Docket A-002-93
Order LR93-6

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 Elwin Jay Rentals Inc. (the Lessor) against Order No. LD92-134 of the Director of Residential Rental Property dated December 15, 1992.

Friday, April 2nd, 1993

Linda Webber, Chairman
John L. Blakney, Vice-Chairman
Michael Ryan, Commissioner

Order

Participants

1. Appellant

Lessor
Don Large, Solicitor for Elwin Jay Rentals Inc.

2. Respondent

Lessee
Pearl (Cartwright) Hartley

3. Witness for the Respondent

Charlene Knowles

Reasons for Order

1 Background

The premises known as Apartment #6, 2 Lowther Drive, Cornwall, P.E.I., are presently owned by the Lessor. The Lessee occupied those premises from July 1, 1987 to September 30, 1992. The Lessee paid a security deposit of $200.00 at the time of her rental of the premises.

The Lessee paid the security deposit to Royal Property Management Inc. (George Bagnall), a former owner of the premises. Mr. Bagnall later sold the premises to Owens Developments Inc. The evidence submitted indicates that the company holding the mortgage on the property took possession of it when Owens Developments Inc. had financial problems. The property was then passed on to CMHC under the Mortgage Insurance Program. After that it was sold by CMHC to Elwin Jay Rentals Inc.

By Form 2, Application for Enforcement of Statutory or Other Conditions of Rental Agreement, dated October 22, 1992, Pearl (Cartwright) Hartley sought a finding that the security deposit paid by her should be returned.

After completing his investigation, the Director issued Order #LD92-134 dated December 15, 1992, in which he ordered that the Lessor pay to the Lessee the $200.00 security deposit, plus interest of $89.00.

On January 8, 1993, the Lessor filed a Notice of Appeal.

2 Evidence & Argument

The Lessee testified that she paid a deposit, received a receipt for it and had done nothing to interfere with her right to have the deposit returned to her. As well, she pointed out that when the company of Owens Developments Inc. got into financial trouble she made inquiries of CMHC and the Director of Residential Rental Property about the status of her deposit and felt she had been assured of her right to receive it back from the new owner.

The letter from the Director at that time, dated November 17, 1989, stated the following:

Thank you for your recent letter concerning security deposit in the amount of $200.00.

We are investigating this matter to ensure the funds will be available to you in accordance with the provisions of the Rental of Residential Property Act.

There is no further indication in the file of what, if anything, was done by the Director in connection with this matter.

With respect to a complaint by the Lessor's representative that the Lessee failed to attend the hearing initially scheduled by the Director, the Lessee pointed out that her address, as well as her name were changed over the period in question and although she had provided the Director with her new address, she never received the Notice. The Director's file does indicate that the Notice was mailed to the wrong address.

Charlene Knowles, daughter of the Lessee, confirmed that she had phoned CMHC on her mother's behalf in October, 1992, to ask questions about the security deposit and was told that whoever had purchased the building would be responsible for the security deposit.

The Lessor, represented at the hearing by legal counsel only, gave no evidence at the hearing. The facts presented by the Lessee were not disputed. Several arguments were put forward at the hearing and in subsequent correspondence:

1. The decision is wrong in law. Subsection 10(12) only binds the Lessor with the responsibility to repay security deposits made to the person who was Lessor just prior to him. Anything paid to a Lessor who existed prior to that is simply lost.

2. The application of the Lessee should have been dismissed because she failed to appear at the hearing.

3. There was a breach of fundamental justice when the Director accepted evidence from the Lessee with the Lessor being present and given the opportunity to cross-examine the Lessee.

Arguments 2 and 3 were withdrawn at the hearing.

After the hearing, in a letter dated February 3, 1993, the Lessor's counsel argued that any remedy available under Subsection 10(12) of the Act was not available to the Lessee because that Act was given Royal Assent on April 26, 1990 and the Lessee paid her security deposit in 1987; the Lessee is governed by the law in effect when she paid her deposit.

3 Decision

As for the last argument put forward on behalf of the Lessor, the Commission is not aware of any legal authority to support the argument made and no legal authority was put forward in support of that argument. The Commission is of the view that the relevant law is that which existed at the time the Lessee's right to seek return of her security deposit arose.

With respect to the argument that Subsection 10(12) obligates the Lessor to repay deposits paid to him or to his immediate predecessor only, the Commission cannot agree.

The Subsection referred to reads as follows:

s.10 (12) A person who acquires the interest of a lessor in residential premises, whether by purchase, mortgage sale or otherwise, has the rights and is subject to the obligations of the previous lessor with respect to a security deposit paid to the previous lessor.

In the Commission's view, the only reasonable interpretation to place upon that section is one which places the obligation of each previous lessor on a new lessor. Since the obligations of the previous lessor included the obligations of his predecessor as well, tenants are protected no matter how many transfers of ownership may occur.

We do not feel this places an unreasonable burden upon a landlord. He simply must ensure at the time of purchase that all security deposits are transferred to him, or an adjustment is made on the purchase price in lieu of that transfer.

Accordingly,

1. The appeal is denied;

2. The Order of the Director is affirmed; and

3. The security deposit of $200.00, plus interest to date of $92.50, is due and payable to the Lessee on or before April 12, 1993.

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 Elwin Jay Rentals Inc. (the Lessor) against Order No. LD92-134 of the Director of Residential Rental Property dated December 15, 1992.

Order

UPON the appeal of Elwin Jay Rentals Inc. against a decision of the Director of Residential Rental Property dated December 15, 1992;

AND UPON hearing the appeal conducted in Charlottetown on February 3, 1993;

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

IT IS ORDERED THAT

1. The appeal is denied;

2. The Order of the Director is affirmed; and

3. The security deposit of $200.00, plus interest to date of $92.50, is due and payable to the Lessee on or before April 12, 1993.

DATED at Charlottetown, Prince Edward Island, this 2nd day of April, 1993.

BY THE COMMISSION:

Linda Webber, Chairman
John L. Blakney, Vice-Chairman
Micheal Ryan, Commissioner