RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
CONTENTS
Tuesday 26 February 1991
Residential Rent Regulation Amendment Act, 1990, Bill 4
Afternoon sitting
Adjournment
STANDING COMMITTEE ON GENERAL GOVERNMENT
Chair: Mancini, Remo (Essex South L)
Acting Chair: Mahoney, Steven W. (Mississauga West L)
Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)
Abel, Donald (Wentworth North NDP)
Bisson, Gilles (Cochrane South NDP)
Drainville, Dennis (Victoria-Haliburton NDP)
Duignan, Noel (Halton North NDP)
Harrington, Margaret H. (Niagara Falls NDP)
Mammoliti, George (Yorkview NDP)
Murdoch, Bill (Grey PC)
O'Neill, Yvonne (Ottawa-Rideau L)
Scott, Ian G. (St George-St David L)
Turnbull, David (York Mills PC)
Substitutions:
Coppen, Shirley (Niagara South NDP) for Mr Bisson
Lessard, Wayne (Windsor-Walkerville NDP) for Mr Duignan
Mahoney, Steven W. (Mississauga West L) for Mrs Y. O'Neill
Poole, Dianne (Eglinton L) for Mr Scott
Tilson, David (Dufferin-Peel PC) for Mr B. Murdoch
Ward, Margery (Don Mills NDP) for Mr Bisson
Wiseman, Jim (Durham West NDP) for Mr Drainville
Clerk: Deller, Deborah
Staff:
Baldwin, Elizabeth, Legislative Counsel
Hunter, Leith, Legislative Counsel
Richmond, Jerry, Research Officer, Legislative Research Service
The committee met at 1012 in room 151.
RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
Resuming consideration of Bill 4, An Act to amend the Residential Rent Regulation Act, 1986.
Section 8:
The Chair: I call the standing committee on general government to order. The standing committee is continuing with its clause-by-clause review of Bill 4, An Act to amend the Residential Rent Regulation Act, 1986. When we adjourned last week I believe Ms Poole was placing a motion before the committee. I am told that before we can hear from Ms Poole we should carry subsections 100e(3) and (4). All in favour? Carried. And subsection 100e(5). All in favour? Carried.
That brings us to Ms Poole's amendment. Ms Poole, could you please move your amendment to refresh everyone's memory on what we were discussing as we adjourned last week?
Ms Poole: I move that section 100e of the act, as set out in section 8 of the bill, be amended by adding the following subsection:
"(5a) In determining whether a rent increase is justified under clause 2(b), the minister shall not consider any portion of an increase in municipal taxes that results from noncompliance with a municipal or other property standards order."
The Chair: You have an opportunity to explain your amendment, Ms Poole.
Ms Poole: Just very briefly, Mr Chair, it is my understanding that the government has indicated a willingness to support this particular motion. It is to cover the instance where a landlord has not satisfied a work order, has not done the work required under the building code and the municipality has actually gone in and done the work in order to protect the integrity of the building or the safety and health of the tenants. In that instance, where a municipality actually does the work, it would put a charge on to the municipal taxes.
In the provision we were discussing earlier, 100e(1), whereby municipal taxes would be considered to be an extraordinary operating cost, under that particular motion a landlord could have had a work order on his building, have the municipality come in and do the work, put a charge on his taxes and then the landlord would have the right to apply for an extraordinary operating cost and have the tenants pay for the cost of lifting that work order. I think all parties were in agreement that this was not the original intent of the motion and this just clarifies that the landlord would not be able to pass that cost on to the tenants.
Ms Harrington: I just want to clarify that our party does realize this is a good idea. This kind of provision could be accepted, as it would prevent landlords abandoning their obligations to comply with property standards bylaws.
Mr Tilson: The Progressive Conservative Party certainly supports the amendment and I would assume it would be straightforward, that all parties would agree to it, because clearly if this amendment is not carried, it would be a wonderful way for the landlord to circumvent the act and take advantage of the tenant. Something that normally could not be carried through under the act you just allow to go under work orders and it would be carried through as an increase of taxes, so what a wonderful way to circumvent the act. So clearly to protect the tenant, our party wholeheartedly supports this amendment.
Ms Poole: Mr Chair, on behalf of the committee I would like to thank the East York Tenants' Association who brought this concern forward and provided us with insight into this possible loophole in the act. I think they are to be commended for their initiative.
The Chair: Very good. We acknowledge their work. Seeing no further discussion on the amendment, all in favour of Ms Poole's amendment? Ms Poole's amendment is carried.
Motion agreed to.
Mr Mahoney: Unanimously.
Mr Mammoliti: See what happens when you are nice?
Ms Poole: And for the record, George supported my amendment because I was nice to him and because the government told him to do it.
The Chair: Shall subsection 100e(5), clauses (6)(a) and (b), subsection (7) and clauses (8)(a) and (b) carry? Ms Poole?
Ms Poole: Yes, I would ask for a clarification from the ministry as to subsection (6), particularly clauses (a) and (b).
Ms Harrington: Subsection 100e(6) specifies criteria to be used for the purposes of calculating interest rate changes under clause (2)(c), namely that the total principal is limited to 75% of acquisition or construction costs and the amortization period must be at least 25 years. So that is a change.
Ms Poole: Right now it is my understanding that it would be 85% of acquisition cost and that the amortization period would not have to be 25 years, so that is a change.
Ms Harrington: Right. We selected these criteria. It is just following conventional lending practices.
Ms Poole: Does the ministry have any statistics or any indication that 25 years would be a normal rate for a residential rental complex? I know, certainly from a home owner's point of view, that 25 years is quite a common amortization period, but I am not familiar with larger rental buildings, whether this is in the normal course of events or whether this is a dramatic change.
Ms Parrish: Twenty-five is what is required now, so that is not a change; the 75% is a change from 85%. I could not say with absolute certainly that it is X percentage, but I think it is the single most commonly used amortization period. Now, I should say that with larger residential rental properties they probably do not have mortgages at all -- they have other kinds of debt instruments -- and we do not make people have mortgages. All we do is say, for the purposes of this calculation, you assume this 75% loan devalued or amortized over 25 years. You can have whatever debt instrument you want; this is just a way of sort of limiting the amount you can pass through and it is chosen, as the parliamentary assistant said, because it is the most common kind of standard financing situation.
Ms Poole: And again, this only refers to the interest rate change.
Ms Parrish: Correct. Exactly the discussion we had the other day.
Ms Poole: So we are not going to talk about flipping.
Ms Parrish: Did we?
Ms Poole: No. I do not think we want to confuse this one any more.
Ms Parrish: This is just a limitation on the pass-through.
Ms Poole: Perhaps, Mr Chair, we could go back to what we were originally doing last week, which is that the ministry would just give a brief explanation for every clause, because with some of them I am not sure we are really aware of what the significance of the change is.
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The Chair: Okay, so we have had the explanation for subsection (6). Ms Harrington, could you give us the explanation for subsection (7) and clauses (8)(a) and (b)?
Ms Harrington: Certainly. Subsection 100e(7) clarifies that in determining financing costs no longer borne, the comparison is to be between a decrease in interest rates with increases in interest rate that occurred on or after 1 August 1985 and were recognized in a previous order.
For example, an order recognized increased financing costs that occurred between 1 August 1987 and 1 August 1988. There is an application for a 1 November 1990 rent increase and the current interest rate is lower, therefore there will be a decrease in the landlord's financing costs. The original period for consideration for the increase in interest rate had to be on or after 1 August 1985. This rule is the same as in the current legislation.
This subsection 100e(8) permits the ministry to look behind the transaction to determine the factual substance of the exchange. This can be done by disregarding the outward form of the transaction and the separate corporate entities and by examining the pattern of activities of the complex.
Ms Poole: On subsection 100e(8), the total rent increase that is justified on the application, this would be referring to extraordinary operating costs or changes in interest rates?
Ms Parrish: Yes.
Ms Poole: This basically is to ensure that there is an arm's-length relationship between --
Ms Parrish: Not necessarily. The most likely situation is not arm's-length transactions, but you are trying to avoid a situation where a building is sold around a group of related parties in order to increase the interest rate cost pass-through or in order to provide some sort of manipulation of the transaction that would increase the amount of the rents but would not actually result in any change in actual ownership. It is most likely to occur between holding companies.
We also control this in a number of other ways. For example, we control it through interest rate trend-capping to sort of make sure that you do not get more than a certain amount. But in the past, I guess, there have been anecdotally problems with transfers among holding companies in order to increase rents. This just allows you to look behind that and see whether or not there is a bona fide transaction which is occurring in the sale of the property or whether the sale of the property is designed to avoid the application of the statute.
Mr Tilson: Looking at subsection 100e(8), I am looking specifically at the words "as a matter of fact the real substance of all transactions and activities." In other words, the minister shall determine as a matter of fact the real substance of all transactions and activities. Is there some regulation to determine what criteria the minister looks at to determine that?
Ms Parrish: No.
Mr Tilson: So that is just in his sole discretion. I am getting back to the question you asked Mrs Poole. Obviously this is designed to prevent the type of situation you described, but surely there must be a criterion that would have to be followed by the minister. I mean, who says he is right? Would there not be a regulation or criteria setting forth how he makes that determination, or does he just guess? Surely not.
Ms Harrington: From the way I read it, in the past we could only go by what was on the paper. This is actually saying that he can have regard to the pattern of activities relating to that particular building and try to find out what the real intent of any transaction is. Now, I cannot speak any further, really, of how that is done.
Mr Tilson: I understand that. In other words, you are trying to avoid a certain situation from occurring as a result of this subsection, and there is a certain amount of ministerial discretion. But for the minister to have that discretion, presumably there is a set of criteria that he follows. Ms Harrington, it may be improper to ask you because you may not know; I guess really my question is to the staff. Is there a regulation or are you contemplating a regulation whereby the minister, to arrive at that fact -- there is a list of criteria presumably; surely he just does not guess. Do you understand what I am saying?
Ms Parrish: Yes, I understand. I guess I would start out by saying as follows, that there are some criteria here, that they have to look at the real substance of the transactions and the good faith of the participants, that they can disregard the outward form of the transaction and that they must have regard to the patterns of activities. Those are the criteria. It would be unusual to have a regulation that would circumscribe discretion. I mean, what you are saying is that you have a situation in which, if you just look at the paper facts, you may have an unexceptional transaction. If you look behind that, you may have a problem and it would be dealt with in the same way as any other discretionary decision is dealt with. If there is insufficient evidence, then there is nothing to make a decision on. If the parties to the transaction are unhappy with the decision that is made in the first instance, they have the right to appeal to the hearings board and then the hearings board has the right to completely retest all of that evidence and call new evidence. And if they are still --
Mr Tilson: Where does it say that?
Ms Parrish: -- unhappy, they have the right to go to the courts.
Mr Tilson: Mr Chairman, this is a decision that is made by the minister.
Ms Parrish: Yes, as every decision is made.
Mr Tilson: But my question is, obviously this is designed to deal with this expression that has been thrown at us, the word "flip." Correct?
The Chair: There is that word again.
Ms Parrish: I guess, with respect, I do not really think it does deal with flipping. The more common factual situation will be transfers between non-arm's-length holders of property. That is the most common situation, where you would have a transfer between non-arm's-length parties of the same property.
Mr Tilson: Well, you get into the favourite type of situation where the directors and the shareholders are all the same for two or three different companies.
Ms Parrish: Yes, sir.
Mr Tilson: And they transfer it back. That is called a flip, at least the way I have always looked at it, the bad word, and I realize the Ministry of Housing is having a very difficult time defining the word "flip."
Ms Parrish: It is a flip if there has been an appreciation in the course of that activity. If there has been no appreciation, it is just a transfer.
Mr Tilson: I could challenge you on that because you could change the mortgage transaction. It could have the same quantum but the terms of a mortgage could vary substantially, just to create other funny things.
Ms Parrish: Yes.
Mr Tilson: And hence, I get back to the question. When you say "the real substance of all transactions and activities," I do not know what that means. This section does not tell me what it means. So I would assume that you would be creating some sort of regulation to define how the minister determines the real substance of all transactions and activities. In other words, there must be a guide, there must be a list of things the minister must look at.
In other words, for example, what the space between the transactions is, defining what a non-arm's-length transaction is, those sorts of things. Would the minister not have to have a guide to determine that? Otherwise he could can specific applications unilaterally without any grounds whatsoever.
Ms Parrish: Except that all decisions go through a process. This is like the exercise of any other kind of discretion.
Mr Tilson: I am trying to find out what the process is.
Ms Parrish: The process is, you would make an application and then the people who would hear the case, which of course is not the minister personally but the administrative rent review administrators. It would then be appealable as all other decisions are. That is how administrative discretion is exercised. If there is a decision, and if people do not like it, they go through a process of appealing it; and there is nothing different about this decision from any other decision that could be made under this section.
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Mr Tilson: I am not challenging the fact that a minister of the crown should have some discretion. What I am challenging is that a minister of the crown, in exercising his or her discretion -- and this applies to any legislation -- must follow a set of guidelines, must follow a set of criteria, otherwise he could say, "I'm going to oppose this increase because I do not like the name of the company, the companies." Why could he not do that with this section? It gives him the right to.
Ms Parrish: I do not think there is any criterion there that would reflect on the name of the company. The name of the company may probably have nothing to do with good faith or real substance or outward form or pattern of activities.
Mr Tilson: It does not say that. It says in his discretion, "the minister shall determine." I read that as his sole discretion, and there are no criteria to determine how he determines the substance of these transactions and activities. I leave that with you. I have trouble with giving a minister of the crown that much discretion without some sorts of guidelines.
Ms Poole: To follow up on Mr Tilson's point, the ministry has filed some draft regulations with committee members. I assume so because I seem to have received it in one of the piles we got from the clerk and I noticed there is not any provision at all under regulation to deal with subsection (8). I wondered if it was the ministry's intention to actually have regulations or have some guidelines that the minister could utilize.
Ms Parrish: No. And the reason is that you are dealing with a matter of discretion. If you knew what all the problems were going to be, you would not need the discretion. You could just have a rule that would say, for example, as we did before, if the mortgage is more than 75% or if it is amortized by less than a certain period of time then you cannot have it or you cannot count it or whatever. If you knew what every potential problem was, you would not need any discretion, you could just have a rule.
Ms Poole: The problem I have with this is that in both the Residential Rent Regulation Act and in Bill 4 it always refers to the minister, while in practicality it is not the minister, it is the minister's staff via rent review who make these kinds of decisions. I would not have too much difficulty giving the minister this type of discretion. I would still prefer some guidelines because obviously he needs --
Interjection.
Ms Poole: No. I said I do not have a great deal of difficulty. I said I would prefer some guidelines for the minister. But I have a great deal of difficulty leaving this to the discretion of rent review administrators who may have had no expertise --
Mr Mahoney: A bad day.
Ms Poole: -- or may have had a bad day, or may not even understand what the motivation is behind this, but certainly do not have the kind of information available to make these discretionary decisions.
I would strongly recommend that you do have guidelines or regulations that would assist the rent review administrators in making these kinds of fairly broad decisions without any backup.
Ms Harrington: I understand what you are saying. I would like to ask our staff -- this might get to the heart of it -- what difference these clauses would make to what has been done in the past under the RRRA? Was there any discretion or what is the real intent behind doing this? Why do we want the change?
Mr Mahoney: A point of order, Mr Chairman: We are debating Bill 4, not the RRRA, so I do not know why you would use it to justify a decision in Bill 4.
Ms Harrington: I am not doing that.
Mr Mahoney: Your government's bill should stand on its own.
Mr Mammoliti: It is not a point of order.
Mr Mahoney: It may not be a point of order, but I got it in.
The Chair: We are discussing concerns that have been raised by Ms Poole and Mr Tilson, and staff and the parliamentary assistant are trying to accommodate the questions of the members and we will continue.
Ms Harrington: So basically I want to say why we are changing the RRRA and why this clause is in there. I would ask our staff to comment, if you could, about the intent of this and how much, as Ms Poole has asked, real leeway or changes are given here and why we need them.
Ms Parrish: In the past there was no discretion under the RRRA to deal with anything but the face of the transaction. That meant there were transactions in which everybody knew there had been, essentially, a non-arm's-length manipulation of the financing and mortgaging package in order to increase the rents, but that no one could do anything about it because there was no discretion to disregard the outward form of the transaction. That is why this is here; it is to deal with those kinds of circumstances.
One thing I would say is that if it would increase the comfort level of the members, when we get to the regulation-making authority we can add a regulation-making authority under this part. I have to be honest with you and say that regulation-making authorities give the government the authority to pass regulations. They do not make them pass regulations, but they do give them the ability to circumscribe discretion if that appears to be necessary and if you get enough cases. The reality is that you may not get enough of these cases to justify a regulation, in the sense that you would end up with a regulation that deals with one case, particularly given the relatively short period of time that the bill is planned to be in place. But if that would be of help, I do not think it would be problematic to draft a regulation-making authority that could provide for guidelines in this area to the rent review administrators.
Mr Tilson: One of the committee members in jest -- maybe it was not in jest -- made a remark that the staff could have a bad day and just decide for whatever reason with respect to exercising discretion. I know that sounds silly but when you read the section that is possible. They may just not like the people who are involved and that is a reason. They do not have to give a reason.
