When a Lease is Rent plus Reimburse the Landlord for Utility Bills, where Does the Landlord Sue for Payment if Necessary?
Nobody knows for sure! A case law decision within an Appeal Court or clearer legislation is needed.
Leases often contain a term requiring the tenant to reimburse utility expenses paid by the landlord. In this type of lease, the monthly (or other period) sums charged to the tenant are a rate for rent and then the variable cost of the utilities. With this type of arrangement comes an often unknown issue that may subsequently lead to concern and difficulty for the landlord when the tenant fails to make good on the responsibility to reimburse the landlord for the utilities. The concern involves determining where the landlord should pursue payment for the utility bills; the Landlord Tenant Board or the Small Claims Court. The concern further involves the problem that the law is unclear with each the Landlord Tenant Board as well as the Small Claims Court often taking view of the law in such a way as to make review of such an issue the job of the other. Sometimes the Landlord Tenant Board will say that utility bills are not 'rent' and are therefore outside the jurisdiction of the Landlord Tenant Board; however, the Small Claims Court will sometimes say that utility bills are properly reviewed by the Landlord Tenant Board. To date, a firm answer to this legal question remains unavailable.
In the case of Luu v. O'Sullivan, 2012 CanLII 98396 at paras 55 to 58, it was stated by Winny D.J. that legislative instruction or appellate clarification of the LTB jurisdiction seems necessary on this issue. Here specifically is what was said:
55. The question of the Board’s jurisdiction over the utilities component of rent payable in residential tenancies cries out for appellate resolution. One avenue for such resolution would be on appeal from this judgment.
56. The other avenue would be for the Board to make a decision on this issue which could then be appealed as a question of law under s. 210 of the RTA. However if the practice of the Board’s staff is to turn away applications based on the contents of Interpretation Guideline 11, this creates an unfortunate obstacle to clarification of the law for residential landlords and tenants in Ontario. My view is that Interpretation Guideline 11 is seriously flawed and internally inconsistent, but it is clearly not a legally-binding instrument. The Board’s ability to adjudicate this issue should not be compromised by its own staff; nor should the ability of the Divisional Court to clarify this issue be so compromised.
57. It also appears plain that there is no aspect to this problem which could not be addressed by amendment to the RTA or its regulations.
58. The Small Claims Court, like any other court or tribunal, must apply the current law. My determination is that this matter falls within the exclusive jurisdiction of the Landlord and Tenant Board. Accordingly, both parties’ claims are dismissed for want of jurisdiction.
In the Landlord Tenant Board ("LTB") case TET-56570-15-RV-IN2 (Re), 2016 CanLII 52841, the LTB disagreed with the Deputy Justice Winny of the Small Claims Court and said:
41. For the same reason, and although it is not mentioned in the exclusions in the definition of rent, the Board has consistently stated that fluctuating amounts for utility charges paid by a tenant to either a utility company or to reimburse a landlord cannot be considered “rent”. (See: Interpretation Guideline #11 Eviction for Failure to Pay Rent.) This is why I disagree with the analysis of Deputy Judge Winny relied on by the Landlord in the request for review in the Small Claims Court case of Luu v. O’Sullivan, 2012 CanLII 98396. It fails to take into account the entire scheme of the Act with respect to rent set out in sections 110 through 133.
In the case of SOC-01295-17 (Re), 2017 CanLII 47397, the Landlord Tenant Board ruled that unpaid utilities are an irregular charge, meaning variable each month (or billing period) rather than a regular charge, and that as an irregular charge utility bills are outside the adjudication powers of the Landlord Tenant Board. Specifically, it was said:
17. Given my determination that unpaid utilities are irregular charges that may be housing charges but NOT “regular monthly housing charges”, the inclusion of these charges on the N4C notice of termination means that the N4C notice of termination is fatally flawed. For this reason, the application must be dismissed.
18. The Co-op’s Legal Representative urged me to consider Luu vs. O’Sullivan, 2012 CanLII 98396, as authority for the proposition that utilities are included within the definition of “rent” in Section 2 of the Act, and by analogy within the definition of “regular monthly housing charges” in Section 94.1. The decision is not binding on the LTB, nor is it helpful to the Co-op. Whether utilities are included in rent is an issue that falls within the expertise of the LTB and is decided on a case-by-case basis. With regard to whether the term “regular monthly housing charges” includes utilities, I am bound by the express provisions of the Act which exclude irregular charges from the definition of “regular monthly housing charges”.
The viewpoint of some adjudicators in the Landlord Tenant Board is that unpaid utilities are beyond the purview of the Landlord Tenant Board. The basis for the position is that view that monies owed for utilities are other than monies owed for the rent and the jurisdiction of the Landlord Tenant Board is limited to monies due for rent only. Accordingly, adjudicators holding this viewpoint will say that legal proceedings involving unpaid utilities must be pursued at the Small Claims Court rather than the Landlord Tenant Board. Further troublesome is the viewpoint that some judges in the Small Claims Court take the position that unpaid utilities is a portion of the rent and therefore the Small Claims Court is without jurisdiction and therefore the matter must be addressed at the Landlord Tenant Board rather than the Small Claims Court. This conflicting interpretation of whether unpaid utilities is a portion of the rent or other than the rent results in a 'catch 22' and can leave litigants, including advisors to the litigants such as lawyers and paralegals, without a firm case authority from which to form an informed legal opinion and basis for providing advice. As was said by Deputy Justice Winny in Luu, a decision at an appeal level court will go a long way in helping to resolve this confusion.