LD26-134

Application · rent increase. Outcome: granted. The evidence supports a 5.0% rent increase for the Units, effective as set out below.

Linked prior order: LR25-31

Order text

Order of The Director of Residential Tenancy
Docket 25-1029 April 28, 2026
INTRODUCTION
[1] This decision addresses 12 applications filed with the Residential Tenancy Office (the “Rental Office”) under the Residential Tenancy Act (the “Act”).
[2] The Landlord is requesting a 5.0% rent increase, which is 3.0% above the 2026 guideline of 2.0%.
DISPOSITION
[3] The evidence supports a 5.0% rent increase for the Units, effective as set out below.
BACKGROUND
[4] The Units are 12 apartments in an 18-unit apartment building (the “Residential Property”) that the Landlord has owned since 2023.
[5] On November 28, 2025, the Landlord served the Tenants 12 Form 8 Notice of Annual Allowable Rent Increases and 12 Form 9 Landlord Application to Request Additional Rent Increases (the “Applications”). The Landlord also filed the Applications with the Rental Office on November 28,
2025.
[6] The current rents and proposed rents are as follows:
Unit Current Rent Proposed Rent 1 $977.99 $1,026.89 2 $1,006.63 $1,056.96 3 $986.17 $1,035.48 4 $975.94 $1,024.74 6 $852.16 $894.77 8 $983.10 $1,032.26 9 $950.00 $997.50 12 $954.00 $1,001.70 13 $961.62 $1,009.70 14 $993.33 $1,043.00 16 $975.94 $1,024.74 18 $986.17 $1,035.48
[7] On December 17, 2025, the Rental Office sent the parties notice of a teleconference hearing scheduled for February 10, 2026.
[8] On February 3, 2026, the Rental Office sent the parties a 634-page PDF evidence package via TitanFile.
[9] On February 10, 2026, the Landlord’s representative (the “Representative”) participated in a teleconference hearing. The Representative confirmed receipt of the evidence package and that it included all of the Landlord’s materials. No Tenants participated in the teleconference hearing or submitted any evidence.
[10] Between March 3 and March 18, 2026, the Landlord submitted additional evidence (18 PDF documents and 17 spreadsheets), which included an amended Form 10 Landlord Statement of Income and Expenses (the “Statement”).

[11] On April 13, 2026, the Rental Office shared the Landlord’s additional evidence with the Tenants via TitanFile, with a response deadline of April 20, 2026. No further submissions were received from the parties after April 20, 2026.
ISSUE
A. Does the evidence support additional rent increases above the 2026 annual allowable guideline?
ANALYSIS
Additional Rent Increase – Factors to Consider
[12] I must consider the following factors in subsection 50(3) of the Act:
1. The rent history for the Units in the three years preceding the date of the Applications;
2. A change in operating expenses and capital expenditures in the three years preceding the date of the Applications that I consider relevant and reasonable;
3. The expectation of the Landlord to have a reasonable return on its capital investment; and
4. The expectation of the Tenants that rent increases will remain within the annual guideline.
[13] Subsection 50(4) states that I also have the discretion to consider any other factor or any factor prescribed in the Residential Tenancy Regulations (the “Regulations”). The Regulations state that I may also consider that the purchase of a residential property should not require an increase in rent within the first year to achieve a reasonable return on the landlord’s capital investment. I find this factor does not apply because the Landlord purchased the property in 2023.
Clause 50(3)(a) – rent history for the affected rental units
[14] Clause 50(3)(a) requires that I consider the rent history for the Units in the three years preceding the date of the Applications.
[15] In 2023, the allowable rent increase was 0.0%. On January 1, 2024, each Unit’s rent was increased by the 3.0% allowable rent increase for 2024. On January 1, 2025, each Unit’s rent was increased by the 2.3% allowable rent increase for 2025.
[16] The evidence presented establishes that the Units have not received additional rent increases above the annual guideline in the three years preceding the Applications.
Clause 50(3)(b) – change in operating expenses and capital expenditures
[17] Clause 50(3)(b) requires that I consider a change in operating expenses and capital expenditures in the three years preceding the date of the Applications that I consider to be relevant and reasonable. The Landlord provided the operating expenses for the past three years in the Statement.
[18] Each claimed expense was supported by testimony and documentary evidence, including statements, invoices, and spreadsheets, which corroborate the amounts. I find that the Landlord’s operating expenses are reasonable and supported by the evidence. The Landlord’s total operating expenses have increased each year.
[19] The Landlord did not list the municipal taxes in the two-year-ago column, as the Landlord was unable to obtain this information from the previous landlord.

