1. The tenancy began February 1, 2008. The Tenants are a mother and daughter. The parties entered into a lease agreement/rent- to-own provided in evidence indicating that the parties agreed to a monthly payment of $1,600.00, $300.00 of which was paid towards the purchase price/down payment of the rental unit located in a condominium complex.
17. Rent is defined in the Act (section 2) as the amount a tenant is required to pay in return for occupying a rental unit. With this in mind, the evidence shows that that the rent amount the parties agreed to at the start of the tenancy was $1,300.00; despite the fact that the Tenants were also required to pay $300.00 each month towards the purchase of the property.
18. Section 136 or the Act also states that “rent charged one or more years earlier shall be deemed to be lawful rent…” Section 136 further states that an increase in rent shall be deemed to be lawful unless an application has been made within one year after the date the increase was fist charged and the lawfulness of the rent charged is in issue in the application.”
19. In keeping with the above definition of “rent”, and considering that the amount of $1,300.00 that the Tenants paid for the initial 12-month period was exclusively for occupying the rental unit, I find the lawful rent for the first 12-month period is $1,300.00. Furthermore, contrary to the Landlord’s claim, I find the Tenants’ evidence, supported by subsequent purchase and sale/lease agreements tendered, that the offer to own the rental unit continued beyond February 2009; and that they continued to pay the Landlord $1,600.00, $1,300.00 of which constituted “rent” and $300.00 towards the purchase of the property. There is no indication that the parties agreed to increase the “rent” portion of the monthly payment to $1,600.00 or that the required Notice of Rent Increase (NORI) was issued.
20. For the above reasons, and in keeping with the above sections of the Act, I find that the lawful rent remained at $1,300.00.
21. Notwithstanding, in the Form N4 Notice of Termination, the Landlord claims a monthly rent of $1,600.00 contrary to the above finding of the amount of the lawful rent, as it complies with the Act. For this reason, I find that the Notice is invalid, and therefore, while the application can be amended to consider arrears only, termination of the tenancy cannot be considered in this application.
At the hearing, the parties attempted mediation; there, they raised the issue of the Board’s jurisdiction to hear the matter and they asked for a consent order stating that the parties agree that the Board does not have jurisdiction to hear the case because it deals with a rent-to-own contract. In return for agreeing to the consent order, the Landlord agreed to drop the claim for unpaid rent from the Tenants. The Landlord also agreed to the review hearing.
I refused to endorse the consent order arrived at by mediation.
7. The parties allege that because their agreement is a “rent-to-own” contract, the Act does not apply. I find that this issue has already been canvassed by the Divisional Court in a few cases. In the end, the Court has decreed that the Board must undertake an analysis of all the circumstances leading to the agreement pursuant to section 202 of the Residential Tenancies Act, 2006.
9. In the case at hand, the Tenants stated that they wanted a determination from the Board that the Board did not have jurisdiction so they could go to Small Claims Court in order to get back the money they paid under the “Option to Purchase Agreement” entered into by the Tenant BB and his father, CBB. It is noted that JJ, the other Tenant listed in the original order issued on March 23, 2016, is not a party to the Agreement. Unless another document lists JJ as a party to the tenancy agreement, this Tenant should not be subject to an order from the Board. There is no evidence before me of any other agreement between these parties.
10. While the Option to Purchase starts off with the possibility of exercising an option to buy the property where the Tenants reside 60 days before the end of the 12-month term ending on May 31, 2016, the balance of the agreement reads like a standard rental agreement where the “occupation payment” of $950.00 is payable by the Tenants for the right to occupy the premises subject to the “option to purchase”. The Option also adds an extra payment of $287.50 towards the option to purchase; this payment is in addition to the “monthly occupation payment” and is 50% non-refundable. It is clear from a plain reading of the Option to Purchase that there are two distinct parts to the agreement: one for occupancy of the premises and one for the possibility of purchasing the premises if certain conditions are met. I find that the $950.00 payment meets the definition of “rent” as defined in s. 2 of the Residential Tenancies Act, 2006. Therefore, I find that the relationship dealing with occupancy of the residential premises is one of Landlord/Tenant and is subject to the Residential Tenancies Act, 2006.
11. I also find that the option to purchase is a contract that is separate from the “rental agreement”; should the option have been exercised, then this would have become a separate offer to buy the residential property.
12. Any amount of money that the Tenants have paid to the Landlord towards the “Option to Purchase” is therefore outside of the Board’s purview; any claim by either party should be brought before another forum.
4. Paragraph 3 of the Option to Purchase Agreement sets out that for each month that rent is paid pursuant to the Tenancy Agreement, the Tenant would earn a "Monthly Option Credit" of $380.00 towards the down payment of the purchase price of the property. The Monthly Option Credits would not bear interest, and would accrue to a maximum of $13,680.00 to be used .as a down payment. This paragraph expressly sets out that if the Tenant does not exercise this option, or in the event of a breach of either agreement, the Monthly Option Credit is to be forfeited, and the Monthly Option Credit is non-refundable.
5. This type of arrangement is known as a "rent-to-own" arrangement, and both parties agreed that they entered into the tenancy specifically because they wanted the rent-to-own option. The Tenancy Agreement and the Option to Purchase Agreement have entire agreement clauses, which set out that the total agreement is set out in the document.
9. The facts of NOL-22623-16-differ significantly from the facts before me. In this case, there are two separate agreements: a Tenancy Agreement and the Option to Purchase Agreement. The Tenancy Agreement clearly sets out the monthly rent at $1,898.00. The Option to Purchase Agreement is worded to say that for every month that rent is paid, the Tenant will earn a credit towards the down payment for the rental unit. In this case, the Tenant did not exercise his option to purchase the rental unit, and as per the Option to Purchase Agreement signed by the parties, he forfeited the monthly option credits. This forfeiture has no impact on the assessment of monthly rent which is clearly set out in the Tenancy Agreement, and is not subject to any caveats, conditions or reductions.
10. The Landlord's N4 Notice is therefore valid, as it correctly identifies the monthly rent as $1,898.00.