Extenuating Circumstances Are Not Exceptional Circumstances – 12 Month Rent Penalties

Originally published by LandlordBC in the Spring 2025 Issue of The Key

When a landlord or purchaser gives Notice to End Tenancy so they can occupy the rental unit, the tenant may claim an amount equal to 12 months' rent if they do not occupy within a reasonable period of time after the effective date of the notice or for long enough, barring "extenuating circumstances."

The BC Supreme Court has held that a Residential Tenancy Branch (RTB) decision awarding the 12-month penalty is liable to be overturned if the arbitrator fails to consider evidence of extenuating circumstances that prevented a landlord from occupying the rental unit within a reasonable period or did not occupy the rental unit for 12 months. Although the RTB must consider extenuating circumstances, the limits of what should be considered extenuating circumstances have not been very well defined by the RTB and sometimes sets too high a threshold.

The recent BC Supreme Court case, 1129728 B.C. Ltd. v Kassam, helps to further clarify the standard the RTB must set for considering extenuating circumstances.

In Kassam, the Court overturned a monetary order for 12 months' rent, which equaled $102,100. The landlord had given a two-month notice to the tenant to occupy the rental unit, requiring the tenant to vacate by April 29, 2022. The landlord planned to demolish and rebuild their regular home and intended to live in the rental unit during the construction process. Prior to issuing the notice, the landlord, who was experiencing health issues, travelled to China to get medical tests. They were to return to Canada and move into the unit in May 2022. Unfortunately, they did not return until August 2022 after receiving their diagnosis. They moved in with an adult child who helped care for them instead of moving into the rental unit. They also did not move into the rental unit due to concerns that building repairs at the rental unit would adversely impact their condition.

Ultimately, the landlord did not move into the rental unit until June 2023 – more than a year after they planned – and the tenants sued for 12 months' rent.

The RTB found there were no "exceptional circumstances" that prevented the landlord from occupying a rental unit within a reasonable period of time.

The Court overturned the RTB's decision for a number of reasons, including that:

1. The RTB applied the wrong test by considering if there were exceptional circumstances and not whether there were extenuating circumstances.
2. The RTB considered irrelevant evidence and ignored relevant evidence concerning whether there were extenuating circumstances.
3. The calculation of the 12-month rent penalty was patently unreasonable.
4. The reasons for the RTB decision were inadequate.

In clarifying the test and the difference between exceptional and extenuating circumstances, the court referred to RTB Policy Guidelines:

[73] I accept that "extenuating" and "exceptional" circumstances are not synonymous. Section 51(3) of the RTA references the former and not the latter. Residential Tenancy Policy Guideline 36 discusses (in the context of extending a time period, which is not applicable here) the meaning of "exceptional circumstances":

The word "exceptional" implies that the reason for failing to do something at the time required is very strong and compelling. Furthermore, as one Court noted, a "reason" without any force of persuasion is merely an excuse. Thus, the party putting forward said "reason" must have some persuasive evidence to support the truthfulness of what is said.

[74] By contrast, Residential Tenancy Policy Guideline 50 discusses (in the context of compensation for ending a tenancy, as here) the meaning of "extenuating circumstances":

These are circumstances where it would be unreasonable and unjust for a landlord to pay compensation, typically because of matters that could not be anticipated or were outside a reasonable owner's control.

[75] The RTB decision references neither of these guidelines. In my view, they highlight the distinction between extenuating circumstances (which was the applicable test here) and exceptional circumstances (which, while not the applicable test, is the one the arbitrator apparently applied).

This distinction clarifies that while extenuating circumstances must typically be unanticipated or outside the landlord's control, the test is whether there are circumstances "where it would be unreasonable and unjust for a landlord to pay compensation". This standard does not imply that the reason why the landlord does not comply with the requirements of the notice must be as "very strong and compelling" as would be needed to say there were exceptional circumstances. This suggests a much broader range of circumstances may excuse a landlord from the penalty.

The Court also clarified the test that the RTB should have applied was whether: "1) the landlord acted in good faith; and 2) [the landlord's] health concerns and/or any other matters comprised extenuating circumstances which prevented the landlord from occupying the Unit within a reasonable period of time." This broader interpretation of what should count as extenuating circumstances that considers the landlord's good faith intentions is consistent with how the government had originally described them before the Residential Tenancy Act was amended to allow for 12-month rent penalty claims. According to Hansard from April 17, 2018, the Minister of Housing, the Honourable Selina Robinson, said the following in response to a question during a legislative debate about what would be considered extenuating circumstances:

I think maybe I have more faith in humanity than the member does around people playing by the rules. But there is certainly appreciation that there could be things like labour shortages that would impact the ability to start a significant renovation. That could be a challenge—or something in someone's personal life.

This formulation of the test from the Kassam case expressly provides that it is important whether a landlord intended to play by the rules (i.e. acted in good faith) when they give notice to their tenant. It also suggests the test is not whether it is practically impossible for a landlord to occupy the rental unit after doing so, as some RTB decisions have seemed to suggest. A broader range of extenuating circumstances must be considered by the RTB.

Given the stakes in a claim for a 12-month rent penalty and the changing law, it is always advisable for parties to seek fact-specific legal advice as soon as possible. A lawyer can assist you in preparing your evidence and arguments before the RTB or advise you on how a negative RTB decision could be overturned by the Court on judicial review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.