Case Considered: Herman v. Boardwalk Rental Communities, 2011 ABQB 394 

Introduction

Questions often arise about whether a tenant can refuse to pay rent because of something the landlord has or has not done, or because of the condition of the premises. The typical short answer is “no.”.” Why? Because, generally-speaking, “rent is sacrosanct.” And so it was in the recent case of Herman v. Boardwalk Rental Communities, 2011 ABQB 394 (Herman), a case considering the situation of tenants in Alberta under the Residential Tenancies Act, RSA 2000, c 17.1 (RTA). Even in the face of allegations of dog/cat urine and fecal matter leaking onto/into his apartment, the Court held the tenant could not unilaterally withhold rent. The Court also held that procedure can be sacrosanct in landlord/tenant matters. The tenant’s failure to meet the procedural requirements for bringing his appeal resulted in it being dismissed, with costs being awarded to the landlord.

The Facts

Herman concerned an appeal to the Court of Queen’s Bench of a Residential Tenancy Dispute Resolution Service (RTDRS) order in which the tenant, Wesley Herman (Herman), was ordered evicted as of the end of February 2011. Herman held a one-year residential lease with the landlord, Boardwalk Rental Communities (“Boardwalk”), with a term of July 1, 2010 to June 30, 2011.

In November 2010, Herman and Boardwalk began a dispute over allegations that dog and cat urine and fecal matter were leaking onto or into Herman’s apartment. In particular, Herman complained of unhealthy and unsanitary conditions on the apartment’s deck and windows. He asked Boardwalk to require the owner of the dog to change the dog’s behaviour or he wanted to be moved to another unit. Boardwalk indicated that it would ask the responsible health authorities to get involved. At some point, Herman threatened to withhold rent until the matter was dealt with. On January 4, Boardwalk staff called police in regard to Herman’s “unruly conduct” and “unsafe storage of weapons, ammunition in the apartment” (at para 2). Police investigated but no charges were laid.

The next day on January 5, Boardwalk issued a 14-day Notice to Terminate the tenancy under section 29 of the RTA. The stated reasons for termination related to Herman allegedly verbally abusing Boardwalk staff (which resulted in the call to the police) and to Herman’s storage of illegal firearms in the apartment (which were discovered by police). The Notice alleged breaches of RTA subsections 21(b) (tenant will not significantly interfere with the rights of the landlord) and 21(d) (tenant will not endanger persons or property in the premises). There was no mention of a possible breach of subsection 21(a) (failure to pay rent when due).

Boardwalk then filed an application with the RTDRS on January 27 to have Herman evicted on the following grounds: (a) failure to pay rent as and when due; and (b) interfering with the rights of the landlord. After Boardwalk’s application to the RTDRS Herman did in fact withhold February’s rent on February 2, 2011.

Both parties were present at the RTDRS hearing. The RTDRS officer found Herman to be in substantial breach of the tenancy agreement by his failure to pay rent when due pursuant to subsection 21(a) of the RTA. Although, as noted, there was another ground listed in the application, the officer focused on the failure to pay rent and granted a termination/eviction order on that basis on February 22, 2011.

Herman appealed the RTDRS order to the Court of Queen’s Bench pursuant to the Residential Tenancy Dispute Resolution Service Regulation, AR 98/2006 (the Regulation). Before the court, Herman argued that the eviction order should be overturned because it demanded his eviction for a reason that was not specified in the 14-day Notice to Terminate that had been served by Boardwalk upon Herman. Herman also told the court that he had decided to withhold rent only as a measure of last resort because his complaints had gone unanswered by Boardwalk.

When Mr. Justice Donald Lee first heard this matter on February 25, 2011, he issued a stay of enforcement of the RTDRS officer’s order subject to Herman bringing all his rental arrears up to date. Herman did so. Herman was also ordered to provide the court with his full argument along with a certified copy of the transcript of the RTDRS hearing. However, by the time the matter was heard by Justice Lee, Herman had failed to file this transcript as required by the court order (and the Regulation).

Issues

Three issues were raised on appeal:

• was the court required to dismiss the appeal because Herman had failed to provide the RTDRS transcript?
• did Herman anticipatorily and in fact breach his obligations under the RTA by threatening to withhold and in fact withholding rent?
• were Boardwalk’s grounds for terminating the tenancy accurately and properly stated in its application to the RTDRS? 

