Schell v. Clarke: Divisional Court Overturns LTB Decision on Rent Increase
Divisional Court overturns LTB decision on rent increase, sends case back for reconsideration
Summarized by RentZenLast updated: August 16, 2024
Case Summary
86 Mary Street, Wingham, ON
Decision in favor of
tenant
Balance Owed
-
Dispute Categories
Agree with the ruling?
Timeline
Tenancy End Date
Apr 2017
Hearing Date
Nov 2020
Order Date
Nov 26, 2020
Dispute Summary
The tenant appealed a Landlord and Tenant Board (LTB) decision that dismissed her claim for reimbursement of monies allegedly paid due to an illegal rent increase. The LTB had ruled that there was an express agreement to the increase between the landlord and tenant, which was therefore not an illegal charge. The Divisional Court allowed the appeal and referred the matter back to the LTB for reconsideration in light of new case law.
Determinations
- LTB erred in relying on Price v. Turnbull's Grove Inc. to justify the rent increase
- Honsberger decision clarified constraints on creating new tenancy agreements
- Matter referred back to LTB to determine if Honsberger exceptions apply
- LTB to determine amount owing if rent increase was illegal
- LTB to consider if limitation period under s.135.1(2) of RTA applies
Case Study
The court found that the LTB erred in law by relying on the Price v. Turnbull's Grove Inc. case to conclude that an express agreement to a rent increase was not an illegal charge. The court noted that a subsequent Court of Appeal decision in Honsberger et al. v. Grant Lake Forest Resources Ltd. clarified that upon expiry of an existing lease, a new tenancy agreement cannot be created outside of the rental increase constraints of s.120 of the Residential Tenancies Act, unless there is a change in parties or premises. The court referred the matter back to the LTB to determine if the exceptions in Honsberger applied in this case.
Arguments and Actions
Landlord
Arguments
The landlord asserted that the written agreement changed the oral agreement by allowing the tenant's spouse to be an occupant and allowing the tenant to rent the garage, which were not part of the oral agreement.
Actions
Landlord informed the tenant in February 2016 that he was planning to sell the house. Landlord negotiated a rental increase of $200 per month with the tenant. Landlord did not serve a notice of rent increase on the tenant.
Procedural Errors
Landlord did not serve a notice of rent increase on the tenant as required by law.
Tenant
Arguments
The tenant argued that the real substance of the transaction was to preserve the tenancy, not to end it. The fact that her spouse was not named as a tenant and no monetary value was attached to the use of the garage underscores that the written agreement was entered into to deter the landlord from selling, not to create a new tenancy.
Actions
Tenant offered to pay more rent to remain in the house when the landlord planned to sell it. Tenant signed a written lease agreeing to a rent increase from $650 to $850 per month.
Decision Summary
The Divisional Court allowed the tenant's appeal of the LTB decision and referred the matter back to a new LTB Member. The new hearing is to determine whether the parties and premises changed sufficiently under the written agreement to meet the exceptions set out in the Honsberger case. If not, the LTB is to determine the amount owing for an illegal rent increase and whether the limitation period under s.135.1(2) of the RTA applies.
Adjudicator Details
Ontario Superior Court of Justice
Total Orders
13
Landlord Favorable
61.5%
Tenant Favorable
38.5%
Mutual Agreement
0.0%
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Financial Details
Lawful Rent
$650
Source
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