Residential Tenancy Award Unreasonable and Consequences for Not Completing a Real Estate Deal

 

Do you know the ins and outs of the Residential Tenancy Act? Join us for an enlightening conversation with Barrister and Solicitor Michael Mulligan as we uncover a recent court decision involving changes to BC’s residential tenancy legislation and how an elderly landlord diagnosed with cancer almost found himself responsible for paying former tenants $34,180.

The elderly landlord had his son helping rent the top part of the home he shared with his wife. When he was diagnosed with cancer, the son provided the tenants with two months’ notice to end the rental so that his parents utilize both the upstairs and downstairs of the home to accommodate relatives staying over to assist with caregiving.

The Residential Tenancy Act was amended to permit former tenants to obtain 12 months’ rent if they are required to move out and the “landlord” doesn’t occupy the property.

The adjudicator who awarded the former tenants the money confused two definitions of who a “landlord” can be. For most purposes, a “landlord” can include someone helping a property owner rent a property. To determine who must move into a property to avoid paying 12 months’ rent to a former tenant, however, this term has a different definition.

Most contracts don’t end up with disputes in court because both parties to an agreement want to enter into them. As the government has imposed increasing conditions on residential tenancy agreements to assist existing tenants, disputes have increased.

Provisions that can result in large financial awards to tenants, like the one discussed on the show, will likely deter property owners from renting a part of their home in the first place.

But that’s not all — we also discuss a court of appeal case where a couple blamed their real estate agent for not providing sufficient warning about the potential consequences of not completing a deal.

If, as in this case, someone enters into a contract to purchase a property and then changes their mind and doesn’t complete the deal, they can be liable to pay the seller and difference between what they agreed to pay and what another buyer eventually pays. In the case discussed, that was $100,000.

The effort to shift blame to the real estate agent for not providing a clearer warning about failing to complete the deal was unsuccessful because the would-be buyers made it clear that there was no circumstance in which they would have followed through and completed the deal. As a result, no warning from the real estate agent would have made any difference.

 

Legally Speaking with Michael Mulligan is live on CFAX 1070 every Thursday at 10:30 am. It’s also available on Apple Podcasts or wherever you get your podcasts.

 

An automated transcript of the show:

 

Legally Speaking June 22, 2023

Adam Stirling [00:00:00] We’re joined by Barrister and Solicitor with Mulligan Defence Lawyers with Legally Speaking. Morning, Michael Mulligan. How are we doing?

Michael T. Mulligan [00:00:06] Hey, I’m doing great. Always good to be here.

Adam Stirling [00:00:08] Some interesting things on the agenda today. I know you and I have talked about administrative law in the past and the various standards of review, and I remember there was Dunsmuir was one case, then it was Laval was another one, and patently unreasonable. It’s all quite complicated, but it’s coming into sharp focus here with a recent decision to award tenants a certain sum of money. Set this up for us.

Michael T. Mulligan [00:00:32] Yes, indeed. So the background of this case involves some changes that were made relatively recently to the residential tenancy legislation in B.C. that provides that if a landlord has the audacity to end the tenancy so that they can move into it, if they fail to move into it within a reasonable period of time, then the landlord can be responsible for paying the tenant what amounts to a windfall of 12 months’ rent. And so, we’re seeing an increasing number of cases where tenancies are terminated so that a landlord can occupy the premises.

Adam Stirling [00:01:18] Yes.

Michael T. Mulligan [00:01:19] And then the former tenant speaking, naturally somebody is incentivized to make the argument because of how much money they could get.

Adam Stirling [00:01:26] Yeah.

Michael T. Mulligan [00:01:27] And in this case, the former tenants made that kind of a claim, and it resulted in an award of $34,180.

Adam Stirling [00:01:38] Wow.

Adam Stirling [00:01:39] Full years rent plus filing fees. And this case, like an increasing number of cases where these sort of windfall awards are being given to tenants, are winding up in court for judicial review because the amount of money involved is substantial enough to make that process worthwhile. Now, when you want to go to, you can’t simply go to court and ask a judge, well, what do you think of all this? Should the former tenant have gotten $34,000? The idea of the Residential Tenancy Act, in BC, is to have those kind of administrative decisions made by adjudicators and not have all of the cases winding up in court because that’s time consuming and expensive, of course, right?