I guess I am still looking for a specific example. There must have been something that made the government implement or put forward this amendment. There must be some specific examples. And if there are specific examples, it should be very easy, as you have indicated, to prepare regulations. I guess what I am looking for is, one, can you give us some specific examples as to why this subsection of the bill is being put forward? And second, if this matter were to be stood down, if the subsection were to be stood down, if the preparation of regulations are fairly simple -- and they must be because I am sure you have thought this out -- could we see the regulations perhaps even today?
Ms Harrington: I just want to remark on your scenario of staff having a bad day; I mean, this could apply to every single section of the act and every single section of government. What I would like to caution --
Mr Tilson: A point of order: That is not quite so. When there are ministerial discretions, normally there is a set of criteria, as I understand it, in most pieces of legislation.
Ms Harrington: Right.
Mr Tilson: This is unusual, what is being done here.
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Ms Harrington: We are saying that we expect staff to do the very best job they possibly can in all areas of rent regulation. I just want to point out that in this particular portion, this discretion, which is in effect the minister's discretion, any staff making decisions are personally responsible to the minister. It is his responsibility. So I would say to you that the staff would be extremely careful in any decision they would recommend to the minister. I think what you are saying is a very generalized thing, that of course decisions are hard to make and that we rely on staff. But I think you would understand that as our staff has said, this is a small number of cases we are dealing with and some discretion -- obviously that is why we put it in here. We feel this is the only way a minister's discretion could actually deal with getting behind what is written on paper to the real effect of transactions.
Mr Tilson: Ms Harrington, everybody has a bad deal. The minister could say: "I do not like this deal. Forget it."
Ms Harrington: Yes, and he is responsible to the electorate of this province and to the government.
Mr Drainville: Mr Chair, on a point of order: The questions have been asked. The parliamentary assistant is responding to them. The ministry officials are responding to them. Every minute or so there is an interjection from Mr Tilson. I would request, Mr Chair, that perhaps you might give a little bit of direction. If answers are given and the member does not like them, that is fine. But at least answers are being given and it seems to me that we need some direction on this.
Mr Mahoney: Are you sure this is a point of order?
The Chair: This is not really a point of order.
Mr Tilson: I think he is out of order, Mr Chairman.
The Chair: That is not really a point of order. I am listening carefully to the questions and to the answers, and it appears that the answers are in fact, in the member's view, causing other questions to be raised. I am keeping an eye on the clock and we have already passed a couple of sections this morning, which is speedy work for this committee. We are close to passing subsection (7), and I am going to let the member continue with his questions.
Mr Tilson: With due respect, Ms Harrington, I simply do not accept that you appear to be saying that the minister can exercise this type of discretion without a set of criteria, a set of guidelines which would be in a regulation. The staff have indicated that it would be possible to prepare some regulations. My question therefore is to the staff: How long would it take to prepare those types of regulations setting forth criteria as a guide to the minister which would assist us in determining whether or not the minister has sufficient criteria to assist him or her in making those decisions?
Ms Parrish: I think it would take quite a long time, and the reason is that what you are really trying to do is to circumscribe the exercise of discretion in unusual cases. The point I guess we are trying to make here is that, with respect, there is nothing unusual about this kind of discretion. In the past this discretion has existed and continues to exist. All we are doing is giving the rent review administrators the same discretion. Perhaps it would be helpful if I read the discretion that the hearings board to which these decisions are appealed has under the current RRRA. It says:
"Every decision of the board shall be upon the real merits and justice of the case. In determining the real merits and justice of the case, the board shall ascertain the real substance of all transactions and activities relating to the residential complex and the good faith of the participants, and in doing so, (a) may disregard the outward form of the transaction or the separate corporate existence of the participants; and (b) may have regard to the pattern of activities related to the residential complex." It is almost exactly the same wording. There are no regulations under this section and those powers are being exercised now.
Mr Tilson: Those powers can be appealed, of course.
Ms Parrish: No, this is the appeal board. The powers that are in section 8 can be appealed to the hearings board and turned to the courts. The hearings board power, under section 49 of the current statute, can only be appealed to the courts. So in fact in section 8 there is more procedural protection, in the sense that the decision could be made by someone, whether that person is for whatever reason making a decision --
Mr Tilson: A bad day.
Ms Parrish: Or because he or she thinks that is the right decision. It is then appealed to the hearings board, which can then reopen the entire case, readduce all the evidence and make its decision on the basis of the language that I have just spoken to you about. If they are still not satisfied, they can go to the courts. So there is significant procedural protection. All we are doing is moving this discretion, which has existed in the RRRA for a long time, essentially down one level. In many ways that is helpful, because otherwise these cases where they exist are pushed into the hearings board and there is a whole sort of process and then eventually you go to the hearings board anyway. All this is doing is moving it down a little bit further in the process.
Mr Tilson: Mr Chairman, if a decision is made that an applicant is not satisfied with the way the minister has exercised his or her discretion, where can that applicant go? To the courts?
Ms Parrish: To the hearings board, and it exercises the discretion I just read out, that is, their discretion. What has happened now is that the rent review administrators have no discretion. They may know there is a problem, but they cannot do anything about it. They then kick it off to the hearings board after it has gone through a great long process at the initial level. All we are saying is, perhaps it would be more helpful to deal without the initial level. If people are still unhappy, they go to the hearings board. The hearings board exercises exactly the same discretion, has the ability to open up all the issues and readduce the evidence. If at the end of the hearings board decision, after they have had two decisions they are still not happy, then they can go to the courts.
Mr Tilson: I appreciate your leniency, Mr Chairman, in allowing me to continue, and I will simply make the statement that I am generally adverse to governments having that type of discretion without some sort of guideline or set of criteria to assist the minister and his or her staff on making that type of decision.
Ms Poole: I would like to go on from Mr Tilson's comments. Colleen, I am glad you clarified in your last statement the difference between rent review administrators and Rent Review Hearings Board members. There is a great deal of difference. Under the RRRA, the rent review administrators have been given absolutely no discretion. It partially accounts for the complexity of the act. They tried to take out every possible loophole, every tiny bit of discretion that an individual rent review administrator might have and consequently we ended up with a very complex piece of legislation.
Appeal board members do have that type of discretion, but that is not what we are talking about here. I would submit to you there is a very real difference between giving this type of discretion to rent review administrators, who are not trained in using discretionary powers, who have not -- in fact, when they are hired they are not hired for their judgement in being able to make discretionary decisions. They are hired on, can they follow the letter of the law? I am uncomfortable with there being no guidelines or regulations for these people to follow.
I have no problem with the hearings appeal board members, because they are not only trained for it, they are of the highest calibre and they make these judgemental decisions, which is why the appeals board usually changes the decisions of the rent review administrators, because they have discretion. I think it comes down to the point that if the government feels that the numbers warrant having this provision in the act to begin with, then surely numbers warrant their having a regulation.
I do not buy the argument that there are not too many cases, therefore why bother dealing with it. I can understand that it would be very problematic for you to come up with a regulation today. I know it not only takes weeks; it sometimes takes months to get these regulations out. I would be satisfied if the ministry could give us just some guidelines over the next day or two. They could give us a list of guidelines that would apply for the use of rent review administrators, and then go ahead and in a timely fashion formulate a regulation because of it. But I am most uncomfortable with the whole idea of giving discretionary power to a rent review administrator who has never had this power before and has not had the training to deal with it.
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Ms Harrington: The power is really given to the minister, so he is responsible.
Ms Poole: The minister is ultimately responsible for everything in the act, but the practicality is that the minister does not look at every single application and the minister does not look at every single instance. The minister has delegated his powers in almost every instance, first to the rent review administrator and then later to the appeals board. I can appreciate your wanting to put this in so that you cut out the number of appeals to the appeals board. I think that is a great thing. All I am saying is that I do not think it is untoward to ask for guidelines for those rent review administrators so that we are not creating more of a mess than need happen.
Ms Harrington: What I would suggest is that we pass this section as it is. Our staff have said they would like to look at the regulations with regard to this section and that will be when regulations for the rest of the act are being formed.
Mr Brown: Most of my questions have really been asked, but could you give me an example of what we are really talking about? What would trigger this clause? We talk about real substance and good faith. Just give me an example, Colleen or somebody, of exactly what kind of a case we are looking at.
Ms Parrish: The most common kinds of cases are probably transfers within related corporations, for example, where you sell a rental property at no cost or at very low cost or you rearrange the mortgage financing package. For example, you sell a property to one corporation. You have a third corporation hold the mortgage at 0.0%. You then refinance the mortgage in the regular market in order to increase the amount of the interest rate cost pass-through. We try to catch that in other ways, for example, with the trend analysis, but at any rate you would still get the benefit of whatever that difference was. And none of these transactions are real transactions; that is, in a normal marketplace situation I would not be prepared to buy your property and give you a mortgage at zero or whatever, and what you are really looking for are those rare cases, and they are relatively rare. They will be more rare.
There was more incentive, frankly, to do this when you had economic loss and financial loss, because when you had financial loss you had an incentive to sell things and generate losses, so you are probably going to have these things happening much less. You can appreciate I have not been in the ministry that long myself, but my understanding from my colleagues is that there have been transactions of this nature in which there has been a manipulation between various holding companies in order to increase the amount of money that can be passed through in the form of rents, and nothing has happened. There has not been any improvement in the property. There has not been any real new owner. I mean, nothing has happened. All that has happened is a series of paper transactions designed to increase the financing costs or decrease the loss associated with the building or whatever. And it is less likely to happen frankly, in a situation where you do not have economic loss and financial loss, in any event. About the only thing that is left, essentially, would be interest rate cost pass-through, which we do deal with in various ways as well.
Mr Brown: So let me get this straight. It was a rare occurrence in the past --
Ms Parrish: It did occur, though.
Mr Brown: Granted. It was a rare occurrence in the past. Generally speaking, most people, if they looked at that application and said, "Ah ha, there is something wrong with this" --
Ms Parrish: But the administrators could not do anything.
Mr Brown: Yes, and it would be more rare in the future because of Bill 4.
Ms Parrish: That is correct, and usually it would end up at the hearings board because the hearings board has the discretion to look behind the transaction.
Mr Brown: And you are just saying we are going to move this down one step from the hearings board to the rent review administrator level.
Ms Parrish: Yes, sir.
Mr Brown: In theory then that should cause less work at the appeals board.
Ms Parrish: You are less likely to have a case sent up to the appeals board for the sole reason of catching this problem. It may still go to appeal because people may still be arguing about whether or not they are one of these bad cases, but in theory you could catch a case much earlier in the system and in theory the whole application could simply be withdrawn because it was clear that the evidence was fairly negative. It is fairly difficult to catch these cases so people often try them on for size, and if they think they are not going to get caught, I guess they will just continue. Essentially, this gives the opportunity to catch these things at an earlier phase, and if people think they are going to be caught they frequently withdraw. However, if there is a bona fide dispute, that is, if it is questionable, or whatever, that they may have some other good reason they are doing this, then they will go on to the hearings board and they will get another full hearing at that stage.
Mr Brown: It strikes me that an administrator would be very wary about making the kind of determination that would be required. He or she would be most likely, again, to see it settled at the appeals board rather than to make kind of an arbitrary decision if they had no guidelines. I guess I am wrestling with this like the rest of the members of the committee. Is this really going to solve a problem? Is it going to end up at the hearings board anyway? I would suggest to you that I think it will end up at the appeals board anyway, in the vast majority of cases, which you are telling me are very rare to begin with and are going to become more rare. I am uncomfortable with the power this gives to the minister and to people below, and if I am uncomfortable I would suggest to you that the administrators will be uncomfortable. They will not want to make these kinds of determinations. We are going to be right back where we were anyway. I am just having some difficulty with how this really works. Thank you.
Mr Turnbull: Colleen, I would ask you for an example.
Let us say you have a building owned by three corporations of three people with or without equal shares in the building and two of the partners decide that they want out and that they want to sell the building. The third partner buys the building with some financing on it. Are you suggesting that with this kind of regulation you would seek to disallow that as a bona fide transaction?
Ms Parrish: It seems to me that in that situation there is no good-faith problem. They are actually selling. The kinds of transactions that cause one concern are situations in which these shares are mysteriously bought by a third corporation that happens to be owned by these other two people. In other words, all you have, I guess, is a transfer and no change of real ownership and that may be for good reasons. It may be for tax reasons or it may be for protection of personal liability or whatever, because maybe one of these partners has gone into some sort of business and wishes to, etc. They may have good reasons for doing all this or they may have reasons that are designed simply to increase the value of the property and to generate losses or interest rate changes that would be passed on to the tenants in the form of increased rents. The reason it is difficult to have criteria for this is that if you have criteria and people are in the business of avoiding the statute, they will simply avoid the criteria.
Mr Turnbull: If you are talking about where there is 100% purchase by essentially a group of owners who are 100% the same as the existing ownership, it would seem reasonable that there is an element of avoidance of the act going on there and perhaps you need some sort of regulation to catch that. However, I am very concerned that you can have some change in the ownership which may be a third corporation but may be substantially owned by some of the partners in that corporation. And if we are having difficulty around this table understanding what is meant by the thrust of this clause, it seems to me very apparent that anybody who is in the rent review system trying to interpret this may have some difficulty. You did not really answer my colleague's question. Give us some concrete examples of this. You have said they are very few and far between.
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Ms Parrish: I gave you this case that was designed deliberately to generate financial loss by increasing the value of the property. Essentially, the property was transferred from the one corporation to the holding corporation at an increased price. You then have a financial loss generated in this corporation because it has bought the property and generated the financial loss. As you know, under the old system financial loss was passed through to the tenants.
Mr Turnbull: Was the recipient corporation 100% the same ownership structure as the original parent corporation?
Ms Parrish: They may be and they may not be. Common cases are cases where you have dominant owners and what you may have is some mixing. For example, the one corporation is wholly owned and then you have another corporation which is 60% owned by one person and 20% owned by someone else and so on; so you do have some situations where there is a somewhat different mix in the partnership, but it is the same person. I guess I draw a distinction between the one issue that is being raised, which is concern about the exercise of discretion, and the second issue, which is whether these cases actually occur. It is clear that they do occur and it is also clear that they are not widespread.
Mr Turnbull: Do you have any indication at to how many transactions we are talking about since the introduction of the RRRA?
Ms Parrish: No, I do not.
Mr Turnbull: No idea at all?
Ms Parrish: The problem is that you do not know to what extent the fact that this power exists deters people from the transaction. Having spent my misbegotten youth in the Ministry of Financial Institutions, we have a lot of powers in the ministry that are far more widespread than these powers, designed to deal with the basis of the transaction. A lot of those powers came into being after the famous Greymac/Cadillac Fairview/Crown Trust transactions which were, by and large, transactions which passed the face of the statutes involved, but in fact, underlying those transactions was a series of other kinds of non-arm's-length transactions.
So, how many would have happened had you not had these powers in the statute I do not know, because I do not know to what extent people would have been deterred by the fact that sooner or later somebody will look back at the transaction. I can also tell you that it is very likely that some transactions have occurred and nobody has caught them. One of the reasons is that you have only one place to test. It seems to me that if you have two places to test, you have a better chance of catching these transactions.
But as I said, somewhere in the system this does get dealt with. The concern is that if you do not want the discretion exercised at the ministerial level or the initial decision-making level, then all that will happen is that these cases will all get pushed up another level where the same discretion will be exercised.
Mr Turnbull: It seems to me you have raised an interesting point. You started talking about the dominant ownership and I would like to have a definition from you as to what percentage you would consider to be dominant ownership.
Ms Parrish: In legislation that deals with ownership laws there is a whole series of positions taken. Most statutes provide for majority ownership, which is 51%. There are a number of variations. For example, if you have less than 51% but you have the ability to control the majority of directors' appointments, that could be another index of control, so if you have less than 51% of the voting shares but control more than 50% of the directors, you may be a dominant owner. In the area of other transactions, financial institutions, for example, there is another test called significant ownership, which is an ownership position which is significantly large to influence the corporation's behaviour and that is usually at 10%. But normally, people look at either the control of 51% of the voting shares or a combination of the control of the voting shares and a control of the number of directors' seats, and that would depend, of course, on the combination of voting criteria they have in their shares, for example, that some voting shares may be more equal than others and they elect more directors, and so on.
Mr Turnbull: In your example of the Cadillac Fairview flip, the interesting thing is that situation is probably the most notable case of what is called a flip. If you have somebody who has had ownership of property for a significant length of time -- let's arbitrarily use a number of five years as an example -- and it is a group of owners and actually there is a significant number of people like this, where they have a group of owners who own a building and one of them needs to get out, unless you interpret this in such a way that it is clear, nobody will be able to sell a partnership interest in a building. Now, if they have owned a building for five years, presumably they have expectation of profit. If it is the position of this government that they are now moving in the direction legislatively that profits are totally disallowed, let them say so, but if you do not allow the disposition of a partnership where one partner is able to buy out the other, that may cause significant disruptions in the market. Is that the thrust of the legislation?
Ms Parrish: These provisions only come into effect in a case where you have an application for a rent increase, so in the normal course of events, people are not buying and selling their properties coinciding with a rent increase.
All this is trying to do is to say that if you have a rent increase which is based entirely on non-good-faith transactions, you may be disallowing part of that rent increase or you may not.
