Docket A-004-94
IN THE MATTER of the Rental of Residential Property Act, R.S.P.E.I. 1988, C. R 13.1,
Order LR95-1and
IN THE MATTER of an appeal, under Section 25 of the Rental of Residential Property Act, by Dave Moore, Moore Enterprises Inc. (the Lessor) against Order No. LD94-100 of the Director of Residential Property dated August 30, 1994.
Thursday, March 16, 1995
Linda Webber, Chair
Debbie MacLellan, Commissioner
Anne McPhee, Commissioner
Order
Participants
1. Appellant:Dave Moore, Moore Enterprises Inc. (Lessor)
2. Respondent:
Diane Clements (the Lessee)
Reasons for Order
1 Background
The Lessor Dave Moore, Moore Enterprises Inc. and the Lessee, Diane Clements signed a standard form Rental Agreement, Form 1, on June 1, 1993 for the rental of premises located at 378 MacEwen Road, Summerside, P.E.I. for one year. The rent was set at $626.00 per month. A security deposit of $300.00 was part of the agreement.
On April 26, 1994 a Notice of Increase of Rent, Form 10, was sent to the Lessee advising her that effective June 1, 1994 a rental increase would be put into effect. (Although this notice does not comply with the three month notice requirement for rent increases, this did not become an issue between the parties.)
The Lessee advised the Lessor in May that she could not afford the rent increase and had found a four bedroom home that she wished to occupy as soon as possible. The Lessor noted that the lease expired on June 1, 1994 in any event and stated that if the Lessee wished to move out earlier he, the Lessor, would agree to her subletting the premises. The Lessee chose to sublet, found new tenants, and they moved in.
When the new tenants moved in allegations were made about the condition of the premises left by the Lessee. On May 30, 1994 the Lessor telephoned the Lessee to discuss this with her. The Lessor stated that at this time the Lessee was advised that her "damage deposit" was being withheld and a statement would be forthcoming. The Lessor, who resides in Nova Scotia, inspected the premises on June 10, 1994. Disputes have continued since that date over: the condition of the premises; what, if anything, the Lessee should pay as a result of this; and what should be done about the security deposit.
On June 28, 1994 the Lessee filed an Application for Enforcement of Rental Agreement, alleging that the security deposit had not been returned to her within the time required by statute, and that she had been given no notice of any intention to retain the security deposit.
The Lessor admitted that no Notice of Intention to Retain Security Deposit was served on the Lessee, and argued that his telephone call to her sufficiently advised her of his intention to retain the security deposit to cover damage and cleaning required as a result of the condition in which she left the premises.
An Order of the Director of Residential Property was handed down on August 30, 1994 ordering the Lessor to pay the sum of $314.25 to the Lessee. The decision was based upon the failure of the Lessor to serve the Lessee with the Notice required by ss.10(5) of the Rental of Residential Property Act, R.S.P.E.I. 1988, Cap. R-13.1 (the Act).
A Notice of Appeal of this Order was filed by the Lessor on September 1, 1994. The grounds of appeal focused on the wrongdoing of the Lessee, the fact that "although technically speaking Form 8 was not served on Diane Clements" she was notified verbally, and on complaints about the Rental Property Officer's failure to pursue allegations by the Lessor that the Lessee had changed her mind about seeking the return of her security deposit. Overall the Lessor objected to the enforcement of "the black and white letter of the law".
A Notice of Hearing of the appeal was sent out on September 26, 1994. In response, both parties stated that attending a hearing would be inconvenient if not impossible and expressed a desire for a paper hearing. The Commission agreed to this request and so notified the parties by letter dated October 7, 1994.
In support of his appeal the Lessor filed:
1) October 10, 1994 - A three page statement of points of appeal plus eleven pages of attachments: a statement of Germaine Young; a copy of a Northumberland Ferries Ltd. receipt; a four-page excerpt from Moore Enterprises "Communication Planner" headed "Diane Clement" [sic]. (Some of these documents were signed by a Justice of the Peace for Nova Scotia but none were properly sworn.)
