Order LR96-03 - A-002-96 - Rental Appeal - Hambly Rentals Ltd. - Agent Wayne Hambly - James & Joyce Reid, RoseAnne MacKay & Bennett Campbell (Apr 1, 1996)

Docket A-002-96
Order LR96-3

IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by Hambly Rentals Ltd. (the Lessor) against Order No. LD96-009 of the Director of Residential Rental Property dated January 12, 1996.

BEFORE THE COMMISSION

on Monday, the 1st day of April, 1996.

John L. Blakney, Vice-Chair
Anne McPhee, Commissioner
Clayton Bulpitt, Commissioner

Order

Participants

1. Appellant:

Hambly Rentals Ltd.
Agent: Wayne Hambly

2. Respondent:

James Reid
Joyce Reid
RoseAnne MacKay
Bennett Campbell

Reasons for Order

1. Discussion & Findings

This is an appeal under the Rental of Residential Property Act, R.S.P.E.I. 1988, Cap. R-13.1, by Hambly Rental Ltd. (hereinafter referred to as the "Appellant"). The Appellant is appealing an Order of the Director of Residential Rental Property (Order No. LD96-009, dated January 12, 1996).

James and Joyce Reid rented the residential premises located at Apartment #4, 20 Waterview Heights, Charlottetown, P.E.I. from Hambly Rentals Ltd.

On or before October 1^st the Lessees contacted Wayne Hambly, agent for Hambly Rentals Ltd., by telephone to tell him that they would be moving from the premises by the end of October, 1995. Subsequently a letter confirming the date that they would give up possession of the unit was sent to the Lessor.

The Lessees paid rent for Apartment #4 up to the end of October, 1995.

On November 7, 1995 Bennett Campbell, acting on behalf of the Lessees, visited the offices of Hambly Rentals Ltd. where he turned over a key to the apartment unit and received a cheque in the amount of $311.70. The amount of the cheque included the security deposits of $375.00 plus interest for the duration of the rental period minus $80.00 for cleaning the apartment unit.

On November 14, 1995 James Reid filed a Form 2 Application for Enforcement of Statutory or Other Conditions of Rental Agreement with the Director of Residential Rental Property seeking a finding that the portion of the security deposit retained by the Lessor should be returned. The reason given by the Lessee as to why the Director should make such an order was:

Form 8(c) was not served on us by Wayne Hambly.

The Rental Property Officer held a hearing on January 12, 1996, and issued Order LD96-009 ordering that:

The lessor pay the sum of $80.00 to the lessees.

The payment to be made jointly to both lessees on or before February 6, 1996.

Subsequently, on February 2, 1996, H. Wayne Hambly, on behalf of Hambly Rentals Ltd. filed a Notice of Appeal (form 17) against the Order of the Rental Property Officer.

The Commission heard the appeal on March 1, 1996, at Charlottetown, Prince Edward Island.

During the hearing the Lessor submitted that under the Act lessors have certain obligations to their lessees but lessees in turn have certain obligations to their lessors. He believes that the Lessees in this case did not properly carry out their obligations to the Lessor when they gave up possession of the apartment unit.

Although the Lessees informed him that they would be vacating the premises by the end of October, 1995, the Lessor argued that they did not properly deliver up possession of Apartment #4 because they left no forwarding address and did not notify him when they actually vacated the premises. Also, the Lessees locked the keys to the unit in the apartment and still kept a key to the patio door. He did not receive the key until November 7, 1995 when Mr. Campbell received the cheque for the security deposit.

On October 28^th, Mr. Hambly, wanting to show the unit, tried to contact the Lessees but only got the message machine. With another opportunity to show the apartment, on October 30^th he visited the premises but was denied access through the front door because a brick impeded entry. He gained access through the patio door.

The Lessor stated that upon entering the unit he found that it was left in an unacceptable condition. Subsequently, he had to have the unit cleaned and painted. According to a submission made after the hearing the apartment was cleaned on Thursday, November 2, 1995 and painted on November 15, 1995. These dates were subsequently refuted by the Lessees in a written submission to the Commission.

Considering the manner in which the apartment was vacated by the Lessees and the condition the unit was left in, the Lessor believed it appropriate to retain $80.00 for cleaning the apartment. Mr. Hambly admitted that he had not filed a Form 8(c) notifying the Lessees that he intended to retain a portion of the security deposit. However, while trying to contact the Lessees he made an inquiry to Bennett Campbell who was looking after Mrs. Reid's financial affairs and he interpreted Mr. Campbell's response as giving him permission to retain a part of the security deposit to clean the apartment.

The Lessees submitted that they were not required to give up possession of the apartment unit until October 31, 1995 and that although Mr. Reid had vacated the premises, Mrs. Reid was still using the unit from time to time. They also understood that they had until the end of the month to ensure it was cleaned. They submitted that the Lessor should not have entered the premises until they had completely vacated the unit or received permission to do so from them.

