Docket A-006-93
IN THE MATTER of the Rental of Residential Property Act, R.S.P.E.I. 1988, C. R 13.1,
Order LR93-11and
IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by F. Scott Coffin (the Lessor) against Order No. LD93-81 of the Director of Residential Property dated June 7, 1993.
Wednesday, January 5, 1994
John L. Blakney, Vice-Chair
Anne McPhee, Commissioner
Deborah MacLellan, Commissioner
Order
Participants
1. Appellant
Lessor
F. Scott CoffinWitness
Pamela MacIssac2. Respondent
Lessees
Karl Doucette
Jeanette Doucette
Reasons for Order
1 Background
On April 1, 1993, the Lessee, Karl Doucette, made application to the Director of Residential Rental Property (the Director) to find that rent is owed the Lessees and to order that an amount found to be owed be paid by the Lessor.
A hearing into the matter was held on April 27, 1993, and an Order (LD93-81) was issued by the Director on June 7, 1993. This Order stated that rent in the amount of $3,610 is found owing and that the Lessor shall pay the Lessees $3,610.00 on or before July 7, 1993.
The Lessor filed a Notice of Appeal (Form 17) on June 23, 1993, appealing the decision and order of the Director.
The Commission heard the appeal on July 9, 1993.
2 Evidence & Arguments
2.1 The Lessor
The Lessor believed that problems over the rent started with the Notice of Termination that he gave to the Lessee, Karl Doucette, on February 18, 1993.
Over the period that the Lessees rented the unit there were a number of occasions when the Lessor could have increased the rent but did not.
The Lessor argued that the decision of the Director to establish a base rent was wrong because there is no such term or provision under the Rental Of Residential Property Act. Notwithstanding that it was wrong to establish a base rent because it was unfair to set the figure at $325.00 based on a rent that was 10 years past; the Director did not consider the costs to improve the rental unit and increases in cost of utilities over that period which together amounted to about $3,700.00 since 1987.
The Lessor argued that from his research the average rent including heat is about $519.00 per month and if you add on utilities the average would be approximately $646.00. Therefore, it is unreasonable to think that a lessor should rent a unit in the Brighton area for $325.00 per month. Even if one considers the allowable rent increases, then the rent would be $450.00 to $460.00 per month instead of $435.00 which he was charging in 1993.
The Lessor was not aware of the requirement to serve a form to notify the Lessees that the rent was to be increased, nor was he aware that he had to give three months' notice.
The Lessee(s) subletted the premises without his permission which relieves him of any obligation under the Act.
In his order, the Director referred to the matter of collecting rent twice for the same month. The Lessor stated that he had not received rent twice for the same month.
2.2 The Lessees
The Lessees argued that the Lessor violated the provisions of the Act on numerous occasions. The Act does not permit a lessor to increase rent more than once within a 12-month period. When Karl Doucette moved back to the unit on May 1, 1990 his rent was $410.00 but was increased without notice to $415.00 and the 12-month period had not lapsed.
Since 1984, the Lessor increased the rent without giving proper notice and therefore the rent increases were not in compliance with the Act. The Lessees did not raise the matter of the violations because they were concerned that they would be asked to vacate the premises.
Although the Lessor may have incurred capital expenses for maintenance of the residential unit there was no need to increase the rent because the costs could be written off as an expense. In fact, $3,700.00 over 10 years is not a substantial amount.
It is not enough for the Lessor to argue that he did not know the rules. It is his responsibility to comply with the requirements of the Act.
The rent increases over the last ten years have been in violation of the Act and the rules have not been complied with since 1984. Therefore, the proper rent is $325.00 per month and the rent owing should be determined based on that monthly rent.
The amount owing should be determined based on the period starting June, 1984 to May, 1993 and not cut off on May, 1990 as the Director did in rendering his decision and order. There is no reason to go back only to May, 1990 since the violations occurred over the 10 year-period.
