LD26-143

Application · rent increase. Outcome: granted. The evidence supports 5.0% rent increases for the Units, effective as set out below.

Linked prior order: LR25-31

Order text

Order of The Director of Residential Tenancy
Docket 25-1023 May 05, 2026
INTRODUCTION
[1] This decision addresses 34 applications filed with the Residential Tenancy Office (the “Rental Office”) under the Residential Tenancy Act (the “Act”).
[2] The Landlord is requesting rent increases of 5.0%, which are 3.0% above the 2026 guideline of
2.0%.
DISPOSITION
[3] The evidence supports 5.0% rent increases for the Units, effective as set out below.
BACKGROUND
[4] The “Residential Property” contains 39 rental units in three apartment buildings, 34 of which are the subject of these Applications. The Landlord has owned the Residential Property since 2023.
[5] On November 28, 2025, the Landlord served the Tenants with 34 Form 8 Notice of Annual Allowable Rent Increase and 34 Form 9 Landlord Application to Request Additional Rent Increase (the “Applications”).
[6] On November 28, 2025, the Landlord filed 32 Applications with the Rental Office; however, the Landlord did not file the Applications for Units #5 - 3 and #2 - 15 until February 6, 2026.
[7] On December 17, 2025, the Rental Office sent the Landlord and Tenants notice of a teleconference hearing scheduled for February 2, 2026.
[8] On January 28, 2026, the parties were notified that the hearing was being postponed to allow the Tenants adequate time to review the Landlord’s evidence.
[9] On February 5, 2026, the Rental Office sent the Landlord and Tenants notice of a rescheduled teleconference hearing for February 24, 2026.
[10] On February 13, 2026, the Rental Office sent the parties a 907-page PDF evidence package via TitanFile.
[11] On February 6, 2026, the Landlord re-served the Tenants in Units #5 - 3 and #2 - 15 with a Form 8 Notice of Annual Allowable Rent Increase and a Form 9 Landlord Application to Request Additional Rent Increase and filed the Form 9s with the Rental Office on February 6, 2026.
[12] I am satisfied that the February 6, 2026, re-service and filing of the Form 8s and Form 9s for Units #5 - 3 and #2 - 15 complied with the Act's notice requirements and did not prejudice the affected tenants. These additional applications form part of the Applications.
[13] On February 25, 2026, the Landlord’s representative (the “Representative”) participated in a teleconference hearing. The Representative confirmed receipt of the evidence package and that it included all of the Landlord’s materials. No Tenants participated in the hearing or submitted any evidence.
[14] On March 10, 2026, the Landlord submitted additional evidence (38 PDF documents and 17 spreadsheets), including an amended Form 10 Landlord Statement of Income and Expenses (the “Statement”).
[15] On March 31, 2026, the Rental Office shared the Landlord’s additional evidence with the Tenants via TitanFile, with a response deadline of April 15, 2026. No further submissions were received from the parties.

[16] The current rents and proposed rents are as follows:
Unit - Building Current Rent Proposed Rent #1 - 3 $1,083.36 $1,137.53 #2 - 3 $1,083.36 $1,137.53 #3 - 3 $1,060.85 $1,113.89 #4 - 3 $836.81 $878.65 #5 - 3 $1,103.82 $1,159.01 #6 - 3 $1,103.82 $1,159.01 #7 - 3 $972.87 $1,021.51 #8 - 3 $995.38 $1,045.15 #9 - 3 $1,003.56 $1,053.74 #10 - 3 $1,025.05 $1,076.30 #12 - 3 $1,003.56 $1,053.74 #1 - 8 $1,018.91 $1,069.86 #2 - 8 $1,045.51 $1,097.79 #3 - 8 $1,049.60 $1,102.08 #4 - 8 $1,144.74 $1,201.98 #5 - 8 $1,033.23 $1,084.89 #7 - 8 $1,083.36 $1,137.53 #9 - 8 $1,027.00 $1,078.35 #10 - 8 $1,041.41 $1,093.48 #12 - 8 $1,021.98 $1,073.08 #13 - 8 $1,074.15 $1,127.86 #14 - 8 $1,083.36 $1,137.53 #15 - 8 $1,011.75 $1,062.34 #1 - 15 $1,083.36 $1,137.53 #2 - 15 $1,025.05 $1,076.30 #3 - 15 $1,018.91 $1,069.86 #4 - 15 $1,100.75 $1,155.79 #5 - 15 $1,032.21 $1,083.82 #7 - 15 $1,144.74 $1,201.98 #8 - 15 $945.25 $992.51 #9 - 15 $1,157.01 $1,214.86 #10 - 15 $1,096.66 $1,151.49 #11 - 15 $1,115.07 $1,170.82 #12 - 15 $1,148.83 $1,206.27
ISSUE
A. Does the evidence support additional rent increases above the 2026 annual allowable guideline?
ANALYSIS
Additional Rent Increase – Factors to Consider
[17] I must consider the following factors in subsection 50(3) of the Act:
1. The rent history for the Units in the three years preceding the date of the Applications;
2. A change in operating expenses and capital expenditures in the three years preceding the date of the Applications that I consider relevant and reasonable;
3. The expectation of the Landlord to have a reasonable return on its capital investment; and
4. The expectation of the Tenants that rent increases will remain within the annual guideline.