Mr Turnbull: But this goes back to this criterion of good faith. If somebody is legitimately wanting to sell his partnership and he has an expectation of profit, there can be no profit unless this is viewed objectively as an arm's-length transaction. He happens to be selling to a partner he has had in the building. The partner nevertheless is paying a higher price for the building. I suspect that probably goes around back to the argument that one needs to define what you mean by a flip because, as my colleague has said, it goes back to the same circular argument of your seeking to disallow any manipulation of this act. That is the intent of this clause, is it not?
Ms Parrish: The intent of the clause is to look at the transaction; it is not to prevent any manipulation. It is only to look at the transaction, if there is a transaction, and to look at whether or not there has been essentially a manipulation of the outward ownership in order to create increase in rent.
Mr Turnbull: I am very concerned about giving the ministry staff discretion over this, in view of the very fuzzy answers that --
Mr Mammoliti: On a point of order, Mr Chairman: I think we have been pretty patient here in having to hear the same old questions over and over and I am getting that gut feeling again that I got last week, that supernatural, psychic feeling. Something tells me they are trying to stall here and I do not know what to do about it. I would ask that the Chair recognize the fact that they are repetitive and to screen that, please.
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The Vice-Chair: Thank you, Mr Mammoliti. I would just remind the members that we are discussing subsection 100e(8), and if they can keep their remarks to that section and try their best to avoid any repetition.
Mr Turnbull: I think we are just going back to the same point. The discretion that would be allowed does not seem to reflect the ability of somebody to sell an interest in a building to a partner. Perhaps Ms Harrington could respond to that.
Ms Harrington: I think the opposition has made its point quite clear about their problem with the discretion involved and I think we have made our position quite clear as well, that in cases like this we feel that to get behind the paperwork and look at the intent, a certain amount of discretion is a good thing, and that is why this has been put forward. Beyond that, I think that is the bottom line.
Mr Mahoney: The issue we are all talking about has to do with the sale of all or a part of the shares of the company that owns the building or the direct sale of the building, and that the minister should have discretion on the application for rent increase that would cover the costs that have been incurred as a result of that sale. Is that basically how you understand it?
Ms Harrington: That we should get at the costs incurred in the sale? Is that what you are asking me?
Mr Mahoney: As I understand it, there are only two costs that will be looked at for approval of a rent increase. One is extraordinary operating costs. I am assuming that is defined in the same manner as it has been defined in the past in the RRRA. The second is the increase in the interest rates as a result of an acquisition -- we went through all of this last week -- and the maturing and that increment on the interest rates.
We are talking about it in terms of a positive action such as the sale of a property. I was talking to an individual yesterday who has told me that to survive the recession he had to sell two income properties, and as a result of Bill 4 looked at decreased valuation of his property in the neighbourhood of 30%. Fortunately for them, the person is strong enough to withstand that economic loss.
My question has to do with this section in regard to an application for rent increase, perhaps by a trustee who has seized the property either through whatever mechanism, whether it is bankruptcy, filing for bankruptcy, power of sale or whatever. You have a number of costs that are involved in such an action, costs the trustee would incur, interest costs, that perhaps there could be creditors, there could be outstanding bills, outstanding orders, outstanding contracts all related to this building and all of these costs, if you sort of wrap up the building. And we have sort of buried the landlord at this stage. The landlord is out of the picture, the building is now in the hand of a trustee. Does this section allow the minister to approve rent increases based on costs incurred through some form of insolvency?
Ms Harrington: That is an interesting question. I would like to ask staff if they could answer.
Mr Mahoney: And it is a new question just for the member for Yorkview.
Mr Mammoliti: I give you credit for that, Steve. You usually do not do that.
Mr Mahoney: The member usually does not listen.
Ms Parrish: There is nothing like having a warm and friendly environment for one's responses.
Mr Mahoney: It is a kinder, gentler place.
Ms Parrish: The question you ask is interesting, but subsection (8) does not help you one way or another. It is sort of like a chip in the porridge. The situation you are talking about is where the trustee incurs costs in seizing the property and therefore wishes to get those costs somehow. Right now you can only get it from the estate, which is from the building, and you cannot pass that on in the form of increased rents, so in that sense, no, they are not helped.
In my view, subsection (8) really would not affect that situation at all because, although the trustee has taken them on and perhaps the trustee remortgages the property because he has to -- the old mortgage has died or whatever -- they remortgage and apply for a rent increase related to the interest rate change. But it seems to me that it is a real transaction. It has really been seized in bankruptcy. There is no bad faith there. It is not really affected at all. The problem with their trustee is that they may be incurring expenses they cannot ultimately recover because the capital value of the property may be insufficient to cover the trustee in bankruptcy costs. But I do not think that subsection (8) has anything to do with it one way or another, because it is clear that the trustee is acting in good faith. There is no reason to think they are not, and since they would be acting at arm's length, I cannot imagine there would even be a prima facie case to throw up. They may not be able to recover their costs, but it is not because of subsection (8), it is because of other provisions in the act.
Mr Mahoney: Clearly we are not going to be worrying about selling of properties, we are going to be worrying about foreclosures of properties as a result of Bill 4. I wonder if there should be some clause that would outline, for tenants' clarification, so that they are not facing -- you can imagine what a trustee would get like with the tenants. There could be harassment, there could be some nasty blood as this trustee comes in and finds that on behalf of the creditors he is unable to succeed at doing his job. There might be tenants who are paying economic rent that is well below market rent and there could be attempts by a trustee to sort of juice those rents up, so to speak.
I just wonder if there should not be some addressing of what will occur and how the minister will deal with rent increase applications that are made as a result of an insolvency. It may not be able to be dealt with here this morning. I might have to ask that it be referred for some kind of report back to this committee to allow for staff to have an opportunity to put in writing what the position of the government would be in the case of an insolvency. I would be happy to stand down my question if staff feel they need some time to respond to the committee in writing, assuming it is a point of some concern to the committee.
Ms Harrington: I understand your concern. It is actually not directly involved with this.
Mr Mahoney: I am not sure about that.
Ms Harrington: But what I would like to say is that staff would be happy to deal with that question and get back to you on it.
Mr Mahoney: Mr Chair, I am not sure about the comment that it is not directly involved. I understand that no ministry can function without some form of discretionary powers on the part of the elected representatives and their appointed agents. I frankly do not share that concern. I am more interested in some of the details particularly surrounding this, and if there is such discretion under subsection (8) of the bill, you could see an application coming in for these extraordinary costs. There might be an argument to say that some of the costs I am referring to could be considered extraordinary operating costs, perhaps not under the pure definition in the RRRA, but perhaps under some lawyer's definition that could be argued in a court at some point. I do not think you have addressed that situation in the bill, so if you will undertake to have staff prepare something back to us in response to that I would be most appreciative.
Ms Harrington: Yes, we will.
Mr Mahoney: Thank you.
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Ms Poole: Mr Chair, maybe it would be helpful for all members of the committee if we clarified exactly what subsection 100e(8) refers to. It says, "In determining the total rent increase that is justified on the application." Now, am I correct in stating that the only two instances where there would be a rent increase would be for extraordinary operating or an increase in interest rate due to changes?
Ms Parrish: That is correct. That is all that is permitted under Bill 4.
Ms Poole: Okay. And subsection (8) really would give the minister's representative the discretion to look at the transaction and determine whether there was something inappropriate about it or whether it was not at arm's length and was trying to circumvent the intent of the act. But the minister primarily would be doing this with an increase in interest rate and dealing with that.
Ms Parrish: Yes. It is hard to think of a situation in which you would have a problem with tax increases or with heating, for instance, unless you had a situation where the heating company owned the building, for instance. That is about the only thing I can think of. The rest are all hydro and so on.
Mr Tilson: The municipality could own the building.
Ms Parrish: So the only situation you would be sort of looking at would be fairly unusual, so it is most likely to be interest rate changes where you could have any kind of factual circumstance arise, in my view. People may have unlimited creativity, but it seems to me most likely interest rate changes.
Ms Poole: I think you made the point earlier, that financial loss was normally the provision under which a landlord who wanted to have a non-arm's-length transaction would benefit the most, which may not have seeped into our minds at the time, and you have stated very clearly that under Bill 4 there is no financial loss provision. Most of the incentive for a landlord to do this has already been removed from the act, so what you are trying to do is address those few remaining cases where the landlord would try to take advantage of an arm's-length company to get the increase rate changes. And so it is really just as a companion to the resolution we talked about, or the motion we talked about last week which dealt with this.
Ms Parrish: Yes.
Ms Poole: You are not really trying to revolutionize the world, you are just trying to take care of those few cases.
Ms Parrish: Yes.
Ms Poole: My major concern, the concern of our caucus, I think, has been with the discretion. Since I believe we have your understanding that you will look at the regulatory powers as far as giving guidelines to the rent review administrators in the performance of this particular clause, then that would certainly satisfy me that you have taken that concern into consideration and that we are not really dealing with anything beyond interest rate changes and the possible abuse of that section.
Ms Harrington: That is correct.
Ms Poole: Does that help anybody?
Ms Harrington: That is very helpful as far as I am concerned.
Ms Poole: I am just clarifying what this does or does not do.
Mr Tilson: A couple of questions to the staff, Mr Chair. Do I understand, then, that this subsection deals with whether or not it is an arm's-length transaction?
Ms Parrish: It does not deal only with that issue. That may be one of the issues, one of the pieces of evidence you would use in testing the good faith or real substance of the transaction.
Mr Tilson: That is my point. I would love to see some pieces of suggested evidence as to what is used -- in other words, it is or is not an arm's-length transaction -- that would be a criterion for the minister to look at.
Ms Parrish: It could be a criterion.
Mr Tilson: Yes.
Ms Parrish: But it would not necessarily be the litmus test. For example, you would not necessarily say, "It is not arm's-length and therefore it is bad faith." Because in the example Mr Turnbull gave earlier, you may have, in fact, a non-arm's-length, good-faith transaction. So it would not be the only criterion and that is the problem with the criteria. You could pass a regulation that said that in considering whether or not something is of real substance and good faith, you shall consider the following criterion: Is it at arm's-length?
Mr Tilson: Yes.
Ms Parrish: Is it this or that? Is it higher than the market interest rate?
Mr Tilson: Yes.
Ms Parrish: Is it lower than the market interest rate? Is it higher than market value? Is it lower than market value? And so on. And those would be the sort of little tests you would use. But as I said, you probably would always have this residual discretion because you could have a transaction that was above market, non-arm's-length, etc but still be good faith. And you would have other evidence that would show it was good faith, that you know there was no other available financing; that the partners were, you know, whatever. So you could have a regulation-making authority.
I had a brief discussion with Legislative council. We could put it in in the regulation-making authority section. I am just trying to be completely honest with you in saying that although you may have criteria that will say to staff, "Look at whether or not it is arm's-length, look at the market value of the transaction, look at this, that and the other thing," you would still have residual discretion.
Mr Tilson: I understand that.
Ms Parrish: I guess I am trying to keep completely honest about that so that you will not --
Mr Tilson: No, no, I understand that a list of criteria would not be exhaustive, but this legislation does not have any list. Mr Mahoney gave an example; there are other examples that could be used. You could have a small family business, a landlord, a ma and pa operation who are not able to withstand the difficulties that are being caused by Bill 4 because of the capital expenditure issue. There may be a few shareholders in that corporation and they may decide to transfer that corporation to a larger corporation which includes ma and pa but includes other shareholders. The purpose of doing that is so that the larger corporation has more financial resources, may be in a financial position to withstand the difficulties that have been created by Bill 4, otherwise they are going to go bankrupt. Then they are going to be in Mr Mahoney's situation of the bankrupt. That type of situation, it would seem to me --
Mr Mammoliti: You going bankrupt, Steve?
Mr Mahoney: Do you want to rephrase that?
Mr Tilson: Yes, I will rephrase it.
Mr Mahoney: I mean, I am broke.
Mr Tilson: I certainly was not suggesting that but that is an example, Mr Chairman, that subsection (8) would fall into, and the minister at his or her discretion could simply say, "Sorry, but we are not going to allow that because there is no reason." That is why, in that transaction between the small company and the large company, there could be an interest change in the mortgage. Hence it would fall under Bill 4 and may or may not be a good thing. The difficulty is that we do not know whether it is a good thing because there are no criteria. I guess that is the concern I have and about which I am most reluctant. Mr Chair, unless I hear good reasons from other members of the committee, our party would be making an amendment that this subsection be struck out unless there is a list, until I see a list of criteria.
I do not think our party is prepared to give the minister that unilateral power without some sort of guideline, and I say that for the minister's benefit. What is the minister going to base his or her opinion on? We do not know. In other words, I gather that one of the sections is to avoid bureaucracy. But the minister could -- in other words, if you do not like the minister's decision, you can move it on according to your answer. More bureaucracy, it is yet another step. It is more cost to everyone; more cost to the whole process; more cost to he taxpayer; more cost to the landlord. It creates more bureaucracy and the next group will not know either. I guess if the minister gave an opinion with no response surely there would be an appeal, probably there would be an appeal. You are trying to avoid all that. And yet inadvertently, with all due respect, you have created that. I would like something a little stronger from the staff as to whether or not it is possible that this subsection could be stood down.
It may well be that I could concur with this if I saw a non-exhaustive list of criteria. I understand that you could have a list of criteria and you could say, "But there could be others," and I could understand that, but at the very least a minimum set of criteria. You must have something in your mind as to what those criteria are. Maybe I could ask you that. What is the minimum standard that you as a staff person would have for a set of criteria?
Ms Parrish: It would be the kinds of criteria I mentioned to you before. You would look at whether or not there was an arm's-length transaction, and if so, what the reason was for a non-arm's-length transaction. There are lots of good reasons for non-arm's-length transactions. They are not always bad. You would look at whether the transaction was at market value; whether it was below market value, whether it was above market value. In both cases there are good reasons for that but you would want to look at whether or not there was some less desirable reason. So you probably would look essentially at the market value or the above-market value and the relationship between the parties and whether or not there had been an unusual number of transactions within the residential complex. That is all.
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Mr Tilson: Mr Chair, all those are reasonable criteria. I guess my question is, if we were to stand this down, how long would it take you to prepare a list of criteria for a regulation?
Ms Harrington: We are not prepared to stand it down at this time.
Mr Tilson: Then, Mr Chair, I would move that subsection 100e(8) be struck out.
The Vice-Chair: No, Mr Tilson, that is not an amendment. You can vote against the section which would have that effect, but it is not an acceptable amendment.
Mr Tilson: Just so I understand the process, if it is voted down it is out of there. Is that it?
The Vice-Chair: That is right.
Mr Turnbull: My questions would be addressed to Colleen again. Colleen, my concerns are that when you gave your shopping list of criteria -- and I do appreciate that you have helped us with that -- I would make a few comments on it.
First, one of your criteria was the market value of the building. Now, the question would be, was that the market value that existed before the introduction of Bill 4 or after the impact of this legislation that has probably wiped 30% off the values of buildings? That is question number one.
Question number two is where you are talking about the interest rate on a mortgage being lower than market rate. Now in that case, we have heard the suggestion by the NDP government that maybe people were not making a good deal, and so if somebody has a deal where he has a mortgage at less than market rate, is that not one of the criteria? It is certainly one of the criteria I use for the good deal, but maybe we are creating a totally new world.
Mr Mahoney: We are; Toryism.
Mr Turnbull: And where we talk about numbers of transactions, would it not be better to have some sort of definition? I mean, we keep on talking about this question of flips and presumably that is the genesis of the suggestion that it be one of the criteria. But whenever we ask about some sort of definition, everybody slides away from it. So Colleen, your answers indeed raise probably more questions than give us comfort.
Mr Mahoney: A flip is what the government did when it brought in this bill. That is easy.
Mr Turnbull: Colleen, if you could answer those three questions I have put to you: (1) Is the market value to be the value that existed before the introduction of Bill 4 or after it when they have depressed the values; (2), is it a lower interest rate than current interest rates; (3), what type of number of transactions are we talking about?
Ms Parrish: The answer to the first question is that it would be the market value at the time of the transaction. I mean, you have to connect that transaction with the total rent increase which they are requesting to be justified, so it is whatever that is.
The second question you asked is whether there is inherently a problem with a below-market interest rate. There may not be, but you can design the following scenario where you deliberately enter into a non-arm's-length transaction in which you increase the capital value, you decrease the mortgage rate and then you refinance and pass through. Now, that transaction may in fact be completely in good faith, because you can have that in an arm's-length transaction as well. It is going to depend on the circumstances. If the entire intent of the transaction is essentially to increase the amount of cost pass-through, then it may indeed be a suspect transaction. It will probably be caught now by the hearings board under its authority.
That is the problem with the exercise of discretion and criteria. I can give you the criteria you would look at, but you would still have to go through a process of exercising discretion as to what is the combination of circumstances of a non-arm's-length transaction below market and so on. You still would have to look at the transaction and that is the problem. If you know everything, you can have a regulation. If you do not, if you cannot govern every situation you have discretion, and I understand the point that is being made by you and your legislative colleagues that you are uncomfortable with this discretion being exercised at this level.
It is exercised at the hearings board level. If this section went away, all that would happen is what happens now, that all of these transactions would go to the hearings board. Instead of being dealt with at an earlier stage, they are simply being appealed in every case. They will be forced up to the next decision-making level, so you will increase the number of these cases going on. They may go on in any event. I cannot remember if it was you or your colleague who said he would go on in any event. I am not sure that that is true. My experience at the financial institutions has certainly been that once people get caught in a transaction which has certain elements to it, and they know they have been caught, they will back off. So I am not sure if I concur with the belief that they will always go on to appeal. They will certainly go on to appeal if people think they have a bona fide case. I do not know if I can add much more. I have tried to give as complete an answer as I can.