Adam Stirling [00:02:27] Yeah.

Michael T. Mulligan [00:02:28] We try to delegate these things. So, what’s happened is in the Residential Tenancy Act, it sets out that a review, a judicial review of a decision can only occurs if the judge concludes that the decision of the adjudicator was patently unreasonable.

Adam Stirling [00:02:46] hmm.

Michael T. Mulligan [00:02:46] That’s the language used in the act. And you’re right, there have been efforts to try to curtail various different standards for judicial review of administrative decisions. But this piece of legislation, like others, has that language right in the legislation.

Adam Stirling [00:03:00] Hmm.

Michael T. Mulligan [00:03:00] And so that’s been interpreted to mean a decision which is openly, clearly unreasonable or, another quote from another case was, the result must almost border on the absurd.

Adam Stirling [00:03:13] Okay.

Michael T. Mulligan [00:03:15] That’s the standard. That’s a fairly high bar to meet.

Adam Stirling [00:03:17] Yes.

Michael T. Mulligan [00:03:17] But here’s the fact that it was an interesting one and it bears on this section, people should know about it. The background is that there was a fellow whose parents owned a home. The elderly parents lived in the basement and they were renting out the top part of the home to the tenants. The son of the owners of the home was helping them do that, I guess, with paperwork and so on. Sadly, the poor husband or the father of the person who was doing the rent renting developed, was diagnosed with cancer. And so, the elderly parents, the one of whom had cancer, wanted to use the full home so that people, family members who were staying there to help the father with his care would have a place to stay. And so, they gave notice to the tenants that they would have to move out on two months’ notice so that the top part of the house could also be used to help the father with care while he was being treated for cancer.

Adam Stirling [00:04:22] Yeah.

Michael T. Mulligan [00:04:24] And the person who gave the tenants the notice was the son, right? The son of the elderly people who owned the home.

Adam Stirling [00:04:33] mm hmm.

Michael T. Mulligan [00:04:33] And that’s fine. And in fact, the Residential Tenancy Act defines what a landlord is in Section one to mean; it can include the person who owns the property, but it can also include somebody who’s the agent for the owner or another person on behalf of the landlord who’s helping them do something. Which makes sense, right? Because you could have family members helping or you could even a property owned by a corporation, which is just a piece of paper. So somebody has going to help do various things, right. Now, the problem arose here because the section that deals with who has to move in when this kind of a notice is given also uses the term landlord, but it’s defined differently and it’s important that it be defined differently because the intention in section 49 of the act is to allow somebody who owns the property to move into it themselves. Right? That’s the purpose for which you can give two months’ notice and require somebody to move out. If you didn’t redefine what landlord was, if you left the definition of landlord as somebody who’s helping the person who owns the home, you could the landlord could evict anyone at any time by saying, well, would you like to move in and pay more rent? Fine, you’re now my helper. Go over and give the tenant notice that they’ve got to go.

Adam Stirling [00:05:53] Okay.

Michael T. Mulligan [00:05:54] Congratulations.

Adam Stirling [00:05:54] So it can’t.

Michael T. Mulligan [00:05:55] Be the landlord now, that’s absurd. All right. The problem here is that the that word landlord is redefined to mean for the purpose of requiring somebody to move out. That has to be somebody who has an interest in the property. They have to have like, at least a half interest, like in the property as an owner of the property. That’s the idea and the adjudicator in this case. So, the arbitration wrongly applied a test of whether the son, the helper, had himself moved into the property rather than the evidence that the elderly father and mother were taking it over for their own use. Right. So, the family members could be there if they’re helping with the cancer treatment. And so, because the adjudicator just got that wrong, the judge on this judicial review found that this was the kind of decision which was patently unreasonable. Right. A result bordering on the absurd.

Adam Stirling [00:06:53] Yes.

Michael T. Mulligan [00:06:53] And so even though the standard is very high in this case, the happily, the elderly parents cleared the standard. And so, the matter will be remitted for a new hearing. Having the judge point out that there is a different definition of what a landlord is for the purpose of who has to move in. And it doesn’t need to be the person who handed the notice or signed the notice and gave it to the tenants, which is what the tenants were arguing and what the adjudicator wrongfully found, applying the general definition rather than the specific one. So, the point here is that the people moving in have to be the person who has the beneficial owner of the place, not the person helping them out. And because the adjudicator focused on, did the person helping them out move in, was patently unreasonable? The bigger obtainable all this again, is that we should give some careful consideration to whether all these sort of efforts interfere with what are ordinarily private arrangements. Right. The very nature of contracts is usually two people agreeing on something, but as between them that they both want.