Failure to provide the RTDRS transcript

It appears that Herman represented himself throughout this entire matter. It is possible that this led to his failure to understand exactly what the Regulation requires and what the consequences would be for failing to meet these requirements. Subsection 23(2) of the Regulation is clear that a party appealing an order of an RTDRS officer to the Court of Queen’s Bench must, among other things, file a transcript of the evidence heard before the officer within 3 months of filing the notice of appeal (unless the Court orders otherwise). Further, section 28 states that if an applicant fails to comply with the requirements of section 23, the appeal “shall be dismissed by the Court of Queen’s Bench.” Moreover, in this case, Justice Lee had gone further and had specifically ordered Herman to file the transcript with the court prior to the hearing of the appeal. As noted, Herman failed to comply with both the Regulation and the court’s order in this regard.

Not unexpectedly, Justice Lee concluded that Herman’s appeal should be dismissed on this ground. First, he noted the “mandatory requirement” (at para 18) in section 28 of the Regulation that the court must dismiss the appeal if the procedural requirements are not met. Second, he cited clause 25(1)(a) of the Regulation which states that only the evidence that was before the RTDRS hearing is admissible before the court on appeal. The appeal is therefore not an appeal de novo and the hearing evidence must be before the court for the appeal to be heard. Third, Justice Lee noted that to proceed with the appeal on the basis of affidavit evidence only, without the evidence that was before the tribunal, would allow for “only an incomplete analysis of the decision by the Tenancy Dispute Officer” (at para 20). It would require the court to speculate about what occurred at the hearing and would encourage the improper rehearing of the case on appeal. It might also, according to Justice Lee, represent “a breach of the principles of fundamental justice since the parties do not know the case that has to be met.” (at para 20).

Thus, procedure matters when it comes to appeals in landlord/tenant matters. One cannot simply ignore the requirements of the Regulation or any court order. Justice Lee concluded that the lack of a filed transcript was grounds alone to dismiss Herman’s appeal.

Although he could (and arguably should) have stopped there, Justice Lee went on to consider the other two issues raised by the appeal. This is particularly odd given his conclusion that the evidence required to properly deal with the merits of the appeal was not before the court. It is also odd that Justice Lee does not mention in any way what standard of review applies to his review of the merits of this appeal.

Breach by threatening to withhold and in fact withholding rent

Although Justice Lee refers to an anticipatory breach on the part of Herman, a close review of his decision on this issue, and the decision of the RTDRS officer, reveals that the focus was not on an anticipatory breach, but rather on the ultimate breach that in fact occurred.

With respect to an anticipatory breach, as noted by Justice Lee such a breach “occurs when, before performance is due, a party renounces the contract or disables himself of performing it” (at para 24). According to Justice Lee, Herman committed such a breach when, in a letter to Boardwalk dated January 2, 2011, he stated that he would not pay February rent unless his concerns were dealt with. Herman ultimately withheld that rent on February 2.

Although Herman did pay the rent owing after the RTDRS order was granted, at the time of the RTDRS hearing, February rent was outstanding and Herman was in breach of his obligations as a tenant. Because the RTDRS hearing took place several weeks after the rent was due, by that time, as noted by Justice Lee, the “anticipatory breach [had] turned into an actual breach” (at para 26). And it was on that basis that the RTDRS officer found that Herman was in substantial breach under the RTA and ordered him evicted. Justice Lee concluded that the officer was within his/her jurisdiction to make that order. He cited section 15 of the Regulation which states that after holding a hearing and considering all the circumstances, a tenancy dispute officer shall make an order that has been applied for as long as it is justified. On the facts, Justice Lee concluded the eviction order was justified.

There are a couple of difficulties with Justice Lee’s decision on this issue. First, the entire discussion of anticipatory breach seems unwarranted in the context of the RTA. This is not a contract case to be resolved by the common law. Rather, it is a case governed by the RTA and its regulations, and there is nothing in those enactments that contemplates an anticipatory breach forming the basis for the issuance of a Notice to Terminate by a landlord. In short, a landlord cannot issue a Notice to Terminate under the RTA on the basis of an anticipatory breach on the part of a tenant (see RTA, ss 1(1)(p)(i), 21, 29).

Second, given that Herman paid the rent owing subsequent to the eviction order being issued, a question arises as to why the RTDRS officer did not condition the order on Herman failing to pay the rent within a specified deadline. This was, after all, Herman’s first breach in regard to rent. Subsection 15(2) of the Regulation allows officers to attach any terms and conditions that are “fair and proper in all the circumstances.” Further, the RTA contemplates tenants having an opportunity to remedy a breach of non-payment of rent. In the provision (s 29) that allowed for the serving of the 14-day Notice to Terminate on Herman by Boardwalk, subsection (3) states that where termination is sought because of failure to pay rent, the landlord must state that the tenancy will not be terminated if the tenant pays the rent owing by a specified date. Subsection (4) further clarifies that a notice to terminate is not effective if the tenant pays all rent due as of the payment date specified in the notice if the reason for termination is a failure to pay rent. No such opportunity was, however, afforded to Herman in this case.