2) November 10, 1994 - A two page response to documentation filed by the Lessee (Also signed by a Justice of the Peace for Nova Scotia but not properly sworn.)
In addition, the Commission had on file a July 13, 1994 two-page statement plus eight pages of attachments filed by the Lessor (copies of receipts from Stringer Appliances & Repairs Ltd. and Rainbow International Carpet Dyeing & Cleaning Co.; copy of Form 10 Notice of Increase of Rent sent to the Lessee; copy of Standard Form Rental Agreement between Lessor and Lessee ( 5 pages).
In support of her position, the Lessee filed a five page statement (undated but received by the Commission on November 4, 1994) with three pages of attachments (statements by Kathy Collicutt and Patsy Clements), all unsworn.
The statements of both parties focused on the condition of the premises and took opposing points of view.
2 Decision
The primary issue here is whether or not the apparent failure by the landlord to give the Notice of Intention to Retain Security Deposit (Form 8) required by subsection 10(5) of the Act prevents the landlord from retaining any part of that security deposit. This is the basis upon which the Director made his decision, which decision has been appealed to the Commission.
Since this issue seems to be the basis of many disputes between landlords and tenants and is the basis of two appeals presently before us, the Commission has undertaken a detailed investigation of the law in this matter.
Questions that arise in reviewing this matter include:
A. What is proper notice?
1. Must it be in writing?
2. Must it be in Form 8?
B. What is proper service?
1. Must it be by way of a method prescribed in the Act?
2. Must it be in writing?
3. Must it be within the time limits set out in the Act?
C. Are A and B preconditions to the Commission having jurisdiction to consider the merits of any dispute over the security deposit?
The Act sets out the parameters within which we must begin to answer these questions. Section 20, entitled "Security Deposit", contains 12 subsections dealing with different elements of security deposits. Subsection (5) specifies what is to be done if a lessor wants to retain all or part of a security deposit:
s.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.
Therefore, the lessor must:
the lesseeserve
- with a notice of intention to retain security deposit
- in the form prescribed by regulation
- within ten days of the date on which the lessee delivers up possession of the residential premises.
A. What is proper notice?
On the face of it, the Act does not specifically state that the notice of intention to retain security deposit must be in writing, although that is implied by the reference to the notice being "in the form prescribed by regulation".
One difficulty is that other sections in the Act specifically state that "written" information is required: s.8 ("written application to the Director"); section 2 ("written rental agreement"); section 15 (3)(a) ("written notice of a termination date"); section 18(1) ("notice to terminate in writing in the form prescribed by regulation"); section 23(6) ("written notice to the lessor and lessee"), etc.
The implication that would normally be drawn from the failure of ss.10(5) to specify written notice is that such notice need not be in writing.
Does it help us to consider the requirement that the notice be "in the form prescribed by regulation"? Certainly the form prescribed by regulation is a written document. However, the law generally does not support a strict application of the requirement for a specific form.
The Interpretation Act, R.S.P.E.I. 1988, Cap. I-8 at ss.25(1) indicates that deviation from the form does not invalidate the form used 1) where the substance is not affected and 2) the form used is not calculated to mislead. That is, so long as the information given contains substantially the same information as required by the prescribed form, and is clear, then it would likely be acceptable.
As David J. Mullen notes in his text Administrative Law 2nd ed. (Toronto: Carswell, 1979) at p. 3-140, this is essentially a codification of the common law:
Many procedural provisions in statutes, regulations and by-laws prescribe details to be contained in forms or documents relating to the proceedings. It is generally accepted that slight deviations from such forms not calculated to mislead do not vitiate proceedings. However, if the form in issue is so defective as to omit material information or be misleading, the courts will hold that there has not been substantial compliance and set the decision aside. This common law rule has been given statutory force in the Ontario Interpretation Act which provides: "...where a form is prescribed, deviations therefrom not affecting the substance or calculated to mislead do not vitiate it". There is a virtually identical provision in the Federal Interpretation Act.
Could such notice be given orally? There does not appear to be any clear case law prohibiting this. Of course, the practical disadvantage of relying upon oral notice is the difficulty of proving that it was given and that it contained sufficient information, especially where there is a requirement that notice be in a certain form.
