Limiting Limitation Clauses?

To what extent are limited use clauses in residential contracts allowable?

In the 2022 case of White et al. v Upper Thames River Conservation Authority, the relationship between landlord and tenant regarding residential leases, and the enforceability of a restricted access clause in a residential tenancy agreement is highlighted through the Residential Tenancy Act.

As for an overview of the case, the appellant tenants own homes that sit on land leased from the respondent. These properties contain the primary residences of many of their owners. The lease under which the appellants leased said land are long-term, first entered as early as 1983. These leases limited occupancy to weekends during the three-month winter period, meaning that for three months out of the year, tenants are not allowed to reside in their homes Monday through Friday. While the lease was amended in 2004, with the alteration of having tenants choose the winter dates when their occupancy limitation runs, the substance of the limitation remained: the appellants are not permitted to occupy their homes for the whole year. The lease also clearly stated that occupancy outside of the permitted time is “a violation of the terms of this lease and will result in delivery of a Notice of Lease Termination.”[1]

Despite these clear terms in the lease, however, the respondent never strictly enforced the occupancy limitation — as a result, many tenants live in their homes year-round. In the process of renegotiating their leases, the topic of the enforceability of the occupancy limitation became the subject of a dispute. As such, the appellants applied to the Landlord and Tenant Board (the “Board”) for an order that the Residential Tenancies Act (the “RTA”) applies to their tenancies, and an order requiring the respondent to allow them unrestricted access to and occupation of their homes for the entirety of the year.[2] The RTA protects tenants from a number of things a landlord could impose on them, including “unlawful rent increases and unlawful evictions” as well as “balancing the rights and responsibilities of residential landlords and tenants and to provide for the adjudication of disputes and for other processes to informally resolve disputes.”[3] The Board held that the RTA applied to the lease agreements, and as such, the tenants should be allowed unrestricted access to their homes throughout the year.[4]

Following this decision, the conservation authority appealed to the Divisional Court. The present judge’s panel overturned the Board’s decision, holding that the Board erred in its determination that the RTA prohibited the parties from mutually agreeing to include a provision limited the tenant’s right to occupy the rental units during the agreed-upon period of time, in this case, the three months of the winter season. The Divisional Court also made note of the fact that no provisions in the RTA specifically deal with situations where parties agree to add a provision to a rental agreement permitting occupancy limitations. The Divisional Court went on the point out that if there was a prohibition on limiting access or occupation of a residential unit, it would expect to find a specific section in the RTA dealing with the issue. The Divisional Court eventually concluded that on a plain reading of the RTA, which prohibits the landlord from substantially interfering with a tenant’s occupancy, it cannot be said that the conservation authority did so as the tenants voluntarily agreed to the subject occupancy limitations based on their explicit presence in the lease.[5]

After the decision of the Divisional Court, the tenants appealed to the Court of Appeal, who unanimously allowed it. The Court of Appeal was particularly critical of the Divisional Court’s reliance on s. 22 of the RTA which states “a landlord shall not at any time during a tenant’s occupancy of a rental unit and before the day on which an order evicting the tenant is executed substantially interfere with the reasonable enjoyment of the rental unit or the residential complex in which it is located for all usual purposes by a tenant or members of his or her household.”[6] They also held issue with the assumption that occupancy limitations were proper by the virtue of absence of a specific prohibition in the RTA along with the tenant’s voluntary agreement. According to the Court of Appeal, a tenant’s voluntary agreement to a provision is irrelevant if the RTA does not otherwise permit that provision. Without specific authorization or prohibition, the legality of occupancy limits must be determined by the consideration of the RTA using the “text, context, and purpose” approach to statutory interpretation.[7]

There is a provision in the RTA which outlines the security of tenure, prohibiting a landlord from taking possession of a residential unit during an ongoing tenancy unless the tenancy is ended in accordance with the RTA.  A tenancy can be ended through lawful termination, abandonment, death, assignment, eviction, or a Board order.[8] The Court of Appeal found it irrelevant whether the landlord has in some sense taken possession or simply denied access to the tenant – in either case, the continuity of the tenancy has been broken in a way that is inconsistent with the RTA. Therefore, the Court of Appeal concluded that the occupancy limits are at odds with the purpose of the RTA. The parties’ agreement to restrictions did not change the result, as freedom of contract values cannot be invoked to limit the protection that the RTA provides – meaning that occupancy limits or restrictions in residential leases are not permitted.[9]

This case has the potential to impact existing leases that contain provisions that inherently go against the RTA. Any limits or restrictions on occupancy should be expected to be denied based on this decision. The court relies on the guidance of legislation to state that if these types of provisions were meant to be acceptable in leases, they would have been discussed in the RTA. This is an interesting precedent that may have far reaching impacts on oppressive and impactful clauses in tenancy agreements.

Contact us with any questions you might have about your residential and commercial leases

We would like to thank our student, Nicole Rocha, for her research and writing on this article

[1] Ontario Reports, “White et al. v. Upper Thames River Conservation Authority,” Feb. 16, 2022 https://digital.ontarioreports.ca/ontarioreports/20220805/MobilePagedArticle.action?articleId=1810084#articleId1810084 accessed Feb. 24, 2023.

[2] Ibid.

[3] Residential Tenancies Act, 2006, S.O. 2006, c. 17.

[4] Supra note 1.

[5] Jeffery R. Risdon, “Rejected! Limits on Occupancy in Residential Tenancies,” Mar. 15, 2022 https://www.lerners.ca/lernx/rejected-limits-on-occupancy-in-residential-tenancies/ accessed Feb. 24, 2023.

[6] Supra note 3.

[7] Supra note 1.

[8] Supra note 5.

[9] Ibid.