3 Decision
It is apparent from the evidence that this matter has a long history and the issues are somewhat complex. Therefore, the Commission has taken considerable time to examine the arguments of both parties and the relevant provisions of the legislation that controlled rents in the Province of Prince Edward Island for almost two decades. After full consideration of the facts related to this case the Commission has decided to vary the order of the Director.In its deliberation over this matter the Commission considered three main questions: Did the Lessor contravene the Rental of Residential Property Act when, on various occasions, he raised the Lessee's rent for the residential premises located at 22 Smallwood Crescent? If the Lessor did contravene the legislation, then what is the last permitted rent charged? If an amount in rent is found to be owing, how much is owed?
After considering the evidence the Commission finds that it must answer the first question in the affirmative. Since the Rental of Residential Property Act came into force on January 18, 1989, and while the Lessees occupied the residential premises, the Lessor raised the rent on two different occasions, being July 1, 1990 and January 1, 1992.
In regards to the rent increase on July 1, 1990, the Lessor did not comply with Section 21 of the Act.
Section 21
The rent payable for residential premises shall not be increased until twelve months has elapsed since the date of any previous increase or, in the case of residential premises not previously rented, the date on which the rent was charged.
The Lessor raised the rent from $395.00 to $410.00 per month on September 1, 1989, when the previous Lessee, Nichole Gallant, rented the premises. Within nine months the Lessor increased the rent from $410.00 to $415.00 and consequently set an illegal rent by failing to meet the time requirement for frequency of a rent increase.
The Lessor did not raise the rent again until January 1, 1992, when it was increased from $415.00 to $435.00 per month. According to the evidence the Lessor only gave the Lessees sixty days' notice of the increase in rent, however, Section 22 requires that:
Section 22
Every notice of rent for residential premises shall:
(a) be in writing in the form prescribed by regulation; and
(b) be served on the lessee
(i) in the case of a weekly agreement, at least three weeks before the date on which it is to take effect,
(ii) in the case of a monthly agreement, at least three months before the date on which it is to take effect. (Emphasis Added)
In the result, the Commission finds that both rent increases are unlawful.
In order to determine whether or not any amount can be recovered by the Lessees, the Commission must first determine what is the last rent the Lessor was permitted to charge for the premises.
What complicates that determination are the facts in evidence. One or both of the Lessees rented the premises from June, 1984 to August 31, 1989 and again rented the premises on May 1, 1990 until May 15, 1993. As already stated on September 1, 1989, the Lessor entered into a rental agreement with Nichole Gallant for an agreed monthly rent of $410.00.
In order to determine what rent the Lessor was permitted to charge, the Commission is guided by McDowall v. Kingdom of Denmark (1988), 51 D.L.R. (4th) 156 (Ont. H. Ct., Div. Ct.). In that case, the Court reviewed the legislation which had two provisions, one dealing with premises which had not previously been rented, and one dealing with the last rent that was lawfully charged. The Court held the term the last rent that was lawfully charged meant the rent that was in place at the time the legislation was enacted.
We find that to give words ''last rent that was lawfully charged' of s.5(1) the first meaning earlier mentioned would lead to an unfair and absurd result in that the last rent lawfully charged could conceivably date back many years. It could not have been intended by the legislature that in enacting rent control legislation the object was to adopt a dated and distant base rent. The Act was intended to ''freeze'" rents at the levels as they existed when the Act came into force, not at the levels as they have existed in years past. The Act provides for ''controlled" rent increases, but a comprehensive reading of ss. 4 and 5 indicates that the rent upon which statutorily prescribed increases would be based was that which existed at the time the legislation became effective.
The Commission believes that in this case, and for that matter any case, the objective is to reach a logical and fair conclusion by giving a fair and reasonable interpretation to the prevailing legislation.
