Changing Housing Markets Create Clash Between Condominium Act and Residential Tenancies Act
With
multi-generational housing on the rise and housing affordability at a critical
low, the Divisional Court put an
important cap on section 51 of the Residential Tenancies Act 2006 S.O. 2006, c.17 (“RTA”) in their recent
decision, Smith v. Gega et al, 2023 ONSC 4723 (“Gega”). The decision sheds light on a dangerous
ramification of this arcane section of the RTA in the backdrop of the current
housing market in Canada and created a crucial precedent in protecting
affordable housing.
are converted into condominiums from being evicted by landlords for personal
use, or renovations under sections 48 and 49 of the RTA. This section, in effect, places tenant rights
above ownership rights. The issue put in front of the Divisional Court in Gega, is whether this right could apply to “heirs” of
the tenant, potentially creating a powerful right that extends for generations,
effectively creating an indefinite un-evictable tenancy.
unit where she lived continuously with her parents until their passing in 2015
and 2018, after which she continued to reside as a tenant at the property. The
fixed-term lease was signed by her parents in 1978 prior to the unit being
converted to a condominium. The Board found she was not a tenant in her own
right at the time the Condominium Declaration was prepared, however, Smith further
argued that the definition of “tenant” under section 2(1) of the RTA includes “the tenant’s heirs”, submitting that she was an heir to her parents at the time that the Condominium Declaration
was prepared, and therefore she could not be evicted pursuant to Section 51(1) of the RTA.1
The Honourable Justice Wilkinson found that Smith was not a tenant as
defined in 2(1) of the RTA and unable to access the protection provided to
tenants in section 51(1) thereby avoiding a potentially devastating consequence
of an indefinite un-evictable tenancy. This is a particularly crucial precedent
when considering the current housing market in Ontario.
According to Canada Mortgage and Housing
Corporation (CMHC),
restoring housing affordability in Canada would require an additional 3.5
million affordable housing units to be available on the market by 2030.
Condominiums are often the first step in creating entry-level housing for
people to enter the market, therefore, there is an incentive for developers to
convert to residential rental units into condominiums which would subsequently
fall under the protection of section 51.
cases contributes to housing affordability and plays an important role.
However, it also creates a dangerous risk when coupled with the related
consequence of the affordability crisis, being the rise in multigenerational
living arrangements as young adults are unable to afford living on their own. Statistics Canada in 2021 reported the number of homes being shared by
multiple generations of a family, two or more families living together or one
family living with people they may or may not be related to grew by 45 per cent
over the last 20 years, with only 39% of Canadians between the age of 20 and 34
that lived without their parents, down from almost 50% in 2001.2
section 51 could potentially expand for generations, making it impossible for
any owner, current or future, to live in the unit they purchased. This
completely contradicts the purpose of most first-time home buyers looking to
gain independence, placing their life savings into an
entry-level condo and substantial mortgage payments, only to find themselves
homeless.
in a project development in Cambridge, Ontario that were rented prior to 1986
and converted into condominiums. The buyer purchased a 3 bedroom townhouse
during the peak of a frenzied real estate market in 2022 for $485,000, however,
section 51 protected the tenant he inherited as part of the Agreement of
Purchase and Sale, leaving him to cover a $21,000/month mortgage payment while
renting a $2,000/month apartment for his family of 5, with the rent of the purchased
unit only covering less than a third of his costs at $1,300.3 While this represents a good lesson in caveat emptor, it also illustrates an unwelcome absurdity of
section 51 which would have been exacerbated, but for the Gega decision. Not
to mention the property value of such condos that would inevitably decrease due
to their limitations in use and become extremely difficult to sell.
the 65+ senior residential setting. A
common response to plurality of cultures in Canada and the increasing cost of
housing has been an onset of multi-generational housing. Even seniors only communities, such as care
facilities or aging in place communities, or event life lease complexes are
feeling the pressures where there is downward trending of the age of the
occupants, such as where children move in with their parents under the rubric
of being care givers but also to alleviate financial stresses, which can
disrupt the culture and climate of seniors’ communities. Multi-generational housing complexes must
find ways to accommodate a broadened population, and face challenges of
maintaining community or cultural harmony while preserving the reasonable
enjoyment of all the residents. Despite
section 51 seeming to be a rare occurrence,4 the current housing market seems to have created a rise in potential issues
surrounding its effect on commercial and residential leasing. In limiting the
definition of “tenant’s heirs”, Gega
has mitigated the
damages of section 51 in relation to multigenerational housing.
[1] Smith v. Gega,
2023 ONSC 4723 (CanLII), at para 10.
Multi-generational homes rising amid increasing costs | CTV News
[3] Reluctant
landlords: Condo buyers find they are unable to evict tenants – The Globe and
Mail
[4] Reluctant
landlords: Condo buyers find they are unable to evict tenants – The Globe and
Mail
