Focus On

LANDLORD AND TENANT RELATIONSHIP - Privity of contract

Thursday, June 06, 2019 @ 8:37 AM  


Lexis Advance® Quicklaw®
Appeal by the plaintiffs from a decision confirming a Master’s decision dismissing the appellants’ claim against the respondent and from the costs award. The appellants were tenants in a mixed-use condominium development operated by the respondent. Each appellant received residential rental subsidies from the respondent. The appellants made serious allegations against the respondent of mismanagement of records and financial impropriety and claimed that the respondent was overcharging them rent that exceeded the maximum rent that it could charge plus electricity charges and that the overcharging was in direct violation of an Operating Agreement between the respondent and Canada Mortgage and Housing Corporation (CMHC). For 40 years, CMHC monitored the operation of the condominium and received audited financial statements. Not once did CMHC raise an issue regarding the respondent’s compliance, or lack thereof, with the Operating Agreement. The chambers judge held that the appellants did not have privity in respect of the Operating Agreement and that it therefore did not apply to the appellants’ residential tenancy agreements. The chambers judge did not interfere with the master’s exercise of discretion in awarding the respondent enhanced costs and awarded the respondent costs on a party-party scale.

HELD: Appeal dismissed. The Master made no error in his findings of fact or the interpretation of the intention of the parties to the Operating Agreement. The chambers judge’s finding that this was not a case where the doctrine of privity should be ignored and that the appellants could not enforce the terms of the Operating Agreement against the respondent did not warrant appellate intervention. The Operating Agreement and the residential tenancy agreements in this matter were two different contracts, neither of which made specific mention of the other. The Operating Agreement did not purport to give benefits to persons who were not party to the Agreement and did not create an agency or trust which might be relevant and lend to granting an exception to the doctrine. There was no provision for the enforcement of the Operating Agreement by the appellants as tenants. The remedy for failing to comply was only exercisable by the parties themselves. The appellants’ tenancy agreements were complete and functional without any necessity of incorporating the argued-for terms from the Operating Agreement. Contrary to the appellants’ assertions, the respondent was not double-charging the appellants for utilities and other service fees. The total rent was calculated based on the basic rent, being 30 per cent of income subject to minimum rent, plus utilities. In this way, the rent included the utilities as per the residential tenancy agreements. The court declined to disturb the costs awards previously imposed by the Master and the chambers judge because the exercise of their judicial discretion was neither unreasonable nor based on an error in principle.

Liu v. Calgary Chinatown Development Foundation, [2019] A.J. No. 487, Alberta Court of Appeal, B.K. O'Ferrall, F.L. Schutz and J. Antonio JJ.A., April 26, 2019. Digest No. TLD-June32019011