Property Managers and Hidden Tenancy Risk: A Recent Divisional Court Decision

Dear friends,

I want to share a very recent case from the Divisional Court that I found interesting and useful for landlords, especially large landlords who use property managers.

The facts of this case are simple. A tenant signed a lease with the landlord and moved into the house. At some point, he sublet one room to a woman with a child for $1,000 per month. In June 2023, the main tenant was accused of criminal activity and had to vacate the property.

And this is where a new character appears — the property manager. This good man enters into a verbal (I emphasize — verbal) rental agreement with the woman. After some time, the property manager starts to suspect that the landlord is not happy with his initiative, does not consider the woman a tenant, and wants her out. So, the landlord signs an N11 with the main tenant and files an L3 application with the LTB to evict the woman who remained in the unit. The landlord gets an eviction order from the LTB and sends in the sheriff.

Meanwhile, the woman, completely unaware, continues living in the house, and only when she is confronted by the sheriff coming to evict her does she realize something is wrong. She quickly files a request with the LTB to review the order. Her request is granted, a full hearing takes place — and she still loses.

The adjudicator finds that the property manager did not have sufficient authority to enter into a tenancy agreement on behalf of the landlord. She is found not to be a tenant, but simply an occupant.

But she wasn’t built to give up that easily 🙂So she appeals to the Divisional Court.

I won’t go into all the court’s reasoning (for those interested, the decision explains it in detail), but I’ll focus on the key point.

Some may not know this, but an appeal cannot be filed just because someone doesn’t like the original decision. An appeal can only succeed if there is an error of law. So the court asked: did the LTB apply the correct legal test given the facts?

The adjudicator at the LTB focused on agency — whether the property manager was an agent of the landlord and whether he had authority to enter into agreements.

But the Divisional Court said: that’s too narrow.

They asked a different question:

Is the property manager himself a “landlord” under the RTA?

They reviewed the definition of landlord in the RTA, looked at relevant case law, and concluded that it is possible for a property manager to fall within that definition. And if so, that question needed to be properly analyzed.

The court didn’t make a final determination. Instead, it sent the matter back to the LTB to be reconsidered using the correct legal test.

Something tells me that after this decision, the LTB may see things differently.

Conclusions:

Landlords, especially large landlords — you are in a business. And it’s not an easy or risk-free business.

Don’t make these kinds of mistakes. Don’t rely only on common sense. Control your agents and property managers.

If something feels even slightly uncertain, it’s better to consult a lawyer or paralegal.

It will be cheaper in the long run.