Payment plans represent hope in Ontario's rental market—a chance for tenants facing eviction to preserve their housing while catching up on rent arrears. However, when these carefully negotiated agreements fail, the consequences are swift and often final. Understanding what happens when payment plans are breached, and the limited circumstances where second chances might be granted, is crucial for both landlords and tenants navigating Ontario's rental landscape.
The Nature of Conditional Orders
When the Landlord and Tenant Board (LTB) grants relief from eviction, it typically does so through conditional orders that preserve the tenancy subject to strict payment requirements. These orders represent a delicate balance between tenant housing security and landlord financial protection.
How Payment Plans Work
Conditional orders typically include:
- Specific payment amounts and due dates
- Requirements to pay ongoing rent on time
- Clear consequences for default
- Section 78 clauses allowing landlords to apply for eviction without notice if conditions are breached
As seen in Paul-v-Mendoza-20220913, the LTB ordered tenants to pay $14,622 in arrears through a structured plan spanning from October 2022 to February 2025, with the clear warning: "If Tenants default on the payment plan, Landlords may apply for eviction within 30 days of the breach."
The Harsh Reality of Default
When tenants breach payment plan conditions, the legal consequences are immediate and severe. The LTB's approach to payment plan failures reflects a fundamental principle: conditional relief comes with strict accountability.
Immediate Consequences of Breach
Upon default, landlords can typically:
- Apply for eviction under section 78 without notice to tenants
- Seek immediate termination of the tenancy
- Collect the full outstanding balance with interest
- Obtain enforcement orders through the Sheriff's office
In Hill-v-Mcclain-20220111, when a tenant "failed to make agreed upon payments of $500 on August 24, 2021 and September 15, 2021," the LTB found that "the Tenant breached the mediated agreement by failing to make the agreed upon payments" and denied the tenant's motion to set aside the eviction order.
The Section 78 Process
Section 78 of the Residential Tenancies Act allows landlords to obtain eviction orders without hearings when tenants breach conditional orders. This streamlined process reflects the LTB's recognition that tenants have already received their "day in court" and been given an opportunity to preserve their tenancy.
As explained in The-Effort-Trust-Company-v-Williams-20220106, "Previous order allowed Landlord to apply under section 78 without notice if Tenant breached conditions." However, the breach must be based on conditions explicitly stated in the order—landlords cannot expand the scope of breach beyond what was originally agreed.
When Tenants Seek Second Chances
Despite the strict nature of conditional orders, tenants who breach payment plans can file motions to set aside eviction orders. However, success rates are low, and the standards for granting relief are demanding.
The Legal Test for Setting Aside Orders
When considering motions to set aside eviction orders, the LTB applies a two-step analysis:
- Did the tenant actually breach the order? If no breach occurred, the motion must be granted.
- If a breach occurred, would it be unfair to set aside the eviction order?
As outlined in Wilstar-Management-Ltd-v-Yvonne-Harding-20200821, "The Board must first determine whether the Tenant breached the previous order. If no breach is found, the motion must be granted and the eviction order set aside. If a breach is found, the Board must then decide whether it would be unfair to set aside the eviction order."
Circumstances Where Relief Might Be Granted
The research reveals several scenarios where tenants have successfully obtained second chances:
Unforeseen Circumstances
In Bradley-Court-Limited-v-Galeano-20210421, a tenant who breached a payment plan due to a motor vehicle accident was granted relief. The LTB found that "the Tenant breached the previous order due to unforeseen circumstances, specifically a motor vehicle accident that affected his ability to make payments."
Minor Breaches with Quick Rectification
In Markham-Corners-Residential-Inc-v-Lynch-and-Mcdonald-20210519, tenants who were "only a relatively small amount of money behind" and could "be caught up by the end of June 2021" were granted relief. The LTB found it would "not be unfair to set aside the order as the Tenants struggled to meet their obligations under the payment plan and are only a relatively small amount of money behind."
