CRA rent ruling sows tenant confusion in Ontario

Ontario's opposition housing critic is calling on the province and the feds to no longer allow tenants to be held responsible for their landlords' debt to the country.

Last month, the Globe and Mail reported on an unusual case in which the Canada Revenue Agency (CRA) went after a Montreal tenant for his landlord's unpaid taxes. It turns out the tenant was supposed to be withholding 25 per cent of his rent to remit to the CRA, since his landlord was a non-resident. When the CRA couldn't collect from the landlord, the tenant was on the hook.

The feds should change the law — but in the meantime, the province shouldn't let landlords evict tenants for legally withholding part of their rent, NDP MPP Jessica Bell wrote in a letter to Ontario Housing Minister Paul Calandra and Minister of National Revenue Marie-Claude Bibeau.

Bell said she's fielded multiple calls from tenants confused by the ruling.

One tenant said his landlord and the CRA both refused to tell him if his landlord was a non-resident, Bell wrote.

After getting confirmation from the CRA about the 25 per cent rule, "the tenant told the landlord that if he didn’t disclose whether he was paying tax he would have to submit the tax himself. The landlord told the tenant that if he withheld rent, he’d be evicted," she wrote.

It's a situation Bell said is "un-Canadian" and "blatantly wrong."

"Imagine having to risk eviction because your landlord's not paying their fair share of taxes," she told The Trillium in an interview.

The CRA should "work with the federal government to reverse this rule immediately, and not force tenants to pay their foreign landlord’s taxes," and instead focus on collecting taxes from landlords themselves, Bell wrote. 

Instead of penalizing the tenant, the CRA could've put a lien on the landlord's property or collected rent directly from the tenant, said Douglas Kwan of the Advocacy Centre for Tenants Ontario.

There's a role for Ontario to play, too, Bell said. The Ford government should direct the Landlord and Tenant Board (LTB), the provincial tribunal responsible for handling evictions, to deny eviction applications from landlords looking to force out tenants withholding rent in accordance with the law, she said.

That might be tricky, since the LTB is an independent quasi-judicial body, Kwan said.

"They can't really be directed" unless the government changes legislation, he said. 

What would help, aside from the feds changing the rules, is a beneficial ownership registry for Ontario, in which prospective tenants could see who their landlord is and whether they're a non-resident, Kwan said. Bell also called for a registry in her letter.

Kwan, who has been in real estate law for more than 20 years, said it's the first time he's heard of a situation like this. It's unfair because it puts tenants in "significant jeopardy" of being evicted into a brutal housing market they could be priced out of altogether, he said.

"And I think it's something that might be more prevalent because our housing is becoming more financialized, with more non-resident investors owning Canadian property," he said. 

Geordie Dent of the Federation of Metro Tenants' Associations said he's also received calls from confused tenants who aren't sure if their landlord is a non-resident. 

In his view, the only rational thing for those tenants to do is withhold all rent until they're sure of their landlord's residency — though that puts them at risk of eviction, Dent said.

"The federal Tax Court has essentially told tenants, do not pay until you've confirmed your landlord's tax rates," he said. 

"I have no idea what's going to happen to those tenants. They could get an eviction order against them. They could win. Or more likely, this could just end up in a very long and lengthy court process for years," he said.

"This case is a disaster."

If the CRA directs them to withhold rent, tenants should get it in writing, Kwan added.

"I'm also concerned that if media ... reports on it too much, then that might give other (non-resident) landlords the idea that maybe it's a good idea to not pay their taxes, and just put it on the backs of tenants who are already suffering during this housing crisis," he said.

EDITOR’S NOTE: This article originally appeared on The Trillium, a Village Media website devoted to covering provincial politics at Queen’s Park.