The Commission denies the appeal and
confirms Order LD20-007.
In the Appellants' Form 12
Application by Lessor for Approval of Rent Increase Exceeding Percentage
Allowed by Regulation, the following increases were sought:
Basement - 71%
* 5A - 43%
* 5B - 70%
The rationale for the rent increase
was stated as:
Current rents are not
allowing for any maintenance or repair for the building.
The building is in need of some capital expenditures in the
near future but is currently negative cash flow based on expenses.
Subsection 23.(8) of the
Act sets out the factors to be considered:
(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.
Section 17. of the Regulations
At least five days prior to a
hearing pursuant to subsection 23(8) of the Act, the lessor shall serve on
the Director and the lessees who are parties a statement of income and
expenses in Form 15. (EC10/89)
The Form 15 filed by the Appellants
considers the income from the residential premises and allows expenses,
including payments for both principal and interest for both first and second
mortgages, to be deducted.
Mr. Marjerrison referenced an
attachment to the Notice of Appeal (see Exhibit E-10).
On page 38 of the file the Appellants seek a reasonable return on
their invested capital.
On page 39 of the file (also part of
Exhibit E-10) the Appellants state:
Our invested capital into
this building came from a line of credit.
This amounted to $X.XX [redacted by the Commission for
This amount included a 25% down payment we had to make to secure a mortgage,
as well as legal fees and other miscellaneous municipal and provincial
charges and closing adjustments.
This is our invested capital.
Page 19 of the file, part of Exhibit
E-6, provides a copy of a '"Line of Credit Home Equity".
The specified payment exactly matches the payment specified for the
'"second mortgage" noted on the Form 15.
This suggests to the Commission that payments for both principal and
interest for the Line of Credit Home Equity, at a specific snapshot in time,
have been accounted for as a monthly expense in the Form 15.
Given that the '"invested capital"
appears to be fully financed, that the Appellants made a choice to include
both principal and interest of that financing as fully deductible expenses
as a '"second mortgage" on Form 15, and that Form 15 does not address
invested capital but speaks in terms of owner's equity with an identified
calculation [value of property as per Provincial assessment minus
outstanding mortgages and loans] the Commission denies the appeal.
pursuant to the
Island Regulatory and Appeals Commission
Act and the
Rental of Residential Property Act
IT IS ORDERED THAT
1.The appeal is
denied and Order LD20-007 is confirmed.