For new Canadians, purchasing a first property is sometimes the fulfilment of the dream of a better life. But a group of buyers in a Cambridge, Ont., townhouse project are warning that an obscure section of Ontario tenant law can turn that dream into a nightmare.
“All the things went wrong. Nothing went right,” said Roland Shehaj, who bought a three-bedroom condo townhouse on Parkview Crescent in Cambridge Ont., in 2022. What he soon found out was that, because the townhouse was part of a complex that had been converted from purpose-built rentals to condominiums, he was not going to be able to move in so long as the tenants he inherited wanted to stay. “I have a cousin who’s sort of a paralegal. He said, ‘You’re screwed.’”
Mr. Shehaj graduated from Albania’s University of Tirana in 2009 and went to work for a NATO contractor as an IT specialist on military bases in Afghanistan. He worked with Canadian soldiers and in 2014 applied to work in this country, landing in Alberta and eventually moving to Ontario with his girlfriend. The couple started a family, and in 2020 Mr. Shehaj became a citizen. In April, 2022 near the peak of a frenzied real estate market, he paid $485,000 for a townhouse that he now finds his family can’t legally occupy. The family of five is still paying $2,000 a month for a two-bedroom apartment in Mississauga while also paying $2,100 a month for the townhouse mortgage, rent from which is just $1,300, or less than one-third of his costs. “There’s no way out,” he said. “I’m obligated to be liable for something I don’t want.”
Experts agree Mr. Shehaj is in a bind. In most cases, an owner of a tenanted property can use sections 48 or 49 of Ontario’s Residential Tenancies Act to obtain a so-called “landlord’s own-use” or N12 eviction order. But a rarely-used section of the act, section 51, blocks own-use evictions and permanently protects the tenure of tenants who have been in place through such a condominium conversion. (The section only applies to condos converted after 1998, and to buildings that were rentals before 1986).
Sec. 51 is so arcane even specialists in landlord-tenant law have rarely seen a case rely on it.
“I can say in my career I’ve never seen it personally,” said Ryan Hardy, staff lawyer for the Advocacy Centre for Tenants Ontario, who could find only find two references in the CANLII legal database where it had ever been cited.
Mr. Shehaj hadn’t seen it either, but the agreement of purchase and sale (APS) that he signed is not a standard document. It has language that shows the sellers understood the import of Sec. 51 and disclosed its potential application to the Parkview towns. “The buyer acknowledges and agrees to: (i) understanding section 51 (1) of the Residential Tenancies Act … and (iii) assume the tenant on closing,” the purchase agreement reads.
The same thing happened to at least two other buyers who bought townhouses on the same block at the same time and who also signed an APS without fully understanding the import of Sec. 51. Those buyers accept that they signed, but still feel misled by their real estate agent and by the seller, Muse Properties Limited Partnership.
Almas Ilyas is an insurance underwriter who has worked for a half-dozen Canadian insurance and financial institutions since the mid-1990s after graduating from Karachi University in Pakistan. She had been looking for a home she could afford when a realtor she knew, Muhammed Nadeem with IQI Global Real Estate Ltd., approached her with what seemed like a great deal.
“This agent is personally known to me, I found him trustworthy,” she said. “I do not fully understand the whole process of the sale; I did it on a trust basis.”
Now she wonders if that trust was well placed and whether he understood the consequences of Sec. 51. She said Mr. Nadeem encouraged her to sign an assignment contract where she took over the purchase of one Parkview unit from Nasim Khan and Asif Khan, part of which was an agreement to pay an extra $50,000 above the Khan’s original $475,000 purchase price. Sec. 51 is mentioned in the APS Ms. Ilyas agreed to take over.
Because there was a tenant in the unit she purchased, Ms. Ilyas recently moved into a townhouse – but not the one she bought. “I used to pay $1,700 in rent and now I’m paying $900: I’m living in a room in a townhouse basement,” she said. “The [Parkview] mortgage is $2,900; I’m paying too much money. I don’t think I’ve been treated fairly.”
When his first deal was shifted onto Ms. Ilyas, Asif Khan worked with Mr. Nadeem to purchase a different unit on Parkview Crescent with four bedrooms. It also came with a tenant he now understands had Sec. 51 protections.
“We talked with him [Mr. Nadeem]: ‘This clause you never tell us!’ He said he also never know that, he never know that,” said Mr. Khan, a retired security supervisor, who has been unable to reach Mr. Nadeem in recent days. He is also continuing to rent while paying almost $2,400 for the mortgage on the Parkview townhouse (his tenant’s rent is just $1,200).
Mr. Nadeem did not respond to Globe attempts to contact him.
In all three cases, the seller at Parkview was Muse Properties, a holding company with two directors: entrepreneur Kartik Ganatra and Ryan Giles, a real estate salesperson with Revel Realty in Grimsby. Both men declined to comment on the record when reached by The Globe.
Because Mr. Giles was a co-owner and a registered realtor, a standard Ontario Real Estate Association disclosure form was added to the Parkview purchase agreements that requires a “full disclosure of all the facts within my knowledge that affect or will affect the value of the property.” Mr. Giles disclosure is one sentence long and reads: “To the best of my knowledge and belief, I don’t know anything that will affect the value of the property.”
The Parkview buyers argue the presence of un-evictable tenants has devalued the condo units they purchased.
“This is pretty relevant information – you’re supposed to disclose all of those things,” said Brian Madigan, a former lawyer and realtor with Re/Max West Realty Inc who has frequently been called as an expert witness for client-agent legal disputes. He argues that even though another section of the APS includes a written disclosure about Sec. 51, Mr. Giles’s ethical duty as a realtor is clear. “You’ve gotta step up to the plate. In a case where you said you didn’t know anything? No that’s not good enough,” Mr. Madigan said.
Though Mr. Ganatra and Mr. Giles didn’t respond, a lawyer representing them – David Ionico partner with McHugh Whitmore LLP – e-mailed a statement in response to questions about their Sec. 51 disclosures.
“There was full transparency regarding the tenancies to ensure the rights of tenants were protected and purchasers were aware of same,” Mr. Ionico. “Additionally, purchasers were independently represented by their own real estate agents and lawyers and received advice from such professionals. Muse Properties has not heard from any purchasers in this regard since the sales closed.”
For the buyers, even a year later they still feel trapped and desperate.
“I understand I made a mistake,” said Mr. Shehaj, who has tried and failed to sell his unit for a price that won’t ruin him. “This thing is not resolvable by any means.”
Editor’s note: A previous version of this article incorrectly referred to Brian Madigan as a lawyer. He is a former lawyer. This version has been updated.