[18] Subsection 50(4) states that I also have the discretion to consider any other factor or any factor prescribed in the Residential Tenancy Regulations (the “Regulations”). The Regulations state that I may also consider that the purchase of a residential property should not require an increase in rent within the first year to achieve a reasonable return on the landlord’s capital investment. I find this factor does not apply because the Landlord purchased the Residential Property in 2023.
Clause 50(3)(a) – rent history for the affected rental units
[19] Clause 50(3)(a) requires that I consider the rent history for the Units in the three years preceding the date of the Applications.
[20] In 2023, the allowable rent increase was 0.0%. On January 1, 2024, each Unit’s rent, except for Units #8 - 3 and #9 - 8, was increased by the 3.0% allowable rent increase for 2024. The rent for Units #8 - 3 and #9 - 8 was increased on February 1, 2024.
[21] On January 1, 2025, each Unit’s rent, except for Units #8 - 3 and #9 - 8, was increased by the 2.3% allowable rent increase for 2025. The rent for Units #8 - 3 and #9 - 8 was increased on February 1, 2025.
Clause 50(3)(b) – change in operating expenses and capital expenditures
[22] Clause 50(3)(b) requires that I consider a change in operating expenses and capital expenditures in the three years preceding the date of the Applications that I consider to be relevant and reasonable. The Landlord provided the operating expenses for the past three years in the Statement.
[23] The Landlord did not list the municipal taxes or capital expenditures in the “two-years-ago” column, as the Landlord was unable to obtain this information from the previous landlord.
[24] Each claimed expense was supported by testimony and documentary evidence, including statements, invoices, and spreadsheets, which corroborate the amounts. I find that the Landlord’s operating expenses are reasonable and supported by the evidence. The evidence establishes that the Landlord’s operating expenses increased over the relevant period. The Representative stated that the Landlord’s expenses cover the period from November 1 to October 31 of each year.
[25] The Landlord provided the income and expenses for the entire Residential Property in the Statement. However, since the Landlord is seeking rent increases for only 34 of the 39 units, I find it reasonable to use only the income attributable to those 34 Units and allocate expenses proportionally at 87% (34/39) of the Residential Property’s total expenses.
[26] I am satisfied that this approach fairly reflects the portion of the Residential Property that is the subject of these Applications, as no evidence was provided indicating that the Units differ materially from the remaining rental units with respect to the expenses.
[27] Other than the adjustments below, I accept the Landlord’s evidence regarding the Statement. The adjusted Statement is set out in Appendix “A”.

