A $150,000 Cash-for-Keys Settlement: What Went Wrong

Introduction & Expert Credentials

Hey everybody, welcome to another episode of CRESI’s Ontario Landlord Series podcast. Today we’re joined by our good friend and colleague, Rob Di Lisi from Stonegate Legal Services, a paralegal who understands and only deals with landlord and tenant issues. Today we’re going to have a conversation to make sure you guys out there understand some of the unfortunate mistakes and mishaps that have happened in our industry — things landlords have gotten wrong in different ways.

Hopefully we’re not making similar mistakes again and again. We’re always here to educate and inform you. But please remember, this is not legal advice — this is a general conversation Rob and I are having to make sure you understand and see that you’re maybe not the only one who’s thought something like this,

but also that you need to understand what the ramifications are, what carries down, and to always surround yourself with proper guidance and great advice — not just from your sister, who may not be a landlord. Anyway, welcome to the show again, Rob. How are you today? Good, thanks for having me on. Really excited to be here — shoot me your questions.

Go ahead.

Client Case Study: The “Nice” Landlord Problem

I’m going to bring up something I know personally, and we’ll chat about our situation here. It’s not that this client made one mistake — she really just wasn’t sure what she was doing, and she was trying to be a good landlord, a good housing provider, and help her tenants out without wanting to make them move. I’ll break it down a bit, and then we can talk about what she maybe should have done. The first answer is always: talk to Rob right away. But here we go. A lady bought an investment property over a decade ago and rented it out from the very beginning, with the intention that maybe one day she’d move back into it, since it’s in the city, closer to amenities and hospitals, as she’s getting later in her years.

Her nephew actually bought the other half of the house — it’s semi-detached — so the plan was that she’d eventually be back closer to him. She has a tenant who’s been in there 10 years, and she very rarely increased the rent because she was trying to be a nice landlord. She did raise it once during those 10 years, for a bigger amount that they agreed to, and they signed a new lease at that new amount because it was a couple hundred dollars more, and they’d agreed to it. When she wanted to come back into the city, the minimal rent she was getting for the place wouldn’t let her buy something else — she either had to move back into this unit, or they’d have had to pay more so she could buy elsewhere. So when she was talking to them, she slipped up and said something like, “you can stay if you pay me more money.”

She really does want to move back in and it’s going to be in her best interest to do so, especially with her nephew there. Now she’s at odds with this tenant, there’s hearsay, and she wants to know what she has to do. If she came to you in this situation, how would you respond?

Rob’s Legal Analysis: Critical Mistakes Breakdown

Let’s cover a few things first — I took some notes while you were talking. This is something we hear every day from landlords. Number one: you said they rarely increased the rent.

That’s a big mistake. The landlord should always be increasing the rent every year, because it’s use it or lose it. If you don’t increase it, and years go by, when that tenant eventually needs to move on somewhere else, they’re going to be looking at paying market-value rent, which will be so much more than what they’re used to paying. So that’s number one. Number two: there should never be a new lease — a lease continues month to month automatically. What you described sounded like an illegal rent increase, since you should only be raising it by the board’s guideline.

Now, on the actual problem she had — the minute you rent out the property, you need to understand that the RTA kicks in, the Residential Tenancies Act. That means she has to give proper notice. Text messages, emails, WhatsApp messages — these are not considered legal notices. She must give the N-12 in this case, which is for personal use of the property — a minimum 60 days’ notice, one month’s rent compensation, and she’d have to occupy the property for one year.

Here’s the dilemma a lot of landlords don’t realize: when you serve an N-12, you’re serving a legal notice, meaning you cannot retract it. More importantly, on the second page, fourth paragraph of the N-12, it tells the tenant that if they don’t agree with the notice, they have the right to remain in the property until there’s an adjudication — meaning the landlord has to file with the Landlord and Tenant Board for a hearing. To get to a hearing on an N-12, roughly speaking, you’re looking at about six to eight months just to get to the board. If your matter is heard, you’re then looking at about 30 to 60 days to get the order.

Depending where you are in Ontario, it could be three to eight weeks for the sheriff to come and evict. So you’re looking at about a year just to get the tenant out. Then the landlord has to move in for one year, which means for the next two years they can’t re-rent or sell that property.

So it’s very important — like you said at the beginning — to get legal advice before doing anything, and not rely on your sister, cousin, or aunt who’s probably never done this before.

Why Landlords Avoid Legal Advice (Big Mistake!)

