Docket A-005-05
Order LR05-04

IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by Ann MacAdam against Order No. LD05-151 of the Director of Residential Rental Property dated June 3, 2005.

BEFORE THE COMMISSION

on Wednesday, the 13th day of July, 2005.

Weston Rose, Commissioner
Norman Gallant, Commissioner
Anne Petley, Commissioner

Order

Participants

1.   Appellant:

Ann MacAdam

2.  Respondents:

William S. Knowles and Lorna Hutcheson

Reasons for Order

1.  Introduction

Ann MacAdam (the Appellant) appealed Order LD05-151 (Exhibit E-8) issued by the Office of the Director of Residential Rental Property (the Director) on June 3, 2005.  The Appellant's Notice of Appeal (Exhibit E-9) was received by the Island Regulatory and Appeals Commission (the Commission) on June 8, 2005. 

The Director's Order and the present appeal concern the top floor apartment located at 33 Grafton Street in Charlottetown (the Apartment).

The appeal was heard in the Commission's main hearing room in Charlottetown, Prince Edward Island on Wednesday June 29, 2005.

2.  Background

On April 7, 2005, William S. Knowles and Lorna Hutcheson (the Respondents) applied to the Director for approval of a rent increase for the apartment which exceeded the percentage established by the Commission pursuant to subsection 23(3) of the Rental of Residential Property Act (the Act).  The allowable percentage increase established by the Commission for 2005 is 2.00%.  The Respondents were seeking approval of a rent increase of 79% which would raise the Appellant's rent from $419.00 per month to $750.00 per month.

On April 21, 2005, a hearing was held by the Director pursuant to subsection 23(6) of the Act.  In Order LD05-151 the Director allowed an increase from $419.00 per month to $750.00 per month, effective July 1, 2005.

3.  Decision

The appeal is allowed in part for the reasons that follow.

Subsections 23(3), 23(6), 23(8) and 23(9) of the Act read as follows:

 23(3)  Where the lessor seeks a rent increase greater than the amount permitted by subsection (1), the lessor shall apply to the Director for approval of the proposed increase not later than ten days after notifying the lessee.

…

23(6)  Upon receipt of an application pursuant to subsection (3) or (4), the Director shall within ten days give written notice to the lessor and lessee of the date, time, and place which he has fixed for a hearing of the application.

…

23(8)  At the hearing both parties are entitled to appear and be heard and the Director shall consider the following factors:

(a) whether the increase in rent is necessary in order to prevent the lessor sustaining a financial loss in the operation of the building in which the premises are situate;

(b) increased operating costs or capital expenditures as advised by the lessor;

(c) the expectation of the lessor to have a reasonable return on his capital investment;

(d) such other matters as may be prescribed by the regulations.

23(9) After hearing and considering the application the Director may

(a) approve the rent increase;

(b) approve a rent increase of such lower amount as he may specify, and shall give written notice of his decision, and the reasons therefor, to all parties within thirty days of the date of the hearing.

At the hearing before the Commission, the Appellant acknowledges that some increase was appropriate given increased costs over the years.  The Appellant submits, however, that she and her sister have been good tenants for the last 15 years and that a 79% increase in rent is both too high and too sudden an increase.  The Appellant requests that the Commission vary the rent increase to a more appropriate figure.

The Respondents told the Commission that the Appellant and her sister are excellent tenants.  The Respondents are committed to completing the repairs listed in their June 27, 2005 letter (Exhibit E-12).  The Respondents state that the rental increase is long overdue and that $750.00 per month represents a fair rent for a third floor 3 bedroom apartment.

The Commission finds that a significant increase in the monthly rent for the apartment is warranted based on the test contained in subsection 23(8) of the Act.  However, the Commission, based on the evidence before it, does not believe that an increase to $750.00 per month is warranted given the apartment's present condition even assuming the repairs promised in Exhibit E-12 are fully completed.  Further, as the increase ultimately to be allowed is still very significant, the Commission finds that a brief phasing in of the increase is in order.

Accordingly, the Commission orders the following:

1.  The rent for the month of July 2005 will remain at $419.00 as the promised repairs have not been completed to date.

2.  Conditional on the completion of the repairs referred to in Exhibit E-12, the monthly rent for the apartment shall increase to $550.00 effective August 1, 2005.

3.  Effective January 1, 2006, the monthly rent for the apartment shall increase to $650.00.  This figure represents the maximum value of allowable increase based on the facts before the Commission.

Order

WHEREAS Ann MacAdam appeals against Order LD05-151 of the Director of Residential Rental Property, dated June 3, 2005;

AND WHEREAS the Commission heard the appeal in Charlottetown on June 29, 2005;

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

IT IS ORDERED THAT

  1. The rent for the month of July 2005 will remain at $419.00 as the promised repairs have not been completed to date.
  2. Conditional on the completion of the repairs referred to in Exhibit E-12, the monthly rent for the apartment shall increase to $550.00 effective August 1, 2005.
  3. Effective January 1, 2006, the monthly rent for the apartment shall increase to $650.00.  This figure represents the maximum value of allowable increase based on the facts before the Commission.

DATED at Charlottetown, Prince Edward Island, this 13th day of July, 2005.

BY THE COMMISSION:

Weston Rose, Commissioner

Norman Gallant, Commissioner

Anne Petley, 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.