When Negotiating a Rent Deferral Is a Tenant Required To Provide Income or Social Benefit Details to the Landlord?

A Tenant Is Without a Duty to Provide Income Details or Social Benefit Details to a Landlord; However, Where a Tenant Does Provide Details the Details Must Be True.
A Helpful Guide For How to Determine What Extent of Good Faith Is Required Between a Landlord and Tenant When Negotiating a Temporary Rent Deferral Because of Covid19

Lease Document The affects of shutting down the economy are sadly felt most by those who could least afford an unexpected lay-off or loss of employment.  Many who struggle and live on a week-to-week basis were caught off guard and are now unable to meet the needs of life without income.  Thankfully employment insurance and the Canadian Emergency Relief Benefit are providing some subsidy; however, for many people these benefits are insufficient.

For those landlords and tenants who are suddenly thrust into the position of needing to discuss shortfalls in rent payments, such presents as an obviously awkward situation.  Generally, aside from receiving timely rent payment, a landlord is without a 'need-to-know' of details regarding the financial situation of the tenant.  However, during Covid19, while a tenant is needing rent relief, there appears certain duties of honesty within such discussions.

The Law

In 2014, the Supreme Court issued a decision in the case of Bhasin v. Hrynew, [2014] 3 S.C.R. 494 which addressed the of good faith, including truthfulness, during the performance of a contract.  Within the decision of the Supreme Court it was said:

[73]  In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith: see Swan and Adamski, at § 8.135; O’Byrne, “Good Faith in Contractual Performance: Recent Developments”, at p. 78; Belobaba; Greenberg v. Meffert (1985), 1985 CanLII 1975 (ON CA), 50 O.R. (2d) 755 (C.A.), at p. 764; Gateway Realty, at para. 38, per Kelly J.; Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533 (C.A.), at para. 69. For example, the duty of honesty was a key component of the good faith requirements which have been recognized in relation to termination of employment contracts: Wallace, at para. 98; Honda Canada, at para. 58.

[74]  There is a longstanding debate about whether the duty of good faith arises as a term implied as a matter of fact or a term implied by law: see Mesa Operating, at paras. 15-19. I do not have to resolve this debate fully, which, as I reviewed earlier, casts a shadow of uncertainty over a good deal of the jurisprudence.  I am at this point concerned only with a new duty of honest performance and, as I see it, this should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.

Per the Supreme Court in Bhasin, it appears clear that the law now imposes, "... a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance."  So what does this mean in the context of a landlord and tenant negotiating a rent deferral arrangement during the Covid19 Crisis?  It would seem the answer is quite simple and is provided in paragraph 73 of Bhasin as, "... a simple requirement not to lie or mislead the other party about one’s contractual performance."  Also stated in paragraph 73 was the explanation that, "This does not impose a duty of loyalty or of disclosure ... ".  Accordingly, it appears that a tenant must be honest when stating details of a difficult financial situation without the requirement of full disclosure.  This duty in law may seem somewhat paradoxical as how does someone refrain from being misleading while also refraining from being fully forthcoming?  As per the Yiddish proverb, "A half truth is a whole lie".

What does seem clear from the Bhasin decision is that any information that the tenant does put forward must be truthful.  If the tenant states that the tenant suffered a lay-off and is unable to pay rent, the tenant must be speaking truthfully about the lay-off.  If the tenant states that the tenant fails to qualify for income subsidy and needs extra-special rent deferral from the landlord, the tenant must be speaking truthfully about the lack of an income subsidy.  Again, per Bhasin, this duty of truthfulness comes without a duty of loyalty or a duty of disclosure.  The tenant is without a requirement to share certain details with the landlord; however, where the tenant does provide details, such details must be true. 

As for consequences for the failure to act in accordance to the duty of good faith with financial disclosures during the Covid19 Crisis, it is unknown how the Landlord Tenant Board, or any appeal courts, will address such a failure.  Perhaps there will be less leniency in decisions that would otherwise provide a tenant with a greater 'break' in consideration for the Covid19 circumstances will occur.  Of course, only time will tell.

Summary Comment

Parties to a contract, such as a landlord and tenant who are parties to a residential lease, owe a duty of honesty in the performance of the contract.  The duty of honesty comes without a duty of loyalty or a duty of disclosure; however, what parties to a contract do disclose to one another must be stated truthfully.

SFG Paralegal Services LLP provides Landlord Tenant Board services for clients located in Richmond Hill, Whitby, Markham, Oshawa, Toronto, among other places.

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