Docket A-001-96
IN THE MATTER of an appeal under Section 25 of the Rental of Residential Property Act, by Allen Brown (the Lessor) against Order No. LD96-006 of the Director of Residential Rental Property dated January 10, 1996.
Order LR96-07BEFORE THE COMMISSION
on Friday, the 19th day of July, 1996.
John L. Blakney, Vice-Chair
Anne McPhee, Commissioner
Clayton Bulpitt, Commissioner
Order
Participants
1. Appellant:Allen Brown (the Lessor)
2. Respondent:
Gary Whipkey
Roberta Whipkey (the Lessees)
Reasons for Order
1. Discussion & Findings
On July 1, 1994, Gary and Roberta Whipkey (the Lessees) occupied the residential premises located at 346 Jardine Street, Summerside, Prince Edward Island.
The residential premises is comprised of a residence containing two rental units and a garage that is approximately 26' by 34' in size.
According to the evidence before the Commission, the Lessor first rented the subject residential rental premises July 1, 1993 to Paula McNamara until she moved out June 30, 1994. The terms of the verbal rental agreement was to rent the residential premises for $750.00 per month without use of the garage.
The Lessees entered into an agreement to pay rent to the Lessor in the amount of $1,200.00 to occupy the premises at 346 Jardine Street. The agreement included full use of the garage located in the residential property.
The Lessees and the Lessor reached an agreement to reduce the rent for the months of January, February and March, 1995 while the Lessees were away, leaving the premises unoccupied.
After notifying the Lessor that they were going to move from the premises and subsequent to their actual move, the Lessees learned from the previous tenant that the Lessor had charged $750.00 per month for rental of the residential premises.
On August 17, 1996, Roberta Whipkey, on behalf of the Lessees, filed with the Director of Residential Rental Property (the Director) an Application For Enforcement of Statutory or Other Conditions of Rental Agreement (Form 2). The application was filed by the Lessees with the belief that the Lessor had overcharged the Lessees for rent in that the previous tenant was paying $750.00 monthly with heat included that they were being charged $1200.00 a month, heat included. To remedy the situation the Lessees requested the Director to order a reduction in rent and the return of an amount owing.
After holding a hearing, the authorized Residential Rental Property Officer (the Rental Officer) issued Order LD96-006 ordering that:
The monthly rent of $769.00 for the residential rental premises located at 346 Jardine Street, Summerside, shall remain in effect.
The lessor shall pay to the lessees the amount of $5,696.00.
The payment or payment arrangements suitable to the lessees to be made on or before February 10,1996.
On January 19, 1996, the Lessor filed with the Island Regulatory and Appeals Commission a Notice of Appeal against the order of the Rental Officer.
In accordance with Section 25(2) of the Act, the Commission scheduled the appeal to be heard on February 6, 1996. However, the Lessees indicated that they were out of the province and would not return until some time during the month of April. The Lessor agreed to postpone the hearing and requested that the hearing not be held before June 17, 1996. Consequently, the Commission held a hearing on June 17, 1996.
During the hearing the Lessor submitted to the Commission that the Lessees agreed to a rent of $1,200.00 including heat and the full use of the garage. He acknowledged that he rented the premises to the previous lessee for $750.00 but it did not include the use of the garage. Therefore he did not increase the rent for the residential unit but charged an additional charge of $450.00 per month for full use of the garage, for a total rent for the residential rental premises of $1,200.00.
The Lessees admitted that they had entered into an agreement to pay rent in the amount of $1,200.00 for the residential premises including full use of the garage. They also acknowledged that they requested that the Lessor reduce the rent to $800.00 for the 3 months that they would not be occupying the premises. Also, after learning more about the local residential market they reached the conclusion that they were paying excessive rent for the subject premises.
The Lessees determined that the previous Lessee had been paying $750.00 per month and that the Lessor had increased the rent beyond the amount allowed under the law.
In this case it is clear that the agreed to rent paid by the Lessees was $450.00 more than what was paid by the previous lessee. The Commission finds that the Rental of Residential Property Act is clear on the matter of increasing rents for residential rental premises.
Section 23 sets out provisions to control the amount of any rent increase and when a lessor requires a rent increase over and above the allowable rate of increase then there are specific procedures to be followed.
23. (1) Except as provided in subsection (3) and notwithstanding the terms of any rental agreement, the amount of any rent increase between January 1 and December 31 of any year shall not exceed the percentage amount which is established by an order of the Commission and published in the Gazette.
(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.
(4) Where the lessor seeks a rent increase equal to or less than the percentage amount permitted by subsection (1), the lessee may apply to the Director, not later than ten days after being served with the notice of rent increase, to have the Director review the rent increase being sought.
(5) An application pursuant to subsection (3) or (4) shall be made on the form prescribed by regulation and a copy of the application shall be served on the other party.
(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.
(7) The lessor and lessee shall supply any information requested by the Director for the purpose of assessing the application, and all information provided to the Director shall be available to both parties, who shall perserve confidentiality with respect to it.
