When Rent Payments Go to Fraudsters: What Ontario Law Says
Can a tenant refuse to pay rent if they were tricked into sending it to a fraudster? It’s a growing problem in Ontario: email spoofing and phishing scams where fraudsters impersonate landlords or property managers to redirect rent payments. Tenants send money to the wrong account, and landlords never receive it. Who bears the loss? And what are the legal remedies?
Ontario case law provides important guidance. While the exact scenario of rent diversion is still rare in the courts, decisions from the Landlord and Tenant Board, the Small Claims Court, and the Superior Court offer clear lessons.
The Core Legal Principle: Privity of Contract
In Ontario, a lease is a contract. Under the doctrine of privity of contract, only the landlord and tenant are bound by its terms. A fraudster pretending to be the landlord is not part of that contract.
That means a tenant’s obligation to pay rent is only discharged when payment reaches the landlord (or an authorized agent). Sending money to a third-party criminal does not fulfill the tenant’s obligation. The landlord can still demand the rent. Case law confirms that only parties to a contract can enforce or be bound by it. Fraudsters fall outside that privity.
Ontario Cases on Payment Fraud
St Lawrence Testing & Inspection Co Ltd v Lanark Leeds Distribution Ltd, 2019 CanLII 69697 (ON SCSM)
In this Small Claims Court case, a defendant tried to rely on fraudulent payment instructions sent by a hacker posing as the plaintiff’s paralegal. The defendant wired the settlement money to the fraudster’s bank account and claimed the obligation was satisfied.
The court disagreed. Because the plaintiff never received the money, the debt remained outstanding. The judge held the payor bears the loss unless:
The contract shifted the risk of fraud,
The payee was dishonest, or
The payee was negligent in enabling the fraud.
None of these applied, so the defendant had to pay again.
Key takeaway: Unless a landlord’s conduct directly caused the fraud or the lease says otherwise, the tenant is still responsible for paying the rent to the landlord.
Hanna v. Quejada, 2025 ONLTB 34220 (CanLII)
This recent Landlord and Tenant Board case involved a tenant who claimed she sent her December rent by e-transfer, but it was intercepted by a phishing scam. The landlord never received the money.
The Board found that the rent was not paid to the landlord. The N4 notice for non-payment was valid. However, recognizing the tenant’s good faith, the Board gave her time to repay the arrears instead of ordering immediate eviction.
Key takeaway: Even if a tenant is a victim of fraud, the rent is still legally due. Relief may be available (such as a repayment plan), but the landlord’s right to collect remains.
Although not a lease case, this Ontario Superior Court decision reinforces the same principle. A bank customer’s email was hacked, and fraudsters tricked the bank into sending wire transfers. The customer sued the bank to recover the lost money.
The court ruled that the loss fell on the customer, because the bank had not been negligent and the contract placed the risk on the account holder.
Key takeaway: Courts enforce contractual obligations strictly in fraud scenarios. If the innocent party (landlord, bank, service provider) is not at fault, the deceived payor usually bears the loss.
The Tenant’s Duty to Verify
Ontario decisions highlight that tenants (and other payors) must act reasonably when receiving suspicious instructions. Red flags include:
● A sudden change in bank account details,
● Payment instructions sent from a personal email address,
● Spelling errors or unusual domains in emails,
● Requests for payment to accounts in other provinces or countries.
In St. Lawrence, the fraudulent instructions contradicted the written settlement and pointed to an unrelated bank account. The judge said the payor should have questioned the authenticity. Similarly, in Hanna, the tenant was faulted for sending money to an “unverified” address.
A quick phone call or confirmation through a known channel could prevent these losses.
Remedies for Landlords
When rent is diverted by fraud, landlords have several options:
● Apply to the Landlord and Tenant Board (residential): Serve an N4 notice and seek an eviction order for non-payment.
● Demand payment of arrears: The lease remains enforceable.
● Charge interest or late fees: If provided for in the lease.
● Treat it as default: In commercial leases, this may allow termination or forfeiture.
● Pursue damages: Landlords can sue for unpaid rent and related losses.
Tenants, on the other hand, may try to recover from their bank or insurer, or even report the fraud to police. But these remedies are separate from their obligations under the lease.
Practical Lessons
For Landlords:
1.1. Make payment instructions clear and consistent.
1.2. Warn tenants about spoofing scams.
1.3. Use secure channels (e.g., auto-deposit e-transfers, official domains).
For Tenants:
2.1. Verify any new payment instructions.
2.2. Be cautious of unusual emails or requests.
2.3. Understand that being scammed does not cancel the duty to pay rent.
Conclusion
Ontario law is clear: tenants cannot escape their lease obligations by claiming they were tricked by fraudsters. The doctrine of privity of contract means rent is owed to the landlord, not to whoever managed to spoof an email address.
Courts and tribunals expect tenants to be vigilant. If they ignore warning signs and send money to the wrong account, they may have to pay twice, once to the fraudster, and again to the landlord.
For landlords, the remedies remain the same as any non-payment case. For tenants, the best defense is prevention: double-check payment instructions before hitting send.