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RTA - 'Real Substance of Transaction' [s.202(1)]. Miller Estate v. Arguelles ['landlord' definition can be limited by RTA s.48]
In Miller Estate v. Arguelles (Ont CA, 2026) the Ontario Court of Appeal allowed a tenant's RTA appeal, this respecting s.48 ['Notice, landlord personally, etc., requires unit' (personal possession)] and s.71.1 ['Application based on certain notice' (supporting affidavit)] issues.
The court usefully points out that the meaning of 'landlord' [under RTA s.2(1)] can be varied by other RTA provisions (here s.48 'personal possession'), and that the s.202(1) 'real substance' provision should not be used as a convenience to override 'formal' difficulties:[29] The respondent relies on the broad definition of “landlord” under s. 2 of the RTA to argue that Ms. Miller’s Estate and her heirs can be landlords. The definition of “landlord” under s. 2 of the RTA is not restricted to individuals, and includes:(a) the owner of a rental unit or any other person who permits occupancy of a rental unit, other than a tenant who occupies a rental unit in a residential complex and who permits another person to also occupy the unit or any part of the unit,
(b) the heirs, assigns, personal representatives and successors in title of a person referred to in clause (a), and
(c) a person, other than a tenant occupying a rental unit in a residential complex, who is entitled to possession of the residential complex and who attempts to enforce any of the rights of a landlord under a tenancy agreement or this Act, including the right to collect rent; “person”, or any expression referring to a person, means an individual, sole proprietorship, partnership, limited partnership, trust or body corporate, or an individual in his or her capacity as a trustee, executor, administrator or other legal representative. [30] The difficulty with the respondent’s position is that it fails to recognize the fact that it is not all landlords who may invoke s. 48(1) to terminate a tenancy for landlord’s own use, but only landlords who meet the statutory criteria under ss. 48(1) and (5). In contrast to other sections of the RTA which use a broad definition of landlord, the statutory criteria under ss. 48(1) and (5) narrowly define a landlord as an individual: Hefzi v. Louw, 2023 BCSC 994, at para. 23;[3] Schuld v. Li, 2025 BCSC 681, at paras. 28-31. While an estate may be a landlord for other purposes under the RTA, such as to collect rent or effect repairs, an estate does not meet the statutory criteria set out for landlord’s own use under ss. 48(1) and (5) of the RTA because it is not an individual, nor can it have a spouse, child or parent.
[31] I acknowledge that the Board is required to “ascertain the real substance of all transactions and activities”, and in doing so can “disregard the outward form of a transaction or the separate corporate existence of participants”: RTA, s. 202(1)(a). In Slapsys (c.o.b. 1406393 Ontario Inc.) v. Abrams, 2010 ONCA 676, 268 O.A.C. 395, for example, this court held that s. 202(1)(a) permitted the Board to pierce the corporate veil to terminate a tenancy for the personal use of the sole shareholder of the corporate owner of rental premises in that case.
[32] However, the Board’s power under s. 202(1)(a) has no application in the present case. A finding that the estate does not meet the requirement in s. 48 that a landlord must be an individual is not merely a matter of form, nor does it obfuscate the “real substance” of the transaction. In Slapsys, the sole shareholder of a corporation that owned the residential unit was an identifiable individual who had performed the duties and responsibilities of a landlord for many years. The shareholder, though technically a separate legal entity from the corporation that owned the unit, was clearly a landlord for the purposes of s. 48(1) in substance. In the present case, the estate has no identified personal representative or trustee. As a result, there is no individual that can be deemed a landlord to permit occupancy for that landlord’s own use. I will return below to the other impediments to landlord’s own use through an estate.
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[46] I accept that the Board erred by amending the eviction application to include the details of the March 2022 N12 notice that had not been included in the application at the time of filing. The Board erred by treating the absence of the details of the March 2022 N12 notice as a mere procedural defect when it was a substantive deficiency that could not be cured by amendment. The Board’s decision to amend the eviction application undermined the remedial, tenant-focused purpose of the RTA that informs the objective of s. 71.1.
