Here’s our final response to the RTB. Now we wait.

Our final response to the RTB

Incomplete Disclosure

1. The tenants take the position that contrary to the interim order there has not been full disclosure and only partial disclosure. What the landlord has provided is a copy of some expenses paid by Visa card apparently on an income statement although that has not even been verified. The tenants are seeking more and full disclosure related to the nature of those expenses since it is their argument that all of the expenses have not been included. For example and more specifically, the work to improve the septic system that was done last year. Also the defendants argue that it is impossible to ascertain whether or not the expenses that have been included include the Hydro costs associated with the running of the pump stations as they were also requested by the Arbitrator.
2. The tenants respectfully request that they be provided with full disclosure of the costs associated with operating the septic system as previously ordered. The tenants request copies of invoices and particulars related to the expenses associated with operating the septic system for the last five years. This is not limited to, and the information should include:
   1. the upgrades,
   2. electrical operation of the pump stations, and
   3. any other associated expenses with the operation maintenance and improvement of the septic system for the last five years.
3. The tenants believe that this information is essential to determining whether or not the increase is requested by the landlord’s reasonable. For example, the tenants are aware that the landlord was having samples tested through Drainmaster, and there is no way to verify the costs based on the way the disclosure has been completed. The Tenants submit that the disclosure does not satisfy the intent of the order.
4. Although the tenants submit that full disclosure is necessary in order to make a full response to the submission by the landlord, In the event that the Arbitrator does not agree with the position on disclosure, the tenants wish to provide a response to the submissions by the landlord, albeit incomplete since they do not have full disclosure.

Increase in Property Value of Park

5. However, the tenants submit that given the landlord’s position that the tenants should be responsible for 45% of the capital cost of installing the sewer system, they have already satisfied that responsibility.
6. On or about August 12, 2014, the landlord sent a letter to each home inviting them to sign the documents that would raise the pad fee for 2015. Contained in this letter is the suggestion:  “while your home’s value has likely increased with this change, our park value has also increased”.   (Attached as Exhibit A)
7. The tenant’s home values have continued to slide by a minimum of $1000 (Exhibit B) and up to $2000 per home for an approximate net loss across all tenants across the park of between $160,000 and $200,000 for 2015.
8. Records as of January 19, 2015 indicate that at the same time the tenants homes have fallen in value by a minimum of $160,000, the 2015 park value itself has risen $72,000 over 2014. (Attached as Exhibit C).
9. The tenants submit that the landlord has benefited by at least $72,000 through an increase in the park value. There is no other reason for this increase in the park value other than the installation of the sewer system. The reason that the tenants values have decreased is that there is a trend across the capital region District of decrease in property values over the last few years.
10. The tenants argue that the landlord should be required to demonstrate that the $72,000 increase is not solely from the installation of the septic system and for some other reason.
11. These recent sewer connection changes to the park have been macro and not micro. Individual units have not had any change in their service or in the lines leading to and from their units.  While the units clearly have not had their value increased, the value of the park has increased as the landlord suggested in their letter.

Two Increases in One Year

12. The landlords have recently served the tenants with a 2.5 increase for April 1, 2015. The tenants submit that this additional increase for the sewer is an illegal increase since it would amount more than one increase in one year. (The notice of Rent Increase is attached as Exhibit E).
13. “Section 8-2 Additional Rent Increase of the Residential Tenancy Act Guide for Landlords and Tenants states:

“An order approving the (additional rent) increase might be issued where the landlord…….completed significant repairs or renovations that could not reasonably have been foreseen…….”

Reasonable Forseeability of Expense

14. It has been both Langford and CRD policy that septic systems be phased out. Consequently, the tenants submit that the expense of the installation of the sewer system should have been reasonably forseen by the landlord at the time of the negotiation of the property purchase in 2006.
15. The hand delivered announcements of July 2007 (Exhibit D), the year the park officially changed hands, indicates that the landlord knew when they purchased the property (January 31, 2007) that this was a requirement. (Exhibit D) states “as we’ve already mentioned we are being asked by the city of Langford to get connected to the sewer sooner than later”.  This was July 14, 2007 and the quote indicates that they had already mentioned this fact previously.
16. The landlords are experienced park owners with several parks in their portfolio. The tenants submit the requirements of section 8-2 of the Residential Tenancy act have not been met.  The sewer hookup had to have been factored into the purchase price and could have been upgraded years ago with less expense.
17. According to the tenancy agreements, the sewer services are written into the contract as being provided by the landlord.

