Criminal Fraudsters Too Often Effectively Game Provincial Legislation

The eviction process in Ontario, Nova Scotia and Quebec typically takes between 3½ to five months. Due diligence is an absolute essential.

Go Public published a really interesting story this week about a landlord in Bedford, Nova Scotia who got burned by a professional tenant, badly. Elizabeth Anne Critchley was renting a duplex from Jim Johnson, and managed to not only secure exceptions for not paying her rent  – but also loans by playing on her landlord’s sympathy. Critchley was a professional. Other known aliases are Betty Drake, Betty Burns and Elizabeth Anne Drake, and she has a criminal record that dates back more than 25 years and includes more than 120 convictions, many of them for fraud in Nova Scotia, Prince Edward Island and Ontario.  By the time Johnson went to the Nova Scotia Residential Tenancies office in May, his financial situation had gone from bad to worse. CBC had reported on her sentencing in an unrelated fraud scheme back in 2014. She’s as bad news as it gets. She pleaded guilty to one count of fraud in 2014 and spent a year in jail when she defrauded a low-income Charlottetown couple.

Here’s the thing. Johnson didn’t do his due diligence. He did not run a background check on her. His mistake in trusting a bad character was not helped by a system in Nova Scotia that many consider to be more tenant friendly than balanced and that facilitates this kind of fraud. Johnson said the system moved so slowly, it allowed her to live in his duplex for three more months without paying a cent. All the while, Critchley was preparing for her next victim. She engaged Terry Gerard to rent Johnson’s duplex, using the name Betty Drake, claiming she was the owner and lived in the other unit. Tanya Gerrard gave almost $1,100 to Critchley in cash when she answered a rental ad for half a duplex. Critchley now faces charges related to Johnson, Gerrard and others, including two counts of fraud over $5,000.

“The tenancy board, in my opinion, takes care of the tenants and the landlords are on their own.”

Too many renters are getting away with not paying rent, then appealing eviction orders. The Toronto Star reported on the issue last year, hitting on a series of instances where professional tenants clearly demonstrate a strategic and intimate knowledge of bending rules and doing things just at the right time – like in the case of Eldebron Holdings vs. Jeffrey Mason.

Mason was renting a unit for $1700 a month. The only payment that cleared was his first. When the landlord filed an eviction application with the Landlord and Tenant Board in November, the tenancy was terminated and the tenant ordered to vacate the unit. On the last day before the eviction could take place, the tenant filed an appeal – buying more time. When the Divisional Court hearing took place in April, the landlord disclosed that the tenant’s previous landlord had been in court on a similar set of circumstances in May 2015.

Think that’s bad? How about the case of James Regan? How about Nina Willis? How about Adam Buttigieg?

A big part of the problem that leads to such long lead times before someone is officially evicted? Delays. The Federation of Rental-Housing Providers in Ontario says delays are happening in each step of the eviction process. They’re not helpful at all. They include but are not limited to…

  • Statutory delays, which means the legislated time landlords have to wait before taking action.
  • Hearing/order issuing delays, which is the amount of time landlords have to wait to get a hearing and then an eviction order after the hearing.
  • Enforcement delays, which is the number of days landlords typically wait for either a sheriff or a private bailiff to enforce an eviction order.

Provincial registries of the worst and most frequent offenders should be part of the solution.

Ontario MPP Ernie Hardeman says part of the solution should be a provincial registry of repeat problem tenants who exploit the system’s flaws. Such a list could be referenced before renting out a unit and would likely reduce a significant number of instances where an eviction order is being sought in the first place.

“We need a system to be able to find people who are doing this professionally, who have figured the system out”

Landlords often make the mistake of giving problematic tenants too much time to rectify a problem or being too lenient. Once they get wise, they realize they’re waiting months to get to the tribunal stage where an eviction notice is formally issued. Earlier this year, Ontario made changes to its Residential Tenancies Act, aiming to strike a “fair” balance between the rights of landlords and tenants. It actually ended up doing the opposite. Tenants who fail to show up at a first hearing now automatically get a second one that sometimes takes more than a month to reschedule. Meanwhile units are lived in by people who often have done this over and over again, and often simply move on and do it again to someone else.