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[54] These provisions are mandatory. There are no provisions under the RTA or SPPA that give the Board any discretion to accept an application for filing or to make an order terminating a tenancy and evicting a tenant if these provisions are not complied with. If the Legislature had wished to provide for discretion, it would have been a simple thing to include such a provision in s. 71.1, as it did elsewhere in the RTA. For example, with respect to the Board’s power on eviction applications, s. 83(1) provides that “the Board may, despite any other provision of this Act or the tenancy agreement” refuse to grant the eviction or postpone the enforcement of the eviction order. In contrast, s. 71.1 contains no such permissive language.
[55] The legislative objective of these provisions is clear: the N12 notices inform the legitimacy of the landlord’s reliance on s. 48(1). The Board’s decision to amend the eviction application effectively treated these provisions as discretionary and procedural, rather than mandatory substantive requirements that fulfill the legislative objective of the RTA by protecting against abuse of the landlord’s own use termination provision. As the RTA stipulates, the application should not have been accepted for filing in the absence of the requisite N12 notice disclosure. As the Board noted, there is no screening process for electronic filing. As a result, this requires the Board to give effect to s. 71.1(4) at the time of the hearing, as it is the only time to do so. This substantive deficiency cannot be cured by amending the eviction application. The respondent’s eviction application should not have proceeded in the first place and should have been dismissed. The eviction application was therefore a nullity. . Cowton v. Landlord and Tenant Board
In Cowton v. Landlord and Tenant Board (Div Court, 2024) the Ontario Divisional Court considers RTA s.202(1) ['Finding of the Board'] ('real substance'):B. Did the Board incorrectly interpret section 202(1)?
[21] In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so: (a) may disregard the outward form of a transaction or the separate corporate existence of participants; and (b) may have regard to the pattern of activities relating to the residential complex or the rental unit. See RTA, s 202(1).
[22] Section 202 of the RTA imposes a statutory duty on the Board to determine questions of fact and to apply governing principles of law to determine the real substance of the transactions and activities regarding the rental units at issue. See Pinto v Regan, 2021 ONSC 5502, at para 40 (Div Ct).
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[24] In this court, Rilene and Emily argue that section 202 is limited to “situations where there was ambiguity.” They rely on The Landlords, Tenants, Occupants and Residential Tenancies Interpretation Guideline 21, which states that if the tenancy agreement is unclear, the Board can determine who’s a tenant by looking at several factors.
[25] First, the Guidelines are not binding on the Board: “a Member is not required to follow a Guideline and may make a different decision depending on the facts of the case.”
[26] Second, the Guidelines don’t purport to limit section 202(1) only to situations of ambiguity. To the extent there’s some lack of clarity, the Board will determine who’s the tenant based on the activities and transactions relating to the residential unit. But section 202(1), even in cases where there’s no ambiguity in the tenancy agreement, still requires the Board to determine the reality of the tenancy based on substance not form. See Amini v Blue Stellar Real Estate, 2023 ONSC 2659, at para 22. . Akbari et al. v. Blenkinsop et al.
In Akbari et al. v. Blenkinsop et al. (Div Court, 2024) the Divisional Court considered the 'real substance of transaction' [RTA 202]provision:[22] Section 202 requires the LTB to take a careful look at the nature of the relationship. This was not done in this instance. [SS: IMHO this last sentence is a summation of the appellant's submissions, not the court's conclusion]
[23] Section 202 of the RTA provides as follows:202(1) in making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,
(a) may disregard the outward form of a transaction or the separate corporate existence of participants; and
(b) may have regard to the pattern of activities relating to the residential complex or the rental unit; and
(c) may have regard to the pattern of activities, relating to the residential complex or rental unit. [24] The appellant submits it was an error of law for the LTB not to examine the nature of the relationship between the Landlords and the Appellant as required by s. 202 and allocate responsibility accordingly.
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[38] The purpose of s. 202 of the RTA is to assist the Tribunal in determining the real nature of the relationship between Landlords and Tenants. It is not to require the Tribunal to determine the relationship between multiple Landlords in the event of a breach of the RTA. . Elkins v. Van Wissen
In Elkins v. Van Wissen (Ont CA, 2023) the Court of Appeal considers (and allows) an appeal from an earlier Divisional Court RTA s.210 appeal on an RTA 57(1) ['Former tenant’s application where notice given in bad faith'] compensation application.
