LD23-589

Landlord application · rent increase. Outcome: granted. A. The maximum allowable monthly rent for the Residential Property, including the 3.0% allowable rent increase for 2024, and additional rent increase, is as follows: Rent Effective Date $1,537.00 January 1, 2024

Order text

Orders of the Director of Residential Tenancy
Docket 23-729 December 13, 2023
Introduction
[1] On September 19, 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.(2) of the Act, in the amount of 3.0%.
[2] The Application is also seeking the 3.0% allowable rent increase for 2024, totaling a 6.0% rent increase.
[3] The Application discloses the current rent, proposed rent (which includes the 3.0% allowable rent increase for 2024), and effective date for the proposed increase which is as follows:
Current Rent Proposed Rent Effective Date $1,450.00 $1,537.00 January 1, 2024
[4] On October 24, 2023, the Landlord submitted into evidence a Landlord Statement of Income and Expenses (Form 10) (the “Statement”).
[5] On November 30, 2023, a teleconference hearing was held before a Residential Tenancy Officer (the “Officer”). A Landlord and two Tenants participated in the hearing.
[6] All relevant documents (including the Notice of Hearing and Evidence Package) were properly served in accordance with subsection 100.(1) of the Act.
Issue to be Decided
i. Is the Landlord permitted to an additional rent increase exceeding the allowable percentage as requested in the Application?
Summary of the Evidence
[7] The Residential Property consists of a condominium which was purchased in 2020 for $202,000.00.
The Landlord stated the Year 1 expenses are the actual expenses from January 2021 to December
2021. The Year 2 expenses are the actual expenses from January 2022 to December 2022. The Year 3 expenses are the actual expenses from January 2023 to December 2023 and some updated expenses for 2024 are also included.
Adjustments to the Statement
[8] The Officer’s adjustments to the income and expenses are provided below. The adjustments will be reflected in the Revised Statement of Income and Expenses (Form 10) and is attached as APPENDIX “A” of this decision.
1. [Line 3 – Rental Income]
The total rental income for 2023 will be $17,400.00. Line 3 of the proposed rental income is set as $18,444.00, which includes the 3.0% allowable rent increase for 2024.

Orders of the Director of Residential Tenancy

2. [Line 12 – Management Fees]
The Landlord stated Line 12 as $1,800.00 for Year 3 for condo / management fees.
Subsection 1.(c) of the Residential Tenancy Regulations (the “Regulations”) states:
“management fee” means the actual cost of the management fee or 5 per cent of the gross rental income for the previous year, whichever is the lesser.
5% of the gross rental income for Year 3 is $870.00. Line 12 is adjusted to $870.00.
3. [Line 13 – Maintenance Fee]
The Landlord stated the maintenance fee as $213.00, however the Landlord submitted further documentary evidence for maintenance. Line 14 is also added to Line 13. Line 13 is adjusted to $571.23.
4. [Line 14 – Capital Expenditures]
The Landlord stated the capital expenditures as $44.88, however, the Officer finds this should be a maintenance expense. Line 14 is added to Line 13 and adjusted to $0.00.
5. [Value of Investment in the Property]
The property was purchased in 2020 for $202,000.00 which makes the value of investment as $202,000.00. No capital expenditures have been invested back into the property.
Analysis
[9] The Officer is bound to consider the factors set out in the Act and the Regulations. The factors for reviewing rent increases above the allowable percentage are set out in subsections 50.(3) and (4) of the Act and section 4 of the Regulations which state:
50.(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.
50.(4) The Director may also consider
(a) any other factor considered relevant by the Director; and (b) any other factor prescribed in the regulations.

Orders of the Director of Residential Tenancy

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.
[10] With regard to sub-subsection 50.(3)(a) of the Act, the Officer finds that the Landlord has provided the rent history for the past three years for the Residential Property. This assists the Application.
[11] With regard to sub-subsection 50.(3)(b) of the Act, the Officer finds that based on the adjusted Statement and the documentary evidence, the Landlord’s operating expenses have increased, such as insurance, taxes, and maintenance expenses. This assists the Application.
[12] With regard to sub-subsection 50.(3)(c) of the Act, the Officer finds that the Landlord is currently operating at a Return on Investment (“ROI”) of 3.3% and the proposed increase, which includes the 3.0% allowable rent increase for 2024, would yield an ROI of 3.8%. The Officer finds this to be reasonable in this case.
[13] With regard to sub-subsection 50.(3)(d) of the Act, the Officer finds that there has been no rent increase at the property. This assists the Application.
[14] With regard to section 4 of the Regulations the Officer finds that this section does not apply to the Application.
[15] The Officer finds that based upon all the factors set out in the Act and the Regulations that the Landlord is entitled to an additional rent increase. Therefore, the Application is allowed.
Conclusion
[16] The Application is allowed.
[17] 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 monthly rent for the Residential Property, including the 3.0% allowable rent increase for 2024, and additional rent increase, is as follows:
Rent Effective Date $1,537.00 January 1, 2024
DATED at Charlottetown, Prince Edward Island, this 13th day of December, 2023.
(sgd.) Mitchell King Mitchell King Residential Tenancy Officer

Orders of the Director of Residential Tenancy

APPENDIX “A” Revised Statement of Income & Expenses (Form 10) Year 3 Proposal Allowed Income Rental Income at 100% (Line 1) $17,400.00 $18,444.00 $18,444.00 Vacancy Arrears/Losses (Line 2) $0.00 $0.00 $0.00 Net Income before expenses (Line 3) $17,400.00 $18,444.00 $18,444.00 Expenses 1st Mortgage Interest (Line 4) $7,097.07 $7,097.07 $7,097.07 2nd Mortgage Interest (Line 5) $0.00 $0.00 $0.00 Fuel (Line 6) $0.00 $0.00 $0.00 Water & Sewer (Line 7) $0.00 $0.00 $0.00 Electricity (Line 8) $0.00 $0.00 $0.00 Insurance (Line 9) $632.00 $632.00 $632.00 Property Tax (Provincial) (Line 10) $1,664.25 $1,664.25 $1,664.25 Property Tax (Municipal) (Line 11) $0.00 $0.00 $0.00 Management Fee (Line 12) $870.00 $870.00 $870.00 Maintenance Fee (Line 13) $571.23 $571.23 $571.23 Capital Expenditures (Line 14) $0.00 $0.00 $0.00 Other (Line 15) $0.00 $0.00 $0.00 Total Operating Expenses (Line 16) $10,834.55 $10,834.55 $10,834.55 Net Profit or (Loss) (Line 17) $6,565.45 $7,609.45 $7,609.45 Value of Investment in Property $202,000.00 $202,000.00 $202,000.00 Operating Income (Line 17) $6,565.45 $7,609.45 $7,609.45 Return on Investment (ROI) 3.3% 3.8% 3.8%
NOTICE

Orders of the Director of Residential Tenancy

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.