Mr Turnbull: I would respectfully question whether the people who are at the basic level of hearing have the expertise to be able to consider these factors.
Mr Mammoliti: Point of order, Mr Chairman: This is repetitive again. We have heard that two other times prior to this questioning.
The Vice-Chair: Again, I would urge the members not to be repetitive and to speak directly to the section.
Mr Turnbull: Relative to the set of questions that I was asking, I think that was appropriate, Mr Chair. I would also ask that in view of the number of interruptions we have had by Mr Mammoliti about points of order which prove not to be points of order, I would ask the Chair perhaps to instruct Mr Mammoliti as to what is a point of order and what is not.
The Vice-Chair: You may continue. Mr Turnbull.
Mr Turnbull: Thank you. Mrs Harrington, I would urge you again to get ministry staff to come forward with some clearer criteria because all of these questions have raised a lot of questions and you will understand our discomfort.
Ms Harrington: I felt the discussion has been very productive as to what the meaning of this is and what the situations in the past have been and I think staff have taken your information and advice and we will do that.
Ms Poole: Mr Chair, I feel we have discussed this issue at great length and I would like to call for the vote.
The Vice-Chair: You want the question put, Ms Poole; just fine. Before the committee we have three subsections to be carried: subsections 100e(6), (7) and (8). I will deal with them one at a time.
Is it the pleasure of the committee that subsection 100e(6) pass? Carried. Subsection 100e(7)? Carried. Subsection 100e(8)? Carried.
Moving on to section 100f, does the parliamentary assistant have an explanation? Do you wish to do this in subsections? Subsection (1).
Ms Harrington: Subsection 100f(1) provides for the apportioning of total rent increase for the whole complex among all units. Subsection 100f(2) sets out the same steps for apportioning the rent increase among units. The same percentage will be applied to the maximum rent for each unit. Other methods of apportioning the rent increase will no longer be available.
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Mr Mahoney: Does this in effect eliminate equalization?
Ms Harrington: Yes, I believe it does. That is in the next subsection, I believe. That is subsection 100f(3).
Mr Mahoney: So it is part of this section. But your comment was that the other means of justifying or allocating the percentage rents would no longer be available. I presume you are referring to equalization.
Ms Parrish: No. This does not actually have anything to do with equalization. It is simply saying that now you decide how much the rent increase is for the whole building. Say taxes have gone up in this whole building by $10,000, then essentially you just say, "How many units do you have?" and you divide it all up. This just takes out some of the other methods of apportionment which are much more complicated. Instead of just simply saying how many units there are and what their rent is, we add them all equally.
There are other systems that are used largely with capital and since capital is not an issue here, we have not put that in. For example, let's have a situation where you have a whole-building review in which you replace half the stoves in the entire building and you do not replace the other half of the stoves. You can apportion the rents so that only the people who get the stoves get more rent -- I mean, for that part -- and then everybody pays for their share of the roof.
Since we do not have all of those things in Bill 4, we felt that we would just go to the simple system, which is just equal apportionment. Because we do not, there is no reason to have all this stuff about the separate stoves and so on because we are not permitting it in the bill. Equalization is not dealt with here.
Mr Mahoney: Okay, I will pass for now.
Ms Poole: Is the effect of this that you are saying we will deal with whole-building review but not part-building review? Essentially, anything that you would have for part-building review is no longer in effect under Bill 4.
Ms Parrish: Yes.
Ms Poole: So you are really just clarifying --
Ms Parrish: Yes, you are quite right, because we do not have part-building review and we do not have any whole-building review application that could result in differential things happening. We just moved to a very simple system of division rather than the current system, which is more complex, because there are different factual circumstances that arise.
The Vice-Chair: Thank you. There being no further discussion, is it the pleasure of the committee subsection 100f(1) carry? Carried. Subsection 100f(2). Carried. Okay, we are on to subsection 100f(3).
Ms Harrington: I would like to comment on subsections 100f(3), (4), (5) and (6).
Subsection 100f(3) means that upon considering a landlord's whole-building review application, the maximum rent allowed may be less than what the landlord could have increased the rent to had the application not been made.
Subsection 100f(4) specifies that a justified rent increase will be applied to the previous maximum rent. If in considering an application a negative adjustment to the previous maximum rent is determined, the order would specify the previous maximum rent, ie, no negative adjustment.
Subsection 100f(5) limits the rent increase to the amount asked for in the landlord's application. Previously there was discretionary power to allow or to order increases for more than requested and that no longer will be able to do that.
Subsection 100f(6) allows for no justified rent increase. The previous maximum rent would be maintained. Thank you.
The Vice-Chair: Are there comments, questions or amendments? Seeing none, is it the pleasure of the committee that subsection (3), (4), (5) and (6) be carried? Carried.
Moving on to subsections 100g(1), (2) and (3); description by the parliamentary assistant.
Ms Harrington: Thank you. This section preserves a tenant's right to dispute an intended rent increase that does not exceed the guideline increase, which is the amount the landlord is permitted to increase the rent by without making application. The application must be made in the prescribed form. Provisions with respect to the time frame for making applications and submissions are retained. The criteria to be considered in reducing the amount of the rent increase are deterioration in the standard of maintenance and repair; discontinuance or reduction in services; degree of compliance with maintenance standards as established by the municipality or standards board. For example, if it is found that the landlord discontinues the services of a concierge, all or part of the intended rent increase amount may be disallowed. If the landlord is permitted by a valid notice of phase-in to add a phase-in amount to the guideline increase, the tenant may only dispute the guideline amount of this application.
I believe it is this section which also discontinues the equalization. There is no provision for equalization.
Ms Poole: It is not in 100(g).
Ms Harrington: It is not in 100(g), that is correct.
Ms Poole: But it would not be in 100(g) in any event, I do not believe.
Ms Harrington: It would have been one of those if it were going to be.
Mr Mahoney: Just on that issue of the equalization, are you saying normally it would be one of the factors that may or may not be allowed and therefore, because it is not here, you are disallowing it?
Ms Harrington: That is right.
Mr Mahoney: So in other words, the entire bill is silent on it?
Ms Harrington: That is correct.
Mr Mahoney: Am I, with respect, getting agreement from your staff on that?
Ms Parrish: Normally, in the past, tenants were able to apply for equalization. Therefore, in the section that says what tenants can do to reduce their rents, they have been able to say to the landlord, along with, you know, "I want my rent to go down because you have deteriorated the services and so on, or taken the service away," I could have said, "And I want my rent to go down because my unit is the same as your unit; I am paying more rent." That was the equalization application. The landlord then would be able to respond by saying, "Well, that is fine, I will equalize you downward, but I am going to have to equalize Ms Poole upward in order to make this work out." That is how the current system would have worked, and therefore, had you wished to look for equalization, this would have been one of the places you would have found it. But because this part is a complete part separate from the rest of the act, it is simply silent, but this is where you would have seen the tenant's application had it been preserved.
Ms Poole: In 100g it says that a tenant may apply to the minister in the prescribed form to dispute an intended rent increase that does not exceed the amount permitted until section 100c. My understanding is that a tenant could apply to have a reduction in the guideline increase under this section.
Ms Parrish: Yes, I think so.
Ms Poole: I believe 100c refers to guideline increases, if I am not mistaken.
Ms Parrish: Yes, 100c is guideline increase.
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Ms Poole: So the effect of 100g would be that if tenants felt there was a decrease in the maintenance in their building or services that were provided, then the tenant could apply for the landlord not to get the statutory increase, or part of it.
Ms Harrington: That is my understanding.
Ms Poole: The difficulty I have with this section and with the way it is dealt is that it requires for a tenant to go to rent review and make application in order to effect any change and for most tenants, going to rent review is not an easy process. It seems to me to be a convoluted way in which to accomplish what you want to accomplish. The other thing is that there is no provision here for ongoing neglect of the building, which I think is a very real factor for most tenants who have had difficulty with rent increases when there is no maintenance. That is a real difficulty that they have had to face.
The scenario in these cases would be that a landlord buys a building that is in a state of disrepair. The landlord gets an extremely good price for it because of the fact that it is in a state of disrepair. Then the landlord does not perform the ongoing maintenance and minor capital that is necessary to bring this building up to standard, and yet the tenants would continue to be paying the guideline increases. I do not see how this section takes ongoing neglect into consideration and I also do not see how it can be justified in the complexity you are making tenants go through in order not to have to pay the guideline increase.
Ms Harrington: I would like staff to clarify. I thought under subsection (3) there where it says "maintenance standards for the municipality in which the rental unit is located" would deal with that. Maybe staff could comment.
Ms Parrish: There certainly are provisions here that deal with the situation where the standards have not been met. My understanding of ongoing and deliberate neglect is that essentially it is a defence to a capital application, so ongoing and deliberate neglect arise where the landlord says, "I have to do all this capital, and therefore I want to increase the rents and pass through that cost to you," and the tenants say, "Well, the only reason you have to do this is because you've been neglecting the property for years and years and years, and that is why this property is in such bad shape and therefore you should not get this." But in Bill 4, of course, we do not allow any capital pass-through and therefore that issue does not arise. So the shield of ongoing and deliberate neglect is not here because there is no capital application.
We do maintain the tenants' ability not to have to pay the guideline increase because basic standards are not being met. The tenant does not have to go through the difficult task, and I agree with you that it has proved difficult, of proving that there has been ongoing and deliberate neglect. They only have to say that it does not comply with the standards. They do not have to show that it was as a result of neglect which occurred in 1972 or something.
Ms Poole: One very problematic part of this section is that it does not deal with outstanding work orders, and for many tenants this is quite a problem that, according to the RRRA and the Ontario Building Code and the various standards of municipalities, landlords should not be able to neglect their buildings and leave outstanding work orders. However, in reality that is not the way it is worked, and according to the provisions in item 3 that you have outlined here, there is nothing to say that a landlord would have to satisfy that work order. There is nothing to beef up the various standards that are adhered to, and I just feel that it is a complicated way of dealing with a very real problem some tenants have, the neglect and lack of maintenance in their building and the fact that they have outstanding work orders which for several years have not been satisfied. I really do not see how this particular section is going to deal with that.
Ms Harrington: I think we certainly would agree that the ongoing maintenance and the neglect that has happened in the past are things we have to deal with. This is what we will be doing in the consultation paper, trying to come to grips with what is the best way of dealing with it, whether it is, you know, municipal bylaws or how -- and I know you have put forward an amendment further on dealing with this.
Ms Poole: That is right.
Ms Harrington: So I certainly would agree it is something we are very interested in and that we are dealing with.
Ms Poole: As Ms Harrington has just mentioned, I have tabled an amendment with the committee that would deal with the outstanding work orders and provide a very simple mechanism for tenants. I would not have a problem supporting section 100g, but I will tell you that I support it only as a first step, in that, to my way of thinking, without the additional step of dealing with the outstanding work orders it does not protect tenants. I feel that it is not adequate. It does not go far enough, and so I would just put the committee on notice that we will be dealing with this in subsection 100t, which I think is where legislative counsel has advised me it would be best placed. Those are my initial comments.
Mr Tilson: Mr Chair, with respect to this section, I guess my question is to Mrs Harrington. We have heard testimony from around this province of landlords who simply will not be able to make expenditures on their buildings, whether to respond to work orders, to major capital expenditures -- they simply will not be able to maintain them because they will not have the funding to do it.
We have heard testimony with respect to landlords, I believe, in Sudbury and Ottawa, commenting that this bill does not allow for situations where damage has been caused in buildings, and perhaps in the common area types of buildings or in the individual units, by tenants or their invitees or their guests that would necessitate substantial repairs or renovations and that they do not have the funds to do that. And yet this section says that if there is going to be an increase, for example, because of taxes, on allowed taxes, the minister could overrule that increase because of the items in subsection (3), the way I read it at least.
If my interpretation is correct, having heard this testimony and having consulted with tenants and landlords around the province on these issues that I have referred to, would you be prepared to withdraw this section as requested?
Ms Harrington: Which section did you wish withdrawn?
Mr Tilson: Section 100g.
Ms Harrington: The whole section?
Mr Tilson: Yes.
Ms Harrington: No.
The Vice-Chair: Mr Tilson, that was a rather succinct response.
Mr Tilson: It certainly was, and I think it shows where this government is going. They do not care.
The Vice-Chair: Thank you. Are there further questions or comments on section 100g?
Ms Harrington: I just want to clarify the intent of this. It is so that when the maintenance is not there, when there is a deterioration, when services are taken away, tenants have the right to go to the ministry and get a reduction in rent. That is what we are talking about here, when services are taken away or there is deterioration in the standards.
Mr Tilson: Mr Chair, in response to that, again I repeat the situation of where capital expenditures will not be made because of the financial implications of Bill 4. And I do not want to hear statements --
Ms Harrington: That is a different matter.
Mr Tilson: -- like, "We are going to address that in the new permanent legislation." We are talking about Bill 4. We have listened to people around this province and I submit that section 100g should either be withdrawn or substantially amended by your government in response to those positions, because they certainly sound like most reasonable positions to me. However, you have given me your very succinct answer, and I do not respect it but I will withdraw from any further questions.
The Vice-Chair: Thank you, Mr Tilson. We are at noon and should be adjourning, but if you are going to be short, Ms Poole, if you can give me some indication?
Ms Poole: I would not want to break precedents and be short, Mr Chair. Some things are beyond my control. I am short no matter what happens. But I have a number of questions to put to the ministry, so I would be happy to wait until 2 o'clock.
The Vice-Chair: Perhaps we can do that after 2 o'clock then. The committee is adjourned until 2 o'clock.
The committee recessed at 1200.
AFTERNOON SITTING
The committee resumed at 1413.
The Chair: When we adjourned, the committee was discussing subsection 100g(1), and I believe Mrs Poole had the floor.
Ms Poole: Mr Chair, just prior to our continuing of Bill 4 discussions, there was something I wanted to table with the committee which pertains to a discussion we had with ministry staff several days ago. They had talked about the table on page 13 of the green paper, "Comparison of CPI and Guideline Bases for Rent Increases." Well, the Multiple Dwellings Standards Association have actually prepared a document which gives figures so that members can actually compare CPI plus what the guideline increase has been since 1975 and the difference in dollar amounts on a particular rent. I think it might be helpful for members to have that so when we do go into the long-term consultation it may assist them with that particular section.
The bottom line of this is that under these figures, it becomes obvious that, comparing the CPI, which as you know is a nationwide figure, and the guideline increases that have been permitted since 1974, actually, the tenant of a building where the rent was $3,000 for their unit on an annual basis in 1974 would have benefited, net, $15,461.78 by using a guideline increase as opposed to CPI. The net benefit is probably even higher than that since the CPI does not recognize the very high housing inflation factor that we have in Metro Toronto.
So just before leaving this, I would ask if the ministry could provide us with figures for when we go into the long-term consultation for the housing inflationary figure since 1974 for Metro Toronto, to give us an idea of how that would even effect CPI.
Ms Parrish: You are asking for CPI housing for Metro?
Ms Poole: That is right.
Ms Parrish: I am not sure that figure exists. I am almost positive that it does not exist back to 1975. We will see what does exist, but I would be surprised if we have that information.
Ms Poole: If the ministry could provide whatever they do have and for as many years back as is available.
Ms Parrish: Yes, we will undertake to do that. I am pretty sure they did not start collecting CPI housing until some later date. In fact, there was only a CPI Ontario brought in fairly recently. It used to be national.
Ms Poole: Thank you very much.
Mr Tilson: Mr Chair, before you start clause-by-clause, I would like a question of the clerk if I could. The question gets back to the issue of the income tax person that we were considering asking to come to this committee. Do you know where we are on that? Can you refresh our memory as to where we are on that?
Clerk of the Committee: I am just going to refer that over to the researcher who has been looking after that.
Mr Richmond: Thank you, clerk. Mr Chairman, Mr Tilson, last week I spoke to a chartered accountant, a tax expert on the tax treatment of rental residential property, through the Institute of Chartered Accountants of Ontario. This private individual indicated to me last week that he would be generally interested and supportive of appearing before a body like this. I could not, because of the committee's uncertain schedule, give him a certain date. He could not, however, appear this week because of the actions of Mr Wilson in Ottawa today. I am expecting to receive a CV from this individual. I believe his name is Michael Fremes. I have not as yet received it. As soon as I do, I will share it with the committee and then the committee can make a decision in terms of a time. But because of the federal budget, this accountant indicated that this week would not be the best of times for him to appear. But he is willing to appear. Thank you. Are there any questions?
Mr Tilson: Yes. Mr Chair, there were other names recommended for consideration. There was a Professor Larry Smith. I am sorry, what is the name of the person that you had recommended or that you had been speaking to, Mr Richmond?
Mr Richmond: Michael Fremes. The other individuals, I do not have those -- my recollection is those people were primarily academic economists. This fellow that I more recently have been speaking to is a tax accountant.
Mr Tilson: Well, Mr Chair, I do not care who we have as long as it is someone who has a knowledge of the up-to-date positions of the federal ministry as to what one can deduct and what one cannot deduct. And I do not necessarily think that a professor who teaches income tax, or writes papers on income tax, cannot come and provide comment to this committee. There were four names submitted to us. My question is that -- the earliest that he can attend, we will be sitting again in the House. This presumes our clause-by-clause will be finished and it is all over. Surely we can get one of these people to appear either tomorrow or Thursday.