The Rent Review Act established rent controls in the 1970s and was repealed with the enactment of a new Act. The Lessees submitted that on a number of occasions during the period June, 1984 to January 18, 1989 the Lessor raised the rent without giving them proper notice. During that period, maximum permitted rent increases were controlled under the Rent Review Act. Section 3(3) required an application by the landlord for an increase in rent. Section 3(5) enabled a tenant to not later than sixty days after receiving notice of the increase, give notice to the landlord ... to justify the increase. Subsection 3(6) required the landlord to reduce the rent increase or file an application with the Rentalsman. Subsection 3(8) enabled the tenant within a fifteen-day period to apply for an order to null and void the increase in rent.
Sections 8(d.1) and (d.2) of the new Rental of Residential Property Act now authorizes the Director to:
(d.1) make a finding that an amount of rent is owed or that a security deposit, or part thereof, should be forfeited or returned:
(d.2) order that an amount found to be owed be paid.
It is the view of the Commission that this is a significant change from the former rent control legislation that authorized the Rentalsman to null or void the increase in rent to now order the return of rent owing. The Commission believes that one must interpret the change to mean that the Director only has the authority to affect rent increases based on rents established or in existence at the time the new legislation was proclaimed and not a dated and distant base rent charged under the former legislation. To take any other interpretation would lead to what the Commission believes would be an unfair and absurd result. It would mean the Director would be declaring rent increases owing that date back almost 10 years when during the majority of that time the Director had no authority to make such an order.
In his decision, the Director established a base rent charged by Mr. Coffin technically under the provisions of the Rent Review Act. It should be noted that the term base rent does not appear in the legislation. However, the Commission finds that the effect of the Director's decision is to establish an amount of rent owing based on rent charged during a time or period when he had only the authority to null or void the rent and not order a rent owing. Therefore, the Commission believes that neither the Director nor the Commission can now extend its authority to order that rent is now owing in an amount based on a rent established almost 10 years ago and under legislation that is now repealed.
If the Commission accepted the argument that the last allowable rent charged by the Lessor was in 1984, under the former legislation the result would be unfair and absurd because so much time has lapsed. Even the Statute of Limitations places a limitation of six years on commencing any actions against a breach of contract situation. Consequently, the only logical finding must be that because of the significant change in the legislation and the implications if found to be otherwise, the legislature intended to freeze rents at the levels as they existed when the new Act came into force.
Following the above logic the last rent permitted to be charged by the Lessor when the new Act was enacted on January 18, 1989 is $395.00. However, the Lessees in effect terminated their agreement on August 31, 1989. A new rent was established on September 1, 1989, when the Lessor entered into a new rental agreement with Nichole Gallant establishing an agreed rent in the amount of $410.00. The rent increase was within the allowable 4% pursuant to Section 23(1) of the Act and met the requirements of Section 21 with respect to frequency of rent increases.
Rent is defined in Section 1(n) of the Rental of Residential Property Act to mean:
the amount of the consideration, whether or not in money, paid, given or agreed to be paid or given by a lessee to a lessor for occupancy of residential premises and for any service, privilege or thing that the lessor may provide for the lessee, whether or not a separate charge is made therefor. (Emphasis added)
In this case, considering Section 22, notice of the rental increase should have been given to the Lessees three months in advance, to be effective September 1, 1989. However, the Commission finds the Act is unclear on the point whether or not there is any obligation on the lessor to give notice of a rent increase three months in advance when there is no lessee between the time of termination of a rental agreement and when the lessor enters into a new agreement with a new lessee. Section 22 requires that every notice be served on the lessee. If there is no lessee to be served then the Act appears to give the lessor the opportunity to increase the rent when a new amount is agreed to by a new lessee, provided the increase is within the allowable percentage (Section 23) and twelve months have elapsed since the last increase (Section 21).
It is the Commission's opinion that by entering into a rental agreement with a new lessee—Nichole Gallant—Mr. Coffin (the Lessor) could raise the rent to $410.00 because it was within the allowable rent increase and was the first increase since the new legislation was enacted. In fact, 28 months had lapsed since rent had been set at $395.00. Consequently, the Commission finds that the most logical and practical last permitted rent charged is that rent agreed to be paid by Nichole Gallant—the $410.00 amount agreed to be paid within the terms of the rental agreement.