Adjustments to the Statement
[28] The adjustments to the Statement are as follows:
Income
a. Line 1 (Rental income): The Landlord claimed $486,314.22. Based on the rental income attributable to the Units, this line is adjusted to $429,303.36 in the current column and $450,768.72 in the proposed column.
b. Line 2 (Other income): The Landlord claimed $1,286.12, which the Representative stated was for parking and other Tenant upgrades. This is adjusted to $1,118.92, reflecting 87% of the income.
c. Line 3 (Less vacancy/Arrears loss): The Landlord claimed ($3,188.05). This is adjusted to ($2,773.60), reflecting 87% of the loss.
[29] Expenses
a. Line 5 (Interest payments on first mortgage): The Landlord claimed $226,212.88. This is adjusted to $196,805.21, reflecting 87% of the expense.
b. Line 7 (Fuel): The Landlord claimed $31,207.95. This is adjusted to $27,150.92, reflecting 87% of the expense.
c. Line 8 (Water/Sewer): The Landlord claimed $6,891.26. This is adjusted to $5,995.40, reflecting 87% of the expense.
d. Line 9 (Electricity): The Landlord claimed $4,686.38. This is adjusted to $4,077.15, reflecting 87% of the expense.
e. Line 10 (Insurance): The Landlord claimed $18,269.48. This is adjusted to $15,894.45, reflecting 87% of the expense.
f. Lines 11/12 (Provincial/Municipal property taxes): The Landlord added lines 11 and 12 together and claimed $41,916.14. This is adjusted to $36,467.04, reflecting 87% of the expense.
g. Line 13 (Island Waste Management fees/additional garbage disposal): The Landlord claimed $8,583.25. This is adjusted to $7,467.43, reflecting 87% of the expense.
h. Line 14 (Property management fees): Clause 1(c) of the Regulations defines
“management fee” as the actual cost of the management fee or 5.0% of the gross rental income for the previous year, whichever is the lesser. Accordingly, the allowable amount is capped at the lesser of these two values, regardless of the Landlord’s actual expense.
i. The Landlord claimed $24,220.61, which the Representative stated was 5.0% of
the Residential Property’s gross rental income ($484,412.29).
ii. The Representative stated that the Landlord’s actual property management fees exceed the 5.0% cap allowed in the Regulations and that property management services are contracted to a third-party company.

iii. I find that the documentary evidence establishes that the Landlord’s actual property management fees total $42,128.54 for the Residential Property and $36,727.45 for the Units. This supports the Representative’s evidence that the Landlord’s actual property management fees exceed the 5.0% cap allowed in the Regulations.
iv. In accordance with clause 1(c) of the Regulations, the allowable management fee is limited to the lesser of the actual cost or 5.0% of gross rental income. The evidence establishes that 5.0% of the Units’ previous year gross rental income ($420,372.18) is $21,018.61, and that 5.0% of the Units’ current year gross rental income ($430,422.28) is $21,521.11. I therefore adjust this line to reflect the applicable statutory cap.
i. Line 15 (Maintenance expenses): The Landlord claimed $49,420.79. This is adjusted to $42,996.09, reflecting 87% of the expense. The evidence establishes that these expenses are for appliances, boilers, cleaning supplies, electrical expenses, general materials, HVAC, painting, plumbing, and unit turnover materials.
j. Line 16 (Capital expenditures): The Landlord claimed $2,629.64. This is adjusted to $2,287.79, reflecting 87% of the expense. The evidence establishes that this is for two air exchangers and ten appliance replacements.
k. Line 17 (Other): The Landlord claimed $37,839.57. This is adjusted to $32,920.43, reflecting 87% of the expense. The evidence establishes that this is for common area maintenance, landscaping, pest control, shop tools and supplies, snow removal, and welcome baskets for tenants Clause 50(3)(c) – reasonable return on the landlord’s capital investment
[30] Clause 50(3)(c) requires that I consider the Landlord’s expectation to have a reasonable return on its capital investment.
[31] To determine the Landlord’s return on investment (“ROI”), I must first determine the value of the Landlord’s capital investment.
Value of Capital Investment
[32] In Order LR25-31, the Island Regulatory and Appeals Commission (the “Commission”) commented on the method and evidence required to determine the value of a landlord’s capital investment as follows:
“[37] In our opinion, the goal when determining the value of the landlord’s investment is to arrive at a valuation that is both accurate and reasonable in the circumstances. A key factor in that determination is for the Commission to interpret what is meant by the term “capital investment”, as used in clause 50(3)(c). In our opinion, a capital investment is just that – the landlord’s investment in capital, which includes both the land and building (i.e. real property).
[38] … valuing a landlord’s capital investment will be on a case by case basis, with the goal being to ascertain the actual fair market value of the capital asset as accurately as reasonably possible based upon the evidence brought forward to the hearing officer or panel.
[50] In summary, the Commission finds that the value of capital investment used to calculate a landlord’s return on investment should be the full value of the landlord’s capital investment (being the real property) and should not be subject to a deduction of the outstanding mortgage principal.”