In these quotes the court considers the RTA 202 'real substance' ['Findings of Board'] provisions:[27] Section 202(1) of the RTA directs the Board, when making findings on an application, to ascertain the real substance of all transactions and activities relating to a rental unit and the good faith of the participants. Section 202(1) reads as follows:202 (1) In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,
(a) may disregard the outward form of a transaction or the separate corporate existence of participants; and
(b) may have regard to the pattern of activities relating to the residential complex or the rental unit. ....
[57] Section 202(1) of the RTA reinforces my interpretation of the legislation. It requires the Board, when making findings on an application, to ascertain the “real substance of all transactions” relating to a rental unit and “the good faith of the participants”. The transaction in s. 49(1) is an agreement of purchase and sale. There are two participants to such a sale transaction: the vendor landlord and the purchaser. A consideration of both participants is necessary to ascertain the “real substance” of the transaction between them and the “good faith” of each in evicting the tenant. . Pelletier v. Bloorston Farms Ltd.
In Pelletier v. Bloorston Farms Ltd. (Div Court, 2023) the Divisional Court considered the RTA 'real substance' interpretive provisions [RTA s.202]:Other Issues: Section 202 of the RTA and the Unconscionability of the Agreement
[22] Mr. Pelletier also submits that the Board erred in its failure to apply s. 202 of the RTA which requires that the Board “in making findings shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so, may disregard the outward form of a transaction or the separate corporate existence of participants; and may have regard to the pattern of activities relating to the residential complex or the rental unit.”; RTA, s. 202(1)(b).
[23] As with the submissions under s. 77(8), the landlord does not dispute the application of these remedial portions of the legislation but relies on the findings of credibility by the Board as applying equally to the aspects of the evidence relative to misrepresentations that are absent from any discussion in the Board’s reasons. For the reasons provided above in the analysis under s. 77(8), I do not accept this submission as it relates to the Board’s duty to consider s. 202 of the RTA. There is no indication that the Board considered the good faith of the landlord given the evidence of misrepresentation before it, and circumstances that suggested that the agreement was at the landlord’s instance, for the landlord’s objective benefit.
[24] As the Divisional Court noted at para. 40 of Pinto v. Regan:Section 202 of the RTA imposed a statutory duty on the Member to determine questions of fact and to apply governing principles of law to ascertain the real substance of the transactions and activities regarding the rental units at issue, and the good faith of the parties to the N11. The Member did not consider all the evidence to determine the element of good faith on the part of the respondent other than making a passing reference in the Reasons. The Member did not take the totality of the evidence into account when he applied the substantive law. This amounted to an error of law. I adopt this reasoning and apply it in the instant case. . Gykan Enterprises Inc. v Pourshian
In Gykan Enterprises Inc. v Pourshian (Div Court, 2023) the Divisional Court considered an RTA LL appeal (dismissed) where the LL argued that the tenancy was commercial, and that there was a physical lock-out which achieved eviction before the LTB applications (one to determine RTA application and another for the lock-out). In these quotes the LL argues that the tenancy was established under a commercial lease and that the property was zoned industrial, in support of their unsuccessful position that the tenancy was commercial:[15] Gykan submits that the Board failed to attach significance to its evidence that the tenancy was commercial. Among other evidence, it relies on the facts that (1) the property was zoned as an industrial commercial building and not as residential; and (2) the lease between the parties stated that the unit was leased for commercial use.
[16] Gykan has not demonstrated an error of law. The Board relied on the relevant provisions of the Act. Specifically, s. 2(1) defines a “tenancy agreement” to apply to a “rental unit.” A “rental unit” means “any living accommodation used or intended for use as rented residential premises.” Section 202 directs the Board to “ascertain the real substance of transactions.” In doing so, it “may disregard the outward form of a transaction.”
[17] The Board correctly stated that the fact that Mr. Pourshian signed a commercial lease is not determinative. Looking to the intention of the parties, it found Mr. Pourshian’s evidence to be more credible and reliable than the evidence Gykan’s witness. This conclusion was well founded in the evidence. Gykan has not identified any error of law in the Board’s conclusion on this issue. . Amini v Blue Stellar Real Estate
In Amini v Blue Stellar Real Estate (Div Court, 2023) the Divisional Court considered a tenant's appeal arguing that the LTB lacked jurisdiction to order $18k rent arrears as the tenancy was actually commercial. The case turned on RTA s.202(1), which reads:Findings of Board
202 (1) In making findings on an application, the Board shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants and in doing so,
(a) may disregard the outward form of a transaction or the separate corporate existence of participants; and
(b) may have regard to the pattern of activities relating to the residential complex or the rental unit. The court considers this argument as follows:[2] Mr. Amini does not dispute the fact that he defaulted on his rent payments. Rather, he takes the position that the Residential Tenancies Act, 2006, S.O. 2006, c.17 (“RTA”) does not apply to his tenancy of the basement unit because his lease was part of a larger commercial transaction, and he never lived in the unit. The Board considered and rejected this argument.