[20] The Landlord provided the income and expenses for the entire Residential Property in the Statement. However, since the Landlord is only seeking rent increases for 12 of the 18 units, I find it reasonable to use only the income attributable to the 12 Units and to allocate expenses proportionally at two-thirds (12/18) of the Residential Property’s total expenses.
[21] I am satisfied that this approach fairly reflects the portion of the Residential Property that is the subject of these Applications, as no evidence was provided indicating that the Units differ materially from the remaining units with respect to the expenses.
[22] Other than the adjustments below, I accept the Landlord’s evidence regarding the Statement. The adjusted Statement is set out in Appendix “A”.
Adjustments to the Statement
[23] Income
a. Line 1 (Rental income): The Landlord claimed $208,720.46. Based on the rental income attributable to the Units, this line is adjusted to $139,236.60 in the current column and $146,198.64 in the proposed column.
b. Line 2 (Other income): The Landlord claimed $3,571.11, which the Representative stated was for laundry and parking. This is adjusted to $2,356.93 to reflect 2/3 of the income.
c. Line 3 (Less vacancy/Arrears loss): The Landlord claimed ($3,155.66). This is adjusted to ($2,082.74) to reflect 2/3 of the loss.
[24] Expenses
a. Line 5 (Interest payments on first mortgage): The Landlord claimed $110,011.01. This is adjusted to $72,607.27 to reflect 2/3 of the expense.
b. Line 7 (Fuel): The Landlord claimed $18,000.97. This is adjusted to $11,880.64 to reflect 2/3 of the expense.
c. Line 8 (Water/Sewerage): The Landlord claimed $4,675.84. This is adjusted to $3,086.05 to reflect 2/3 of the expense.
d. Line 9 (Electricity): The Landlord claimed $3,400.41. This is adjusted to $2,244.27 to reflect 2/3 of the expense.
e. Line 10 (Insurance): The Landlord claimed $8,240.84. This is adjusted to $5,438.95 to reflect 2/3 of the expense.
f. Lines 11/12 (Provincial/Municipal property tax): The Landlord added lines 11 and 12 together and claimed $28,033.14. This is adjusted to $18,501.87 to reflect 2/3 of the expense.
g. Line 13 (Island Waste Management fees/additional garbage disposal): The Landlord claimed $4,703.66. This is adjusted to $3,104.41 to reflect 2/3 of the expense.
h. Line 14 (Property management fees): Clause 1(c) of the Regulations defines
“management fee” as the actual cost of the management fee or 5.0% of the gross rental income for the previous year, whichever is the lesser. Accordingly, the allowable amount is capped at the lesser of these two values, regardless of the Landlord’s actual expense.

i. The Landlord claimed $10,451.80, which the Representative stated was 5.0% of
the Residential Property’s gross rental income ($209,035.91).
ii. The Representative stated that the Landlord’s actual property management fees exceed the 5.0% cap allowed in the Regulations and that property management services are contracted to a third-party company.
iii. I find that the documentary evidence establishes that the Landlord’s actual property management fees total $17,400.43 for the Residential Property and $11,484.28 for the Units. This supports the Representative’s evidence that the Landlord’s actual property management fees exceed the 5.0% cap allowed in the Regulations.
iv. In accordance with clause 1(c) of the Regulations, the allowable management fee is limited to the lesser of the actual cost or 5.0% of gross rental income. The evidence establishes that 5.0% of the Units’ previous year's gross rental income ($136,616.19) is $6,830.81, and 5.0% of the current year's gross rental income ($141,593.93) is $7,079.70. This line is adjusted.
i. Line 15 (Maintenance expenses): The Landlord claimed $12,327.27. This is adjusted to $8,136.00 to reflect 2/3 of the expense.
j. Line 17 (Other): The Landlord claimed $18,898.63. The documentary evidence
establishes these expenses are for: common area maintenance, landscaping, pest control, snow removal, telephone, and welcome baskets for tenants. This is adjusted to $12,473.10 to reflect 2/3 of the expense.
Clause 50(3)(c) – reasonable return on the landlord’s capital investment
[25] Clause 50(3)(c) requires that I consider the Landlord’s expectation to have a reasonable return on their capital investment. This requires first determining the value of the capital investment.
Value of Capital Investment
[26] In Order LR25-31, the Island Regulatory and Appeals Commission (the “Commission”) stated that the purpose of determining the value of a landlord’s capital investment is to arrive at a fair market value assessment that is both accurate and reasonable in the circumstances. The Commission further stated that capital investment refers to the real property itself, including land and buildings, and is to be assessed on a fair market value basis without deduction for mortgage principal:
“[37] In our opinion, the goal when determining the value of the landlord’s investment is to arrive at a valuation that is both accurate and reasonable in the circumstances. A key factor in that determination is for the Commission to interpret what is meant by the term “capital investment”, as used in clause 50(3)(c). In our opinion, a capital investment is just that – the landlord’s investment in capital, which includes both the land and building (i.e. real property).
[38] … valuing a landlord’s capital investment will be on a case by case basis, with the goal being to ascertain the actual fair market value of the capital asset as accurately as reasonably possible based upon the evidence brought forward to the hearing officer or panel.
[50] In summary, the Commission finds that the value of capital investment used to calculate a landlord’s return on investment should be the full value of the landlord’s capital investment (being the real property) and should not be subject to a deduction of the outstanding mortgage principal.”

