Are Residential Tenancy Agreements Binding Contracts Before the Tenancies Commence? A Case Comment on Adam v HomeEd

By: Ryan Magh and Sarah Eadie

Tenancies of residential premises are governed by the provisions of the Residential Tenancies Act[1] (“RTA”). In Alberta, landlords and tenants often assume that those provisions do not fully govern their relationship until the tenant takes possession of the rental property—we routinely see landlords refuse to allow tenants to move in on the basis of alleged breaches of conditions precedent (such as non-payment of the full first month’s rent). In Adam v HomeEd [Adam], [2] though, the Residential Tenancy Dispute Resolution Service [the “RTDRS”] held that the provisions of the RTA begin to bind the parties upon the formation of the residential tenancy agreement, and not just when the tenant takes possession. Therefore, a landlord is not entitled to take enforcement measures into their own hands and refuse to give possession to a tenant who hasn’t met the landlord’s stated pre-conditions for tenancy; instead, they must apply to a court or the RTDRS for an order for possession.

The RTDRS also took the rare step of issuing a written decision, in the hope “that it provides clarity … in future similar circumstances.” While RTDRS decisions are not usually published anywhere, images of the pages of the written decision are available here.

The facts as found in Adam were as follows:

  • On June 6, 2018, Mr. Adam filled out an application to rent a residential apartment, and paid a $25 application fee which would form part of his damage deposit if he was approved.
  • Mr. Adam’s application was approved, and on June 13 he paid a further $475 toward the damage deposit of $500.
  • Also on June 13, 2018, the parties signed a written tenancy agreement.
  • While the written tenancy agreement stated that the tenancy would begin on July 1, 2018, there was an oral agreement between the parties that the tenancy would begin on June 15, 2018.
  • On June 15, 2018, the tenant went to the rental premises, but was not allowed to move in. The landlord provided the following four reasons for refusing to allow possession:
    • Failure to show proof that utilities had been transferred to the tenant’s name;
    • Failure to show proof that tenant’s insurance had been secured;
    • Failure to pay July’s rent; and
    • Failure to pay June’s pro-rated rent of $345.
  • The tenant told the landlord that if he could not get possession on June 15, as they had agreed, then he would not be moving in at all.
  • On June 20, 2018, the landlord accepted a third party payment for July’s rent on Mr. Adam’s behalf.
  • The tenant then brought an application seeking the return of his damage deposit and all the rent he had paid; the landlord brought a counter-application seeking damages from the tenant for rent for the rest of the summer and into the fall of 2018, alleging that they could not re-rent the unit and had therefore lost rental income.

Issue

The main issue before the tenancy dispute officer [“TDO”] was: what happens when a tenancy agreement falls apart on the day the tenant is supposed to move in? To answer that, the TDO had to consider the following questions:

  1. Can a landlord refuse possession if a tenant has not met all of the landlord’s pre-possession conditions?
  2. If a landlord cannot refuse possession, what are the landlord and tenant’s ongoing rights and obligations and a landlord believes a tenant has not met all of the landlord’s pre-possession conditions?

Decision

In his decision, the TDO noted that the landlord said they did not give possession to the tenant because the tenant had not met their specified preconditions to possession. He found that the landlord did not have the right to withhold possession on that basis, as the correct procedure for a landlord in that situation would be to apply to a court or the RTDRS for a remedy in accordance with section 26 of the RTA (the “Landlord’s remedies” section). Landlords do not, he held, have the right to “take enforcement measures into their own hands and withhold the keys to the rental premises until the Tenant ha[s] complied with the tenancy agreement to their satisfaction.” In fact “whether the Tenant committed any sort of breach at all is not relevant” once a tenancy agreement is in place (emphasis added). Essentially, once a tenancy agreement has been formed, there is no ending that agreement except by consent or court order.

Further, the TDO noted that the facts did not support three of the landlord’s four allegations of breach of conditions precedent to possession:

  • The tenant had provided clear proof that he had transferred utilities to his name;
  • As it was not yet July, failure to pay July’s rent could not be a substantial breach;
  • The tenant had given uncontroverted evidence that he had June’s pro-rated rent of $345 with him on June 15, but did not give it to the landlord because the landlord refused him possession.

The only possibly breach of the landlord’s pre-conditions supported by the facts was failure to show proof that tenant’s insurance had been secured. The TDO found that this constituted an allegation of a breach of a covenant set out in the tenancy agreement—an allegation, in effect, of a substantial breach of a tenancy agreement which might be used as the basis for an eviction application. He noted, though, that despite the wording of the tenancy agreement itself, failure to secure tenant’s insurance was “probably not” a substantial breach as defined in section 1 of the RTA, and might not even have been an enforceable contractual term.

Since the landlord could not refuse possession to the tenant, he found that the landlord had breached section 16(a) of the RTA, which sets out one of the landlord’s covenants in a residential tenancy: “that the premises will be available for occupation by the tenant at the beginning of the tenancy.”[3] At that point, as set out at section 38 of the RTA, the tenant had the right to repudiate the rental agreement and treat the tenancy as at an end.[4] Mr. Adam had repudiated the agreement. In this case, then, the landlord had to return the tenant’s security deposit. Further, they had no right to collect rent. The landlord was ordered to return the security deposit and the rent paid on the tenant’s behalf for July.

Commentary

Adam clarifies that the provisions of the RTA—including the obligation for landlords to seek court orders before denying entry to rental premises to their tenants—begin to apply as soon a residential tenancy agreement is formed. The decision accords with the common law of contracts in that it finds that a residential tenancy agreement is formed (and enforceable) once all the necessary elements of a contract are present: offer, acceptance, and consideration.

The decision is important because, in our experience, landlords often refuse to give possession to tenants in Mr. Adam’s situation (and also often withhold their damage deposits), and the consequences can be disastrous. Consider, for example:

  • Tenants who get money for a security deposit from Income Supports are not usually eligible for another security deposit for at least three years.
  • Tenants who have already ended their previous tenancies before their new tenancies fall through might not have anywhere to store their belongings and might lose everything they own.
  • Stable housing is often a requirement for people working to regain custody of their children from Child and Family Services, or who are on parole.

Of course, RTDRS decisions don’t bind any decision-makers (not even other TDOs), but Adam could be persuasive if landlords are made aware of it.

One final consideration is that section 38 of the RTA expressly allows tenants whose landlords have failed to make the premises available to them at the beginning of their tenancies to bring claims for resulting general and special damages. Although Mr. Adam did not bring such a claim, other tenants finding themselves in this situation in the future might want to do so.


[1] Residential Tenancies Act, SA 2004, C R-17.1, as amended [“RTA”].

[2] Adam v The City of Edmonton Non-Profit Housing Corporation, RTDRS Case No. E-18-61084, November 14, 2018, unreported [Adam].

[3] RTA, section 16(a).

[4] Section 38: If at the beginning of the tenancy the landlord is in breach of the landlord’s covenant under s. 16(a) or (c), the tenant may do one or more of the following:

  • repudiate the residential tenancy agreement or apply to the Court of Queen’s Bench for specific performance of the covenant;
  • recover general damages resulting from the breach;
  • recover special damages resulting from the breach if the landlord could reasonably have foreseen that those damages would have a consequence of the breach.
This entry was posted in Agency News, Civil Litigation, Housing Law, Poverty law, Public Policy, Uncategorized and tagged , , , , , , , , , . Bookmark the permalink.

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