In the result, the Commission finds that the amount owing to Karl Doucette and Jeanette Doucette (the Lessees) is as follows:
In this case, nothing was heard to convince the Commission that the amount should not be repaid and therefore orders that $502.50 be paid to the Lessees by the Lessor.
Period
Amount Owed
Permitted Rent
Rent Charged
July 1, 1990 - Dec. 31., 1991 $90.00
$410.00
$415.00
Jan. 1, 1992 - Dec. 31, 1992 $300.00
$410.00
$435.00
Jan. 1, 1993 - May 15, 1993 $115.20
$410.00
$435.00
Total Amount Owed $502.50
In the event the Commission decision on the permitted rent is in error, then based on the evidence heard from both parties, the Commission must conclude that Mr. Coffin (the Landlord) did not comply with the requirements for proper notice under the Rent Review Act. However, the tenant or tenants did not avail themselves of the provisions under the Act to null or void the rent increases. The Lessees indicated to the Commission that they, or at least Mr. Karl Doucette, knew the laws that applied to renting property. Even though they did not like what was being done, they did not avail themselves of the provisions of the Rent Review Act and the Rental of Residential Property Act, because they were concerned that if they did the Lessor might terminate their rental agreement. Mr. Doucette did say that he had talked to Mr. John Comeau, the former Rentalsman, about the problem of the rental increases and his response was that the only thing they could do was to leave the premises. Although certainly disturbed over the Lessees' concern, the Commission believes that one of the very reasons for rent control legislation is for lessees to use the legislation to protect themselves, exercise their rights and rectify problems they might have with a lessor. The same applies to any lessor. Notwithstanding Mr. Doucette's conversation with Mr. Comeau, the Commission finds that the Lessees, although knowledgeable of what was required of them, did not take action under the Rent Review Act to null or void any improper rent increases.
Mr. Justice G. J. Mullally in White v. Thomas (P.E.I.S.C.) 1989, (Unreported)(SCC-11774), found that he did not believe that the plaintiff waived her rights by entering into an agreement because she was not aware of her rights at the time so it was not a conscientious or true waiver ... From this decision it appears that the important test is whether or not one is aware of one's rights. Therefore, if the Commission found that the Lessees did not know or understand the options available to them to correct the unlawful rent then it could be difficult to say that they waived their right but that is not the case. Given these circumstances, there appears to be little to support the claim that the Lessees should now be reimbursed for those overages in rent caused by improper rent increases charged under the repealed legislation.
From the foregoing, it would appear from the evidence that they (the Lessees) have waived their rights. However, before the Commission can fully decide whether or not there was a true waiver in this case, evidence from Mr. Comeau would first have to be heard.
Accordingly,
1. The Order of the Director is varied; and
2. Rent in the amount of $502.50 is found owing to the Lessees and shall be paid by the Lessor on or before February 4, 1994.
An Order will therefore issue.
IN THE MATTER of the Rental of Residential Property Act, R.S.P.E.I. 1988, C. R 13.1,and
IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by F. Scott Coffin (the Lessor) against Order No. 93-81 of the Director of Residential Property dated June 7, 1993.
Order
UPON
the appeal of F. Scott Coffin against a decision of the Director of Residential Rental Property dated June 7, 1993;AND UPON
hearing the appeal conducted in Charlottetown on July 9, 1993;NOW THEREFORE
, for the reasons given in the annexed Reasons for Order;IT IS ORDERED THAT
1. The Order of the Director is varied; and
2. Rent in the amount of $502.50 is found to be owing to the Lessees and shall be paid by the Lessor on or before February 4, 1994.
DATED
at Charlottetown, Prince Edward Island, this 5th day of January, 1994.BY THE COMMISSION:
John L. Blakney, Vice-Chairman
Anne McPhee, Commissioner
Deborah MacLellan, Commissioner
