Agreement that $330.00 of the monthly payment of $1,230.00 is to be applied towards the down payment to purchase the property. This was also testified to by the parties.

24. Given the above, I find the lawful monthly rent to be $900.00 as this is the amount the Tenant was paying to the Landlord for the right to occupy the rental unit. The monthly installments of $330.00 were intended to apply towards the purchase of the property (to eventually become the owner of the property) and not towards the right to occupy.

25. Subsection 59(2) of the Act states:

(2) The notice of termination shall set out the amount of rent due and shall specify that the tenant may avoid the termination of the tenancy by paying, on or before the termination date specified in the notice, the rent due as set out in the notice and any additional rent that has become due under the tenancy agreement as at the date of payment by the tenant.

[Emphasis added.]

26. The N4 notice of termination that is the subject of this L1 application lists the monthly rent as $1,230.00. Given my finding above, the N4 notice of termination does not comply with subsection 59(2) of the Act as it claims an additional amount that is not rent, namely the $330.00 that is intended to be applied towards the purchase. Thus, the Landlord’s N4 notice of termination is defective and the application must be dismissed.

27. This order contains all of the reasons for my decision within it. No further reasons shall be issued.

It is ordered that:

1. The Landlord's application is dismissed.