By: Ali Golabgir
Precedent setting decision by the Ontario Supreme Court levels the playing field for renters in Ontario.
The Residential Tenancies Act of Ontario strictly limits the rent deposits landlords can charge new tenants. Landlords cannot ask for damage deposits or any security deposits in excess of first and last month’s rent, so the only means they have to protect themselves against careless or destructive tenants is a very selective rental application process.  They’re often pigeon-holed into a tight tenant demographic profile and may find it necessary to keep their unit vacant longer, until an ideal tenant comes along.
These rent deposit rules were implemented to protect tenants, but they can hurt the most vulnerable renters – families with small children or pets, new arrivals to Canada, and students or people on disability – more than they help them.
Think about it – the rental market in Toronto is highly competitive. Vacancy rates are consistently low and there is stiff competition for units in high demand areas. If a landlord has the choice between a single, professional person or a couple with small children, they will choose the single person who is less likely (hopefully) to colour on their walls or damage the unit.
While most families would happily offer a damage deposit to secure a rental in their desired area, until recently, it simply wasn’t an option. Felicitously, a landmark decision by the Ontario Supreme Court in February of 2014 may be changing the way the RTA is interpreted with respect to rent deposits.
Corvers vs. Bumbia – Background Information, Facts, and Findings:
- Alison Corvers, a UK resident here on a visitor’s visa, agreed to rent a Mississauga home from Tanveer Bumbia for $7,500 per month from May 1st 2013 to April 30th 2014.
- Mr. Bumbia initially refused her application because he was worried she might return to the UK or be unable to pay the rent if she was unable to qualify for a work visa.
- Corvers then paid one full year’s rent in advance, $90,000, plus a security deposit of $7,500 which Bumbia accepted.
- After moving into the home in May of 2013, Corvers brought an application before the court to have this money returned to her, claiming that it violated the terms of the RTA.
- Bumbia brought evidence before the court which proved that Corvers offered to pay the extra rent up front in order to secure the home.
- In a decision dated October 7th 2013, the Superior Court of Ontario ruled against Corvers’ application, stating that since the tenant offered to pay the extra rent up front, the lease was legal and binding and the additional rent did not need to be paid back. However since the security deposit was not specifically offered by the tenant, it did need to be paid back.
- In a decision dated February 12th 2014, the Supreme Court of Ontario upheld this verdict citing a 2009 case Royal Bank v McPherson.
This ruling doesn’t change the law as proscribed in the Residential Tenancies Act of Ontario. However, it does open the door for renters with pets or small children, students, new Canadians and renters with irregular employment to have a competitive edge when they find their dream apartment.
Citation
Mark Weisleder, The Toronto Star, Online: Ontario tenants can offer rent up front <http://www.thestar.com/business/personal_finance/2014/03/29/ontario_tenants_can_offer_rent_up_front.html>
The ruling on this case helps not only tenants without perfect credit history, but also landlords to protect their rights to be paid. It is not a secret that in order to secure the rental contract with a tenant lacking steady employment, landlords often prefer to receive a pre-paid rent which is beyond the first and last months. Until now, their right to collect and keep this rent was not clearly defined. Now it is established in which circumstances their actions are justified.