GAAP
[27] The Landlord provided a Generally Accepted Accounting Principles (GAAP) valuation of $2,285,477.24 for the Residential Property, which includes the combined value of buildings, building improvements, land, and appliances. This valuation would assign each Unit a value of $126,970.96, and a total value of $1,523,651.52 for the 12 Units in the Application.
[28] I recognize that GAAP financial reporting is reliable for accounting purposes; however, I find that it does not establish a fair market value for the determination of clause 50(3)(c). GAAP is based on historical cost and depreciation, and depreciation accounting does not always reflect changes in real estate values over time. Depreciation accounting reduces asset values over time and does not necessarily reflect fair market value.
[29] I note that the Regulations also state that operating costs exclude depreciation costs; however, this is only for the purposes of clause 50(3)(b) of the Act.
Appraisal
[30] The Landlord submitted a May 2023 appraisal (the “Appraisal”), which assessed the market value of the Units at $139,024.00 per Unit.
[31] I find the Appraisal to be reliable evidence because it was prepared by a qualified, independent appraiser who used a recognized market valuation method.
[32] I accept that the Units are substantially similar and that no evidence was provided indicating any material variation in market value between the Units. I therefore find that a per-unit allocation of the Appraisal is reasonable for determining the Applications.
[33] Accordingly, I find that the fair market value of the Landlord’s capital investment for the purposes of clause 50(3)(c) is $1,668,288.00 ($139,024.00 x 12) based on the Appraisal evidence. I find the Appraisal evidence more accurate than the GAAP valuation because the Appraisal more directly reflects the Units' current fair market value. In contrast, the GAAP valuation reflects historical accounting values that have been depreciated.
Reasonable Return on Investment
[34] In Order LR25-31, the Commission stated that when calculating return on investment (“ROI”), mortgage principal is not deducted from the capital value, but is excluded from operating expenses for normalization purposes. The Commission further stated that landlords are generally entitled to an ROI range of 4.0% to 7.0%, depending on the circumstances:
“[53] … Where we have accepted that mortgage principal should not be deducted from the value of the landlord’s investment, we recognize that there should be some kind of “normalizing” in respect of how landlords choose to fund their investments. Therefore, we find that when calculating a landlord’s ROI, the financing costs of interest on mortgages registered against the property should not be included in the “annual operating expenses”.
[60] … based on previous Commission Orders, landlords are entitled to a ROI of at least 4% and, on a case by case basis, landlords may justify that a ROI of up to 7% is reasonable, based on the specific circumstances.
[61] Additionally, it is always open to landlords on additional rent increase applications to bring forward professional evidence and challenge the accepted ROI guideline, but the upper limit of 7% should not be adjusted further upward unless satisfactory professional evidence is provided.”