The Commission gave careful consideration to the evidence submitted at the hearing and decided to deny the appeal.

In considering the Lessor's submission that the Lessees did not properly terminate the rental agreement, the Commission considered Section 11 and 18 of the Act. Section 11 of the Act states that:

Section 11(1) A lessee may terminate a rental agreement by serving on the lessor a notice of termination which complies with section 18.

(2) A notice of termination is to be served by the lessee

if the premises are let under a fixed term agreement, at least two months before the expiration of any fixed term, to be effective on the last day of the term;
if the premises are let from month to month, at least one month before the due date for payment of rent, to be effective on the day preceding the due date;(Emphasis added)
if the premises are let from week to week, at least one week before the due date for payment of rent, to be effective on the day preceding the due date;

(3) For the purposes of subsection (2), where the premises are let for periods that are greater than a week and less than a month, they shall be deemed to be let from month to month.

In this particular case the Commission finds, based on the evidence, that the rental agreement allowed the premises to be let from month to month.

Therefore, in this case the Lessees could terminate the rental agreement if they gave the Lessor notice at least one month before the due date for payment of rent. The Commission understands from the evidence that prior to October 1, 1995 James Reid informed the Lessor that they would be vacating the apartment by the end of October and forwarded a letter informing him of the same. The Lessor confirmed he received the letter after October 1st.

It appears to the Commission that the Lessees did not strictly comply with Section 11 because they did not ensure that a written notice of termination was served to the Lessor on or before October 1, 1995 and they did have an obligation to do so. Based on the evidence before the Commission although written notice was given it was technically not within the time period required under the Act, if the Lessees wanted to terminate the rental agreement on October 31. However, this point is not the subject of this appeal and did not appear to be a problem for the Lessor until he appealed the decision of the Rental Property Officer. To the Commission's knowledge he did not raise it with the Director when the problem of the security deposit first arose and it now does not give reason for the Commission to allow this appeal since the issue that must be settled is specifically related to the retention of a portion of the security deposit by the Lessor.

According to the evidence, although the Lessees were in the process of moving out of the apartment unit during the month of October and did so in stages, the Commission finds that they, specifically Mrs. Reid was depending on the use of the facilities contained in the unit until the end of the month and continued to use the unit. The Commission can find no fault in the fact that the Lessees were utilizing the unit during the month of October since the rent was paid up until October 31st.

The Lessor contends that when he entered the premises on October 30, 1995 he found the unit in an unacceptable condition. Although the Commission is not making any specific finding on the condition of the unit in regard to cleanliness, it does agree with the Lessees that Mr. Hambly acted too quickly and did not give them full time, until October 31, 1995, to carry out their obligation as lessees to ensure the unit was left in an acceptable condition. The Commission would not think it unusual for any lessee to wait until the final day to finish cleaning the apartment they were vacating. However, it would seem to the Commission that much of the problem now to be resolved could have been averted if the Lessees had informed the Lessor of their plans for moving and the use of the unit during the month of October. It is of no surprise to the Commission that when Mr. Hambly could not get in contact with the Lessees through normal channels, found the apartment door blocked and access only through the patio that there would be some concern on his part and that he needed to take some action. It would seem that improved communications on the part of both parties may have averted the problem to be resolved.

In this particular case, the Commission must decide whether or not the Lessor acted in a proper manner to retain a portion of the security deposit. Although the Lessor argues, and the Commission agrees, that lessees are equally responsible to carry out their obligations to the lessor as is the lessor to satisfy his obligations to the lessee, these issues are not directly relevant to whether or not the Lessor in this case satisfied the requirements of the Act when he retained a portion of the security deposit.

The Commission finds that the legislation is clear on the procedure a lessor must follow in order to retain all or a part of a security deposit.

Section 10(5) The lessor may retain all or part of a security deposit and interest thereon where he believes the lessee is liable to the lessor for damage to the residential premises, caused by a breach of statutory condition 4, or for outstanding rent, provided that the lessor, within ten days of the date on which the lessee delivers up possession of the residential premises, serves the lessee with a notice of intention to retain security deposit in the form prescribed by regulation.

In addition, Section 10 of the Rental of Residential Property Act Regulations requires that:

A notice of intention to retain all or a portion of a security deposit, pursuant to subsection 10(5) of the Act, shall be in Form 8.

The Commission therefore concludes that in order for the Lessor to retain $80.00 of the security deposit because of the condition of the apartment, he is required by statute to complete Form 8—Notice of Intention to Retain Security Deposit and serve it on the Lessees within ten days of the date on which they delivered up possession of the apartment or at the very least written notice in the form of Form 8.

