By
Pace Law

Allowing tenants to forgo paying rent may be equivalent of down-zoning

May 1, 2020

As we enter what may be the second full month of the economic shutdown, landlords are left wondering whether they will be able to rely on the usual recourse – eviction – if their tenants do not pay rent.

At the end of March, Ontario Premier Doug Ford took the position that residential landlords, at least, will not, telling Ontarians that they should not fear eviction if they were unable to pay rent. While the premier said that those who were working would be expected to pay rent, he did not indicate whether and how a landlord would be entitled to determine if a tenant has sufficient resources to pay. Many landlords were left unable to collect and continue to wonder when or if they would have any right to evict a non-paying tenant. While landlords may in some cases have been able to negotiate a deferral of mortgage payments to the bank, the message from the premier was that renters would have their monthly rents waived, not deferred. This left many landlords in a very difficult position.

Should it go on for very long, forbidding landlords for evicting non-paying tenants may be comparable to the down-zoning of residential rental properties. In Re City of Toronto Restricted Area By-Laws 234-75 and 300-75 (1977), 7 O.M.B.R. 344, the Ontario Municipal Board made clear that while municipalities are permitted under certain circumstances to down-zone, or make changes to zoning such that property value is negatively affected, “the burden is on the municipality attempting such an exercise to satisfy the Board that the effect of down-zoning will result to a greater benefit to the public at large than the harm or injury to the owner of the property.”

During the economic shutdown, it was the premier and not a municipal board who determined that the benefit to the public of permitting tenants to forgo paying rent was greater than the harm to the landlord. While courts have generally said that elimination of all private property rights cannot be done without compensating the private owner, they have also said that partial elimination of the private owner’s rights is fair game for public authorities (Mariner Real Estate v. Nova Scotia (Attorney General) (1999), 177 DLR (4th) 696 (NSCA)). Needless to say, a rental property without the ability to collect rent is worth little to nothing to either the owner or on a resale basis, and while the quasi-expropriation in this case may only be temporary, that is, for the duration of the pandemic, it is indefinite and harsh.

It remains to be seen whether stripping the value of rental property in its entirety, but for a limited period of time, is within government authority or requires some compensation to the owner, but if the down zoning examples are a model, compensation may well be called for.

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