It may have been that both the RTDRS officer and Justice Lee were influenced (albeit implicitly) by the general rule that rent is sacrosanct in landlord/tenant matters. Under the common law, tenants are not entitled to withhold rent despite breaches on the part of the landlord that fall short of eviction: see, for example, Johnston v Givens, [1941] 4 DLR 634 (Ont CA). As for residential tenancies in Alberta, the RTA contemplates only one very limited instance when a tenant can unilaterally withhold rent and that is where a landlord fails to serve a signed residential tenancy agreement on the tenant in a timely manner (see s 17(2)). Otherwise, rent is sacrosanct. It must be paid until the tenant obtains an order for abatement of rent or termination of the tenancy (s 37, RTA) or, where the breach by the landlord is a substantial breach (meaning that the landlord has failed to meet the minimum housing standards required by the Public Health Act), it must be paid until an order has been issued by the public health authorities which the landlord has failed to comply with (see RTA, ss 1(1)(p)(ii), s. 16(c), s. 28).

Further, Justice Lee made a point of emphasizing that under the RTA the unsatisfactory nature of the condition of residential premises “almost never justifies the tenant unilaterally withholding rent, except in situations where the rented premises are unsafe or unliveable” (at para. 28): see also Prestigious Properties Ltd. v Kouba, 2006 ABQB 562. And even in those situations, as noted above, Justice Lee stressed that health and safety officials must certify that those problems exist. Were it otherwise, tenants could unilaterally withhold rent as they see fit. They could, according to Justice Lee, create “problems of never ending repairs and deficiencies within their premises and foster a scenario of the Tenant virtually never having to pay rent” (at para. 29). Or, tenants could, after discovering legitimate problems with rented premises, “conveniently or otherwise not allow for the repairs creating yet another scenario where no rent would have to be paid” (at para. 29).

Accuracy of Boardwalk’s grounds for terminating the tenancy in RTDRS application

Although the Court stated this third issue as whether Boardwalk’s grounds for terminating the tenancy were accurately and properly stated in its application to the RTDRS, the issue which the Court really dealt with was whether the eviction was proper given that Boardwalk’s Notice to Terminate did not mention non-payment of rent as a ground for termination. This ground was raised only later in Boardwalk’s application to the RTDRS.

Justice Lee held that there was no reason to cancel the RTDRS order on this basis. He stated that the “eviction notice was reasonable given the express intention in writing indicated by the Tenant.” Again, however, this raises the problematic anticipatory breach idea. As noted, under the RTA, a landlord is not entitled to evict a tenant on the basis that the tenant has said s/he is not going to pay rent (whether they do so orally or in writing). In any event, Justice Lee continued and concluded that “the actual breach subsequently occurring gave the Landlord the right to proceed with their application” (at para 27). He further stated that “[h]ad the Tenant paid the rent for February 2011 in advance of the hearing, that portion of the hearing would have been moot” (at para 27).

While it is true that Herman was in fact in breach for non-payment of rent by the time the RTDRS hearing occurred, the fact remains that the Notice to Terminate did not mention non-payment of rent as a ground for termination. Consequently, Herman quite rightly believed that the only case he had to meet before the RTDRS was with respect to the two grounds that were mentioned in the Notice to Terminate (despite what the application to the RTDRS said). Ironically, the fact that Herman did not know the case he had to meet before the RTDRS reminds one of Justice Lee’s natural justice comments noted earlier.

On the commercial side, there is case law that says a notice by a landlord to exercise a right to terminate a lease does not have to list all possible grounds for termination. Rather, at least one valid ground must be mentioned, and new additional grounds may be raised later: see, for example, 261488 Alberta Ltd. v Westwinds Club (1989) 4 RPR (2d) 241 (Alta CA). But those are commercial tenancies and the RTA is consumer protection legislation. If it had been crystal clear that Boardwalk was seeking termination for non-payment of rent, Herman may have indeed paid up, rendering at least that part of the hearing moot. Further, clause 29(2)(d) of the RTA is clear that the 14-day Notice to Terminate “must set out the reasons for the termination.” There was no mention of non-payment of rent as a ground for termination in Boardwalk’s Notice.

Section 29 of the RTA requires a “substantial breach” to allow a landlord to terminate on 14 days notice. Clause 1(p)(i) defines a “substantial breach” as a “breach of a covenant specified in section 21 or a series of breaches of a residential tenancy agreement, the cumulative effect of which is substantial.” Was there a “substantial breach” in this case justifying Boardwalk’s termination? Because the termination was wrongly based on a breach that was not in existence at the time of the Notice to Terminate, we unfortunately do not know.

[Thanks to Professor Jonnette Watson Hamilton for her helpful comments on this blog.]