However, in interpreting this section we should give some consideration to the "trust" element of security deposits.
Subsection (2) of section 10 of the Act states:
10(2) Subject to subsection (5), a security deposit or the proceeds thereof shall be held in trust by the lessor and, if in money, shall be deposited in a trust account at a chartered bank, trust company or credit union within the province.
There appears to be substantial acceptance and recognition that there is a trust relationship between landlord and tenant in relation to the security deposit. (See Hyndman v. Mitchell (1990), 85 Nfld. & PEI R 148, 266 A.P.R. 148 (PEITD); Keltic Mortgage Corporation Ltd. v. Director of Residential Rental Property (PEI) (1989), 79 Nfld. & PEI R 288, 246 A.P.R. 288(PEITD).
The full implications of this are not totally clear but certainly suggest that if the landlord is a trustee of the security deposit and the notice of intention is, in effect, an accounting requirement, then the requirement of written notice in the form set out in the regulations may well be substantive rather than procedural.
Because of the trust element of the relationship between landlord and tenant here we cannot find that oral notice would be sufficient even if one could prove it had been given. The reporting requirements under the Act appear to us to require a form of accounting that must be in writing to be sufficient.
Overall, this leads us to conclude that proper notice is written notice in the form set out in the regulations, presently Form 8. However, a form different from Form 8 could be used and found acceptable if it provided all of the same essential information as that required on Form 8.
B. What is proper service?
Since the notice in question must be served it is appropriate to consider the methods of service set out in the Act under section 33:
33.(1) Any notice, process or document to be served by or on a lessor, lessee or the Director or the Commission is sufficiently served if
(a) delivered personally; or
(b) sent by ordinary, certified or registered mail
(i) to the lessor at the address given under section 31,
(ii) to the lessee at the address of the premises,
(iii) to the Director at the address of his office;
(iv) to the Commission at the address of its office.
(2) Where a notice cannot be delivered personally to a lessee by reason of his absence from the premises or by reason of his evading service, the notice may be served on the lessee
(a) by serving it on any adult person who apparently resides with the lessee;
(b) by posting it in a conspicuous place upon some part of the premises or a door leading thereto; or
(c) by sending it by ordinary, certified or registered mail to the lessee at the address where he resides.
(3) Where a document is delivered by ordinary mail, it is deemed to have been delivered on the third day after the date of mailing.
What should be noted is that this is not an exhaustive list of how service can be effected. This is an outline of a number of ways in which service may be effected in order to be sufficient, but not a statement that the ways outlined are the only means by which service may be effected. Other methods can be contemplated -- e.g. certified mail to a lessor's home address, which may differ from the address provided by the lessor pursuant to ss.33(1) -- which would clearly give notice to the party concerned.
This view is consistent with the Court's view that "actual notice" can't be ignored -- and can be effected many ways, including orally (see MacDormand Construction Ltd. v. Mapp (1991), 111 N.S.R. (2d) 17 (NSC Ct.)). Once again, the difficulty for any lessor claiming to have given "actual notice" by orally conveying Form 8 information to the lessee would be reconciling this type of notice with the trust elements of the relationship. Since we have concluded these trust elements are paramount, such oral notice would not be sufficient for the Notice of Intention to Retain Security Deposit.
The final element of proper service is the time limit set out in the Act. On this issue the law is more consistent than in other areas and requires that time limits be strictly adhered to.
The case of Re Kasprzycki and Abel et al. (1986), 55 O.R. (2d) 536 (Dist. Ct. of Ont.) involved rent increases from 1979 to 1985 paid by the tenant without complaint but for which the proper 90 days' notice was not given. Neither the tenant nor the landlord were aware of the required notice period. When the tenant found out, he objected to paying the increased rent. The Court held the rent increases to be void because the statutory notice requirement was not met. We also note that the judge found (at p. 542) that the Landlord and Tenant Act was, in large measure, created for the protection of tenants.
