McIntosh Run Housing Co-operative v. MacIntosh, 2018 NSSM 58

IN THE SMALL CLAIMS COURT OF NOVA SCOTIA ON APPEAL FROM AN ORDER OF THE DIRECTOR OF RESIDENTIAL TENANCIES Citation: McIntosh Run Housing Co-operative v. MacIntosh , 2018 NSSM 58 Claim No: SCCH - 477341 BETWEEN: McINTOSH RUN HOUSING CO-OPERATIVE Landlord (Appellant) - and - HELEN MacINTOSH Tenant (Respondent) REASONS FOR DECISION BEFORE Eric K. Slone, Adjudicator Hearing held at Halifax, Nova Scotia on September 4, 2018 Decision rendered on September 10, 2018 APPEARANCES For the Landlord Allison Reid Counsel

For the Tenant Tammy Wohler Counsel REASONS FOR DECISION [ 1 ] This is an appeal by the Landlord from a decision of the Director of Residential Tenancies dated June 4, 2018, which found the Tenant not to be in arrears of rent (as the Landlord claimed), except to a trivial extent. The application for rent arrears and termination of the tenancy was accordingly disallowed. [ 2 ] There are some important issues at stake concerning the nature of a tenant’s obligation when receiving a rent subsidy. [ 3 ] The unit in question is part of a 54-unit co-operative housing project in Spryfield (“the co-op”).

The Tenant has been in the building since 2008 and was until recently a member of the co-op 1 . For most of that time, she was living in her unit under a rent subsidy program administered by Metro Regional Housing Authority (MRHA). [ 4 ] The central question is whether, when her housing subsidy ceased in 2017, the Tenant became responsible for paying the full rental amount (i.e. market rent) applicable to the apartment, without the Landlord taking any formal steps, such as by giving notice of a rent increase.

The Facts [ 5 ] The co-op has some eleven units which are set aside for subsidies from MRHA, one of several such provincial agencies across the province which assists 1 Within the last few weeks she was expelled as a member of the co-op and no longer has any special status beyond merely being a tenant, though I do not believe this action changes the legal conclusions I am reaching. low-income people to obtain better housing than they could otherwise afford. It fulfills this mandate through buildings it owns or operates and others, such as here, which dedicate a set number of units to participate in the program.

Of course, tenants in the other 43 units in this co-op pay “market” rent, which may be lower than comparable commercial apartments, but is still sufficient to support the existence and continuation of the unit and support the co-op generally. [ 6 ] MRHA’s own website gives a good and useful definition of public housing, which (it says) “was established to provide safe, affordable rental housing for eligible low-income families and seniors, and for persons with disabilities, subsidized by public funds ....” [ 7 ] The website goes on to provide that tenants pay a monthly rent they can afford based upon gross household income. [ 8 ] Generally speaking, tenants receiving a rent subsidy for a private or co-op unit (as opposed to a unit in public housing) must meet an income test and have an obligation to provide income information, no less often than annually, in order to demonstrate that they continue to qualify for the subsidy.

Upon an income review, if it is determined that the tenant no longer qualifies, they can have their subsidy withdrawn or reduced and, if they want to stay where they are living, must (at some point) begin to pay the full rent (or

something closer to it) for the unit. [ 9 ] What happened here is that the Tenant signed a lease in 2008, which was expressly stated to be under a public housing program as defined in the Residential Tenancies Act , s.2(fa): (fa) "public housing program" means a rental program offered to tenants of low and modest income by reason of funding provided by the Government of Canada, the Province or a municipality or any agency thereof; [ 10 ] The Residential Tenancies Act has certain relevant provisions, mirrored in the lease, which recognize that the tenant has certain responsibilities, mostly set out in s.7(7) and (8): 7.

(7) Tenants who are leasing pursuant to a public housing program shall, with respect to that public housing program, (

a) provide income verification as required; and (

b) continue to meet the qualifications required pursuant to the provisions of that public housing program.

(8) For the purpose of subsection (7), qualifications required pursuant to the provisions of a public housing program means income and family composition and those qualifications shall be attached to the lease. [ 11 ] The 2008 lease set out the rent at $731.00 per month, which rent has crept up over the years with small legal increases that are not disputed. The current basic - or market - rent for the unit is $796.00 per month. [ 12 ] For about nine years the Tenant paid about one-quarter of her net income toward the base rent, with MRHA paying the rest.