It is accepted by all parties that such notice was never given by the Lessor. His reasons for not notifying the Lessees were that they never properly gave up possession of the unit nor did they leave instructions as to how they could be reached and that he understood permission to retain a portion of the security deposit was granted by Bennett Campbell who represented Mrs. Reid.

The Commission does find that the Lessees should have been more diligent with regard to communicating their plans and where they could be reached by the Lessor. However, the Commission also finds that the Lessees did not intend to give up the apartment unit until October 31 and it was the Lessor who intervened prior to that date. Also, the Lessor knew that they would have to vacate the premises by the end of the day on October 31 and despite whether or not the Lessees properly gave up possession of the unit it is clear to the Commission that he made no effort to complete and serve written notice in the form of Form 8.

The serving of the notice is mandated by the legislation and in order for the Lessor to exercise his right to retain a part of the security deposit such a notice must be served. Even if the Lessor had served the notice to the Lessees' former address when he found the keys and reached the conclusion that the Lessees had for all intents and purposes moved out, at least an attempt should have been made to serve notice. Even an attempt to serve could be weighed by the Commission in its consideration as to whether or not proper notice was served. Such is not the case in this situation.

Although one could question the manner in which the Lessees gave up possession of the apartment and informed the Lessor that they were vacating the unit over the period of a month, the Lessor made no attempt to complete the required notice even after discussing the matter with Mr. Campbell on the telephone or before Hambly Rentals Ltd. issued the cheque to him on November 7. Clearly at that point or sometime after October 31, 1995, the Lessees were no longer in possession of the unit. The Lessor had the keys and was in possession of the unit by that time.

The Commission believes that the mandatory serving of notice in the form of Form 8 not only ensures that proper notice is given to the lessee that the lessor intends to retain the security deposit or part of it, but it also ensures that the lessee can exercise his statutory right to refute the action of the lessor. Section 10(7) states:

Section 10(7) A lessee served with a notice under subsection (5) may, within fifteen days of the date of service, apply to the Director in the form prescribed by regulation for a determination on the disposition of the security deposit, in which case he shall serve a copy of the application on the lessor.

According to Section 10(7), the right of the lessee to apply to the Director for a determination on the security deposit hinges on the serving of notice. Also, the procedure follows that if the lessee makes no application to the Director under Section 10(7) subsection (8) permits the lessor to retain the security deposit or a part.

It is the Commission's view that the Act sets out a clear and simple procedure for returning and retaining security deposits and if followed gives the right to the lessor to retain all or a part, and a right to the lessee to question the reasons for retention, in an efficient and effective manner.

The Lessor is correct that both the lessor and the lessee have obligations under the Act, but the Commission finds that when all the evidence is considered in this case the Lessor simply made no attempt to satisfy notice that he was going to retain a part of the security deposit. The reasons given by the Lessor for not giving notice and the fact that the Lessees could have communicated their plans for vacating the premises more clearly to him does not, in the opinion of the Commission, overcome the statutory requirement for proper notice as set out in Section 10 (5).

2. Decision

The Commission affirms the decision and order of the Rental Property Officer for the above stated reasons.

Accordingly,

1. The appeal is dismissed;

2. The Order of the Rental Property Officer is affirmed; and

3. The amount of $80.00 is to be paid by the Lessor to the Lessees on or before April 11, 1996.

IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by Hambly Rentals Ltd. (the Lessor) against Order No. LD96-009 of the Director of Residential Rental Property dated January 12, 1996.

Order

WHEREAS Hambly Rentals Ltd. filed an appeal against a decision of the Director of Residential Rental Property dated January 12, 1996;

AND WHEREAS the Commission heard the appeal in Charlottetown on March 1, 1996;

NOW THEREFORE, for the reasons given in the annexed Reasons for Order;

IT IS ORDERED THAT

1. The appeal is dismissed;

2. The Order of the Rental Property Officer is affirmed; and

3. The amount of $80.00 is to be paid by the Lessor to the Lessees on or before April 11, 1996.

DATED at Charlottetown, Prince Edward Island, this 1st day of April, 1996.

BY THE COMMISSION:

John L. Blakney, Vice-Chair

Anne McPhee, Commissioner

Clayton Bulpitt, Commissioner

NOTICE

Sections 26.(2), 26.(3), 26.(4) and 26.(5) of the Rental of Residential Property Act provide as follows:

26.(2) A lessor or lessee may, within fifteen days of the decision of the Commission, appeal to the court on a question of law only.

(3) The rules of court governing appeals apply to an appeal under subsection (2).

(4) Where the Commission has confirmed, reversed or varied an order of the Director and no appeal has been taken within the time specified in subsection (2), the lessor or lessee may file the order in the court.

(5) Where an order is filed pursuant to subsection (4), it may be enforced as if it were an order of the court.