Banking or Administrative Issues
In teecon-corporation-v-dawson-20231207, a tenant whose "bank account was frozen for 14 days, preventing payment" was granted another opportunity, though the LTB noted the tenant's long-term residency and medical conditions as additional factors.
When Second Chances Are Denied
The majority of motions to set aside eviction orders after payment plan breaches are denied. The LTB consistently applies strict standards, recognizing that conditional orders represent final opportunities.
Bad Faith and Lack of Credibility
In Q-Res-IV-Operating-GP-Inc-v-Mustafa-20220111, a tenant who "negotiated a mediated agreement on August 10, 2021 but immediately breached it" was denied relief. The LTB found the tenant's "set aside motion was either frivolous or vexatious, or launched in bad faith to delay the eviction and live without paying rent."
Repeated Breaches and Pattern of Non-Compliance
In TCHC-v-JA-20171124, the LTB denied relief where the "Tenant breached the terms of the mediated settlement multiple times by failing to pay rent and arrears," finding that "setting aside the eviction order would render the mediated settlement meaningless."
Inability to Comply Going Forward
In 20-Hillisborough-Holdings-Ltd-v-Barlow-20240305, even though a tenant's breach was due to banking issues, relief was denied because "the Tenant's current income was insufficient to comply with the repayment plan" and "setting aside order would result in further breaches."
The Importance of Realistic Payment Plans
The research reveals that successful payment plans share common characteristics that reduce the likelihood of breach:
Affordability Analysis
In Equiton-Residential-Income-Fund-LP-v-Mungala-20220629, the LTB "granted relief from eviction based on a feasible payment plan and the absence of prejudice to the Landlord." The 24-month plan with $270 monthly payments was deemed realistic based on the tenant's income.
Consideration of Tenant Circumstances
In City-of-Cornwall-Housing-Services-Division-v-Martineau-20221028, "a 12-month repayment plan was deemed reasonable, considering the Tenant's source of income and the social housing context."
Landlord Cooperation
In 2686250-ONTARIO-STREET-v-GAMULIN-20230224, the LTB noted that "the Landlord failed to negotiate a reasonable payment plan with the Tenant" as a factor in granting relief, emphasizing the importance of good faith negotiations.
Strategic Considerations for Landlords
Crafting Enforceable Conditions
Landlords should ensure conditional orders include:
- Clear, specific payment amounts and dates
- Explicit consequences for default
- Section 78 clauses for streamlined enforcement
- Comprehensive coverage of all ongoing obligations
Balancing Enforcement with Pragmatism
While landlords have the right to enforce breached conditions strictly, the research suggests that some flexibility can be beneficial. In Deepwood-Investments-v-Lee-20230303, the landlord's "willingness to allow the Tenant to remain in the unit" through a payment plan demonstrated a compromise approach that ultimately benefited both parties.
Documentation and Evidence
Successful enforcement requires proper documentation of breaches. In Rosslyn-Residences-v-Cornfield-20230501, the landlord's application was dismissed because they "failed to provide conclusive evidence of the Tenant's alleged breach of the previous order."
Strategic Considerations for Tenants
Compliance is Critical
The research consistently shows that strict compliance with payment plans is essential. As noted in MSANF-Inc-v-Pedersen-20220714, "the Tenant must strictly adhere to the payment plan ordered by the Board. Any default could result in eviction."
Early Communication
When facing potential default, tenants should communicate immediately with landlords and consider seeking variations before breaching conditions. Waiting until after default significantly reduces options for relief.
Realistic Proposals
Tenants should only agree to payment plans they can realistically maintain. In Radel-Investments-v-Eisho-20210512, the LTB found the tenant "entered into the previous agreement in bad faith, knowing she would be unable to make the required payments."
The Role of Unforeseen Circumstances
While the LTB generally takes a strict approach to payment plan breaches, genuine unforeseen circumstances can provide grounds for relief:
Medical Emergencies
Health crises that prevent payment can justify relief, but tenants must provide proper documentation and act quickly to address the breach.