Adam Stirling [00:08:00] Yes.

Michael T. Mulligan [00:08:01] not, things where one of the people doesn’t want it at all and we’re forcing them to continue doing something. When you try to force people to do things they don’t voluntarily want to do, you’re going to wind up with all kinds of litigation and the toothpaste tube is going to pop out in different ways the more you squeeze it. And that’s really where we’ve gotten to with residential tenancy legislation in British Columbia, the government response to inadequate supply of rental accommodations has been to try to clamp down on landlords, like this couple, in the hope that somehow that’s going to solve the problem when really what it’s doing is producing all kinds of litigation, potentially unfair results like this one would have been. But for the judicial review with large amounts of money involved. And of course, for anyone hearing any of this who would want to put themselves in this kind of a position. Right. It’s just going to discourage people from doing things that you would want them to do, like saying, well, we don’t need the upstairs of our house right now. I guess we can rent that out. That’s desirable.

Adam Stirling [00:09:06] Yeah.

Michael T. Mulligan [00:09:07] But if you turn it into a legal nightmare for anyone who chooses to do that with the possibility of the person who manages to rent the place, having the benefit of potential windfall sums of money going to them, who in their right mind would want to put themselves in that position? People like these elderly people who rent out the top of their house are going to make the rational decision. Forget that. That’s a nightmare. Look what happened to these people. Look at what I heard on the radio or read in the newspaper. That’s a disaster. You don’t want to do that. And so, in an effort to try to improve things for tenants by clamping down on landlords and making these kind of rules in the long term, I don’t think it’s going to be helpful. It’s not helpful. It may offer some windfall benefit to people who are currently tenants and are able to avail themselves of these things. But it is really going to have. The opposite effect of what we desire, which is people to voluntarily build places and rent them out or rent out parts of their home, all those kind of things that actually create space for people to live. We don’t create space for people to live by imposing these kind of rules, and we’re seeing the output of that in the legal system. So that’s the story of the $34,000 award against the elderly people with cancer. Happily, that was overturned, and they can go back to try again reading the correct definition.

Adam Stirling [00:10:32] Michael Mulligan with Mulligan Defence Lawyers, Legally Speaking here CFAX 1070. More right after this.

[00:10:38] COMMERCIAL BREAK.

Adam Stirling [00:10:38] Back on the air here at CFAX 1070. Legally Speaking on CFAX1070 with Michael Mulligan from Mulligan Defence Lawyers. Is the wording or actually, no, that was the one coming up. I’m reading $100,000 in damages upheld on appeal for backing out of a real estate deal. What’s the situation with that?

Michael T. Mulligan [00:10:58] Yeah, the background of this is that a couple entered into a contract to purchase a home and they entered into the contract and then after signing it and sending a cheque for the deposit, the next day they got cold feet and changed their mind. And so, they left a voicemail for their real estate agent saying, Stop, we don’t want to complete this. And then went and put a stop payment on their $50,000 deposit. What happened then, unfortunately for the couple is that the people who owned the home continued to try to sell it because obviously the that those people weren’t going to pay up. And ultimately, after a few more weeks of effort, they did manage to sell the house, but only for $100,000 less than the contract they entered into with the people who got cold feet. And when that happens, the people who had the contract to sell the home for more can, did and would, sue, as you would expect.

Adam Stirling [00:12:04] Yeah.

Michael T. Mulligan [00:12:04] What they can sue for would be the difference you agreed to pay in this case 935,000. We only managed to sell it several weeks later for 835,000. So, we lost $100,000. And people should first of all know that’s how it works. Right? And so, if you had, particularly in a falling market, you could wind up on the hook for a lot of money. Now, here what happened is the couple who was sued for not completing this deal blamed the real estate agent and said, well, we may be respond…you know, we may be responsible for $100,000. But really, it’s the real estate agents’ fault because the real estate agent, they claimed, hadn’t sufficiently warned them of what could happen had they not followed through and completed the deal, having made the deal, and sent the cheque.

Adam Stirling [00:12:51] Yeah.