 

New York City Landlords Get Creative To Commit Tenants

Landlords face steep competition as thousands of new units emerge onto the market.

The New York Times published a great piece a couple of days ago about the rental market in the big apple. At this time of the year, college grads start looking for apartments and generally speaking see rents rise with the season, however, this year is more of the same sluggish growth that market has seen since coming out of the financial crash. New York rents have skyrocketed in the last 10 years – but professional salaries haven’t exactly kept pace. With renters unwilling or unable to pay ever higher rents, the market has flatlined – and now it’s become a tenant’s market. As per the piece, last year, 8,774 market-rate units opened in Manhattan and Brooklyn, with an additional 15,291 opening this year. For the first time in years tenants renewing leases have the upper hand.

February saw rents for studios and one-, two-, and three-bedroom apartments in Manhattan fall year-over-year, according to real-estate appraiser Miller Samuel. As a result, landlords are getting quite creative in offering perks to tenants who agree to rent their units. Everything is on the table. Netflix subscriptions. Free Uber rides. Even flat screen televisions are on the block. The market is also seeing reduced security deposits and even a month of free rent. These creative enticements to differentiate apartments in an increasingly cluttered market of rentals are called “concessions”, and there are growing number of them. According to the StreetEasy there’s been a significant increase of tactics like this.

…citywide, the share of rental listings on StreetEasy with concessions rose to roughly 14 percent of listings in October…

Overall, StreetEasy’s data shows that the share of concessions has grown substantially over the past five years, rising from an annual total of 2.7 percent of listings in 2011 to 10.4 percent of listings in 2016. It looks as if they’re working too, at least to get tenants to renew their leases. The number of new leases was down 28% from a year ago.

The biggest deals seem to be happening at the top of the market, where some luxury developments are offering up to four months of free rent on a 24 month lease. But deals are to be had in older, less expensive buildings, too.

As of April 2017, average apartment rent within the city of of New York, NY is $3074. One bedroom apartments in New York rent for $2732 a month on average and two bedroom apartment rents average $3510. Manhattan’s median rental price fell 0.9% year-on-year to $3,350 in February. Median prices also fell in Brooklyn and Queens.

 

Landlords Have Legitimate Issues with Canada’s Half Baked Legislation

The Federal government didn’t bother to get into specifics on upcoming marijuana legislation.

The tabled cannabis law proposes allowing Canadians to grow 4 plants per person at home – whether they own or rent, provided the plants aren’t taller than 100 centimetres. It sounds benign when it’s framed as a new and progressive law – which in many ways it is – however the practical implications of the legislation are something that a growing number of national and provincial landlord groups aren’t happy with in the least. The government has not said if landlords will be able to prohibit tenants from growing pot in their apartments.

The Professional Property Managers Association and  The Canadian Federation of Apartment Associations are both looking to compel the government to change this aspect of the law. They both seek a ban on tenants growing plants in rented homes or multi-unit buildings. Full disclosure: we also support this change in the law as it is rooted in common sense. We touched on some of the complicated aspects of growing marijuana in a rented unit – particularly the insurance nightmare it has the capacity to create.

“I think the government is obviously balancing a lot of issues here. They do want to break the black market, and that’s important. But we think we can break the black market if they let people [only] grow it in their own owner-occupied homes, and the product is readily available in stores or by mail order.” -John Dickie, Canadian Federation of Apartment Associations

Optimal conditions for growing marijuana include warm temperatures, extensive lighting and high humidity. In order to grow weed, you need these three things. Creating the hydroponic conditions in a residence in an effort to achieve this key trifecta is not something you can do without affecting the domicile in some capacity. That’s just a fact. Water that is fed to plants will transpire and evaporate from the containers into the surrounding air. Cannabis plants also require warmth. Excess water vapour and high temperatures can create humidity damage. Large mold accumulations can follow and grow fast in humid environments and can lead to structural decay.

To boot, unusually high amounts of steam coming from vents in winter can damage exterior finishes on houses. The smell of weed seeps into drywall the same way tobacco smoke does, and even when it’s not being smoked, marijuana can create a permanent odour that can be repulsive to people – like other tenants and incoming ones in the future.