(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.
(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.
(10) Where an application has been made pursuant to subsection (3) or (4), the lessor shall not charge or collect a rent increase pending the outcome of that application.
Based on the evidence before the Commission the Lessor did not follow these steps when he charged the Lessees $1,200.00 and the former Lessee, Paula McNamara $750.00 to rent the residential premises. It is obvious that the difference is substantially more than the allowable percentage increase as determined by the Island Regulatory and Appeals Commission which was 0.0% in 1995, 2.5% in 1994 and 1.0% in 1993.
The Commission's understanding of the Lessor's argument for not following the required procedures outlined in Section 23 is that the residential rental premises he rented to Paula McNamara was substantially different from the one he rented to the Lessees. In the case of his previous lessee, Paula McNamara, he submitted that the rent for the premises was $1,200.00 including the garage, but he did not include the garage as part of the residential rental premises in the rental agreement, so he dropped the rent to $750.00. In the case of the Lessees he included the full use of the garage and charged the full rent of $1,200.00. Therefore, he submitted that the first rent charged for the residential premises was set at $1,200.00 and there was no increase in rent for the residential premises occupied by Gary and Roberta Whipkey.
In the Commission's view the fundamental questions that must be answered in this case are: Was the residential premises rented to Paula McNamara the same as the residential premises rented to Gary and Roberta Whipkey? If it was the same, then did the Lessor illegally increase the rent from $750.00 to $1,200.00?
In order to determine if the premises rented to Ms. McNamara was the same as that rented to Gary and Roberta Whipkey the Commission must first determine, for purposes of the Act, whether or not a garage is considered part of a residential premises. The Act defines residential premises to include:
1.(p) "residential premises" or "premises" includes
(i) any house, dwelling, apartment, flat, tenement or other place that is occupied or may be occupied by a natural person as a residence or that part of any such place that is or may be occupied by a natural person as a residence, whether such residential premises are furnished, partly furnished or unfurnished.
It is the Commission's view that under normal circumstances one must consider a garage located on a residential property as accessory to or ancillary to the main building on the property which, in this case is residential. The use of the garage is incidental to the residential use and the lessee uses a garage for not only storing their household vehicle but also personal belongings that would normally be associated with the residential rental premises. Therefore, the Commission finds that a garage located on a residential property constitutes part of the residential premises occupied by the Lessee. Section 1(q) defines residential property to mean:
1.(q) "residential property" means a building in which, and includes land on which, residential premises are situated.
Based on the evidence available to the Commission the Lessor first rented the residential rental premises to Paula McNamara without the garage and therefore, one could not consider the garage as part of the residential premises because the rental agreement did not allow her to occupy the space for residential purposes. However, according to the evidence, as space became available the Lessor allowed her to park her car in the garage. In the Commission's view, this was a gratuitous action only. Ms. McNamara still had no right to the use of the garage, the Lessor simply allowed her to use a part of it when it became available. The rental agreement did not include the garage.
According to the evidence, the Lessor entered into a new rental agreement with the Lessees ( Gary and Roberta Whipkey) and negotiated a new rent of $1,200.00 for a different residential premises, which included full use of the garage. The Commission finds that the Lessor negotiated with the Lessees a new rent for a different residential premises and his actions did not constitute a rent increase for the same residential premises. It is the Commission's view that Section 23 of the Act applies to increasing rent for the same residential premises which is not the situation in this case.
It would be unreasonable to think that a lessor under a new rental agreement could not exclude a garage or any other ancillary building from a residential property to be rented to a lessee. Therefore, in this case the Lessor could have chosen not to include the garage in the residential premises rented by Gary and Roberta Whipkey and negotiated a rental agreement that set a rent, pursuant to the provisions of Section 23, for the residential premises without the garage. However, in this case he charged a rent for the residential premises that included the garage. In the McNamara case he charged a rent that did not include the garage. The Commission finds that his actions did not constitute a rent increase for purposes of Part IV of the Act - Rent Increases.
2. Decision
Therefore the Commission allows the appeal and orders the decision of the Rental Property Officer reversed.
Accordingly,
1) The appeal is allowed;
2) The Order of the Rental Property Officer is reversed.
IN THE MATTER of an appeal under Section 25 of the Rental of Residential Property Act, by Allen Brown (the Lessor) against Order No. LD96-006 of the Director of Residential Rental Property dated January 10, 1996.Order
WHEREAS
Allen Brown filed an appeal against a decision of the Director of Residential Rental Property dated January 10, 1996; AND WHEREAS the Commission heard the appeal in Charlottetown on June 17, 1996;NOW THEREFORE
, for the reasons given in the annexed Reasons for Order;IT IS ORDERED THAT
1. The appeal is allowed;
2. The Order of the Rental Property Officer is reversed.
DATED
at Charlottetown, Prince Edward Island, this 19th day of July, 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.