MRHA also provided a contribution to the Tenant’s utilities. Roughly speaking, the Landlord received between a half and two thirds of the rent from MRHA, which payment was made directly to the Landlord. [ 13 ] It is important to note that the Landlord plays no role in applying for the MRHA subsidy, nor in administering the subsidy on an ongoing basis, although it appears to be kept apprised of the status from time to time. It is the Tenant who deals directly with MRHA and who assembles the required income and other information that the program requires.

The Residential Tenancy Officer’s findings [ 14 ] The Residential Tenancy Officer found as a fact that under the subsidy as it existed (until revoked in 2017) the Tenant was paying $359.25 per month, with MRHA paying the rest. That is not disputed. However, his eventual conclusion was that the rent payable by the Tenant has never exceeded that amount.

He treated that amount as being the rent payable under the lease, notwithstanding that the lease on its face appears to say something quite different, namely that the rent is $731.00. [ 15 ] The Residential Tenancy Officer appeared to be under the belief that the Tenant’s rent subsidy had not been permanently

revoked but was only suspended because the Tenant was not up to date in her filings. He assumed that her subsidy would be reinstated retroactively, and that the Landlord would be entitled to that retroactive money. In this respect, he either misapprehended the evidence or simply erred in his assumption.

The evidence before me was that there had been some occasions in 2015 and 2016 when the subsidy was held up because the Tenant was unable to supply the required paperwork, during which time the rent fell behind, but the real issue is that her subsidy was completely revoked as of September 2017 by reason of the fact that she had become employed and no longer eligible under the income guidelines. [ 16 ] The Landlord prepared a rental statement going back to 2015, showing rent accruals and payments received, either from the Tenant herself, from MRHA, or both.

The Tenant does not dispute this accounting. [ 17 ] The last time the Tenant was entirely in good standing, according to these records, was in late 2016. From January 2017 until the present, the Landlord has not received any money from MRHA. The Tenant continued to pay amounts more or less in line with her previous subsidized rent, at one time paying more when she had a roomer (a foreign student) contributing to the rent.

As a result, the rental balance grew to the point where it now stands at $8,908.15. (At the time of the Residential Tenancies hearing it was just over $8,100.00). [ 18 ] The Residential Tenancy Officer essentially wrote off all of this rent allegedly owing, on the theory that the lease did not obligate her to pay more than $359.25 per month.

At the hearing before this court, counsel for the Tenant advanced the additional theory that the Landlord was not entitled to the higher rent because it never gave the Tenant four months’ notice of a rental increase, as required by the Residential Tenancies Act. [ 19 ] As a practical matter, the Tenant realizes that she cannot afford this apartment and proposes to move by October 15, 2018. My order will reflect this fact.

Discussion [ 20 ] I am of the view that the Residential Tenancy Officer erred in his conclusion and that his order cannot stand, notwithstanding the harsh result for the Tenant. [ 21 ] I disagree with his finding that the lease should be interpreted as if the applicable rent was not $731.00, or whatever it had become, but was some number based upon a percentage of the Tenant’s income. Such a finding flies in the face of the lease itself, although (as I observe below) the lease is somewhat ambiguous.

On its face, the rent is stated to be $731.00, and the Landlord’s participation in the public housing program is noted. This three-party arrangement undoubtedly changes some things, but nowhere does the Landlord expressly, or by implication, accept the risk that it might receive less than full market rent (i.e. the amount that would be charged to an ordinary paying tenant) based upon decisions by MRHA that are determined by the state of account between MRHA and the Tenant.

As a matter of policy, it would discourage landlords from setting aside units as subsidized units if they had to accept less than the unit could command on the open market.

Doubtless having to deal with MRHA or a similar authority places some administrative burden on the Landlord, which is to be expected and which is voluntarily undertaken, but it would be a very different and much greater burden if landlords had to write off rent because of a withdrawal of the rent subsidy. [ 22 ] Part of that administrative burden is that, at times, the landlord may have to wait, such as when a subsidy is held up pending the tenant submitting required information.

This happened here on several occasions prior to the events of 2017. [ 23 ] Where a tenant ceases to qualify for the subsidy altogether, as happened here, it is because the tenant is theoretically able, or

better able, to afford the unit at market rent. If the reasoning of the Residential Tenancy Officer is followed to its logical conclusion, the rent would remain frozen at the rate of the tenant’s contribution while she qualified for the subsidy. He does not appear to allow for the rent to increase to market rent, under any conditions. That cannot be correct. It simply switches the granter of the subsidy from MRHA to the Landlord.

