Canada: Residential Tenancies - Comment on Matthews v. Algoma Timberlakes Corporation

The Issue: Does the Residential Tenancies Act, 2006 apply to leased recreational property?

The Answer: Yes it does.

In Matthews v. Algoma Timberlakes Corporation, 2010 ONCA 468, the Ontario Court of Appeal was asked to determine whether the protections of the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (the "RTA") extend to tenants who lease recreational property. The issue transcends recreational property and includes any rented residential property where the tenant has a permanent residence elsewhere.

For at least two generations, a number of persons living in the Sault Ste. Marie area had leased "sites" from the Algoma Central Railway. As required by their leases, the tenants had expended considerable time and effort to improve the sites with permanent cabins. While the tenants and their families had permanent homes elsewhere, they used the cabins for recreation and family events, often for extended periods of time.

In December 2005, the respondent Algoma Timberlakes Company ("ATC") acquired the property on which the sites were located. ATC sent notices to the tenants seeking significant rent increases. ATC also tried to replace the tenants' leases with "licences," which would have changed the tenants' status to that of licensees.

A large number of the tenants responded by filing an application to the Landlord and Tenant Board (the "Board") under section 9 of the RTA for a determination that the RTA applied to their sites.

The Board dismissed the tenants' application, believing itself to be bound by the Divisional Court's prior decision in Wheeler v. Ontario (Ministry of Natural Resources) (2005), 25 O.R. (3d) 113 (Div. Ct.). In that case, the Divisional Court had opined that leases for sites within a provincial park were not protected by the former Tenant Protection Act, 1997.

An appeal by the tenants to the Divisional Court was dismissed. In separate concurring reasons Justice J. deP. Wright observed: It was argued before us that the appellants used their property for "recreation" and not as "residences." While this sort of distinction may make sense to lawyers, it is bound to leave lay-people such as the appellants shaking their heads in wonder.

The tenants appealed the Divisional Court's decision to the Court of Appeal which, by a unanimous decision, overturned the decisions of both the Board and Divisional Court and held that the tenants' sites were "land lease sites" protected by the RTA.

The Court of Appeal indicated that the RTA is remedial in nature and must be interpreted liberally to ensure the realization of its objectives. As the RTA provides a broad definition of "rental unit," and the tenants' cabins were clearly being used as "rented residential premises," the cabins and their underlying sites fell within the RTA's protections.

The Court of Appeal held that the prior comments in Wheeler had been obiter and had not been the result of a proper exercise of statutory interpretation. Consequently, the Wheeler decision was not binding on the Board or the Court.

The Court of Appeal further held that the Divisional Court had erred in determining that because the tenants' sites were used for recreational purposes, they were not residential. The Court noted that if the Divisional Court's interpretation were to prevail, a person who rented premises while residing elsewhere could not be protected by the RTA.

The Court of Appeal's decision is consistent with the Divisional Court's prior decision in Putnam v. Grand River Conservation Authority (2006), 210 O.A.C. 291. Both cases stand for the proposition that, where cottage or cabin establishments are at issue, the RTA only excludes those cottages or cabins that are operated analogous to rooms in a hotel, seasonal campsite or bed and breakfast. Where the cottage or cabin is a permanent structure constructed on lands leased year-round by the tenant, the cottage or cabin is a "land lease home" and the tenant is entitled to the protections of the RTA.

ATC has sought leave to appeal the Court of Appeal's decision to the Supreme Court of Canada.

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