Executive Summary: Key Legal and Evidentiary Issues

• Landlords Eun Hee Park and Sang Hun Cho appealed a Landlord and Tenant Board order finding they collected and retained money in contravention of the Residential Tenancies Act, 2006.
• Central to the appeal was whether a $4,900 payment written into an N11 early termination agreement constituted a prohibited fee, penalty, or last month's rent deposit under the Act.
• Collection of a $1,000 pet deposit and a $100 key deposit were found to be fees not permitted under the Act.
• Retention of rent for the full month of September 2024, beyond the agreed termination date of September 15, 2024, was found to violate the Act's prohibition on collecting rent after a tenancy ends.
• The standard of review on appeal was correctness, as the appeal was limited to questions of law under s. 210 of the Act.
• Existing Board case law confirmed that payments required as settlement for early lease termination are not permitted under the Act.

Facts of the case

The appellants, Eun Hee Park and Sang Hun Cho, are landlords who entered into a tenancy with respondent Jessica Anelli beginning September 15, 2023 and ending August 31, 2024, at a monthly rent of $4,600. On June 3, 2024, the parties signed a new one-year lease running from August 31, 2024 to August 31, 2025, with rent increased to $4,900 per month. On July 31, 2024, the tenant advised the landlords that she wished to vacate the unit on September 30, 2024 due to a change in personal circumstances. On August 30, 2024, the parties executed an N11 agreement — a Board-provided form — terminating the tenancy on September 15, 2024. That agreement included a term, written in by the parties, requiring the tenant to pay the landlords $4,900, described as equivalent to one month's rent and payable "as a penalty for the early termination of a one-year lease."

The tenant subsequently brought an application to the Landlord and Tenant Board under s. 135 of the Act, alleging the landlords had collected or retained money illegally — specifically, excess rent, an illegal pet deposit of $1,000, a refundable key deposit of $100, and a last month's rent deposit. The Board found in the tenant's favour and ordered the landlords to repay a total of $8,807.13. The landlords' request for review was dismissed on September 9, 2025, with the Board finding no serious error in the original order. The landlords then appealed to the Divisional Court.

Statutory and contractual provisions at issue

Several provisions of the Residential Tenancies Act, 2006 were directly engaged. Section 134(1)(a) expressly prohibits landlords from collecting or requiring a tenant to pay any "fee, premium, commission, bonus, penalty, key deposit or other like amount of money whether or not the money is refundable." Section 17 of Ontario Regulation 516/06 sets out limited exemptions to this prohibition, none of which applied on the facts. Notably, s. 17(3) exempts a refundable key payment, but the key deposit here was not refunded. Section 17(6), which exempts payments made in settlement of a court action or Board application, also did not apply — there was no evidence the landlords intended to bring any such application, and the N11 itself described the $4,900 as a "penalty." Section 106(10) of the Act limits the use of a rent deposit strictly to the last rent period. Section 134.1(1.1) prohibits a landlord from collecting rent for any period after the tenancy has ended and the tenant has vacated.

Court's reasoning and analysis

The landlords argued primarily that the Board mischaracterized the $4,900 payment, contending it was mutually agreed-upon consideration for the early termination of the lease rather than an unlawful fee. The court rejected this argument. While it acknowledged the Board did not expressly address the landlords' settlement characterization, it found the Board was clearly aware the parties had entered an early termination agreement and was taken to know that, under s. 3(1) of the Act, the legislation applies "despite any agreement or waiver to the contrary." The court also noted existing Board precedent — Campbell Spence v. Robinson, 2025 ONLTB 78499, and Serruya v. Libfeld, 2024 ONLTB 5833 — holding that a payment required as settlement for early lease termination is not permitted under the Act. Because the N11 itself labelled the payment a "penalty," and because the tenant had already paid a last month's rent deposit prior to the N11, the Board did not err in finding the $4,900 could not be retained.

On the remaining issues, the court found no error in the Board's treatment of the pet and key deposits, both of which fell squarely within the prohibitions of s. 134(1)(a). The landlords also conceded they may have increased the rent in error and did not contest that finding. As for the excess rent retained for the second half of September 2024, the court found the landlords had collected rent beyond the agreed termination date of September 15, 2024, in violation of s. 134.1(1.1). The court further held that the Board is not required to expressly address every piece of evidence before it, and that disagreements with the Board's weighing of evidence raise only factual questions, not errors of law.

Ruling and overall outcome

The Divisional Court dismissed the appeal. The respondent tenant, Jessica Anelli, was the successful party. The court upheld the Board's original order requiring the landlords to repay a total of $8,807.13 to the tenant. On the question of appeal costs, the tenant had claimed over $2,000 but was self-represented and provided neither a bill of costs nor supporting documentation; accordingly, no costs were ordered by the Divisional Court.