When a landlord ends a tenancy under certain grounds — including owner’s use, purchaser’s use, demolition, conversion, and renovation — the Residential Tenancies Act requires the landlord to compensate the tenant for the displacement. Understanding what is owed, when it is owed, and what happens if you do not pay it is essential.
When Compensation Is Required
Compensation is required whenever an N12 or N13 is served. An N12 for owner’s use or purchaser’s use requires one month’s compensation. An N13 for renovation or demolition requires three months’ compensation. These amounts are calculated based on the tenant’s current monthly rent.
When It Must Be Paid
The compensation must be paid on or before the termination date stated in the notice. You cannot pay it after the fact and have the notice remain valid. Failure to pay compensation by the termination date can void the notice and require the entire process to restart.
Who Pays in a Sale
When the N12 is served on behalf of the purchaser, the purchase agreement should specify whether the vendor or purchaser is responsible for paying the one month’s compensation. This is a negotiable term in the APS and should not be left ambiguous — disputes over who pays compensation have derailed closings.
Bad Faith Penalties
If a landlord receives vacant possession through an N12 and then does not actually use the property as represented — instead re-renting it to a new tenant at a higher rate — the former tenant can file a T5 application. A successful T5 can result in up to 12 months’ rent being awarded to the former tenant as compensation for bad faith.
Right of First Refusal for Renovations
When a tenant is displaced under an N13 for renovation, they have the right of first refusal to return to the unit after the work is completed at the same rent they were paying before. This right must be honoured, or the landlord faces additional liability.
What Comes Next
Stonegate assists Ontario landlords with N12 and N13 compliance including compensation obligations. Book a free call at https://calendly.com/stonegatelegalservices/20min.
▶ Watch: Tenant Relocation When Landlords Sell: Understanding Your Rights
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