The electricity required for lighting in even a small cultivation of weed is high. It also introduces a fire concern with having that much botanical lighting in a house – and that’s assuming that a tenant doesn’t re-wire the electrical in a home (which they can’t do). Most wall outlets are on a 15-amp, 120 volt circuit. Many outlets are generally on that one circuit. One 1,000 watt metal halide or high pressure sodium light draws 9 amps at 120 volts. So just by using one of those plugged into a wall outlet, you have already significantly maxed your circuit – and that’s not taking into account the other devices, computers, or appliances that are also typically in a unit. Maxing a circuit is not a good thing. Your circuit breaker (if it’s working properly) may shut down your circuit because you’ve overloaded it. Your wiring may heat up, flame up, short out or otherwise fail. Lastly, there is an increased fire hazard danger due to people drying marijuana in a household stove.

Even four plants in a building can change the risk assessment on a property, and creates a greater likelihood of water damage, mould, fire, vandalism and burglary. Under most basic home insurance policies, marijuana-related damages or anything that companies believe is “high risk” is not covered. That view is shared by many insurance companies, according to the Insurance Bureau of Canada.

“Landlords currently have little recourse available if a tenant is growing medical marijuana and aren’t required to be told if it’s happening” -Avrom Charach, The Professional Property Managers Association

Under new federal rules introduced last August, landlords are left a little high and dry (no pun intended) if a tenant is growing licensed medical marijuana. They don’t even have the right to know it’s happening. None of that is right. The federal government should formally include a clause in the Cannabis Act including restrictions on any and all rented dwellings or they should at least mandate that provincial legislation needs to compensate for the loophole this creates.

 

 

Guys, You Should Tell Your Landlord If You’re Going To Grow Pot.

A grow-op, whether legal or not, is still a high-risk activity

In August of 2016, Health Canada expanded rules for medical marijuana patients through the Access to Cannabis for Medical Purposes Regulations. They were granted the right to access their cannabis three ways.

First – They can register with Health Canada to grow a “limited” amount of cannabis for their own medical purposes. Second – Designate someone else to grow it. If a patient is not healthy enough to grow their own, someone else can provided they pass a background check showing they haven’t been convicted of a drug offence in the last 10 years and aren’t growing for more than two people, themselves included. Third – Getting it from one of 34 Health Canada-approved producers — the only legal source under the current laws.

Seems great, right? Not really. At least not from the perspective of landlord and retired fire inspetor Darryl Spencer. Go Public at CBC News told his story in full force last week, shining a light on what is increasingly becoming a complicated issue.

Spencer has owned a rental property in Kamloops, B.C. for over 10 years. After receiving complaints from one of his tenants about radiating heat from the floor and electrical breakers tripping, he discovered his basement tenant’s legal (albeit scattered and poorly set up) grow set up. The tenant received a medical marijuana license, enabling him to grow up to 60 plants without the permission or knowledge of his landlord. After learning of the development, he disclosed to his insurance company that he had a legal set up for the plants supported by a license from the federal government. His reward? Losing his coverage and having his policy cancelled.

Since last year’s new rules, landlords have little to no recourse if a tenant is growing licensed medical marijuana. They don’t even have the right to know it’s happening. You read that right. Under most basic home insurance policies, marijuana-related damages or anything that companies believe is “high risk” is not covered. That view is shared by many insurance companies, according to the Insurance Bureau of Canada, since a greater likelihood of water damage, mould, fire, vandalism and burglary exists.

While regulations may allow for the legal growing of marijuana for medical purposes, it does not change the structural risk grow-ops pose to homes and condos – Andrew McGrath, Insurance Bureau of Canada

So in other words – a tenant’s privacy trumps the rights of a property owner – at least as far as the federal government is concerned. Besides being ridiculously short sighted and ill considered, to boot, the government is leaving it up to the municipalities to enforce whether the grow set ups are safe. The problem with that is federal privacy rules prevent local authorities from knowing where marijuana is being grown. There also is no system in place to proactively check if tenants are growing the allowed number of plants and following their permit.