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The Chair: I hear your point, Mr Tilson, and it is a very good point. Maybe we could ask Mr Richmond to canvass the entire group on our list and we can take the first available person.
Mr Tilson: Mr Chair, might I suggest a motion to give them at least a couple of days' notice, that of this list that Mr Richmond has, that --
The Chair: Well, today is Tuesday and we adjourn on Thursday, so if we do it today they will have a couple of days' notice.
Mr Tilson: Yes. That is what I am suggesting. Say, at the opening of our hearings, at 10 o'clock on Thursday or an agreeable time during Thursday.
The Chair: You understand that involves interrupting the clause-by-clause?
Mr Tilson: Yes, it does. I do not think it will take that long, Mr Chair. I really do not. And I would accordingly move that Mr Richmond be instructed to request an individual to appear on Thursday to provide us with comments on this subject.
The Chair: And how long might we want to set aside for this discussion?
Mr Tilson: I would think half an hour to an hour.
The Chair: One hour?
Mr Tilson: Yes. It is only one point. I do not think it would take much longer.
The Chair: And you want to do that Thursday at 10 am or at 2?
Mr Tilson: Or at any other time during the day, whichever individual is available for Thursday.
The Chair: Maybe 2 in the afternoon might be --
Mr Tilson: At 10 am or 2 pm, whichever -- I think we should be flexible to Mr Richmond on that as opposed to a specific time.
The Chair: Well, either 10 or 2. It will be very difficult during the middle of the afternoon.
Mr Tilson: I would like to be flexible on the time, that is all I am saying.
Mr Mammoliti: Is there a motion on the floor?
The Chair: Yes, there is.
Mr Mammoliti: Mr Chairman, on the motion, I would suggest that we prioritize and that we deal with clause-by-clause first and then have the tax person come and talk to us. It is very important to this government to go through clause-by-clause and to do it as quickly as possible, and I would recommend that we finish our clause-by-clause and then talk with the experts.
The Chair: Okay. Very good. Mrs Poole.
Ms Poole: Mr Chair, in the interest of time, I would just ask that we place the question.
The Chair: All in favour of --
Mr Mammoliti: Can we take a 20-minute recess, Mr Chairman?
The Chair: All in favour of Ms Poole's motion?
Mr Mammoliti: Are you calling the question, or --
The Chair: Yes.
Mr Tilson: The question has been called.
Mr Mammoliti: Would you mind if we get 20 minutes to get our group together?
The Chair: All right. Twenty minutes. The committee will resume at 2:45.
Mr Tilson: On a point of order, Mr Chairman: Can that be done when the question has been -- is literally on the verge of being voted on?
The Chair: It must be done? I cannot give 20 minutes?
Clerk of the Committee: The question has to be put and then if the 20 minutes is asked for, yes, it is done correctly.
The Chair: Yes, they can have their 20 minutes. We will resume hearings at 2:45.
The committee recessed at 1424.
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The Chair: We are now prepared to vote on Mr Tilson's motion. I would ask the clerk to read the motion before we vote.
Clerk of the Committee: Mr Tilson moved that a tax expert be invited to appear before the committee on Thursday 28 February at 10 am or 2 pm.
The Chair: All in favour? Excuse me. Ms Harrington would like to speak to the motion, but I want to explain that the rules do not allow that because the request was that the motion be now put.
Mr Tilson: If that is the case, Mr Chair, I request that the vote be recorded.
Mr Brown: We will give you unanimous consent.
Mr Tilson: Unanimous consent to hear from the parliamentary assistant.
The Chair: Well, if there is unanimous consent among the committee, then we will hear the parliamentary assistant.
Ms Harrington: I want to clarify the position of the government. When the motion was voted on in Ottawa, the intention was that we would hear the tax expert this week, because this week we would have finished the clause-by-clause. Being new, I guess we presumed that three days last week was enough for clause-by-clause, but we are finding out the reality is otherwise.
Mr Mahoney: Well, 20-minute delays.
Ms Harrington: Right. So our understanding was that we want to hear the tax expert as soon as the clause-by-clause is finished, and that is our position, just to make it clear. When this vote is defeated, or if this vote is defeated, I would hope that --
Mr Turnbull: Why are we having these hearings?
Ms Harrington: -- if you want to put forward a further motion that we have the tax expert as soon as the clause-by-clause is finished, that would be fine.
Ms Poole: Mr Tilson may correct me if I am wrong, but I think part of his original presupposition was that a tax expert would be helpful in dealing with Bill 4 itself, not only in the long-term consultation; that was his original request. At the time Mr Tilson made this request, it did not appear that we would be able to have a tax expert last week, but now we have that opportunity this week and I think it would be helpful not only for the long-term consultation but also for completion of the clause-by-clause of Bill 4.
The Chair: Mr Brown and then Mr Tilson.
Mr Brown: Just to make life interesting, could the clerk tell us what the motion was that was made in Ottawa, precisely?
The Chair: We will find it right away or as quickly as possible.
Interjection.
Mr Mammoliti: Are you stalling, Clerk?
Mr Mahoney: Mr Chair, while we are waiting, I would just like to note that when the parliamentary assistant spoke -- and Hansard, I am sure, will record same -- she used the terms, "When this vote is defeated," abruptly replaced by "if."
Ms Harrington: When or if.
Mr Mahoney: I did not hear "or if," and I am sure that Hansard will record it in the true way that it was said and meant.
The Chair: Is there anything else you want to tell us, Mr Mahoney?
Mr Mahoney: No, I think it is quite obvious that it is a cooked vote.
The Chair: The clerk, in response to Mr Brown's request, will read the agreement that was made in Ottawa.
Clerk of the Committee: The motion was that a tax expert be invited to appear before the committee during the week of 25 February. The motion was carried.
Mr Tilson: Well, we are now here in the week of the 25th, Mr Chair, and I must confess the whole intent of that motion was to listen to such an expert prior to the debate on Bill 4 ending. And as Ms Poole has indicated, it does seem kind of silly to ask an expert to talk on something when that something has ended, namely Bill 4. So I think it is a most reasonable motion, and if the government members do not like the time on that particular day, I would be quite prepared to amend that, but I think that is the last day that has been scheduled for clause-by-clause.
The Chair: Can I recommend a compromise to the committee?
Mr Tilson: Of course, Mr Chair.
The Chair: How be if we have lunch brought in on Thursday and we can have the gentleman or lady appear before the committee over lunch hour?
Mr Tilson: If the government would -- it sounds like a most reasonable request.
Ms Harrington: It sounds like there is some support here.
Mr Mahoney: Do you want 20 minutes to discuss it?
Mr Tilson: Sure, take all the time you like.
Mr Mammoliti: What happens to the motion?
The Chair: I am assuming the motion will be withdrawn and a new motion will be put forward suggesting that the individual come between 12 and 1 or 1 and 2, or between 12 and 2. That is if we can reach the appropriate individual.
Mr Tilson: Whatever time you want, George.
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Ms Poole: I would suggest the compromise would be acceptable to most members. My only concern is that the expert witness we are inviting might be available at another time during the day, and I would not want that to preclude the fact that we are hearing his testimony. So I would like some flexibility in there to say, as a first option, can the expert witness be requested to come between 12 and 1 or 1 and 2, and if that is not possible, to have the flexibility to schedule another time.
The Chair: That would be up to the committee to decide. Right now we are still discussing Mr Tilson's motion. We are all very familiar with the motion. It is that we have an expert witness on tax matters appear before the committee this Thursday, either at 10 am or at 2 pm. We should either continue to talk to that motion or dispose of that motion one way or another.
Mr Abel: I would like to amend the motion if I could.
The Chair: A friendly amendment?
Mr Abel: Perhaps we could change the time frames, the 10 or the 2, and have the expert come in from 12 to 1 on Thursday, and lunch be provided.
The Chair: Or 1 to 2.
Mr Abel: We agree that it would be important to hear this person speak, but our concern is we do not want to cut into the time set aside for clause-by-clause. We feel it is very important that we get on with it.
Mr Tilson: Mr Chair, if the government members wish a working lunch, I have no problem with that. I would agree to that amendment.
The Chair: Why do you not withdraw your amendment, Mr Tilson?
Mr Tilson: If that is what you recommend, I would withdraw the motion and make a further motion suggesting the time frame of an hour between 12 and 2.
The Chair: Mr Tilson moves that on Thursday of this week we have an income tax expert appear before the committee between the hours of 12 and 2, and the committee will work through its lunch hour to hear this individual. All in favour?
Mr Abel: And that is for a one-hour period?
The Chair: For a period of one hour.
Mr Abel: Okay. Thank you.
The Chair: All in favour?
Motion agreed to.
The Chair: Now, Mr Richmond, do you have any information for the committee?
Mr Richmond: Yes, Mr Chairman. for the information of the committee, during the recess I managed to reach each of the four economists on the list that was distributed to you last week. Unfortunately, I mentioned the prospective times of 10 and 2, but I would presume the only one who can appear on Thursday is Professor Andrew Muller. The others are busy on that day. So I do not know whether that changes the situation. Mr Muller, however, did mention that he felt he was more familiar in terms of coming before the committee to speak to Bill 4 rather than tax matters. He felt he could brief the committee in general on income tax matters, but in talking to him, I got the impression that he did not regard himself as a true expert on income tax, but he is an economics professor.
The Chair: Well, how did he get on our list?
Ms Poole: Somebody thought he was an income tax expert.
The Chair: Well, we have to have the appropriate individual, I say to the committee, if we are going to go through all of these items.
Mr Richmond: As I mentioned earlier, the other individual who has not gotten back to us is a chartered accountant. However, he indicated that he was tied up this week because of the federal budget, but I could attempt to reach him again.
The Chair: Mr Richmond, why do you not just continue your search for the appropriate individual, and when you think we have an expert, please let us know? The committee has got to get back to regular proceedings. It is almost 3 o'clock. We have not dealt with any sections yet.
When we were last discussing subsection 100g(1), if memory serves me correctly, Ms Poole had the floor, and I cannot recall if you had completed your remarks.
Ms Poole: No, actually I was just beginning.
Mr Mahoney: Could I, Mr Chair, before Ms Poole goes on subsection 100g(1), make an inquiry as to the status of the amendment that was stood down with regard to conditional orders as to when we were going to have something back from the government? I thought that was today.
Ms Harrington: Could I --
The Chair: Certainly, please go ahead.
Ms Harrington: To my knowledge, the reason that we cannot deal with it today is the minister is not here and he wanted to respond directly to it. He will be here tomorrow and we would like to deal with that tomorrow.
Mr Mahoney: More delaying tactics.
The Chair: Yes, that was subsection 100e(2) that we had stood down. Okay, Ms Poole, subsection 100g(1).
Ms Poole: By the way, Ms Harrington, it might be good also to remind the minister -- because my understanding is he cannot attend for the whole day tomorrow -- that we stood down the section on mobile homes pending his attendance, so we might like to deal with that and the conditional orders at that time.
Ms Harrington: We will tell him. Thank you.
Ms Poole: Thank you. I had a few questions for the ministry. Under section 100g, where you have provided that a tenant may make an application at rent review to get release from paying all or part of the statutory increase if that tenant feels there has been a decline in the service or in the maintenance in their building, how long would it be anticipated that such an application to rent review would take? What are current time lines? If a tenant was to apply under this section for relief, how long would it be, in your estimation, before rent review had not only dealt with it but come to a decision and made an order in this respect?
Ms Parrish: I think it depends on the area that it is occurring in. There are statutory restrictions. There is a certain notice period which I think is 30 days, so you would have that minimum circulation time because you have to give the landlord the opportunity to respond; and then there would be variations depending on where it was filed because, as you know, some of the regions of the province are pretty well current and therefore I deal with their tenant applications pretty well as they come in the door. They are still in some cases trying to deal with the backlog from landlord applications. In other areas, they are not current, notably in Toronto, and therefore they deal with them as quickly as they can.
I have to say that I do not know the average period of time that it takes to deal with a tenant rebate -- it is not a rebate -- a decline or a decrease in the statutory guideline application. I can undertake to find that out and inquire as to the average period of time from application to resolution.
Ms Poole: Right now when the standards board is involved and they go through rent review, the new improved time, my understanding is, is somewhere between 10 months and a year, and this is a significant improvement over what it used to be. This is for a rebate of the statutory guideline amount if a tenant is not getting appropriate maintenance service and if outstanding work orders are not being satisfied. One of the concerns I have with this provision is that it is a very unwieldy process as far as the tenant is concerned. They first of all have to apply to rent review. Then they have to go and prove their case and then, thirdly, they have to wait for an extended period of time and possibly an appeal by the landlord before they have any relief from this. Have you not considered any alternative which would provide the tenant with an easy mechanism to get relief when the landlord is not doing the day-to-day repairs, the ongoing maintenance, and providing the services he or she should be?
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Ms Harrington: I think it is very clear that what we hope to do as we have said many times is have the interim legislation and very quickly move on to how we are going to deal with these things in an effective and efficient manner in the long term. And that is what we are going to do in the green paper, to try and look at options to deal with this.
Ms Poole: Mr Chair, I would like to table with the committee a copy of a column by a tenant activist, Jeffrey Freedman, who writes for the Toronto Star. This is a column which specifically addresses Bill 4 and some of the not only potential difficulties with maintenance but the difficulties that are occurring right now because of Bill 4 and maintenance. So I would like members of the committee to have a copy of this. I am going to quote from several sections. In this column -- and I can tell you, from reading Mr Freedman's columns in the past, that he is very much concerned with tenants and tenant protection, and that is one of his main goals -- his opening paragraph starts out:
"As predicted, the new rent control legislation has caused deterioration of maintenance in some buildings in Metro." And then he gives specific examples in the St Andrews Towers Tenants Association as to some of the difficulties they have incurred up there. And it says, "It is a strange coincidence that, as soon as the NDP fixed the cracks in the rent review legislation, landlords stopped fixing the cracks in buildings.
"Sure, there has always been a lag between the time problems in buildings are reported and when they are fixed. But the lag has never been as long as it is now.
"We can expect the deterioration to continue. Landlords are unhappy about rent controls and this is how they are going to let us know it.
"While they may not impose a complete moratorium on repairs and maintenance, we can expect to find landlords doing only what the law obligates them to do.
"The fridge that should have been replaced a year ago won't be replaced.
"The garage that needs more lighting and a new door won't get it.
"Unless city officials and the provincial government are made aware of how this neglect is jeopardizing safety and comfort, it will continue."
I think that very aptly states the severity of the problem. And to quote a famous phrase, "We ain't seen nothing yet." Under Bill 4, because there is no provision for capital repairs and because there is inadequate provision for maintenance, tenants are going to be facing these kinds of conditions in increasing severity as the year goes on.
So I would like to know what alternatives the ministry discussed for dealing with this in the short term. Not the long term; I certainly agree with you that we need very strong provisions for maintenance for the long term. But tenants cannot afford to wait and let their buildings deteriorate for a year and a half, or however long it takes for the moratorium to be over, to wait for relief. It is a major concern I have with this provision, the lack of timeliness to it and also the difficulty it gives tenants. Have you considered for Bill 4 any alternatives for dealing with the maintenance problem? Are there any options?
Ms Parrish: Yes, quite a few options were looked at and most of those are discussed in the green paper. The problem is that it is very difficult to intervene within a system that does not support the kinds of interventions. One of the problems you have now is that the way the current system is structured, there is actually a three-stage process. When you have a maintenance problem the municipality looks at the problem. They attempt to rectify it, and if they are unable to get compliance, they then send it to the standards board. The standards board then re-examines the whole issue and then sends it to the rent administrator who eventually has the power not to actually reduce the rent but just to suspend the new guideline increase. And there is no doubt that this is a fairly long line of supply.
This problem of delay, which I understand is about eight and a half months from the work order to the rent penalty, is quite a serious problem, and we do look at that quite extensively in the green paper. But it is very difficult, unless you completely rip apart the entire statute, to fix it, because you do not have the basic tools in some cases. For example, the people who impose the rent penalties are not the same people who do the inspection, and that seems to be a fairly critical problem in the current system. Of course you are going to have delay if you have three different groups looking at exactly the same issue and only one of them has the ability to impose a penalty and that penalty is very limited.
The problem is really that you need such substantial change in this area. It is very difficult to do it in essentially an interim kind of bill without having a completely different kind of administrative structure to support it.
These were all looked at and that is why, in the end, they were issues that were put forward for the whole system. It does seem to be in the minds of tenants and, in some cases, the minds of landlords that these issues have to be better connected, including the kind of administrative structure and decision-making in order to make the whole system work better.
So it is not that these issues were not looked at. We also looked at the issue of whether or not you could tie work orders and so on into rent increases. It is very difficult to do that within the existing statute without completely gutting it, essentially repealing the whole statute and starting again, which is what the long-term system does.
Ms Poole: As you know, I have an amendment which deals with maintenance, which deals with work orders in a speedy way to get relief to tenants, but I do not wish to address this right now because it is not the appropriate section to do so.
