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Civil Litigation

Landlords cannot charge potential renters for application

Some Toronto landlords may be taking advantage of desperate renters by illegally charging money just to apply for an apartment, says Toronto civil litigator Patricia Virc.

“The law is very clear that you cannot ask for money during the application process,” says Virc, a lawyer with Steinberg Title Hope & Israel LLP.

She tells AdvocateDaily.com that it’s important for renters to know they don’t have to pay any money until they've signed a tenancy agreement.

Toronto’s tight rental market may make people a little more willing to do whatever is asked of them — like fork over $2,000 during the application phase, as Virc’s two sons did recently.

The two men, 22 and 19, found a place they were interested in and filled out the rental application. They were then asked to pay $2,000, which they did.

The pair kept looking for other apartments and eventually found one they liked before hearing back from the first place. When they asked for their money back, they were told they could pick up a cheque — less $250, which represented an administration fee. Virc’s son was also asked to sign a document acknowledging “rescission.”

Virc, who accompanied her son to pick up the cheque, refused to sign and argued there was no contract in place to rescind.

She took the $1,750, walked out and prepared a written response to the company, saying. “As you undoubtedly know, it is illegal to charge tenants an application fee or to apply a rental deposit to anything but rent.”

She cited sections of the Residential Tenancies Act, which states. “the only security deposit that a landlord may collect is a rent deposit …” but only if a tenancy agreement has been signed. She noted the offences “are punishable by a fine of $25,000 in respect of an individual and $100,000 in respect of a corporation.”

The company promptly returned the outstanding $250.

Given her sons’ experience, Virc isn’t surprised by the results of a Radio-Canada hidden-camera investigation that allegedly caught several Toronto landlords demanding cash during the application process, according to a CBC story.

Radio-Canada visited 10 apartment buildings across the city. In four cases, real estate companies asked for payments from $200 to $3,000 just to provide a rental application form, alleged the CBC.

The apparent pressure tactics are happening as the condo apartment vacancy rate sits at just one per cent in Toronto, the lowest it has been in seven years, according to the Canada Mortgage and Housing Corporation.

Virc says some landlords are taking advantage of the situation. She suspects many people pay whatever is asked of them and then just accept it if some of the money is held back

“How many people are going to know that this is not legal and then be willing to challenge them over it? Nobody is going to hire a lawyer to recover $250 and nobody is going to go to small claims court for it. It took more than $250 of my time to draft that letter.”

Virc is especially concerned with the company’s claim that the process “had been vetted by their lawyers.”

“That gives the impression that this was legal, but it’s not and their lawyers should have known that. I believe they consulted with lawyers when they prepared this document and I believe it was done to dupe as many people as possible into believing that it was legitimate for them to keep a rental application fee.”

Virc says it probably works in many cases.

“If you steal $250 from enough people, it really starts to add up,” she says.

The bottom line is that no money should change hands until there’s a tenancy agreement. Virc says the courts have also been very clear on that, including in this Ontario Court of Appeal case.

“They should not have to pay to submit their rental application, that should be a red flag because it’s illegal,” says Virc.

She says renters should also know that landlords can’t ask for a damage deposit.

“They're permitted to bill you for repairs if you damage the property, but they can’t ask for a damage deposit up front. If you don't want to pay it, maybe they won't rent to you but it's illegal for them to do that and if the regulator became involved, they could possibly be fined for asking,” explains Virc.

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