The federal government’s role is to ensure people who need medical marijuana have access – Jane Phillpott, Health Minister

Two months after his policy was cancelled, Spencer ended up finding a new insurance company that specializes in domestic cannabis-operations. The coverage cost almost twice what he used to pay and has a much higher deductible. The story has a happy ending though.

Go Public contacted Gore Mutual, Spencer’s original insurance company. They offered to reinstate Spencer’s policy for almost the same amount he used to pay, to which Spencer took up.

 

Absolute Idiocy On Unpaid Electrical Bills in Prince Edward Island

In another fantastic assumption that landlords are rich, entitled building owners, the wise city councillors in Summerside, Prince Edward Island are contemplating what to do about unpaid electrical bills in the small town of just under 15,000. The city takes in $20 million a year from the utility with the majority of people paying on time, however, after council “discovered” 1.3 million dollars of delinquency, all these city councillors determined the problem needed to be decisively addressed. Their proposed solution? Landlords should pay the bill. Seriously.

Summerside’s Director of Finance, Rob Philpott said involving landlords is just another option for council to consider that if for whatever reason the tenant is unable to pay in a timely matter or doesn’t pay at all, then landlords could potentially be held accountable for that. “There are 225 landlords in the city. It is safe to stay that if they became aware that they might be liable for the debt of a tenant who skipped out… it would generate a lot of attention,” added Philpott. If passed, this new law would affect residential, commercial, and industrial units.

If the municipality passed this law tomorrow, and also got all 225 of these landlords to foot this bill, they’d be looking over $5700 a piece.

City councillor Frank Costa thinks this is a step in the right direction. “Landlords have a collective responsibility to the city to ensure that we are not alone in having to absorb delinquent accounts,” added Costa. “If it is communicated well and there is an education process out there, I think people will recognize the value of this. I think we are giving them notice.”

Fellow councillor Tyler DesRoches disagreed.

“We are not signing up the landlord for the power; we’re signing up their tenant. The landlord has no idea whether or not their tenant is paying on time.”

Coun. Gordie Whitlock owns rental properties and agreed with DesRoches.“If you have a consistent collection policy with a consistent cut off time as to when the final notice is given after there is no attempt to pay, then there is no need for the landlord to be involved whatsoever,” said Whitlock.

Why the city doesn’t consider a more aggressive policy with respect to it’s unpaid bills is a head scratcher. Why the 1.3 million dollars in unpaid bills even occurred in the first place is interesting. The city of Summerside services 6950 customers. It’s reasonable to expect this utility to manage its accounts better. That’s their job! If they can’t wrap their heads around it, as a municipality supported for profit organization, how do they expect the small city’s 225 private landlords to be any better? Why should the city’s landlords accept this? How would the city’s landlords manage this any better? Are they to open their mail? How would landlords manage this as a new issue? Is not paying your electrical bill immediate grounds for an eviction? How many chances would someone get to settle up their electricity bill? This seems like a remarkably short sighted, objective ignoring, illogical, precedent setting idea. Utilities can and do ask for deposits in advance, engage collection agencies, cut off service and sue the tenants. Landlords have to wait until the tenants move out and then initiate a small claims suit at their own expense. What this whole idea represents is a desire to see electrical utility delinquencies at zero, improving the cash position of the municipality, at the overall expense of the landlord.

Time to go back to the well, city councillors.

Perfect Storm For Landlords in Alberta

The slow down in the oil patch is affecting Alberta’s major city residential landlords. Seriously. The market was once quite hot. Now…not so much. CBC reported a doubling of the vacancy rate late last year.

Edmonton is a renter’s paradise right now. Economic slowness, coupled with more supply than demand in terms of available units, has flexed adversity on Alberta’s landlords. Vacancy rates have increased steadily since last year, and now range from six to eight per cent, depending on property type. The average rent in Edmonton and the surrounding area has dropped between 10 and 15 per cent from a five-year high in July 2014. This has been forcing landlords to get creative about attracting tenants and signing leases, including free Wi-Fi, amenities, groceries, and even flat screen televisions as part of rental agreements. We touched on this phenomenon in Halifax late in 2013, when landlords there were offering free iPads to prospective tenants.