Sadly, a lot of us turn to people we’re comfortable with to talk about what’s going on in our world. They may have advice that feels good to them, but it might not be proper advice, or the only option available. That’s just what we hear, and then we go, “oh, that’s what I need to do.”

Again, we’re always trying to make sure people understand all their options when they’re going through something. Can I comment on something, Kevin, if you don’t mind? I think the problem with a lot of people is that they’re afraid to talk to legal reps because a lot of legal reps charge for consultations. A lot of people would rather try to figure it out themselves than talk to someone who’ll give them proper information. I’m not trying to make a plug here, but in our office, we don’t charge

for an initial discovery call. We don’t tell you what to do, we don’t give you advice, but we give you at least the options that are available, so you know what can be done.

Because if you don’t talk to someone and get stuck in a situation like the one you just described, it can cost the landlord thousands of dollars. There’s an expression that people will jump over a dollar to pick up a nickel.

Free vs. Paid Legal Consultation Reality Check

You’re right about that — people are losing lots of money right now, normally when they’re looking for your type of advice. I have no problem with you plugging Stonegate and what you guys do, because the free consultations are probably one of the reasons our relationship started off so well, about seven years ago now — we wanted to know exactly what was going on, and you guys were always there to make sure the guidance was provided. If you’re losing thousands of dollars because a tenant isn’t paying rent, and now you have to go spend what you think is going to be a ton more money just to figure out what’s happening with a consultation, you become hesitant to do it.

You’re not wanting to throw more money after bad money, but this is actually good money — it’s making sure you’re getting proper advice. Meanwhile, tenants who aren’t paying their rent can get free advice and free support. Here we are as landlords needing to pay for that same advice and counsel to counteract what they’re being helped with.

Landlords, make sure you’re getting the advice. We’ll make sure the link for Stonegate is somewhere in this episode. And if you can’t get to Stonegate, you can get to us and we’ll connect you. As Rob said the other day, when we were chatting with one of our clients — he just charges triple time and overtime to talk to all of us.

We’ll make sure everybody out there is looked after. You were telling me about something off-air. We’ve talked about cash for keys a few different times, where a settlement gets a tenant to move on so it gives the landlord more flexibility to do whatever they want to do after that tenant has left.

You mentioned something crazy involving a realtor in a settlement — an amount that sounded astronomical.

THE $150K SETTLEMENT STORY (You Won’t Believe This)

I can expand on that. It’s amazing, because we were just talking about needing proper advice and using the right people. It’s not just about getting legal advice.

It’s also about finding a realtor who understands the RTA at least at a minimal level. The situation was: a realtor listed a multi-unit — I’m not sure if it was three, four, or six units, I don’t remember the exact details. It was an estate sale, and the executor was not a family member. They accepted an offer. However, the realtor guaranteed vacant possession.

Just so you know, in your agreement of purchase and sale, clause number two, you cannot guarantee vacant possession, because you don’t know whether the tenant or tenants are going to move out. So the realtor put herself in a precarious position, because she couldn’t guarantee vacant possession. Luckily, only one tenant was left in the property, but that tenant asked for cash for keys — and the amount was $150,000.

The realtor and the executor were in a position where they had no other offers. If they didn’t accept, they’d be in breach of contract, and the executor — who wasn’t a family member — was at risk of being sued personally. So they had no choice but to give this tenant $150,000.

And the astonishing part, Kevin, is that the tenant was only paying $800 a month. That’s not the end of the story, either. Remember, we were talking about hiring the right people — afterward, that realtor did get sued, because she’d breached the contract.

They relied on the real estate agent for her knowledge and information on how to proceed with the contract. So the estate started suing the real estate agent. I don’t know the exact details of what happened, but the important thing for anyone listening to this is that you need to get the proper people doing the proper jobs.

Get information and advice before listing a tenanted property, because not all realtors know the ins and outs of what’s going on.

Realtor Liability & Professional Responsibility

Yeah, no — the landlord and tenant world is so big, and it causes so much liability in our world as realtors. A lot of realtors start off doing leases and helping landlords or tenants find places because it’s easier business, lower down the food chain of what’s easier to pick up.

A lot of people pass that business down. There are a lot of realtors getting into trouble because they don’t understand what’s going on with what they’re doing, and they put themselves in these situations. Similar to what you mentioned, that was a sale, but they still didn’t understand what was going on with the RTA. I know of instances where a realtor was sued because they didn’t do any due diligence at all when placing a tenant in a landlord’s property.

We’ve talked before about buying and selling tenanted properties. We’ve talked about screening proper tenants and the due diligence we need to do. I’m sure we’ll get into more of this in other episodes.