There is, however, one other item that I would like to bring up that is covered under section 100g, and that is equalization. Section 100g actually deletes the opportunity for a tenant application under equalization. Although I am not sure this is the information we got from the ministry this morning when we were told that section 100f did not deal with equalization, my understanding is that 100f deleted equalization by the landlord. But that has already passed; we cannot deal with that.
I would like to deal with equalization under section 100g, which is the tenant application. There are actually quite a few tenants who are very upset that the government has removed this particular provision.
As you know, equalization was a revenue-neutral provision for the landlord. The landlord did not gain one penny out of equalization; the landlord did not lose any with equalization. The principle is that for numerous reasons, rents for an identical apartment in a building would be $350 for one and $600 for the other. It was felt by many tenants that it was very unfair that they would be paying this kind of tremendous surcharge. So the difference was equalized: The tenant who was paying $350 would be paying $475 and the tenant who was paying $600 would be paying $475, so that the landlord was not a net winner or a net loser. I guess the only thing is that it provided a more even balance in the apartment building.
We were given some of the reasons why equalization was not being considered in the long-term legislation the other day by ministry staff but, quite frankly, I did not feel that we were provided with sufficient evidence to show that equalization should be taken out either in the short term or in the long term. As I say, it is something that many tenants feel they should have a right to and they are very upset that this is being removed.
I do not know if you have any comments other than that you are going to look at it in the long term, and I do not really want to hear that; I want to hear why you removed it from the short-term interim bill.
Ms Harrington: Okay, I will just comment. When I first looked at this, being new to rent control a few months ago, I felt the same way, that equalization sounds like a very fair thing and something that should be done. The problem that I have found with it is that it is very complex. It does not give the desired effect. Those tenants who have the lower rent are not happy when their rents are raised, and they think it is because of the other person within their building.
What we have done, as you have mentioned, is we have left that option open in the consultation paper. That is something we are still looking at, but we felt at this time -- and that is why it is has not been declared over the last three years, I guess -- it was unworkable. And Colleen can explain a little further about why it was unworkable and why it was not declared.
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Ms Poole: Colleen looks stunned. Or contemplative, maybe.
Ms Parrish: I always look stunned. I am trying not to be repetitive and to give you the same explanation as I gave before because I know that it is irritating. I gave the best answer I could before, which is that I agree that in the best of all possible circumstances it is revenue-neutral. One of the problems we have in Ontario is that we do not always have the best of all circumstances because we do not always know what the legal rents are, particularly for smaller buildings.
So you may have equalization, and in theory you first of all adjust for your legal rents. But it is frequently the case that you do not know, because only the larger buildings, of course, have been caught by the rent registry today. So that is one issue that occurs largely --
Interjection: In smaller buildings.
Ms Harrington: It tends to occur in smaller buildings. I think it is true that some tenants like equalization and some landlords like it and some think it is sort of irritating because they do not get anything out of it and they have to go through all of this back-and-forth. It is definitely, I think, an issue which is open in the consultation document.
One of the issues around equalization is that, in Bill 4, by and large, you do not allow increases above the guideline. Essentially, you are sort of holding things in place. And if you permit it for equalization, you may get a lot of pressure for equalization in order to increase rents in certain areas. I do not think I can give a better explanation than that. I think that is the reason. It is complex. It has its supporters, but it also has its detractors, and it is more difficult to administer it in a system where the legal rents for smaller buildings, in particular, are not known with any degree of certainty. And sure, you can go through a certain process, but that can be complex as well. So there is always the fear that in the absence of a good information base you will be equalizing upwards against illegal rents.
Ms Poole: I would submit to you that that argument does not really have a lot of validity. If that landlord is charging an illegal rent already, then whether you codify it by equalizing the rents, to me, is totally irrelevant. That landlord is still charging that tenant that rent. And that tenant is paying it. And if you are equalizing it, I do not see how that says you are codifying an illegal rent that the landlord is charging anyway.
I have never found that to be a problem with equalization, and we have had a number of calls to my constituency office about it. I have never had the complaint that the landlord was charging an illegal rent to begin with. The only problem I have ever found with equalization is that the tenant who is equalized on the other side, who has to pay more rent, is not as happy as the tenant who is equalized on the side where they have to pay less rent. But it just seems to me that it is revenue-neutral. It is not going to get the landlord one more penny in rent, and yet it would provide much more fairness to the system.
Mr Chair, I have a motion to make with regard to equalization and tenant applications, and I am firmly resisting Mr Mahoney's comments to my side, who keeps trying to compare this to market value assessment.
Mr Mahoney: Same thing.
Ms Poole: He always tries to be contentious.
Mr Mahoney: I am on your side.
Ms Poole: Not often.
The Chair: He is correct, though.
Ms Poole: Mr Chair, this is highly inappropriate, for the Chair to be making highly partisan comments.
Mr Turnbull: Dianne, I am with you. Do not worry.
Ms Poole: Yes, obviously Mr Turnbull has the discernment to tell the truth on that particular issue.
The Chair: Ms Poole moves that subsection 100g(3) of the act, as set out in section 8 of the bill, be amended by adding the following paragraph:
"5. Variations and the reasons therefore in the rent being charged by the landlord for similar rental units within the residential complex."
Ms Poole: This basically reinstates equalization as part of this particular section. And I would say to the ministry that I welcome your analysis of equalization in the long term, but given the fact that you have not provided us with any statistics or any hard data showing that it was problematic or that there is any reason why it should be deleted from Bill 4, I would submit very strongly that it should stay in until such time as the ministry obtains such hard data and statistics and an analysis of the situation beyond what was provided in the long-term consultation paper.
The Chair: I am assuming, then, that 100g(1) and 100g(2) are going to carry. Why do we not carry those two sections?
Motion agreed to.
The Chair: We are now dealing with an amendment made by Ms Poole to 100g(3) by adding a new paragraph 5. Any further comments, Ms Poole?
Ms Poole: Not at this time.
The Chair: Mr Mahoney, then Mr Tilson.
Mr Mahoney: Mr Chairman, I was not going to mention section 63, but let me, in fairness, point out a couple of differences. And I have a question of the ministry as to how it would deal with this. In a market value system, you can determine --
Ms Poole: Mr Chair --
Mr Mahoney: No, just a moment. You are going to like this.
Ms Poole: I am?
Mr Mahoney: Yes, you are. Trust me. I am no longer with the government. You can trust me. In a market value system --
The Chair: You have been right on so far.
Mr Mahoney: -- you can determine the value of the property based on its market value and make your adjustments. The concern I have -- and we need a response from the government to make this amendment effective -- is that we need some way of determining the value of the apartments. And that is where it really is, in all seriousness, different from a section 63 market value reassessment. The reason, Mr Former Minister who is totally unbiased in this, is that it is difficult to determine the many issues. For example, the term of the lease could have an impact on the rent that you pay. A landlord might give you a reduced rent in return for an increased term. You might be living in an identical apartment for which you signed your 10-year lease five years ago at an agreed-upon rent based on what was fair at the time, and you are paying your increments each year. I come in and negotiate a lease today that is five years in advance, and the marketplace could have turned around completely. There could be addenda to the apartment. One apartment might include broadloom and another one does not. One apartment might have newer appliances and another one does not.
And so there is a difference in that you are not comparing it to just the real estate value, which is what you are doing in the very fair system that is accomplished under market value, section 63. There are too many other issues in the mix. And I guess what I need to know from the parliamentary assistant is, would the government be prepared to undertake some method of determining that? Because clearly if tenant A is paying $600 a month and tenant B is paying $400, and they are under identical living conditions and terms etc etc, then there is an unfairness there. And your government is the one who promised to bring fairness to all aspects of this province. Are you prepared to undertake some kind of analysis? I am going to support the amendment because I think it is fair, but in order for you to carry out the successful implementation of the amendment, you have got some homework to do, it seems to me, in coming up with -- not necessarily a huge bureaucratic system where you are analysing everybody's apartment and lease, because it would have to be done on the basis where the tenant could apply. In other words, if the adjustment were made in equalization and instead of paying $600 and $400 you had them both paying $500, one with an increase, one with a decrease, obviously, as Ms Poole has pointed out, the one with the increase would be unhappy and could then apply to a rent review board or someone of that nature to do the analysis. If you do not put in that appeal process, then the amendment would have virtually no effect, even if it were to carry.
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Ms Harrington: I think you have brought up the point, really, of what I was saying, that it is unworkable at this time unless you have all kinds of other structures in place. And I was wrong in saying that it was not proclaimed. It was the other part of the bill that was not proclaimed, which was the chronically depressed rents. I am sorry about that, if I misled anyone.
But the system as it is now, you are saying it is not workable unless you have a whole new structure, and the answer to your question is no, we are not prepared to look at that at this time, because this is an interim bill.
Mr Mahoney: Mr Chair, I am sorry, I did not say you need a whole new structure. What I said is you have to recognize a process within the existing structure that gives the tenant the right to appeal. And I do not think there is any need for that to be very cumbersome or difficult. They simply appeal and say: "You raised my rent based on equalization and I submit that my apartment is not equal to John Doe's apartment and here is why. I have a different term lease, I signed it at a different time," whatever it is. And the same review board would hear that and adjudicate the matter.
It does not need to create a whole new system. If you agree with the unfairness of having one person pay substantially more rent for the same accommodation than another, then maybe you should say so. I would be surprised that you would ever agree, and if you do not agree, why not do something about it within the system that is in place? You do not need to create a new bureaucracy to solve this.
Ms Poole: It is workable, eminently.
Ms Harrington: Yes, I said how I felt about it at the outset and I could just conclude by saying that under this legislation we are not prepared to look at it. But, as you know, as soon as possible this year we are trying to get a workable system in place.
Mr Tilson: I have a question on the main section as opposed to the amendment, Mr Chair.
The Chair: We should be discussing the amendment.
Mr Tilson: I have no questions on the amendment.
The Chair: Can we wait until we deal with the amendment, and we will get right back to you, Mr Tilson? Any further comments on Ms Poole's amendment?
Mr Tilson: Recorded vote.
The Chair: A recorded vote has been requested.
The committee divided on Ms Poole's amendment, which was negatived on the following vote:
Ayes-3
Brown, Mahoney, Poole.
Nays-8
Abel, Harrington, Lessard, Mammoliti, Tilson, Turnbull, Ward, M., Wiseman.
The Chair: The amendment has been lost.
Ms Poole: They have won, they have won. The Conservatives now see the socialist party leader.
Interjections.
The Chair: Mr Tilson, I believe you wanted to make a comment on the main section.
Mr Tilson: With respect to subsection 100g(3), I have two questions of perhaps Ms Harrington or the staff, and that is whether or not there should be an item indicating that this list, these factors, are not exclusive, that there might be other factors.
Ms Harrington: I am sorry, what do you mean by exclusive?
Mr Tilson: Well, the subsection says: "The minister shall consider the following factors on the application," and there have been four factors. Should there be a fifth item that indicates that this is not an exclusive matter?
Ms Harrington: I would like to ask staff to answer.
Ms Richardson: Perhaps I could address part of the answer in that under previous rent review legislation, this kind of application has been available both under the Residential Tenancies Act and under the Residential Rent Regulation Act. Under both of those pieces of legislation, there have been very limited grounds on which tenants can challenge a rent increase, and the grounds especially concerning deterioration in the standard of maintenance have been the ones that have been used the most when this kind of application is brought forward. The discontinuance and reduction of services has also been traditionally part of the grounds on which tenants can bring forward these kinds of applications.
The tenants, of course, in the context of a whole building review can bring forward these kinds of concerns, and in the course of the whole building review is when a landlord's costs are being examined. These are not cost-based items. These are the kinds of things that tenants would be most familiar with and, as I say, have traditionally been grounds for this kind of an application.
Mr Tilson: I appreciate what you said, although I would hope that the factors would be of a more universal nature. For example -- and, again, I am trying to respond to the comments that have been made to this committee through the hearings throughout the province -- there might be a situation where landlords simply do not have the funds, because of the regressive nature of Bill 4, to maintain certain standards; and if that argument can be reasonably put forward by a landlord in that specific situation, that is a factor that may justify, for example, why some particular work order has not been completed.
Ms Richardson: That kind of situation would be captured either under number one or number three or number four.
Mr Tilson: With respect, I do not think it would. Number one indicates that the standards of maintenance and repair may have indeed deteriorated. I mean, we have heard of some situations where standards of maintenance in buildings have deteriorated drastically, and answers have been given to us by landlords that the reason they are deteriorating is that they do not have the money to maintain them because of rents that, for whatever reason, have not been increased over the years, or simply for the fact that they do not have the funds.
It may be, for example, that something needs to be done to the building to maintain the standards, and that requirement by, for example, a municipal bylaw or by a rental standards board may break the landlords' back if they are forced into it and may put them into bankruptcy because of the funds that are required for capital expenditure that they do not have. And again, I therefore ask, should there be a clause? These are sound reasons that the minister should consider, but there may be others, and I have not really put my mind to it. There may be others. I am just thinking of examples as we are sitting here, but those, I think, are two sound reasons that the minister should consider. Would you agree?
Ms Harrington: I think we are getting into a little different area here about maintenance and capital expenditures. This section is strictly dealing with lowering of the rents by an application of the tenant. I think maybe we could deal with that concern in another section.
Mr Tilson: Well, with respect, Ms Harrington, it is dealing with the maintenance standards of a building. If maintenance has deteriorated, then this section says that the applicant should not get their increase or may not get their increase depending on what ruling the minister says.
Ms Harrington: That is right.
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Mr Tilson: And subsection 3 says that the following are the factors. I still say that there may be other factors that favour the tenant. I have listed two that may favour a landlord, but there may be other factors that we have not even thought of that are of very great concern to the tenant as to why that increase should not be allowed.
Ms Harrington: Well, I think staff has said that these are the reasons that have been used in the past, and there are other --
Mr Tilson: I thought you were trying to change the past.
Ms Harrington: Yes.
Mr Tilson: I thought you were a party of the future.
Ms Harrington: Very good. I am glad you are seeing the light.
Mr Tilson: No. I have not seen the light. I would like to see some signs of it, though.
Ms Harrington: Good. If there are other factors that we should be considering, I hope that you will bring them to our attention.
Mr Tilson: I just brought two examples to your attention.
Interjection: Would you care for 40 more?
Mr Tilson: We do not need them.
Ms Harrington: And we will hopefully deal with them in the long term. But what we have done is put down the factors that we feel should be used in an application.
Mr Mammoliti: On a point of order, Mr Chairman --
Mr Tilson: Who are you ordering it from?
Mr Mammoliti: Somebody.
Interjection: Mr Mahoney.
The Acting Chair (Mr Mahoney): I take the chair on the condition I do not recognize Mr Mammoliti. Do you have a point of order?
Mr Mammoliti: Yes, Mr Chairman, I do have a point of order. I have got a problem with the questioning. We have heard the answer --
The Acting Chair: That is not a point of order.
Mr Mammoliti: Well, I am saying that it is repetitive.That is a point of order.
The Acting Chair: You have made that point many times already this morning, and it is not a point of order.
Mr Mammoliti: And I am going to continue making it, Mr Chairman.
The Acting Chair: Okay.
Mr Mammoliti: How do you rule?
The Acting Chair: It is not a point of order.
Mr Mammoliti: On a point of privilege, Mr Chairman.
Mr Tilson: That is repetitive too.
Mr Mammoliti: The questioning is repetitive. How about a point of hot air?
Interjection: Well, I would certainly agree with that.
Mr Tilson: Mr Chair, if I could proceed with my second question. The second question I have is with respect to whether or not factor number one --
Mr Mammoliti: It was a point of privilege, Mr Chairman.
The Chair: Order. We have a point of privilege. Mr Mammoliti.
Mr Mammoliti: I mentioned that this line of questioning is repetitive and nobody seems to be giving me an answer. We are wasting time with the questions, and I would ask the Chair to rule.
The Chair: I have to ensure that all members feel they are an effective part of the process, and I have to allow members to put their questions. While it may be true that some questions may sound repetitive, if you listen to the nuances it appears that members are coming at a particular subject from different angles and different degrees of different angles; and there is a purpose to that. And the purpose, I understand, is to be able to understand the many effects certain sections of a piece of legislation may have.
If the questions were direct in nature asking for certain specific policy statements from the ministry or figures, those types of questions which basically have to be asked very directly, if they were being repetitive, then I think I could agree with you, Mr Mammoliti. But there are differences in the questions that are being asked by the members. Maybe they are trying to get at the same point but they are coming at it from many different angles. So for the present time, I am going to have to rule against your point of order --
Mr Mammoliti: Point of privilege.
The Chair: Point of privilege -- well, it was not a point of privilege. I am going to have to rule against your point of order, and I am going to allow the questioning to continue.
Mr Mammoliti: I was told it was not a point of order either.
The Chair: I believe all members have heard your concerns, and I am sure all members are going to try not to be repetitive, but in this business sometimes it does sound as if we are being repetitive. But, as I said earlier, there are many different angles to approach the same subject so I am going to ask Mr Tilson to proceed.
Mr Tilson: Thank you, Mr Chairman. The second question that I have is with respect to subsection 3. My question is to Ms Harrington: Does factor 1 conflict with factor 4? In other words, could the deterioration of the standard of maintenance and repair that affects a rental unit -- it might be substantially higher than is required by a municipal bylaw or by the provincial rental standards board, thereby putting a hardship on the landlord.
Ms Harrington: Okay. You are saying that the landlord has a rather high standard of maintenance.