Banking or Administrative Issues
Temporary banking problems, as seen in the frozen account case, may provide grounds for relief if the tenant can demonstrate the issue was beyond their control and temporary in nature.
Employment Disruption
Sudden job loss or income reduction may justify relief, particularly if the tenant can demonstrate efforts to secure new income or assistance.
The Finality Principle
The LTB's approach to payment plan breaches reflects a fundamental principle: conditional orders represent final opportunities. As stated in S.M.P.-v-Y.C.-20170328, when a tenant "breached the mediated settlement by failing to make the required rent payments," the LTB found "it would not be unfair to uphold the eviction order."
This finality serves important policy purposes:
- Maintains the integrity of the conditional order system
- Provides certainty for landlords who have already shown forbearance
- Encourages tenants to take payment plan obligations seriously
- Prevents abuse of the system through repeated defaults and applications
Abandoned Motions and Procedural Issues
A significant number of motions to set aside eviction orders are abandoned when tenants fail to appear at hearings. In Forgione-v-Gorrie-20200806, the LTB found that "the motion to set aside the previous order has been abandoned" when the tenant didn't appear.
This pattern suggests that many tenants file motions as delay tactics rather than genuine attempts to preserve their tenancy, reinforcing the LTB's strict approach to payment plan enforcement.
The Cost of Failed Payment Plans
Beyond eviction, tenants who breach payment plans may face additional financial consequences:
Interest and Costs
Failed payment plans often result in the full outstanding balance becoming immediately due with interest. In Devries-v-Case-20211125, "any breach of the agreed-upon payment plan is subject to repayment on the outstanding balance on the date after the default, and also subject to interest."
Legal Costs
In cases of bad faith breaches, tenants may be ordered to pay landlords' legal costs. The tenant in Q-Res-IV-Operating-GP-Inc-v-Mustafa-20220111 was "ordered to pay the Landlord $260 in costs due to the Tenant's unreasonable conduct in filing the set aside motion."
Best Practices for Payment Plan Success
For Landlords
- Conduct Affordability Analysis: Ensure proposed payment plans are realistic based on tenant income
- Include Clear Consequences: Specify exactly what happens upon default
- Document Everything: Maintain detailed records of all payments and communications
- Consider Flexibility: Minor breaches might be addressed through communication rather than immediate enforcement
For Tenants
- Be Realistic: Only agree to payment plans you can genuinely maintain
- Communicate Early: Contact landlords immediately if problems arise
- Maintain Records: Keep detailed payment records and receipts
- Seek Help: Consider financial counseling or legal advice before agreeing to plans
The Broader Policy Context
The LTB's strict approach to payment plan breaches reflects broader policy considerations about housing stability, landlord rights, and system integrity. While this approach may seem harsh, it serves important functions:
- Maintains credibility of the conditional order system
- Provides predictability for both parties
- Encourages realistic negotiations
- Prevents abuse through repeated defaults
Conclusion
Payment plans represent a crucial tool for preserving tenancies while addressing rent arrears, but they come with strict obligations and severe consequences for breach. The LTB's approach to failed payment plans is deliberately stringent, reflecting the principle that conditional orders represent final opportunities for tenants to preserve their housing.
For landlords, understanding the enforcement mechanisms and standards for breach provides important tools for protecting their interests while working with struggling tenants. For tenants, recognizing the finality of payment plan obligations and the limited circumstances where second chances are granted is essential for making informed decisions about their housing future.
The cases reviewed demonstrate that while second chances are possible, they are rare and require compelling circumstances beyond the tenant's control. The most successful approach for all parties is to negotiate realistic payment plans from the outset and maintain strict compliance once agreements are reached.
Whether you're a landlord considering whether to agree to a payment plan or a tenant facing the possibility of default, understanding these dynamics and consequences is essential for navigating Ontario's rental market successfully. The stakes are high, the standards are strict, and the opportunities for redemption are limited—making careful planning and realistic expectations crucial for all involved.