David F. Mullen in his text Administrative Law, supra, at p.3-139 states:
. Once again, however, it is impossible to generalize and on occasions, breaches of provisions as to time where there has been no substantial prejudice have not given rise to a remedy. [emphasis added]statutory requirements as to time tend to be treated as mandatory by the courts and are sometimes described as conditions precedent to jurisdiction
The Prince Edward Island Supreme Court dealt with a time requirement under the Rent Review Act in the case of White v. Thomas (1989), 6 R.P.R. (2d) 258 (PEISC, TD). In that case Mr. Justice Mullally strictly enforced the requirement that a tenant be given three months' notice of a rent increase, stating that this was a statutory requirement that the tenant could not waive.
Overall the cases lead us to conclude that the time provision for the notice must be strictly construed. Failure to give notice within the required 10-day period cannot be waived by the tenant.
C. Jurisdiction of the Commission
In light of these conclusions,
- that notice must be in writing, substantially in the form set out
by regulation, and
- that the notice must be served within the 10-day period set
out in the statute, and this cannot be waived by the tenant
the Commission has no jurisdiction to consider the merits of any dispute over a security deposit unless these preconditions have been met. The question, then, is whether or not these preconditions have been met in this case.
The Lessor has confirmed that he did not send Form 8 or any other written notice to the Lessee. He did, however, advise the Lessee orally that he intended to keep the security deposit because of alleged damages to the premises during the Lessee's occupation.
While the oral notice might meet the requirements of service as actual notice of any intention to retain the security deposit, since it is not in writing it does not meet the Act's requirement in this case.
As noted earlier, with regard to security deposits this legislation appears to create a trust relationship between lessor and lessee. This places a substantial onus on a lessor to be accountable for the funds so held and to render an accounting promptly when the premises are vacated. This requirement we believe is a substantive part of the law, only properly met by a written accounting.
We note the statute has provided a mechanism - through security deposits - for landlords to have a remedy for both nonpayment of rent and damage to premises. This is done at the lessee's expense by requiring the lessee to pay funds to the lessor prior to there being any default. The lessee must trust in the Act to protect his/her right to a prompt return of those funds at the end of the tenancy, and his/her right to have those funds treated as trust funds - protected from creditors of the landlord and from unfair claim by the landlord. In these circumstances it is reasonable to place the burden of timely proper notice on the landlord.
If rendered in the form set out by regulation, the accounting is acceptable. If rendered in another form the accounting will have to be reviewed to determine its acceptability. If not in writing, it does not meet the trust requirements for an "accounting" and so is insufficient to meet the requirements of the Act.
Having failed to give the proper notice in the form required, the Lessor has forfeited his opportunity to claim part of the security deposit.
As for the allegation by the Lessor that the Rental Property Officer should have pursued the Lessor's allegations that the Lessee had changed her mind about wanting her security deposit returned, we can find no merit in such a suggestion. The officer's responsibility is to respond to applications filed in accordance with the Act. If one party sincerely chooses to withdraw an application then that party can easily notify the officer of that decision. Since one party, especially the lessor, may often be in a position to intimidate the other party, even a lessor's true statement about what he was told by a lessee in this regard could be misleading with regard to the real intentions of the lessee.
For the reasons set out herein, the appeal is dismissed.
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 Dave Moore, Moore Enterprises Inc. (the Lessor) against Order No. LD94-100 of the Director of Residential Property dated August 30, 1994.Order
WHEREAS
Dave Moore, Moore Enterprises Inc. filed an appeal against a decision of the Director of Residential Rental Property dated August 30, 1994; AND WHEREAS a paper hearing was conducted, at the request of the parties;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 Director is affirmed; and
3. The security deposit of $300.00, plus interest to date of $20.00, is due and payable to the Lessee on or before March 30, 1995.
DATED
at Charlottetown, Prince Edward Island, this 16th day of March, 1995.BY THE COMMISSION:
Linda Webber, Chair
Debbie MacLellan, Commissioner
Anne McPhee, Commissioner
NOTICE
Sections 13.(1) and 13.(2) of the Island Regulatory and Appeals Commission Act provide as follows:
13.(1) An appeal lies from a decision or order of the Commission to the Appeal Division of the Supreme Court upon a question of law or jurisdiction.
(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.