Mr Tilson: No, I did not say that.
Ms Harrington: No?
Mr Tilson: I said that all buildings are different. Some residential accommodation is of medium standard, some is of luxury standard, and the standards of maintenance may be substantially higher in a particular building as opposed to the provincial regulations or the municipal bylaws. So therefore, my question is whether, because of that, factor 1 conflicts with factor 4.
Ms Harrington: I do not quite get what you are getting at here. You are saying if the standard deteriorates but does not go below the --
Mr Tilson: Conceivably the standards of factor 1 -- it is possible they may deteriorate for a particular building, but not indeed for factor 4. I guess my question is, what does deterioration mean, and in whose eyes?
Ms Harrington: Not being an expert, I would think that factor 1 would be above and beyond factor 4. Number 4 would be a minimum standard, and factor 1 would be a building where there is good maintenance that the tenants are used to and that standard has been set in that building; if that deteriorates they want a compensation in their rent.
Mr Tilson: What is the standard?
Ms Harrington: In that particular case, it says, "A deterioration in the standard of maintenance and repairs that affects the rental unit." So, the tenants, if they are used to a certain level of maintenance and repair which they can prove has been there, and those standards are not there any more and they can prove that, then they would apply for this decrease in the guideline amount.
Ms Poole: If I might provide a point of clarification on 3 and 4 -- and the ministry, of course, is free to correct me if I am wrong -- my understanding is that factor 3 refers to a situation where the municipality has maintenance standards and they have established bylaws to deal with them. Factor 4 is quite different because they are dealing with municipalities that do not have these bylaws in place.
So in the absence of any local bylaws, the maintenance standards established by the Residential Rental Standards Board would hold sway. So the two are not actually in conflict with each other at all. One just deals with municipalities that do not have any bylaws, and the other deals with municipalities that do.
Mr Tilson: Mr Chair, Ms Poole is quite correct. Therefore, does factor 1 conflict with factors 3 and 4, one of which has the municipal bylaw, one of which has the provincial requirements?
Ms Harrington: No, I do not believe they conflict.
Mr Tilson: I think they do.
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Ms Poole: With relation to the factors outlined, paragraph 100g(3)3, I am looking to find what criteria there are in the draft regulations that you have supplied to assist the rent review administrator in making these determinations. The reason I ask this is that it is not always obvious what a reduction in services, for instance, would constitute. I had a building in my riding where the landlord unilaterally took out half of the lobby to put in a convenience store, and the tenants had the argument that they had had a reduction in services because the couches were taken out. The place for them to have friends in was removed and something else put in that the tenants did not want to have there in the first place because it violated security provisions.
Well, the answer from rent review was that it was not a reduction in services. So, I do not know. I would be much happier if some of these things such as the deterioration in the standard of maintenance and repair, the reduction in services or facilities, if there were some criteria that would guide the rent review administrator in determining that indeed these things have occurred and that a rent increase should be stayed or deleted. Otherwise I think you are going to have tenants who spend an awful lot of time and effort making arguments and defences and do not get any assistance.
Ms Harrington: I will ask staff to answer.
Ms Richardson: It is quite correct that there are no specific regulations dealing with that, and as you have pointed out, it is a very difficult area because the standard of maintenance and repair, for instance, varies from building to building, and it is very difficult to capture a rule that explicitly deals with those kinds of things. Our staff do try to look at the particular circumstances of the building in these kinds of cases, and as I have mentioned, the difficulty is finding a rule that is appropriate for all buildings, and dealing with it in the regulations in that way. We are certainly always looking towards improving how those kinds of criteria are established and, you know, we could certainly look at some of the criteria that you would like to suggest.
Ms Poole: Would you consider establishing criteria via regulation or are you just suggesting that there might be guidelines to assist rent review administrators in having a uniform application?
Ms Richardson: I would have to ask my legal colleagues about the regulation-making authority, but assuming that we had that regulation-making authority, that kind of criteria could be established in regulations. The question, though, is how long a list are we going to make and what would be the appropriate things to deal with? From experience I know that this actually is a very difficult area to make some rules.
Ms Poole: If you had a list that was not exclusive but gave rent review administrators a guideline for most of the scenarios, I think that would be helpful to them. Otherwise, the tenant is going to have quite a difficult time in proving that there has been a deterioration in the standard of maintenance. Most tenants do not run around with cameras saying, "Well, on 1 January 1989 this is what my hallway looked like, and this is what it looked like on 1 January 1991." In the best of all possible worlds, of course, they would have done that, and you would have nice, bundled-up proof. What I am quite often dealing with is trying to help tenants put together a case where they are showing a deterioration in the standard of maintenance. You not only do not have that, you do not have a necessarily uniform application at rent review as to what constitutes a deterioration or a reduction in services, which is what I originally mentioned. So I think it would be helpful.
Ms Richardson: By leaving it the way that it is set out here, it actually gives the broadest possible scope to look at a number of different criteria rather than just being restricted to certain very specific criteria. So this actually may address more situations than having very strict rules about what can be looked at and what cannot.
Ms Poole: Well, I do appreciate that, and I am glad you are going to be looking at some sort of guidelines; and if I can be of assistance I would be happy.
The Chair: Any further questions on subsection 100g(3)? Seeing no further questions, all in favour?
Interjection: Carried.
The Chair: No, the Chair says, "Carried." Members raise their hands. Carried.
Ms Poole: On a point of order, a point of information, a point of clarification, whatever you would like to call it --
The Chair: Try one and let's see how it goes.
Ms Poole: Okay, let's try on a point of order, Mr Chairman: Just when I was leafing through my very large pile here, I happened to find on the bottom a letter from the Association For Further Ontario's Rental Development, which I believe was distributed to members today. Is that correct?
The Chair: Yes.
Ms Poole: Anyway, it appeared on my desk and it appears that they are inviting all committee members to attend a meeting that they are interested in setting up with two internationally known experts, William Tucker of New York, I believe, and Professor Ingemar Stahl of Lund University in Sweden.
They have asked that we reply to this as soon as possible. They phoned me, I think yesterday, and mentioned that they are interested in having these experts over for a meeting of their own and would members be interested. I indicated my own interest.
Could we perhaps give them some indication at this time whether members would be interested, all or some of us, in attending such a meeting?
The Chair: Well, it is definitely not a point of order. We are discussing information that has been made available to the committee as a whole and I guess that is in order, if there are no objections.
I do not know how to deal with your question because it appears to me that each member will have to make an individual decision.
Ms Harrington: I might suggest that one of the evenings, either Monday or Tuesday, we could ask the clerk to book this room so there would be a place that we are familiar with available to any of us who would like to come. These two people certainly seem to have a lot of interesting background. I certainly would be interested.
The Chair: I think we should just leave it up to the individual members.
Mr Tilson: I think all members of the committee would agree that it would be most useful to hear this individual. I guess I am looking for comments from the committee that, assuming we will shortly be finishing the clause-by-clause and assuming this committee will also be hearing some individuals with respect to the green paper, perhaps this individual could be added to the list whenever clause-by-clause is over, unless we are trying to get this person in before this committee submits Bill 4 as amended.
Ms Harrington: They are only here on the one date.
Mr Tilson: Oh, they are only available the one day. Is that what the letter says?
Ms Poole: They are flying in from Sweden and New York. Those are the only two days they were available for committee members, and I think that was why it was suggested that we might like to take advantage --
Mr Tilson: I would be interested in hearing them, Mr Chair.
The Chair: The clerk reminds me that when the Legislature is in session, we are only authorized to sit on Thursdays as a committee. So we definitely cannot sit as a committee Monday and/or Tuesday unless we get authorization from the Legislature.
Mr Tilson: We could sit on the Monday.
The Chair: How is that?
Mr Tilson: I do not believe the House commences until the Tuesday.
Ms Poole: No, it starts on the Monday.
The Chair: The 18th.
Mr Tilson: Oh, does it? Okay. Then I guess we have a problem.
The Chair: Unless I am incorrect, the way I read this letter was that while it was addressed to the clerk, it was copied to all the individual members and I assumed that every member would treat this piece of correspondence as an individual invitation. I could be interpreting it incorrectly. As a committee, I do not know what we possibly can do.
Ms Harrington: I thought we could just book the room.
The Chair: Yes, other than that, other than making a room available.
Ms Poole: I guess the only problem with that, Mr Chair, is if we wanted to have Hansard and I do not know whether you felt this was necessary.
The Chair: Well, if we had Hansard, that is a formal sitting of the committee. I wish we could sit on Mondays or Tuesdays, but we are only authorized to sit on Thursdays, am or pm. That is the day that we have been assigned.
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Ms Harrington: Then we will have to sit informally.
The Chair: Each individual member would have to treat this invitation exactly as that, an invitation for each and every one of us to decide on our own how to respond. We will make sure that this room is available if it is necessary and we will carry on from there. In regards to Mr Tilson's suggestion that they be put on a list for possible discussions in regards to the green paper, I guess because they are from different -- is it Sweden or Switzerland?
Ms Poole: Sweden and New York.
The Chair: Sweden. Well, maybe the individual from New York may be able to fly in, but I would assume that the other person would have a difficult time. I am not averse to having the person from New York put on a list with the possible consideration that he may be able to come and discuss matters with us more fully at a further date. We can do that.
Mr Tilson: Mr Chair, I would support that either individual, if for some reason they are available at a later date whenever the committee is sitting to review the green paper, be added to that list. I do not think we appear to have the time restraints that we thought we had with respect to the discussions of the green paper, and there is nothing to preclude us from adding further authorities such as this to the list.
The Chair: My understanding is we will be able to meet regularly every Thursday to discuss the green paper.
Mr Tilson: Yes.
The Chair: It will be up to the committee to decide whom we are going to see and when.
Mr Tilson: We do have a list -- whether that list needs to be revised -- that the three parties have agreed on, Mr Chair.
The Chair: I do not hear any objections, so by adding either one or both of these people to the list, I would be in fact revising our original list. I hear no objections so I am going to ask -- yes, Ms Ward.
Ms M. Ward: Would that involve the committee paying for flying this person from Sweden? I mean, if they are here for one day, it seems rather --
The Chair: It may or may not. I just remind the committee that in the past, I have seen committees, particularly in the field of energy, scour the world for experts. I cannot tell you from memory whether or not their expenses were paid when they came to give testimony or advice or information.
We are passing legislation which is going to affect over one million units and I do not know how many tens of thousands of landlords. It is certainly a lot cheaper to have this individual come here than for all of us to go to New York or elsewhere.
Ms Harrington: I just want to put on record that, as of this time, there is certainly no intent to fly people in. The phone call that I received and that other parties received yesterday was that these people would be here and willing to address us here at Queen's Park and that we would then be able to take advantage of that situation. So I think that is the way it is at this moment.
Ms Poole: That was certainly my understanding as well, Mr Chair, that these individuals were going to be here and that the committee would have no part --
The Chair: We had already dealt with the point that you raised; it was dealt with by the committee. The point that I was addressing was the concern raised by Mr Tilson, who was very specific in what he wanted to have done. He asked that the committee make arrangements to hear these individuals when we were further discussing the green paper.
It has been noted that we will be discussing the green paper on Thursdays when the Legislature convenes. He asked specifically whether or not, if we added these individuals to our already established list, that would in fact be appropriate, and I responded by saying that unless I heard some objections it certainly was appropriate. And then we got into the subject of how we were going to get these people here if we wanted to hear from them.
That is a decision that this committee will have to make.
Mr Tilson: Mr Chair, my feeling is that we are dealing with a letter from AFFORD dated 26 February, signed by Mr Satchu, and my position would be that Ms Deller inform Mr Satchu that this committee is unable to meet on the 18th or 19th and that we would provide AFFORD an opportunity to produce these individuals if they wish to present them at a date on which we are discussing the green paper. In other words, AFFORD already is on the list to speak on their own behalf, if I recall, with respect to the green paper and I suppose, if it is understood that over and above the presentation made by AFFORD, perhaps if AFFORD wished to make these people available for the committee, we would provide that time to them.
The Chair: That is somewhat different than a committee inviting them.
Mr Tilson: Yes, it is.
The Chair: It is a substantial difference, but it is up to the committee to decide.
Ms Poole: There are two possibilities. One is to ask the House leaders for permission to meet after question period on the 18th or 19th. The other possibility is that the clerk would notify AFFORD that the invitation has been proffered to the individual members and that they will be signifying, as individuals, their interest in attending this meeting.
The Chair: I appreciate that, but my understanding is that the committee has already dealt with your initial point.
Ms Poole: I do not recall it being dealt with, Mr Chair.
The Chair: All right. We will redo it.
Ms Poole: No, I think the comment was made that we would need House leaders' permission in order to sit. I am just saying that we could request it.
The Chair: My understanding is that we sit by motion. We are authorized to sit on Thursday by a motion of the Legislature which is agreed to by the House leaders in advance. So somebody is going to have to pass a motion on Monday afternoon so that we can sit Monday evening. That may or may not happen. So do we want to keep these people waiting until 5 o'clock Monday or 6 o'clock Monday before they finally know whether or not we are going to be here as a committee? And finally, has the committee decided -- I thought we had decided but I guess it was not clear enough -- whether or not we want to do that?
Mr Wiseman: Just a couple of points that I would like to make. First, we do not know how much relevancy these two individuals have in the debate or what they can contribute to the debate in the first place, so I would recommend that we get the researcher to research some of the articles and some of the work that they have already published, and make that available to the committee for their perusal, and then perhaps a decision as to whether their expertise in the area is relevant to what we are doing or not will warrant us making these supreme efforts.
The Chair: Any further discussion? Mr Tilson and Mrs Harrington.
Mr Tilson: Mr Chair, I would like some response because obviously when the government has the votes on this committee, we have to pretty well do as it wishes. Again, I repeat, this letter came from AFFORD. What is wrong with indicating to AFFORD that obviously, for technical reasons, this committee cannot sit on those two days, but that we would be pleased to hear one or both of these individuals when we are inviting certain groups to appear before this committee to discuss the green paper?
Ms Harrington: From my conversation with this person, it was fairly clear that these people would only be here for a very short time and that this letter is an invitation for us to hear them at this date. I think we had a consensus on this committee, or a feeling anyway, that as individuals we are invited to hear these people at this time. I think that is as far as it can go. I do not think we should really go any further with it.
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Ms Poole: I agree with Mrs Harrington both as to the availability of the witnesses and the fact that that may be as far as we can go. I would suggest, though, that it is because the letter has been addressed to the clerk of the committee that we ask our clerk to notify AFFORD that there is interest by individual members on the committee in attending such a meeting, and would they please let members know, so that we can RSVP to it, as to the final date, time and place.
I think Mr Tilson's suggestion that they be put on the list for the green paper may be problematic simply for the cost of flying them in, and this is our opportunity as members to avail ourselves of the information. I think we should really grasp it while it is with us as an opportunity. If there is a consensus by committee members who are attending this meeting that these are worthwhile witnesses that we would like to come back for the long-term consultation, there is nothing to preclude us from doing it at that time.
The Chair: Well, we continue to deal with two points without resolving one or the other. So we have to either bear down and resolve one or both, or we are going to move immediately back into clause-by-clause. We are pressed for time. Committee members have stressed to me their concern about getting done etc, etc.
The first point to resolve is whether or not committee members will make themselves available, as individual members of the committee, on Monday or Tuesday. If you wish to make yourself available on the Monday, as was suggested by Mrs Harrington, and, as was further suggested, we make this room available, then it is incumbent upon every member of the committee to tell our clerk as soon as possible so that she can inform AFFORD that we have a number of members who wish to see these international experts; this is the time, this is the place and this is the location.
What I would not like to see happen, and I have no authority over this, is that we book this room and we have these individuals come with a lot of enthusiasm about meeting a committee and only one or two of us show up. I do not think that would be fair.
So I think within the next few days it would be appropriate if committee members would advise the clerk as to what they want to do; then when we find out, say by Friday morning, how many members are available, we will pass that information on to AFFORD.
The second matter that we have to deal with is whether or not we want to call these people back as experts to consult with us during the green paper process. There have been two points of view put forward. One is that we invite the individuals as a committee. The other is that we inform AFFORD and AFFORD bring these individuals to the committee at the appropriate time.
So I want to know from the committee members which route they would rather go. Would you rather inform these individuals as a committee directly or would you prefer to go through AFFORD?
Ms M. Ward: I do not see a need to do either. I expect AFFORD knows the consultations are going to be held. I understood they are already on the list of potential participants. Since they have taken the initiative to invite these people here, if they felt there was something to be gained by having them back, they would do so and apply to appear before the committee. I do not feel that we need to take any initiative in that regard; not at this point anyway. We have not even gotten into the consultation process.
The Chair: Very good. Any other point of view?
Ms Poole: I would just support your suggestion that we notify the clerk of our intention to attend a meeting and signify which of the two days we would be available for this, and that the clerk could then transmit this information to AFFORD.
The Chair: As for the second part, the point that Mr Tilson made, we are not going to deal with that point.
Ms Poole: There is nothing to preclude us from dealing with it at a later date once we have met with these witnesses and determined whether indeed they might have some valuable insight.
The Chair: Very good. So the consensus of the committee is that by Friday morning we will have informed the clerk of the committee, on an individual basis, as to whether or not we are going to be available on the 18th or the 19th and whether or not there is enough interest to meet these two experts as has been suggested by the AFFORD group.