Michael T. Mulligan [00:12:52] That was their claim. The real estate agent’s response to that was well, no, no. Yes. We told you instead that you should speak to a lawyer A.S.A.P, telling them to talk to a lawyer and get legal advice about what may happen to you. Now, that’s the fact pattern of the trial. Unfortunately, at the trial, the judge made a bit of a mistake in that the judge misunderstood what the evidence was about, whether the couple that was being sued had waived privilege over what the lawyer had told them. In fact, they had waive privilege and said, yes, the lawyer could disclose their file. And the advice that they gave. The judge just seemed to misunderstand that it drew an adverse inference against the couple, saying, well, you didn’t let us find out what advice the lawyer gave you when you’re claiming that, you know, you were lulled into some false sense of security by your real estate agent not giving you sufficient warning.

Adam Stirling [00:13:48] Yeah.

Michael T. Mulligan [00:13:48] So there was a mistake the judge made. But this is the interesting issue on the appeal, and it’s one I think people should just generally know about, because what happened is the couple who was unsuccessful at trial, the people who didn’t follow through on the deal, appealed. And in the Court of Appeal, the Court of Appeal said, yes, indeed, the judge did make a mistake. The judge just seemed to misunderstand that they had said, yes, the privilege is waived. The lawyer can provide evidence at the trial. So, the judge made a mistake. But despite that just human mistake, the Court of Appeal pointed out sort of a fundamental premise of what is required to succeed when you are suing somebody in this way, saying that he really the real estate agent, it’s their fault. They should have given me a better warning. Right?

Adam Stirling [00:14:37] Yeah.

Michael T. Mulligan [00:14:37] And the point is this, that a defendant’s negligence without more does not make out a cause of action. Instead, an additional element is required. You need to show that even if there was negligence, even if the real estate agent should have done more, provided a stronger warning, that just saying talk to a lawyer immediately. Right.

Adam Stirling [00:14:57] Yeah.

Michael T. Mulligan [00:14:58] The you have to also proves that that negligence, if that was negligent, must cause the loss. Right. So, you need to prove, hey, the real estate agent had some obligation to do this. Furthermore, you need to prove the real estate agent didn’t, you know, act sufficiently. Wasn’t a strong enough warning about hey could be on the hook for a bunch of money here. But finally, you need to prove that had they done what you say they should have done, which was to say warn you about, they could be on the hook for a lot of money. Right. You don’t get to succeed in your claim. And here the people who didn’t follow through the contract, who had some experience, bought ten previous properties, including rental properties and things. So, they weren’t sort of a babe in the woods.

Adam Stirling [00:15:42] Yeah.

Michael T. Mulligan [00:15:43] And moreover, the evidence of the husband in this case of the couple that entered into the agreement to purchase it, in his examination for discovery and testimony at trial was that he was firm and unwavering and that there were no circumstances under which he would have considered completing the contract with or without legal advice. And so, the reason, even though the judge made a mistake about whether the lawyer was allowed to give evidence, why the appeal didn’t succeed is that even if the real estate agent had pulled the person in absolutely no uncertain terms, don’t do this. You’re going to be on the hook for $100,000. I strongly recommend you don’t do it. Terrible idea. You know, complete the contract, Get the house. You’re too late. Don’t back out.

Adam Stirling [00:16:31] Yeah.

Michael T. Mulligan [00:16:32] Because the purchaser was clear that no matter what they were told, they just weren’t going to complete the contract. It didn’t matter whether the real estate agent should have given them a stronger warning or not, it would have made no difference to the evidence of the people that didn’t follow through on the deal. They had just made an irrevocable decision. They were not going to buy this house despite having signed the contract the day before. And so that’s why in this case, the mistake made no difference. And even though it’s a clear mistake, it’s a meaningless mistake, because whether you draw some adverse inference or not, and no matter what advice was received, they just weren’t going to follow through. And so that’s an important thing for people to know about. You need to actually have, in addition to proving that somebody was careless or didn’t do something, you need to prove that that failure, if it was a failure, is what caused you to lose money. And here they didn’t do that. And so, the real estate agent is off the hook, including on the appeal. And the other takeaway for people, of course, is when you enter into a contract to purchase something like this, if you don’t do it and if the parties selling it winds up having to sell for less, guess what? You’re going to be on the hook for exactly the difference between those two figures. And so that could be a lot of money. And so, when you enter into these kinds of agreements, take them seriously. You’re not going to get out of it by putting a stop payment on your check or telling your real estate agent, I don’t want to keep going with this. You are still going to be on the hook because the amount of money involved can be a lot. It’s going to probably go to court. So, follow through on your deals. Don’t try to back out. And if you’re trying to blame somebody else for your decision, you’re going to need to prove not only should they have done more, but them doing more would have had some impact on stopping you from your bad decision to not follow through with the contract.