But this is the most important thing: screening a tenant. Because once a tenant is in the property, they’re in the property, and there’s due diligence needed on all levels — as a realtor, as the landlord, if you’re not hiring somebody, make sure you’re really going through everything.

I spoke to one of our tenants the other day, and they mentioned it was so hard to get accepted for this place — they had to do this and this, and all their references got called. I said, yeah, we need to make sure who you are.

That landlord even doubled up on our due diligence and called as well. So that’s why they were asking again who this person was — I said, well, that’s actually the landlord, and that’s what they were doing.

They wanted to make sure everything checked out, because sometimes you might get an answer from one person and a different answer from another, and then questions arise about what’s going on and who’s who, because we have to make sure we’re placing good people in our units.

Tenant Screening Tools & Due Diligence

It’s good that more awareness is coming out, because landlords and tenants both know the system better now. That’s a great tool for landlords, and it keeps tenants accountable. We haven’t dove into Open Room, Single Key, or Front Lobby yet — those are definite tools, definite websites that are great for landlords to have. We’ll do something about that for sure.

I actually have a rep from Front Lobby — we use Front Lobby over Single Key, but six or half a dozen, probably, as to what they’re going to do; they’re both helpful. Here’s one for you, since a question was brought up the other day about

broken windows and things going on with a property, because one continues to happen. Some say it’s just the neighbourhood and not anyone’s constant responsibility if it’s shattered — obviously it’s dangerous — but what about if it’s just cracked, or a screen is torn? How does that all break down?

Property Maintenance Legal Requirements

I always tell people, it only becomes a problem when it is a problem. Under Section 20 of the Residential Tenancies Act, the landlord needs to upkeep and repair the property. Window screens, which are very inexpensive and easy to repair, and cracked windows, you should be fixing. The thing is, if this is happening every two or three months, or constantly, then obviously there’s another problem — it could be an outside factor.

If it’s in a rough area, maybe someone’s throwing rocks or whatever — but then the question is, why are they throwing rocks? Maybe there’s drug activity going on and someone’s trying to signal a person inside — I had that problem in one of my own properties. If it keeps occurring, the landlord still needs to fix it.

But then the landlord can file something against the tenant called an N5, explaining to the board that they’ve kept fixing the window and they believe it’s the tenant’s problem, that the tenant is the reason it keeps happening. Unfortunately, the board is the one that makes the final decision on whether it’s the tenant’s responsibility or the landlord’s.

Unfortunately, the landlord still has to fix that window first and then go to the board, because you have to show that you fixed it and that there was a cost involved, and that you’re trying to pass that cost on to the tenant. Just as a side note — even if you get a judgment against the tenant, will you be able to collect that money? That’s where it gets a little tricky, because even if you win, are you actually going to be able to collect? Some tenants are living hand to mouth.

So how are you going to be able to collect it, and if you’re chasing it and spending money to do so — you should just be maintaining the property.

Key Takeaways & Professional Resources

Yeah, definitely. I think this has been a great conversation, as always, with some good information. At the end of the day, the moral is: make sure you understand your options, your obligations, your responsibilities, and your rights before acting on anything. If you need any help, as always, reach out to us.

Reach out to Rob at Stonegate Legal Services for any of your tenant and landlord issues in the province of Ontario, and they’ll help you out. Unless you have anything else to add, Rob, let’s wrap this one up. We covered a lot today, and sparked some other subjects we could talk about in another podcast.

Yeah, it’ll definitely be about tools again, folks — stay tuned for that one. There’s a whole bunch of other episodes where we’ve covered buying or selling tenanted properties. If you have any questions or anything you’d like us to discuss, feel free to reach out — comment below, email us, or if you really want to get old school, call us on that magical thing called the phone. But anyways —

as always, thanks so much for listening. I hope you enjoyed it.

Please continue to like, subscribe, and share with other Ontario landlords, so we can keep getting the proper information and guidance out there. Rob, thanks so much for doing this — we’ll talk to you all again soon. Bye for now.

Bye. Please remember, while we are professionals, this podcast is for informational and entertainment purposes only. The advice shared may not apply to your unique situation. Always seek personalized advice from a qualified professional before making any investment decision.

Hey everybody, thanks so much for joining us this week. I hope you enjoyed the episode. If you’re finding it informative and useful, make sure to like, subscribe, and share with a friend so that we can keep getting the information out there to Ontario landlords. Keep on joining us — we’ll see you next time.