Moving along, did we pass 100g? I am informed that we should pass 100g as an entire section. All in favour? Carried.
Moving along to section 100h. That is the eighth one. We would ask the parliamentary assistant for an explanation to subsection 100h(1).
Ms Harrington: This section sets out what is to be contained in an order as a result of a landlord application for whole building review, or a tenant application to dispute an intended rent increase, or in an order which replaces an order issued before the bill receives royal assent.
The order shall contain the maximum rent that may be charged for each rental unit and the date the maximum rent takes effect. The order may also specify that the landlord or tenant pay moneys owed to one another as a result of the order as well as other terms and conditions.
The ordered maximum rent will be effective for 12 months for the rental unit.
The Chair: Any questions on clauses 100h(1)(a) and (b)? Any discussions? All in favour of 100h(1)(a) and (b)? Carried.
Can we please have an explanation for clauses 100h(2) (a) and (b)?
Ms Harrington: I gave you the explanation for subsections 100h(1) and 100h(2) together.
The Chair: Okay. I am sorry, I missed that. Any questions on 100h(2)(a) and (b)? All in favour of clauses 100h(2)(a) and (b)? Carried.
Ms Harrington, could we have an explanation for subsection 100h(3).
Ms Harrington: Yes, I did that one as well.
The Chair: You did that one as well.
Ms Harrington: The ordered maximum rent will be effective for 12 months for the rental unit.
Ms Poole: How does this tie in with current provisions that a landlord may only raise the rent in a rental unit once every 12-month period? What is the reason for this particular wording and what is the difference from that provision?
Ms Richardson: Perhaps I could address that. It is parallel to that provision and supports the provision that there can just be one increase in a 12-month period. It actually makes quite explicit what the period of time the ordered rent is in place for. There may indeed be cases where the ordered rent is less than guideline, and a landlord may want to take guideline rather than the order. This says it is the ordered rent that is the maximum rent, which would be the lower amount in my example.
Ms Poole: Could you perhaps describe a scenario where the landlord would be given a rent less than the guideline amount?
Ms Richardson: In the case particularly of the tenant dispute. That is exactly the kind of order where you would get less than the guideline amount because a tenant is disputing a guideline increase.
Ms Poole: I see. So you are saying that it might be a pending increase that is in dispute.
Ms Richardson: Yes. That is an example.
Ms Poole: So what would be the scenario if this provision was not in the legislation?
Ms Richardson: This actually clarifies what the operation of maximum rent and an ordered maximum rent is all about. And indeed this has certainly been the approach that rent review has always taken in these cases. It sets it out quite explicitly.
Ms Poole: So basically what you are saying is this codifies the practice.
Ms Richardson: Yes.
The Chair: All in favour of subsection 100h(3)? Carried.
All in favour of section 100h as a whole? Carried.
Section 100i.
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Ms Harrington: When an order has been delayed at least three months after the first effective date of increase, it may stipulate that the outstanding rent may be paid over a period of 12 months in equal monthly instalments. The tenant still has the option of paying the entire amount in a lump sum. The tenant may continue to pay in instalments where the order contains such a provision even if the tenancy is terminated.
For example, if an order is issued four months after the first effective date of rent increase and a tenant owes the landlord $600, the order may provide for spreading the payments over 12 months. In this case, the tenant may elect to pay $50 per month over the ensuing 12-month period.
Mr Tilson: My question to Ms Harrington is whether there is a minimum figure. In other words, you could get down to where a nominal amount would be paid each month which administratively would be foolish. Did you canvass that with your staff when this was being prepared?
Ms Harrington: I think there would logically be some sort of minimum that you would not divide by 12.
Mr Tilson: I do not know. Is that in the regulation? Or have you thought of that?
Ms Harrington: Maybe you would like to comment if there is a figure.
Ms Richardson: Finding such a figure is somewhat of a challenge. One hundred dollars may not seem a lot to some tenants but it is a lot to other tenants who cannot manage saving $100 in a lump sum. So there is no minimum amount that is actually set out in the legislation.
Mr Tilson: So conceivably they could be paying $2 a month.
Ms Richardson: Yes.
Mr Tilson: Thank you.
The Vice-Chair: Thank you. Any further comments or questions?
Is it the pleasure of the committee then that section 100i carry?
Ms Poole: Is this 100i(1) or both?
The Vice-Chair: It is 100i(1).
Ms Harrington: Subsection (1) and (2)? We did both together, actually.
The Vice-Chair: Just for clarity then, is it the pleasure of the committee (1) and (2) carry? Carried.
Mr Tilson, do you have a motion relating to section 100i(a) which would come before 100j?
Mr Tilson: No.
The Vice-Chair: Moving on to section 100j, the parliamentary assistant has a comment.
Ms Harrington: Thank you. As you may notice, we have an amendment which is really just a clarification, a little more detail instead of the one line that we had for section 100j.
The Vice-Chair: Ms Harrington moves that section 100j of the act, as set out in section 8 of the bill, be struck out and the following substituted:
"100j(1) No tenant is liable to pay any rent increase in excess of that permitted to be charged under this part.
"(2) Nothing in this part limits the relief available to a tenant or the power of the minister under subsections 95(2) and (3)."
Ms Harrington: This amendment basically just clarifies the intention to continue the ability of the tenant to make an application under section 95 of the act if excess rent has been paid, and the ability of the minister to make the appropriate order in such circumstances. Section 95 relates to tenant rebates.
The Vice-Chair: Questions, comments or amendment relating to the government amendment?
Ms Poole: Just a request for clarification, Mr Chair. Under "remedy," subsection (2), it says, "Nothing in this part limits the relief available to a tenant or the power of the minister under subsections 95(2) and (3)." Could the ministry clarify what kind of limitations there might be that would limit the relief available to a tenant? I am not quite sure of the purpose of that.
Ms Richardson: I am afraid I am at a loss to describe what the additional limits might be. Section 95 itself, subsection (2) and subsection (3), as you note, are quite lengthy sections, and they also deal with the concept of maximum rent and 1 August 1985, when the concept of maximum rent takes effect, and how to calculate the rebate amount in relation to those things. When we were reviewing the wording of Bill 4, it came to our attention that perhaps the original wording did not capture the essence of section 95, and that was the reason why we have introduced this amendment.
Ms Poole: Well, that is interesting, but I am not sure a great lightbulb has gone off in the sky for me. With all respect to legislative counsel, I know that sometimes it is necessary to put in some boiler-plate legal terms to make sure everything is in full force and effect, but I just cannot quite see a reason to put this in if there is nothing limiting the relief available to a tenant.
Ms Richardson: I really am at quite a loss to describe what some of the legal limits might have been.
Ms Poole: Might I just suggest, Mr Chair, that we give the ministry an opportunity to respond, either with the other two staff here, or if tomorrow morning they just wanted to give a brief explanation before we actually pass this section. There is something in me that rebels against passing something when I do not know what it means.
Ms Richardson: Perhaps, Ms Poole, I would ask Christina Sokulsky, our legal counsel, to address this particular issue.
Ms Poole: Thank you.
Ms Sokulsky: My name is Christina Sokulsky. I am senior solicitor, rent review section, Ministry of Housing, legal branch. I would also like to call on my colleague's assistance, legislative counsel assistance, in responding to this question. But my understanding is that this wording is meant merely to adopt the provisions in subsections 95(2) and 95(3), and I am not aware of any limitations. I mean, I cannot answer the question of what limitations there might have been. It is my understanding this language was employed in order to make it clear that the remedies or the relief and the powers of the minister in subsection 95(2) and subsection 95(3) are preserved in this part.
Ms Baldwin: I do not have anything to add to that. In terms of the wording, that is correct. I thought that Ms Poole was asking for more substantive information about what subsections 95(2) and 95(3) were about, and I thought perhaps you were in a better position than I to respond to that.
Ms Sokulsky: Oh, all right. Is that your question, Ms Poole?
Ms Poole: My actual question was, what type of limitations would there be that you would have to put in a part saying that nothing in this part limits the relief available to a tenant?
Ms Sokulsky: It is my understanding it is employment of a certain drafting style.
Ms Baldwin: Perhaps now I understand your question better. There are rights for tenants, relief available to tenants and powers granted to the minister under subsections 95(2) and 95(3), and we are just trying to ensure that under part VI-A those are retained.
Ms Poole: Okay.
The Vice-Chair: Is that perfectly clear, Ms Poole?
Ms Poole: It is clear enough that I think I will feel silly if I pursue this. It does not seem to do much harm. I am not sure it does much good, but I guess it cannot hurt to pass it then.
Ms Harrington: Just a quick comment. In the original section 100j it says, "Nothing in this part limits the right of a tenant," and in this other language we said, "limits the relief." I think the word "relief" has thrown us because it seems a bit out of context. But apparently, according to our lawyers, this second version was better than the first.
Ms Poole: I bow to the supreme wisdom of legislative counsel and all the other lawyers who have conspired on this particular amendment.
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The Vice-Chair: Thank you, Ms Poole. Is it the pleasure of the committee, then, that this amendment be carried?
Motion agreed to.
The Vice-Chair: Shall section 100j, as amended, be carried? Carried.
Section 100k. Do you wish to deal with these as subsections (1) and (2) or separately?
Ms Harrington: Together, please.
This provision continues to allow an order to separately set out and declare the maximum basic unit rent and maximum separate charges such as parking and cablevision. Other rules with respect to separate charges will continue to apply. Certain separate charges may be equalized in an order. The maximum rent may be increased or decreased according to prescribed rules when certain services are added or discontinued and the landlord and tenant agree. However, any agreement as a result of coercion is unenforceable. Finally, it is clarified that an increase in maximum rent resulting from such an agreement does not violate the 12-months-between-increases rule. This is the same as the current law.
Ms Poole: Mr Chair, to quote the former member Sam Cureatz we all loved so dearly, I find this passing strange that under the regulations for 100k we are talking about the equalization of separate charges, the same equalization which mere paragraphs ago we deplored as unworkable, unfair, unjust --
Ms Harrington: Oh, I did not say that.
Ms Poole: -- and all those terrible things.
Mr Tilson: Who said that?
Ms Poole: I think they did.
Ms Harrington: Not quite.
Ms Poole: Now we are going to bring in equalization of separate charges under section 100k, under the regulations. Tsk, tsk.
Ms Harrington: Maybe we should explain that word "equalization" here.
Ms Poole: Oh, it has got a new, improved meaning?
Interjections.
Mr Mahoney: Acrimonious? Where did you learn that?
The Vice-Chair: Order.
Mr Mahoney: Did you swallow a dictionary or what?
Ms Richardson: Perhaps I could address this particular subsection. In the Residential Rent Regulation Act there has been a provision that separate charges -- and the most commonly known separate charge is parking -- could be equalized separately. Whether you were equalizing the rents in the building, it did not matter; you could equalize the charges for parking so that all parking spaces would have, for example, a $50 charge, rather than variations in that charge. The immediate equalization of separate charges usually results in a very, very small variation from the previous rent, and it is a calculation that does not depend on a number of different factors. A parking spot is a parking spot -- it might be indoors or it might be outdoors -- and it is the kind of finding that can be made quite easily in a rent review order.
Ms Poole: Well, as the former member Sam Cureatz said many times, this is passing strange, Mr Chair. I think what we have had here is that --
The Vice-Chair: So was Sam.
Ms Poole: -- we will not equalize rents for tenants, but we will equalize rents for parking spaces, and the sole difference seems to be based on the amount of rent. So maybe what we could do is take a new look at section 100g under these new terms that have just been described to us and put a cap on so it would only equalize small rent increases. Would that be suitable for the ministry if that is the sole criterion?
Ms Harrington: I think what this section is doing is preserving what had been in the previous one.
Ms Poole: That was my intention too, with my equalization amendment, to preserve what was in the RRRA. So we had common intent.
Ms Harrington: I see. We have already argued the previous consideration so I will leave that be.
Ms Poole: Okay, Mr Chair. I guess we do not want to be consistent. So if we do not care about being consistent, I guess we can go ahead and pass equalization in section 100k where we resisted it mightily in 100g.
The Vice-Chair: Thank you, Ms Poole. Are there further comments, questions or amendments? Seeing none, is it the pleasure of the committee that section 100k pass? Carried.
Moving on to section 100/l. Parliamentary assistant?
Ms Harrington: This provision preserves sections 98 and 99 of the legislation. Section 98 pertains to the subsequent rental of a unit which was rented at any time on or after 29 July 1975 and was not rented for a period of time. In this case, the maximum rent is the amount the landlord would have been able to charge had the unit been rented and proper notice of rent increase been issued by the landlord. This would be based on the annual guideline and any ordered amount.
Section 99 pertains to units rented for the first time since 29 July 1975. In this case, the rent charged by the landlord when it is first rented is the maximum rent except as otherwise provided in the regulations. This is the same as in the current law.
Ms Poole: Am I to take it from 100/l this means that if a landlord had a unit vacant for an extended period of time, under this provision the landlord would be allowed to charge the current maximum rent, which would include any guideline increases which accumulated in the meantime?
Ms Harrington: That is the intent, I believe.
Ms Poole: I have a little bit of difficulty with this simply because one of the concerns I have always had, which I believe was also a concern of your minister when he was in opposition, was that for various reasons certain landlords leave units vacant for extended periods of time. This was when we were in the middle of a very serious housing crisis. In fact, there was talk at one stage of having a vacant apartment tax to penalize a landlord if he left his or her unit vacant. There were some allegations that a landlord might do this in order to try to vacate the building and then change the use and this type of thing, that it was an effort to circumvent the Rental Housing Protection Act.
Anyway, I would not like to offer any encouragement to landlords who might be prone to leave their apartments vacant for extended periods of time, to say: "Well, it is okay. We will allow you, when you eventually do rent it, to have accumulated the guidelines."
Ms Harrington: Could I ask staff if they feel that would be the case, that this would encourage landlords to vacate units?
Ms Richardson: I would point out that it also works the other way. People who have not been able to rent their unit are not limited then in the amount of rent that can be charged. And there may be a variety of reasons why a rental unit is indeed left vacant.
This kind of provision means that a separate application does not have to be made in order to establish a new rent when that unit comes back into the market as well.
Ms Poole: So you would be referring to the type of instance where there might be a unit, say, in a duplex, where for some reason there is no rent charged for a year and a half because the landlord's mother-in-law is living in there.
Ms Richardson: Exactly.
Ms Poole: You are trying to make things fairer for that landlord so that he or she can, at the end of the day, not lose money by the fact that they were not charging rent for that period.
Ms Richardson: Another factor of course is when you compare this particular section to the previous legislation. Under the Residential Tenancies Act, if a unit had been vacant for 12 months, it virtually became unregulated. This actually limits the amount of rent that can be charged when it comes back into the market. It can only be the ensuing guidelines or maximum rent concept, so this is a protection from that previous situation.
Ms Poole: So you see it not as an encouragement to leave a rental unit vacant but in fact a tightening up of previous legislation?
Ms Richardson: Yes. That was the previous reason why it was in the RRRA.
Ms Poole: That seems reasonable.
Ms Richardson: We do like to be fair to landlords, strange as that may seem.
Ms Poole: Once in a while. I am sure they will be quite heartened by that comment.
The Chair: Any further comments? All in favour of section 100/l? Carried.
Ms Harrington, an explanation for section 100m, please.
Ms Harrington: This section clarifies that the prohibition against collecting additional charges, most often referred to as "key money," continues to apply to a landlord, a person collecting on behalf of the landlord, a tenant or person acting on behalf of a tenant. This is the same as in the current law.
Ms Poole: This too is passing strange, Mr Chair, because in their previous reincarnation as an opposition party, the NDP said time and time again that they felt that the provisions regarding key money under the RRRA were totally inadequate and did not deal with the problem. And now we have Ms Harrington on behalf of the government today saying, well, maybe they were wrong in all those accusations; it was working perfectly well, and we would like to reinstate it in Bill 4. Might I ask the ministry if they took a look at the key money issue when they were drafting this particular section and whether they took a look at whether they could strengthen it and make sure that it was more enforceable and was actually a deterrent to either landlords or sometimes other tenants from charging key money?
Ms Harrington: I would just comment first. A lot of these sections, I believe, that we are going to be doing now -- instead of having to refer back to the RRRA, we have taken the same sections just to make it a little bit easier. It is not that we feel these are the answers in the long run. Hopefully what the NDP said last year still applies. We did not change everything that we could or wanted to. That is coming.
To answer your direct question as to whether the ministry has looked at key money, I will ask Dana for clarification.
Ms Richardson: Obviously, there have been a number of prosecutions for key money offences. In the green paper there are certain improvements that are being suggested as even the preferred approaches for the government to strengthen some of those sections having to do with key money.
But there is a larger enforcement issue, and a number of different kinds of enforcement issues, that are being discussed in the green paper that would be tied in with improving this particular section.
Ms Poole: Hope in the long term.
That is all, Mr Chair.
The Chair: All in favour of section 100m? Carried.
I just want to inform the committee that some of the other committees of the Legislature have adjourned to watch the federal budget. I was wondering if there was any interest for the standing committee on general government to do the same. Ms Poole.
Ms M. Ward: Cry now or cry later.
Ms Poole: In my opinion, it is trading one form of masochism for another, but I would be quite amenable to that.
The Chair: Any other opinions? I would like to see it.
Mr Mahoney: You have the gavel.
The committee adjourned at 1635.