Adam Stirling [00:18:29] With about 4 minutes left is the wording of a COVID 19, ticket that came in the amount of more than $5,000 sufficient. Is the next one.

Michael T. Mulligan [00:18:38] Yes.

Adam Stirling [00:18:40] All right. let’s wrap this up.

Michael T. Mulligan [00:18:41] So this case involved a ticket for somebody who crossed the border during the height of COVID and was given a ticket under the Quarantine Act for $5,750. And the ticket said, “Failure to comply with an order prohibiting or subjecting to any condition, the entry into Canada”. That’s what the ticket says. And so, the argument that the person who got the ticket made was, well, that’s not sufficient. Just tell me why I’ve got this ticket. Right.

Adam Stirling [00:19:15] hmm.

Michael T. Mulligan [00:19:15] It doesn’t say, well, what know what condition did I not follow? What order was it? You know, you haven’t told me enough or you’ve just given me an amount. And so, they haven’t complied with an order that you haven’t specified. And so, a judge in this case had to decide, is that enough? Does a ticket need to specify more clearly what this ticket is about? And there’s a bunch of laws on that. Right. As one might expect. And there’s a bunch of laws in that normally for tickets, but also for when people are charged with criminal offences and so on. And the overarching principle is that there must be sufficient evidence to tell somebody what is this transaction. What is this about? Right. So that a person can reasonably answer it or later defend themselves or decide what they should be doing. And I should say in the past there was a lot more attention paid to things like the exact wording of things, sort of technical arguments prior to, I think the charter coming into effect where there is now some scope for judges to consider sort of fairness arguments within the sort of structure of constitutional rights which are set out in the charter.

Adam Stirling [00:20:25] Mm hmm.

Michael T. Mulligan [00:20:25] And I guess my real politic of it would be that in the past, when that didn’t exist, I think sometimes the efforts to or the decisions based on things like the precise wording of something got a lot more traction because in some cases they were sort of the safety valve for what might seem unfair. Right. To say, well, look, you know, there’s no constitutional right to anything here. But, you know, I find that, you know, this doesn’t quite comply with this or that act or requirement. So, it’s, I am quashing this thing. Right. A little bit of sort of fairness on the side or a basis to do that. But so, the sort of more current approach is one that is premised on sort of the idea of fairness and whether the, in all the circumstances, did the person have sufficient information to sort of know what they were being alleged to have done. And here the judge found that indeed there was lots of information that the alleged failure was not putting a mask on when crossing the border. That was a requirement at one point. Right.

Adam Stirling [00:21:32] Yeah.

Michael T. Mulligan [00:21:33] And so the judge found no. It was absolutely clear to this man what the problem was. He wouldn’t put a mask on when crossing the border. And furthermore, the crown had given him lots of information and confirmed that, provided disclosure material to him about that. And so, the judge found that it wasn’t unfair, even though this wording was far from ideal, because the man in all those circumstances, knew full well what this was all about. It wasn’t just charging somebody with you’ve done something wrong, wondering, well, what on earth was that? It was clear to the man, the dispute here was about his refusal to put a mask on.

Adam Stirling [00:22:08] Yeah.

Michael T. Mulligan [00:22:08] And so, as a result, the matter will proceed, and we’ll see whether the man has any other defences to the $5,750 ticket. That’s a lot of money. But there it is. It didn’t get quashed on the basis of the wording. And so again, the approach is, is it fair and is this enough to identify what this is all about so a person can proceed accordingly.

Adam Stirling [00:22:32] All right. Michael Mulligan with Mulligan Defence Lawyers, Legally Speaking, thank you so much as always. Until next week.

Michael T. Mulligan [00:22:37] Thanks so much. Have a great day.

Automatically Transcribed on June 26, 2023 – MULLIGAN DEFENCE LAWYERS