LD25-398

Landlord application · rent increase. Outcome: granted. I find that the evidence supports 5.3% rent increases for the Units.

Linked prior order: LR25-31

Order text

Order of The Director of Residential Tenancy
Docket 25-717 November 07, 2025
INTRODUCTION
[1] This decision determines two applications filed with the Residential Tenancy Office (the “Rental Office”) under the Residential Tenancy Act (the “Act”).
[2] The Landlords seek 5.3% rent increases for the Units, which are an additional 3.0% above the 2025 annual allowable guideline of 2.3%.
DISPOSITION
[3] I find that the evidence supports 5.3% rent increases for the Units.
BACKGROUND
[4] The Units are located in a split-entry, side-by-side duplex that was built in 1998.
[5] On August 19, 2025, the Landlords filed two Form 9 Landlord Application to Request Additional Rent Increase (the “Applications”) with the Rental Office. The Landlords also provided the Rental Office with two Form 8 Notice of Annual Allowable Rent Increase.
[6] The Landlords request the following rent increases:
Unit Current Rent Proposed Rent A $968.00 $1,019.00 B $927.00 $976.00
[7] On September 26, 2025, the Rental Office sent the parties notice of a teleconference hearing scheduled for November 6, 2025.
[8] On October 20, 2025, the Landlords provided the Rental Office with a Form 10 Landlord Statement of Income and Expenses (the “Statement”).
[9] On October 23, 2025, the Rental Office emailed the parties a 79-page PDF evidence package.
[10] On November 6, 2025, the Landlords and one of the Tenants participated in the teleconference hearing. The Landlords and the Tenant confirmed that no documents were missing from the evidence package.
ISSUE
A. Does the evidence support 5.3% rent increases for the Units?
ANALYSIS
Additional Rent Increases – Factors to Consider
[11] In order to determine the Applications, I must consider the following factors in subsection 50(3) of the Act, which are as follows:
1. The rent history for the affected 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 the Director considers relevant and reasonable;
3. The expectation of the Landlords to have a reasonable return on their capital investment;
and;

4. The expectation of the Tenants that rent increases will remain within the annual guideline.
[12] Subsection 50(4) of the Act provides that I have the discretion to consider any other relevant factor and any factor prescribed in the Residential Tenancy Regulations (the “Regulations”). The Regulations state that the purchase of the Units should not require an increase in rent within the first year in order to achieve a reasonable return on the Landlords’ capital investment. This factor is not relevant because the Landlords are not purchasers.
Clause 50(3)(a) – Rent History for the Affected Rental Units
[13] Clause 50(3)(a) requires that I consider the rent history for the affected Units in the three years preceding the date of the Applications.
[14] The Landlords last increased the Units’ rents over 1.5 years ago. I find that this factor alone provides some support for the Landlords’ request for the proposed increases.
Clause 50(3)(b) – Change in Operating Expenses and Capital Expenditures
[15] 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.
[16] The Landlords provided the operating expenses for the past three years in the Statement. Most of the operating costs have been steadily increasing, except for the fuel cost which has fluctuated.
The Landlords also incurred unexpected costs due to a flood last year, with the total other costs (line 17) increasing by about $3,000.00 for this one-year period.
[17] The Landlords’ capital expenditures increased from $0.00 two years ago to $687.57 currently.
[18] I find that this factor alone supports the Landlords’ request for the proposed increases.
Adjustments to the Statement
[19] The adjusted Statement is detailed in Appendix “A” of this decision, which is based primarily upon the Landlords’ costs in the most recent twelve-month period in the Statement. The rental income is based upon the annual current and proposed rents.
Clause 50(3)(c) – Reasonable Return on the Landlords’ Capital Investment
[20] Clause 50(3)(c) requires that I consider the Landlords’ expectation to have a reasonable return on its capital investment.
[21] In order to determine return on investment (“ROI”), I must first determine the value of the Landlords’ capital investment.
Value of Capital Investment
[22] In Order LR25-31, the Island Regulatory and Appeals Commission (the “Commission”) commented on the method and evidence required to determine the value of a landlord’s capital investment as follows:
[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.
[23] The Landlords provided the Units’ 2025 tax assessed value, in the amount of $244,600.00.
[24] As stated in Order LR25-31, valuing a landlord’s capital investment will be done on a case-by-case basis. In this case I have used the tax assessed value. I note that this is a conservative value of the Units.
Reasonable Return on Investment
[25] In Order LR25-31, the Commission commented regarding a landlord’s ROI:
[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.
[26] Based upon a value of $244,600.00 for the Units, the Landlords’ ROI is currently 4.0%.
[27] After including the proposed rent increases, the Landlords’ ROI would increase to 4.5%.
[28] This ROI is within the 4.0% to 7.0% range of a reasonable ROI.
[29] The value of the Units is a conservative number because it is based upon the tax assessed value.
Therefore, I find that a return on investment of 4.5% is supported. When conservative values are used, a reasonable ROI is closer to the 7.0% end of the range.
[30] I find that this factor alone weighs in favour of the Landlords’ request for the proposed increases.
Clause 50(3)(d) – Expectation of Tenants Regarding the Annual Guideline
[31] Clause 50(3)(d) requires that I consider the Tenants’ expectations that rent increases will remain within the annual guideline. In 2025, the annual guideline increase is 2.3%.
[32] The Tenant that participated in the hearing did not oppose the rent increase and the other Tenant did not participate. I find that this factor alone is neutral regarding the Landlords’ request for the proposed increases.

CONCLUSION
[33] After considering and weighing all the factors and evidence, I find that the evidence supports 5.3% rent increases for the Units and the Applications are allowed.
[34] The Landlords operating costs have generally been increasing and the Landlords incurred a recent, significant cost due to a flood. The Landlords have also incurred recent capital expenditures. The ROI based upon the proposed rent increases is supported because the calculation is based upon a conservative value of the Units and the higher end of the 4.0% to 7.0% range is supported.
[35] 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 December 1, 2025, the Units’ maximum allowable monthly rents are:
Unit Rent A $1,019.00 B $976.00
DATED at Charlottetown, Prince Edward Island, this 7th day of November, 2025.
(sgd.) Andrew Cudmore Andrew Cudmore Residential Tenancy Officer

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.
Rental Income Current Rent 5.3% Increase Income (Lines 1 & 2) $22,740.00 $23,940.00 Vacancy/Arrears (Line 3) $0.00 $0.00 Net Income (Line 4) $22,740.00 $23,940.00 Expenses 1st Mortgage Interest (Line 5) $0.00 $0.00 2nd Mortgage Interest (Line 6) $0.00 $0.00 Fuel (Line 7) $4,587.59 $4,587.59 Water & Sewer (Line 8) $700.97 $700.97 Electricity (Line 9) $0.00 $0.00 Insurance (Line 10) $1,595.00 $1,595.00 Provincial Property Tax (Line 11) $2,244.59 $2,244.59 Municipal Property Tax (Line 12) $1,638.82 $1,638.82 Island Waste Management Fees (Line 13) $438.00 $438.00 Property Management Fee (Line 14) $0.00 $0.00 Maintenance Fee (Line 15) $655.50 $655.50 Capital Expenditures (Line 16) $687.57 $687.57 Other (Line 17) $460.00 $460.00 Total Expenses $13,008.04 $13,008.04 Annual Net Profit $9,731.96 $10,931.96 Value of Investment $244,600.00 $244,600.00 Net Profit $9,731.96 $10,931.96 Return on Capital Investment 4.0% 4.5% Return on Investment APPENDIX “A” Revised Statement of Income & Expenses (Form 10)