In Calgary – a city where mayor Naheed Nenshi famously criticized what he considered rent gouging in 2014, things are not that much better. Rents have fallen astonishingly fast. A 20% drop in January of this year from the beginning of 2015. The Calgary Real Estate Board is anticipating that the vacancy rate will rise to 7% by the fall. By the fall of 2017, CMHC expects the vacancy rate in the city to decline back to 5.5 per cent. Calgary’s 2016 civic census revealed that while the city’s population increased slightly to more than 1.2 million in April, more people moved out of the city than arrived here. More than 20,800 units were empty in April, a 67 per cent spike over last year’s levels, which brought the vacancy rate for dwellings to 4.3 per cent, according to the census. According to the Financial Post, the vacancy rate hasn’t been this high since 2004, when the city reported the lowest level of migration in 12 years. A city hall analysis of historical housing data shows there are more vacant units in 2016 than in any of the past 16 years. To put this into perspective, Canada’s national vacancy average for urban centres is 3.3 per cent.

Even rural cities in Alberta have been affected.The Government of Alberta annually conducts the Rural Apartment Vacancy and Rental Cost Survey of multi-family dwellings in Alberta’s rural communities between the months of May and August. This survey does not include cities whose population is more 10,000 people. Vacancy rates have increased and decreased in a cyclical pattern with vacancy in rural Alberta communities being on an upward trend, having risen 3.7 per cent in 2014, up to 8.2 per cent in 2015. Not only are vacancy rates up in general, in a number of communities they are at their highest point since 2006.

Experts say the next big hit to the market could come in the spring, when many leases typically come up for renewal. Not good.

Questions? Comments? Are you a landlord in Alberta? We’d love to hear from you.

Tenant Assured Isn’t What Landlords Need

British data mining startup Score Assured has developed a system that claims to accurately determine a person’s financial and personal worthiness based on their social media reputation and history. The company has plans to market their system to employers and dating services but, for now, called it Tenant Assured, and is focusing on landlords as customers.

This is how Tenant Assured works:

A landlord who’s signed-up with Tenant Assured sends all of their rental applicants to a special link on the Tenant Assured website. They are then asked  to provide full access to up to four of their social media profiles—on Facebook, Instagram, LinkedIn and Twitter. These are then thoroughly crawled, scraped, and analyzed by Score Assured. The scrutiny includes conversation threads, private messages, and contact lists. A report is produced and delivered to the landlord. Landlords makes a decision on whether they want to rent to an individual based on the information provided.

Caitlin Dewey of the Washington Post wrote a piece on voluntarily going through the process herself. She found it uncomfortable. As per the piece:

…It’s not just the amount or detail of data that’s problematic, either. Tenant Assured reports include information such as whether you’ve mentioned a pregnancy and how old you are, which are both protected statuses under U.S. housing discrimination law. 

My personal tenant report includes a list of my closest friends and interests, a percentage breakdown of my personality traits, a list of every time I’ve tweeted the words “loan” and “pregnant,” and the algorithm’s confidence that I’ll pay my rent consistently.

Tenant Assured co-founder Steve Thornhill maintains that his product is a useful tool for landlords. “If you’re living a normal life, then, frankly, you have nothing to worry about.”

Here’s the thing though…we’re firmly of the opinion that being considered as a candidate for a tenancy based on your social media activity is not good business. This is unnecessarily invasive and most importantly feels weird (at least to us). While it’s true that the tenant is voluntarily providing this information, there is no way for them to view their ratings or dispute something they consider to be incorrect. Credit reports and background checks are regulated under federal law in the U.S. and in Canada and have consumer protections built into them. An algorithm that determines whether you’re worthy of an apartment based on your social media activity is not regulated at all. I mean…who doesn’t have a ridiculous tongue and cheek tweet or Facebook status meant in jest or sarcasm? Can algorithm’s detect sarcasm? We live in the age of autocorrect. It would be an understatement to say that this product will more than likely not produce a useful snapshot of a person’s payment reliability and character. We also question whether this is the right way to have a tenancy started off, even if a tenant voluntarily provides this information.

What do you think? Landlords? Do you have any comments? We’d love to hear them!