LD23-363

Landlord application · rent increase. Outcome: granted. A. The maximum allowable rent for the Residential Property is: Unit Rent Effective Date 1 $1,075.30 August 1, 2023

Order text

Orders of the Director of Residential Tenancy
Docket 23-335 July 28, 2023
Introduction
[1] On April 28, 2023 the Landlord filed a Landlord Application to Request Additional Rent Increase (Form 9) with the Residential Tenancy Office (the “Rental Office”), pursuant to subsection 50.(1) of the Act (the “Application”). The Landlord is seeking a rent increase for the Residential Property exceeding the allowable percentage established by subsection 49.(4) of the Act for 2023. The Application indicates that the current rent, proposed rent and effective date for the proposed increase is as follows:
Unit Current Rent Proposed Rent Effective Date 1 $1,044.00 $1,075.30 June 1, 2023
[2] On July 7, 2023 the Landlord submitted into evidence the Landlord Statement of Income and Expenses (Form 10) (the “Statement”).
[3] On July 11, 2023 a teleconference hearing was held before a Residential Tenancy Officer (the “Officer”). The Landlord’s representative participated.
Issue to be Decided
i. Is the Landlord permitted to increase the Residential Property’s rent as requested in the Application?
Summary of the Evidence
[4] The Landlord purchased the Residential Property in 2014. The Application includes 1-unit in a 4- unit building. The Landlord provided documentary evidence to support the Statement and the Application.
Landlord’s Evidence and Submissions
[5] The Landlord disclosed his income and expenses for the Residential Property. The expenses disclosed are 1/4th the total expenses to represent the rental unit for the Application. The value of the Residential Property is $117,050.58.
Tenant’s Evidence and Submissions
[6] The Tenant did not participate and did not provide any submissions or testimony at the hearing.
Adjustments to the Statement
[7] The Officer’s adjustments to the income and expenses are provided below.
1. [Line 12 – Management fee]
The Landlord claims $1,500.00 in the Statement for management fees. However, the Officer notes that subsection 1.(c) of the Residential Tenancy Act – Regulations states:
Definitions “management fee” means the actual cost of the management fee or 5 per cent of the gross rental income for the precious year, whichever is the lesser.
The Officer finds that the disclosed amount on the Statement is above 5%. Therefore, the Officer adjusts line 12 to 5% of the gross rental income.

Orders of the Director of Residential Tenancy

[8] The adjusted calculations to the Statement can be found in Appendix “A” of this decision.
Analysis
[9] The factors for reviewing rent increases above the allowable percentage are set out in subsections
50.(3), (4) of the Act and section 4 of the Residential Tenancy Regulations (the “Regulations”) which state:
Factors (3) The Director shall consider the following factors, as applicable, in deciding whether to approve an application for a rent increase under subsection (1):
(a) the rent history for the affected rental unit in the three years preceding the date of the application;
(b) a change in operating expenses and capital expenditures in the three years preceding the date of the application that the Director considers relevant and reasonable;
(c) the expectation of the landlord to have a reasonable return on the landlord’s capital investment;
(d) the expectation of the tenant that rent increases will remain within the annual guideline.
Other factors (4) The Director may also consider (a) any other factor considered relevant by the Director; and (b) any other factor prescribed in the regulations.
Request for additional increase
4. For the purposes of clause 50(4)(b) of the Act, the Director may also consider that the purchase of a residential property should not require an increase of rent within the first year in order to achieve a reasonable return on the landlord’s capital investment. (EC269/23).
[10] The Officer is bound to consider the factors set out in the Act and the Regulations. What is not included in the list of factors to be considered is whether increases are warranted because the current rents are below comparable market rents, a submission frequently made by landlords.
Further, the Officer does not consider the financial hardship of the tenants, a submission frequently made by tenants.
[11] With regard to sub-subsection 50.(3)(a) of the Act the Officer finds that the Landlord submitted into evidence the tenancy agreements for the affected rental unit for the past three years, which show the rent history.
[12] With regard to sub-subsection 50.(3)(b) of the Act the Officer finds that the Landlord’s operating expenses have increased over the past three years.

Orders of the Director of Residential Tenancy

[13] With regard to sub-subsection 50.(3)(c) of the Act the Officer finds that after the adjustments, the Landlord is yielding a 4.2% return on investment. After considering the proposed increase and the adjustment to the Statement, the Landlord’s return on investment would increase to 4.5%.
[14] With regard to sub-subsection 50.(3)(d) of the Act the Officer finds that the Tenant did not provide any submissions or evidence as it relates to this factor.
[15] With regard to section 4 of the Regulations the Officer finds that this section does not apply to the Application.
[16] The Officer finds that based upon all the factors set out in the Act and the Regulations that the Landlord is entitled to a rent increase. The Landlord’s operating expenses have increased and with the proposed increase, the Landlord would see a reasonable return on his investment. Therefore, the Application is allowed.
Conclusion
[17] The Application is allowed.
[18] The Officer notes that this decision contains sensitive information of the Landlord and that the parties are required to preserve its confidentiality pursuant to subsection 75.(3) of the Act.
IT IS THEREFORE ORDERED THAT
A. The maximum allowable rent for the Residential Property is:
Unit Rent Effective Date 1 $1,075.30 August 1, 2023
DATED at Charlottetown, Prince Edward Island, this 28th day of July, 2023.
(sgd.) Cody Burke Cody Burke Residential Tenancy Officer

Orders of the Director of Residential Tenancy

APPENDIX “A” Revised Statement of Income & Expenses (Form 10) Period "A" Proposal Allowed Rental Income Income (Line 1) $12,508.00 $12,903.60 $12,903.60 Arrears (Line 4) $0.00 $0.00 $0.00 Net Income (Line 5) $12,508.00 $12,903.60 $12,903.60 Expenses 1st Mortgage (Line 6) $0.00 $0.00 $0.00 2nd Mortgage (Line 7) $0.00 $0.00 $0.00 Fuel (Line 8) $2,629.80 $2,629.80 $2,629.80 Water & Sewer (Line 9) $311.02 $311.02 $311.02 Electricity (Line 10) $0.00 $0.00 $0.00 Insurance (Line 11) $460.50 $460.50 $460.50 Property Tax (Provincial) (Line 12) $1,048.25 $1,048.25 $1,048.25 Property Tax (Municipal) (Line 13) $953.91 $953.91 $953.91 Management Fee (Line 14) $625.40 $645.18 $645.18 Maintenance Fee (Line 15) $562.86 $562.86 $562.86 Capital Expenditures (Line 16) $287.50 $287.50 $287.50 Other (Line 17) $708.94 $708.94 $708.94 Total Expenses $7,588.18 $7,607.96 $7,607.96 Annual Net Profit $4,919.82 $5,295.64 $5,295.64 Value of Investment $117,050.58 $117,050.58 $117,050.58 Net Profit $4,919.82 $5,295.64 $5,295.64 Return on Capital Investment 4.2% 4.5% 4.5%
NOTICE
Right to Appeal
This Order can be appealed to the Island Regulatory and Appeals Commission (the “Commission”) by serving a Notice of Appeal with the Commission and every party to this Order within 20 days of this Order.
If a document is sent electronically after 5:00 p.m., it is considered received the next day that is not a holiday. If a document is sent by mail, it is considered served on the third day after mailing.
Filing with the Court
If no appeal has been made within the noted timelines, this Order can be filed with the Supreme Court of Prince Edward Island and enforced as if it were an order of the Court.