[35] Based on the net operating income and the appraised value of $1,668,288.00, I calculate the Landlord’s current ROI to be 4.06%, excluding mortgage interest from operating expenses in accordance with Order LR25-31.
[36] After including the 2026 annual allowable rent increase of 2.0% and the maximum additional rent increase of 3.0%, the Landlord’s ROI would increase to 4.47%. I find this projected ROI remains on the lower end of the Commission’s generally accepted range of 4.0% to 7.0%, as set out in
Order LR25-31.
Clause 50(3)(d) – expectation of tenants regarding the annual guideline
[37] Clause 50(3)(d) requires that I consider the Tenants’ expectation that rent increases will remain within the annual guideline. In 2026, the annual guideline increase is 2.0%.
[38] No Tenants participated in the hearing or submitted any evidence suggesting their expectations regarding the determination of the Applications.
Weighing the Factors
[39] After considering and weighing all factors and evidence, I find that the evidence supports 5.0% rent increases for the Units.
[40] The Landlord’s total operating expenses have increased over the past three years.
[41] The Landlord’s ROI is currently 4.06%. With a 5.0% rent increase for the Units, the Landlord would achieve an ROI of 4.47%.
[42] As stated in Order LR25-31, the Commission (and the Rental Office) currently lacks a professional
analysis that sets out an appropriate rate of return on investment for residential rental properties.
Landlords are entitled to an ROI of at least 4.0% and, on a case-by-case basis, may justify an ROI of up to 7.0% as reasonable, based on the specific circumstances.
[43] In this case, particularly the increase in expenses and the fact that the Units have not received additional rent increases above the annual guideline over the three years preceding the Applications, I find that a 4.47% return on investment is reasonable. I find this return remains at the low end of the Commission’s generally accepted reasonable ROI range.
[44] I find that the tenant expectation factor does not weigh in favour of either granting or denying the Applications and is therefore neutral in this case.
[45] The Landlord provided the Tenants with three months’ notice of the rent increase, effective on the date noted below, in accordance with the Act.
[46] After considering and weighing all of the statutory factors set out in subsection 50(3) of the Act, I find that the evidence supports rent increases above the annual allowable guideline, and the Applications are allowed.
[47] This decision contains sensitive information, and the parties are required to preserve its confidentiality under subsection 75(3) of the Act.

IT IS THEREFORE ORDERED THAT
1. Effective June 1, 2026, each Unit’s maximum allowable monthly rent is as follows:
Unit Rent 1 $1,026.89 2 $1,056.96 3 $1,035.48 4 $1,024.74 6 $894.77 8 $1,032.26 9 $997.50 12 $1,001.70 13 $1,009.70 14 $1,043.00 16 $1,024.74 18 $1,035.48
DATED at Charlottetown, Prince Edward Island, this 28th day of April, 2026.
(sgd.) Mitch King Mitch King Residential Tenancy Officer

APPENDIX “A” Revised Statement of Income & Expenses (Form 10) Current ROI Proposed
ROI
Established Expenses Income (Yearly) Rental income at 100% occupancy (Line 1) $139,236.60 $146,198.64 Other income (Line 2) $2,356.93 $2,356.93 Less vacancy / Arrears loss (Line 3) ($2,082.74) ($2,082.74) Net Income (Line 4) $139,510.79 $146,472.83 Expenses (Yearly) Interest payments on first mortgage (Line 5) $0.00 $0.00 $72,607.27 Interest payments on second mortgage (Line 6) $0.00 $0.00 $0.00 Fuel (Line 7) $11,880.64 $11,880.64 $11,880.64 Water/Sewerage (Line 8) $3,086.05 $3,086.05 $3,086.05 Electricity (Line 9) $2,244.27 $2,244.27 $2,244.27 Insurance (Line 10) $5,438.95 $5,438.95 $5,438.95 Provincial/Municipal Property Tax (Lines 11/12) $18,501.87 $18,501.87 $18,501.87 Island Waste Management fees/garbage (Line 13) $3,104.41 $3,104.41 $3,104.41 Property Management fees (Line 14) $6,830.81 $7,079.70 $7,079.70 Maintenance expenses (Line 15) $8,136.00 $8,136.00 $8,136.00 Capital expenditures (Line 16) $0.00 $0.00 $0.00 Other (Line 17) $12,473.10 $12,473.10 $12,473.10 Total operating expenses (Line 18) $71,696.10 $71,944.99 $144,552.26 Net profit/loss (Line 19) $67,814.69 $74,527.84 Value of Investment in Property $1,668,288.00 $1,668,288.00 Operating Income $67,814.69 $74,527.84 Return on Investment (ROI) 4.06% 4.47%
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.