Are Evictions the Norm in Covid?
On March 17th 2020, amidst the chaotic unfolding of the global COVID19 crisis, one statement was made that could not have been more misunderstood if you tried.
“And if you can’t pay rent, and you’re just in absolute crisis, then you don’t have to pay rent.” stated Doug Ford, the Premier of Ontario. This was on the heels of declaring that the Landlord Tenant Board cannot issue any eviction notices during the state of emergency and that all municipal Sheriffs must cease any eviction notices at that time. Of course, the other part of his announcement fell on deaf ears. “I heard there was a petition going around saying, just don’t pay rent! That’s wrong. That’s hurting people across the board. We’re standing up for tenants here so please don’t take advantage of it,” he stated, emphasizing that anyone who still has a job is expected to pay. Unfortunately, that was too little too late. The horse had left the barn and was running away full steam. So where do we go from here?
I would like to clarify what is really going on here, and perhaps shed some light on a broken system that has continued to deeply deteriorate over the last 30 years. For those of you that are old enough, you will remember the “RAE days” and how then Premier Bob Rae pretty much destroyed the rental housing industry. But perhaps if Bob Rae had not implemented the rules that he did, we would not have the number of condominiums we have in Ontario. However, if we fast forward to the past decade, being a Landlord has become increasingly difficult and complicated to navigate.
The Provincial government has a housing crisis on their hands and with no readily available solutions they have, in essence, made the private sector responsible for providing rental housing. At the same
time, they have made it almost impossible to evict a tenant, even during normal, non-pandemic times. Landlords are faced with more obstacles than ever before and the government continues to charge Landlords more money for the broken process they have in place. Here are some numbers for you. Prior to COVID19, there were over 54,000 cases before the LTB for nonpayment of rent in the GTA alone and 76,000 in total for the province. How is this even possible to overcome? More importantly, when did it become the responsibility of a private Landlord to pay for the roof over someone’s head?
The answer is SIMPLE! Landlords are rich! Landlords are greedy! This is the current battle cry of tenants everywhere. Yes, that is right. Every Landlord takes the rent and fuels up their Ferrari or evens out the lumps in their bed with the cold, hard cash. At least, that is what most tenants think. Since this pandemic has started, the negative characterization of the Landlord is downright unbelievable. We have government leaders taking shots at Landlords and threatening them to do the right thing. Perhaps they could be more specific as to exactly what they mean by “the right thing”. Is it to just forget about rent all together? I am not sure if these elected officials are aware of the debt that sits on the rental industry, but approximately 95% of all rental properties have debt. For smaller investors, who perhaps bought into the Toronto condominium market in the last several years, they will have negative cash flow and getting no rent paid at all could result in financial ruin in a very short period of time. It is understandable that the thought of an eviction during this pandemic is not even up for discussion, but when leaders start carelessly throwing around statements and talking points that could have a massive impact on the overall economy, then perhaps they need to know what they are really speaking about.
There are plenty of tenants that are capable of paying rent, but their attitude seems to be that since they cannot be evicted, they suddenly do not OWE it. I had a conversation the other day with a physician who actually claimed they were not going to pay because they did not have to pay. I inquired whether they could afford to pay their rent, and they said, of course, they could. So, I decided to press the issue and asked again why they would not pay their rent. Their answer was, “Why should we, no one else has to.” I was shocked, and when I mentioned that no matter what they will still owe the rent in the end, they said ”Well ,we will pay it when we have to.”
That, right there, is the problem and it is a bigger one than it appears at first glance. Tenants do not understand what the government has said, and the government has done an inadequate job in clarifying to the tenants the potential outcomes of these thoughts and actions. There are several ways that this can play out and the Government seriously needs to consider the potential consequences.
Let’s start with a first scenario. The tenant who can pay, does not. After all, that greedy landlord should put a roof over their head for free, right? Multiple months go by. The owner can no longer afford to pay the mortgage and they are not allowed a mortgage deferral any longer, so the lender decides to foreclose on the property. The property goes on the market under power of sale and is sold. However, the new owner purchased it for their personal use, not as a rental property, so the tenant will HAVE to move out no matter what.
Another scenario: The tenant decides not to pay rent for months and the Landlord is able to arrange sufficient financing so that they do not lose their property. The Landlord is a prudent landlord and delivers timely, proper notices to the tenant each month indicating nonpayment of rent. When the Landlord Tenant Board re-opens, the Landlord WILL get to evict the tenant for nonpayment of rent. Of course, there will be some tenants thinking that they got free rent, even though they will be evicted. WRONG! The Landlord now has a legal judgement against the tenant and will be able to pursue the tenant for the lost rent. The landlord can put the tenant in collections and negatively impact their credit rating. In addition, the previous Landlord in the first scenario who lost their property in foreclosure can still go after the tenant for nonpayment of rent.
For those tenants who have experienced financial stress, the government needs to do something to help offset the debt that will accumulate from renters not paying but let me be perfectly clear. Rent is NOT
forgiven. No matter what, unless the government decides to compensate the Landlords directly for your nonpayment of rent, you still owe the money. FULL STOP. For the tenants that want to game the system and take advantage of it even when you CAN afford your rent, you should be ashamed. You will end up paying it in the end, one way or another.
Here’s the one thing that I think most tenants forget. If there were NO “greedy landlords”, be it low income housing, REITS, or small “mom and pop” investors offering rental accommodations, renters would have NO PLACE TO LIVE! Of course, the argument can be made that if there were no tenants, (everyone owns their home, which we know is neither feasible nor desirable for a large majority of the population), Landlords would not have anyone to rent the property to in the first place. However, in this version of the old chicken and egg argument, who came first? Simple, it is the Landlord and without them, the government will be looking at millions of people with no place to live. What then?
I believe it is especially important to address this ongoing situation and the inactivity on this issue from our government during this pandemic. We all need to do our part, stay at home when possible, socially distance and do our best to get through this difficult time. This is no longer just a hot topic, but this is a LIFE TOPIC! Shelter is a necessity, and the current disrespect the government is showing towards Landlords is unacceptable. If they are not careful with their words and actions, there may very well be significantly fewer landlords (translation: fewer places to rent) by the time this crisis is over. Then what will they do?
Todd C. Slater is a Real Estate expert, President of the Simple Investor and the Simple Landlord. He is host of Canada’s number 1 Real Estate Talk show, Simply Real Estate featured on Newstalk 1010.