[3] Mr. Amini argues that the Board erred in law by failing to ascertain the real substance of the transaction between the parties, as required by s. 202(1) of the RTA. Blu Stellar submits that the Board’s decision is correct in law and requests that the appeal be dismissed with costs.
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Analysis
[21] Section 3 of the RTA provides that the Act “applies with respect to rental units in residential complexes”. Section 2(1) of the RTA defines “rental unit” as “any living accommodation used or intended for use as rented residential premises.” The Court of Appeal for Ontario has ruled that this definition must be interpreted liberally to promote the remedial objectives of the statute, namely, to protect residential tenants from unlawful rent increases and evictions: Matthews v. Algoma Timberlakes Corp., 2010 ONCA 468, at paras. 22-23.
[22] The parties agree that s. 202(1) of the RTA applies when determining whether a unit satisfies this statutory definition: Matthews, at para. 24. Substance, not form, governs the determination of the true nature of a tenancy: OnTheGoShipping Inc. v. Khan Medical Corp., 2020 ONSC 2789, at para. 22; Sterling Studio Lofts, at para. 35.
[23] Mr. Amini argues that, although the Board referred to s. 202(1) in its decision, it failed to apply the section. He submits that the Board reached its decision based solely on the form of the lease and failed to consider the actual use of the basement unit as storage space for the businesses operated on the upper floors, the clause in the APS that restricts use of the property to “current professional office use,” and other factors that suggest the space was uninhabitable as living quarters.
[24] The plain language of the RTA (i.e., the definition of “rental unit”) and the relevant jurisprudence make it clear that a living accommodation will satisfy the definition of “rental unit” if it is intended for use as rented residential premises, even if it is not actually used for that purpose. The Board therefore did not err when it decided that, in the circumstances of this case, it did not matter whether anyone resided in the basement unit.
[25] Section 202(1)(b) of the RTA provides that the Board “may have regard to the pattern of activities” relating to the rental unit in ascertaining the real substance of a transaction (emphasis added). However, those activities are not determinative. Other relevant factors may also be considered. In this case, the Board examined the Residential Tenancy Agreement and the circumstances surrounding its execution. It looked at the substance of the transaction, which changed after the APS was executed. It determined that the parties agreed to enter into two separate lease agreements, including a residential lease for the basement unit, for the purpose of reducing the amount of HST payable by the tenant. The parties’ intentions, the fact that a Residential Tenancy Agreement was executed, and the fact that the landlord did not charge HST on the rent for the basement unit are all circumstances relevant to the determination of the “real substance” of the transaction under s.202(1) of the RTA: OnTheGoShipping, at para. 24. The Board did not err when it took these factors into account in deciding that the RTA applies to Mr. Amini’s tenancy.
[26] Moreover, s.202(1) of the RTA states that the Board “shall ascertain the real substance of all transactions and activities relating to a residential complex or a rental unit and the good faith of the participants” (emphasis added). In this case, the Board found that Mr. Amini “cannot rely on an agreement for one purpose and then seek to resile from this agreement when it is no longer convenient.” The Board thereby implicitly considered the good faith of the parties, as required by the statute: Akelius Canada Ltd. v. Barrett, 2018 ONSC 7144 (Div. Ct.), at paras. 29-30.
[27] Mr. Amini benefitted from the execution of a Residential Tenancy Agreement, which spared him the obligation to pay HST on $3,000 monthly in rent. He also benefitted from the protection of the RTA when he defaulted on his rent payments for the basement unit. Indeed, during the appeal hearing, he stated that the reason he continued to pay rent under the commercial lease is because he knew that the landlord could come onto the property and evict him and his subtenants if he defaulted. He exploited the fact that Blu Stellar could not evict him so swiftly from the basement unit because of the protections afforded to tenants under the RTA. In the circumstances, his assertion now that the RTA does not apply constitutes bad faith.
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