Promise by Landlord and Notice of No increase to Tenants as a result of Sewer Connection

18. On or about July 14, 2007, the landlord met with the tenants Two tenants were present at that meeting in which the landlord told the tenants that there would be no increases in costs of sewer connection passed on to the tenants. They have provided sworn affidavits testifying to what occurred. At Exhibit E of both affidavits, there is further evidence of this notice that there would be no increases by the Newsletter to the Tenants (Exhibit D).

Amortization Period

19. The tenants submit that the 10 year amortization period for the capital expenditure is not fair to the tenants. Under the Canada Revenue Agency the sewer connection would be under Class 1 for the purposes of amortization. Class 1 of depreciable property includes (Exhibit F, page 1):
    1. electrical wiring;
    2. lighting fixtures;
    3. plumbing;
    4. sprinkler systems;
    5. heating equipment;
    6. air-conditioning equipment (other than window units);
    7. elevators; and

20. This class of depreciable property is further explained in the Tax Bulletin IT482R attached as (Exhibit G) (see paragraphs 1-5 and paragraph 10). The Bulletin specifically speaks to sewer connection at paragraph 10:

An amount paid by a taxpayer for pipes that will supply gas, water or sewers to the taxpayer’s place of business may be a deduction from the taxpayer’s income from a business under paragraph 20(1)(ee), depreciable property included in Class 1(l), or an “eligible capital expenditure”, as the case may be.

21. Four percent of the project cost of $1,179,329 would be $47,173.16 per year. That amounts to $294.83 per tenant per year. The tenants argue that the 4% should be used in determining the amortization since the landlord will entitled to claim the 4% as an expense towards their taxable income and thus this would be the most fair way of dealing with the expenditure.
22. Even if the amount of 4% per year is not accepted, the tenants argue that since the sewer system is permanent in nature, that the amortization should be over 50 years rather than 10 years.

Other Financial Calculations

23. Finally, even if all of the above is not enough to make our case, we believe the financial notes that follow based on numbers that the landlord has provided, will indicate that our financial obligation and participation with Timberlands in covering their requested portion of the expenses related to connecting to the city sewer is fully covered.
24. According to the landlord’s submissions and disclosure, the Sewer system project cost is $1,179,329. This means that the cost per site @160 sites = $7370 each.
25. The landlord has suggested that the amount to be carried by homeowners = 45% or $3316.’
26. Amortized over 10 years = $331 annually or approx. $28 per month.
27. According to the landlord, the septic system has cost each of the 160 units an average of $42.65 per month over the past five years.
28. If one considers the cost of sewage services moving forward, the annual sewer usage fee for 2015 is $110 per unit or $9.15/month. The landlord submitted that the anticipated operating & maintenance is at $1000/mo or $6.25 per unit and the total Sewer Expenses anticipated for 2015 are then $15.40 per unit/month.
29. This amounts to a savings to the landlord per unit as of 2015 at $42.65 (previous septic service) minus $15.40 (present city sewer) = $27.25 savings.
30. The owners have indicated in writing that they were willing to take on 55% of the cost of the sewer upgrade with tenants to take on 45%. (The request was for 5.1 percent of pad fee for an average of $28/mo/unit)  (Please see Exhibit ***).
31. However, the tenants submit that the landlord is seeking $54.75 per month per unit. (The $27.25 savings above plus the requested additional pad fee averaging $28 per unit).
32. As tenants over the 10 years, we would be paying $1,057,770. ($54.75 per mo. X 160 units X 12 months X 10 years).
33. This will leave a remainder of only $121,559 to the owners who knew when they purchased the park that the city was requiring the hookup
34. Therefore although the tenants could seek a reduction in the pad rent of a minimum of $27.25 (and likely more if the landlord is mandated to submit a more detailed notation of septic service costs,) they submit that the most equitable way of addressing the landlord’s request will be to contribute our requested 45% / $27.50 per month by turning over those savings to the park owner which satisfies the landlord’s stated request.

All of which is respectfully submitted by Roger Batchelor on behalf of the Tenant Respondents.