In a case of profit trumping penalty, a Toronto landlord has been fined $75,000 for forcing out long-term tenants under the guise of renovations — money it can recoup in a matter of months thanks to a legislative loophole that allowed the permanent installation of new renters paying three times the price.

The landlord for a lowrise, eight-unit rental building at 795 College St. showed a “blatant disregard” for the Residential Tenancies Act (RTA) when it evicted five tenants from three units for renovations, ignored their requests to return, then put those new units up for rent, the Landlord and Tenant board ruled earlier this month.

But the landlord, a company called 795 College Inc., is “profiting enormously” from flouting the law, wrote board adjudicator Dale Whitmore in a Feb 7. decision.

It was the board that ordered the original College St. tenants out, after the landlord asked to use a piece of rental housing law that allows landlords to evict tenants during renovations, a process advocates have called “renovictions.”

Under the law, landlords must issue tenants an N13 notice, which comes with a written promise that if tenants want back in once work is done they must inform the landlord and will not face increases beyond what they would if they stayed in their homes.

Tenants from three of the eight College St. units have been battling before the board to try and keep their homes. They had previously told the board the law was being used in bad faith, to get and to keep them out. The board ruled against them and so once told to leave they informed their landlord they intended to return. Instead the landlord found new renters and the board, as it turns out, doesn’t have the power to order those people out or get the former tenants back in.

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“There is no doubt that in this matter, the Landlord has shown a blatant disregard for the RTA,” Whitmore wrote, and the company was “well aware” of its duty to the tenants and has “given no explanation for ignoring that obligation.”

In his decision, Whitmore worked out the math for those three units. The former tenants paid $1,250 for the three-bedroom units, he noted, and the new tenants between $4,150 and $4,200 — meaning a monthly profit of about $2,900 per unit. For the three units over a year, the difference amounts to almost $105,000. Minus the fine, that means the landlord can still clear about $30,000 in a year.

Given the profit “vastly exceeds” the fine, he said, if he wasn’t restricted by a $25,000 maximum per unit, a $45,000 per unit fine would be more appropriate.

Aurora Browne was one of five tenants who requested the board fine the landlord for acting in bad faith and issue an order that would result in them gaining repossession of their homes.

“In the grand scheme of things, when you look at the total profit that these guys stand to make, it is probably just the cost of doing business to them,” she said. “I don’t think this will slow down any developer.”

When the Star published the story of 795 College in March, then Liberal housing minister Peter Milczyn pledged to instruct staff to look into this gap in housing law and the New Democratic Party campaigned on eliminating “renovictions.”

Ontario’s new Progressive Conservative government has consulted on ways to improve Ontario’s housing supply and a housing action plan is expected in spring. Input on rental evictions was not specifically sought out, a ministry staff member said when asked about N13s, but input on that issue is in materials being considered.

In a response to questions about Whitmore’s decision, a spokesperson for 795 College Inc. sent an emailed statement:

“Despite the finding in this matter and the significant financial penalty imposed, we have always believed that the Landlord and Tenant Board process is the appropriate place to adjudicate disputes between landlords and tenants and that, through it, issues will be heard in a fair and equitable manner,” Danny Roth said.

“We also continue to believe in the public need for private companies to invest in the city’s urban rental market, and support a system that encourages landlords to invest in market housing, while incentivizing them to make the same financial commitments in the affordable housing sector.”

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The building at 795 College St. was once deeply affordable housing in Toronto’s vibrant Little Italy neighbourhood and the low rent allowed a community of artists, actors and photographers to build lives and careers.

In 2014, the building was sold for $1.5 million to 795 College Inc. The directors are Evan Johnsen and Neil Spiegel, co-founders of Circa, a development company that transforms lowrise buildings and older homes into luxury condominiums. The tenants were offered $4,800 to leave voluntarily and those who were ordered out were later paid three months rent as required by law.

The N13 notices came in late 2016. The tenants told the landlord and Briarlane Rental Property Management Inc., the property manager for the building, they intended to return. Johnsen told one tenant, not among the five, that returning is “quite frankly, something that is not going to happen,” and his son would be moving in. “It’s no secret that the rent you were paying there was well below what that space was worth and I’m not going to try to pretend that that’s not part of the story that’s evolving here, because obviously it is,” he said, based on a transcription of a December 2016 phone call submitted to the board.

The five tenants named in the case were out by summer 2017. By November, the tenants were back at the board because people were seen inside their homes. They got an interim order that would force the landlord to not rent out their apartments but, as Whitmore noted, by that point the units were filled.

Despite the evidence, Whitmore wrote, rental housing law doesn’t equip him with the power to get the tenants back their homes, whether empty or full.

“I can only conclude that, where a landlord is found to have terminated a tenancy in bad faith or failed to afford a right of first refusal, the Legislature did not intend reinstatement of the tenancy to be an available remedy,” Whitmore wrote. Any potential remedies are “the exclusive province of the Legislature,” he said.

Whitmore ordered 795 College Inc. to pay $75,000 in administrative fines to the board by April. The fine is meant to deter landlords from breaking the law. The money is not awarded to the tenants.

There is a process where the former renters can apply to get back some rental costs incurred over the year. Board orders can be appealed within 30 days of notice.

Browne said they hope highlighting the glaring hole in the law will result in better protections for tenants, although she is not optimistic.

“I hope that any other tenant facing this situation points with a huge red flag to this ruling and any N13s are stopped until this is dealt with in the Legislature,” Browne said. “I just don’t know if this is going to slow any of this down.”

Raising the rent in any building in Toronto opens up another avenue for profit. Owners of luxury rental buildings can apply to convert to condominiums if the rent is 1.5 times the average market rent as reported by the Canada Mortgage and Housing Corporation. The landlord for 795 College would qualify but has not applied, city staff confirmed. Any application would go to city council.

While the LTB manages disputes and issues fines, higher penalties are possible through provincial court. Ontario’s Rental Housing Enforcement Unit has charged 795 College Inc. with three counts of Failing to Afford a Tenant a Right of First Refusal. Each count could mean a $100,000 fine. A hearing is scheduled for August.

Toronto Councillor Mike Layton has asked the city solicitor to see what can be done to provide support during that hearing.

“We need to send a strong message that the city will intervene,” Layton said, in cases where despite a clear abuse of the law “hands are tied at the board.”