That would place an inappropriate burden on the Landlord. [ 24 ] The argument that the Tenant should have some time to adjust to the withdrawal of the subsidy is more attractive, though also incorrect in my view, if it is said to forestall the effective increase. [ 25 ] The argument treats the withdrawal of the subsidy as the equivalent of a rental increase. Under the normal rules in Residential Tenancies, landlords have to give notice of an intended rental increase (four months in the case of a month to month or year to year tenancy).

This is something that the Landlord here did annually when it increased the base rent. Notice is a matter of fairness. A tenant facing a rental increase may decline to accept the increase and choose to move elsewhere, and four months (for monthly or year to year tenancies) is the time within which they have to move and avoid paying the increased rent.

The specific amount of notice is the Legislature’s view of what is fair. [ 26 ] The first reason to distinguish a loss of the subsidy from a straightforward rental increase is found in the lease itself, which states as part of paragraph 7, (after setting out the requirement for written notice of rent increases, and the amount of notice required): Where the landlord administers a public housing program and the tenant’s rent is increased solely on the basis of an increase in income, the restriction on frequency of rental increases and notice requirements do not apply. [ 27 ] This use of language actually does support one of the Tenant’s arguments, as it treats “the tenant’s rent” as the amount that the tenant is personally paying, rather than the (larger) market rent.

In this respect the lease is ambiguous. However, even if we regard the Tenant’s rent obligation as restricted to the amount of her personal share of the rent, we are still left with the fact that the subsidy was withdrawn as of early 2017 and, without any subsidy, the Tenant’s rent obligation cannot be fairly interpreted as anything other than the full rental amount provided by the lease. [ 28 ] Apart from the fact that the lease expressly exempts the Landlord from giving notice, requiring the Landlord to serve notice of a rental increase in this type of situation would be an empty formality only.

The Tenant is actually in the better position to know that her rental subsidy was in danger of being withdrawn, because she knows what her income is, and she knows or ought to know the requirements of the subsidy program.

From a fairness standpoint, she had plenty of notice that her situation had changed. [ 29 ] Requiring notice would also cost the landlord money, even if only four months of the difference between the subsidized rent and the market rent, which (again) would force landlords to subsidize tenants, which is not a result that I believe is intended in the public housing scheme. [ 30 ] I am not unsympathetic to the situation that this Tenant faced. She appeared to believe that she would still qualify for the subsidy, having launched an unsuccessful appeal to MRHA, but in the end she did not succeed.

She appears to have made good faith efforts to avoid having to move, by taking in a student for a number of months to generate additional rent, but that effort was apparently thwarted for reasons that were not explained to me. [ 31 ] Nevertheless, I believe that the Residential Tenancy Officer was wrong to treat her rent as if it were at all times the amount she was paying under the subsidy program, with the result that she is seriously in arrears.

[ 32 ] One last item that I wish to comment upon is the apparently missing

Schedule B to the lease. Referring to the fact that the lease is administered under a public housing program, the lease states that “Program eligibility requirements and rules relating to changes in rent are contained in

Schedule “B” attached hereto.” No actual

Schedule “B” has been located. The Landlord’s witness, property manager Wannetta Fisher, testified that to the best of her knowledge the practice in these situations is to append a standard document called “Rent Supplement Program - Tenants” which contains, among other things, the form that the tenant must fill out to declare their income, together with detailed instructions on how to do so. [ 33 ] It is not good practice to refer to a document as a schedule, and fail to attach it, but this failure does not invalidate the lease or dictate that it should be interpreted differently.

Assuming that the document which was placed in evidence is similar to, or identical to, the document referred to in 2008, it does not help the Tenant. If anything, it makes clear that the rent may increase at any time, retroactive to the date that the tenant’s income changed. [ 34 ] In the final result, the decision of the Director of Residential Tenancies must be set aside, and in its place an order is made that the Tenant shall vacate the subject unit by no later than 11:59 p.m. on October 15, 2018.

She is also ordered to pay the rental arrears of $8,908.15, plus a prorated rent for October, minus any amounts that she may have paid in the interim. The Landlord is also entitled to the $31.15 filing fee at Residential Tenancies, together with its fee to file and serve this appeal. I will also permit the Landlord to offset the $365.50 security deposit that the Landlord is holding. [ 35 ] Because I am unsure of the precise calculation, I will defer signing an order until I have heard from counsel. Eric K. Slone, Adjudicator