GAAP
[33] The Landlord provided a Generally Accepted Accounting Principles (GAAP) valuation of $4,632,406.40 for the Residential Property, which includes the combined value of buildings, building improvements, land, and appliances. This valuation would assign each Unit a value of $118,779.65, and a total value of $4,038,508.14 for the Units in the Application.
[34] I recognize that GAAP financial reporting is reliable for accounting purposes; however, I find that it does not establish a fair market value for the determination of clause 50(3)(c). GAAP is based on historical cost and depreciation, and depreciation accounting does not always reflect changes in real estate values over time. Depreciation accounting reduces asset values over time and does not necessarily reflect fair market value.
[35] I note that the Regulations also state that operating costs exclude depreciation costs; however, this is only for the purposes of clause 50(3)(b) of the Act.
Appraisal
[36] The Landlord submitted a May 2023 appraisal (the “Appraisal”), which assessed the market value of the Units at $139,024.00 per Unit.
[37] I find the Appraisal to be reliable evidence because it was prepared by a qualified, independent appraiser who used a recognized market valuation method.
[38] I accept that the Units are substantially similar and that no evidence was provided indicating any material variation in market value between the Units. I therefore find that a per-unit allocation of the Appraisal is reasonable for determining the Applications.
[39] Accordingly, I find that the fair market value of the Landlord’s capital investment for the purposes of clause 50(3)(c) is $4,726,816.00 ($139,024.00 x 34) based on the Appraisal evidence. I find the Appraisal evidence more accurate than the GAAP valuation because the Appraisal more directly reflects the Units' current fair market value. In contrast, the GAAP valuation reflects historical accounting values that have been depreciated.
Reasonable Return on Investment
[40] In Order LR25-31, the Commission commented regarding a landlord’s ROI:
“[53] … Where we have accepted that mortgage principal should not be deducted from the value of the landlord’s investment, we recognize that there should be some kind of “normalizing” in respect of how landlords choose to fund their investments. Therefore, we find that when calculating a landlord’s ROI, the financing costs of interest on mortgages registered against the property should not be included in the “annual operating expenses”.
[60] … based on previous Commission Orders, landlords are entitled to a ROI of at least 4% and, on a case by case basis, landlords may justify that a ROI of up to 7% is reasonable, based on the specific circumstances.
[61] Additionally, it is always open to landlords on additional rent increase applications to bring forward professional evidence and challenge the accepted ROI guideline, but the upper limit of 7% should not be adjusted further upward unless satisfactory professional evidence is provided.”
[41] Based on the net operating income and the appraised value of $4,726,816.00, I calculate the Landlord’s current ROI to be 4.89%, excluding mortgage interest from operating expenses in accordance with Order LR25-31.

[42] After including the 2026 annual allowable rent increase of 2.0% and the maximum additional rent increase of 3.0%, the Landlord’s ROI would increase to 5.34%. I find that this projected ROI remains in the mid-range of the Commission’s generally accepted range of 4.0% to 7.0%, as set out in Order LR25-31.
Clause 50(3)(d) – expectation of tenants regarding the annual guideline
[43] Clause 50(3)(d) requires that I consider the Tenants’ expectation that rent increases will remain within the annual guideline. In 2026, the annual guideline increase is 2.0%.
[44] No Tenants participated in the hearing or submitted any evidence suggesting their expectations regarding the determination of the Applications.
Weighing the Factors
[45] I find that the evidence supports additional rent increases, resulting in a total increase of 5.0% for the Units.
[46] The Landlord’s total operating expenses have increased over the past three years. The Landlord has also incurred capital expenditures for the Units.
[47] The Landlord’s ROI is currently 4.89%. With 5.0% rent increases for the Units, the Landlord would achieve an ROI of 5.34%.
[48] As stated in Order LR25-31, the Commission (and the Rental Office) currently lacks a professional
analysis that sets out an appropriate rate of return on investment for residential rental properties.
Landlords are entitled to an ROI of at least 4.0% and, on a case-by-case basis, may justify an ROI of up to 7.0% as reasonable, based on the specific circumstances.
[49] In this case, given the increase in operating expenses and capital expenditures and the absence of prior additional rent increases during the relevant period preceding the Applications, I find that a
5.34% return on investment is reasonable. I find that this return remains in the mid-range of the Commission’s generally accepted reasonable ROI range.
[50] I find that the factor in clause 50(3)(d) does not weigh in favour of either granting or denying the Applications, as no Tenants submitted any evidence, and is therefore neutral in this case.
[51] The Landlord provided the Tenants with three months’ notice of the rent increases, including Units #5 - 3 and #2 - 15, effective as of the date noted below, in accordance with the Act.
[52] After considering and weighing all of the statutory factors set out in subsection 50(3) of the Act, I find that the evidence supports rent increases above the annual allowable guideline, and the Applications are allowed.
[53] This decision contains sensitive information, and the parties are required to preserve its confidentiality under subsection 75(3) of the Act.

IT IS THEREFORE ORDERED THAT
1. Effective June 1, 2026, the maximum allowable rents for the Units are:
Unit - Building Rent #1 - 3 $1,137.53 #2 - 3 $1,137.53 #3 - 3 $1,113.89 #4 - 3 $878.65 #5 - 3 $1,159.01 #6 - 3 $1,159.01 #7 - 3 $1,021.51 #8 - 3 $1,045.15 #9 - 3 $1,053.74 #10 - 3 $1,076.30 #12 - 3 $1,053.74 #1 - 8 $1,069.86 #2 - 8 $1,097.79 #3 - 8 $1,102.08 #4 - 8 $1,201.98 #5 - 8 $1,084.89 #7 - 8 $1,137.53 #9 - 8 $1,078.35 #10 - 8 $1,093.48 #12 - 8 $1,073.08 #13 - 8 $1,127.86 #14 - 8 $1,137.53 #15 - 8 $1,062.34 #1 - 15 $1,137.53 #2 - 15 $1,076.30 #3 - 15 $1,069.86 #4 - 15 $1,155.79 #5 - 15 $1,083.82 #7 - 15 $1,201.98 #8 - 15 $992.51 #9 - 15 $1,214.86 #10 - 15 $1,151.49 #11 - 15 $1,170.82 #12 - 15 $1,206.27
DATED at Charlottetown, Prince Edward Island, this 5th day of May, 2026.
(sgd.) Mitch King Mitch King Residential Tenancy Officer

APPENDIX “A” Revised Statement of Income & Expenses (Form 10) Current ROI Proposed ROI Established Expenses Rental Income Rental Income at 100% (Line 1) $429,303.36 $450,768.72 Other income (Line 2) $1,118.92 $1,118.92 Vacancy Arrears/Losses (Line 3) ($2,773.60) ($2,773.60) Net Income before expenses (Line 4) $427,648.68 $449,114.04 Expenses 1st Mortgage Interest (Line 5) $0.00 $0.00 $196,805.21 2nd Mortgage Interest (Line 6) $0.00 $0.00 $0.00 Fuel (Line 7) $27,150.92 $27,150.92 $27,150.92 Water & Sewer (Line 8) $5,995.40 $5,995.40 $5,995.40 Electricity (Line 9) $4,077.15 $4,077.15 $4,077.15 Insurance (Line 10) $15,894.45 $15,894.45 $15,894.45 Property Tax (Provincial/Municipal) (Lines 11/12) $36,467.04 $36,467.04 $36,467.04 Island Waste Management Fees (Line 13) $7,467.43 $7,467.43 $7,467.43 Property Management Fees (Line 14) $21,018.61 $21,521.11 $21,521.11 Maintenance Fee (Line 15) $42,996.09 $42,996.09 $42,996.09 Capital Expenditures (Line 16) $2,287.79 $2,287.79 $2,287.79 Other (Line 17) $32,920.43 $32,920.43 $32,920.43 Total Operating Expenses (Line 18) $196,275.29 $196,777.79 $393,583.00 Net Profit or (Loss) (Line 19) $231,373.39 $252,336.25 Value of Investment in Property $4,726,816.00 $4,726,816.00 Operating Income $231,373.39 $252,336.25 Return on Investment (ROI) 4.89% 5.34%
NOTICE
Right to Appeal
This Order can be appealed to the Island Regulatory and Appeals Commission (the “Commission”) by serving a Notice of Appeal with the Commission and every party to this Order within 20 days of this Order.
If a document is sent electronically after 5:00 p.m., it is considered received the next day that is not a holiday. If a document is sent by mail, it is considered served on the third day after mailing.
Filing with the Court
If no appeal has been made within the noted timelines, this Order can be filed with the Supreme Court of Prince Edward Island and enforced as if it were an order of the Court.