Mizrachi v. Lenihan, 2021 NSSM 3

2021 Claim No. 502129 IN THE SMALL CLAIMS COURT OF NOVA SCOTIA Citation: Mizrachi v. Lenihan , 2021 NSSM 3 BETWEEN: DANNY MIZRACHI Appellant/Landlord - and - PATRICK LENIHAN Respondent/Tenant ORDER and DECISION [ 1 ] This is an appeal by the Landlord of a Director’s Order dated November 16, 2020.

That decision dealt with the Tenant’s application for return of the security deposit of $825. [ 2 ] At the hearing before the Residential Tenancies Officer, the Landlord provided evidence of various items said to justify the retention of the security deposit including having to repaint the unit, plumbing costs, and a broken fridge. [ 3 ] While noting these matters, the Residential Tenancies Officer appears to have given them no weight. She refers to and quotes portions of

Section 12 of the Residential Tenancies Act , R.S.N.S. 1989, c. 401 , most notably the requirement that the landlord return the security deposit within 10 days of the termination of the lease, and states that the Landlord failed to comply with Act by not filing an application to retain the security deposit within ten days, or at any time. She then in ordered the return of the security deposit. [ 4 ] Upon review, I am of the view that the Residential Tenancies Officer was correct in arriving at the decision she did.

As I will explain, in my view the statutory intention of the provisions regarding security deposits are clear and compelling. I refer to in particular, Sections 12(5),12(6), and 12(7), which read as follows:

(5) Subject to subsection 6, the security deposit together with any interest, shall be returned to the tenant within ten days of the date of the termination of the lease;

(6) Where the landlord seeks to apply all or part of the security deposit and interest to the outstanding rent or to expense incurred in respect of any damage for which the tenant is responsible and the tenant does not consent in writing, the landlord may make an application under

Section 13 in the form prescribed in the regulations;

(7) An application pursuant to subsection 6 shall be made within ten days of the date of the termination of the lease and, if no application is made the security deposit shall be returned in accordance with subsection (5). [Emphasis Supplied] [ 5 ] Existing case law makes it clear that, unless the tenant otherwise consents in writing, the requirement to return the security deposit

within ten days of the termination of the lease is mandatory. I refer first to the Supreme Court of Nova Scotia case of Singh v. Cowie,, where Nathanson, J., stated (page 3): It is probably undesirable to treat the ten-day time period for applications set out in s. 1297) of the Act as a matter of jurisdiction. If itwere treated as a matter of jurisdiction, there might be a danger of overlooking appropriate adjudication or prejudging and objector’scomplaint. However, the requirement of that provision is a mandatory condition precedent for a valid application: Fuchs v. Hancock(unreported, C.A.

No. 02932 dated June 9, 1994); Voiculescu v. Gailinaugh (unreported, S.H. No. 93-100851 and 93-6497R, dated May4, 1994): and Law v. L. & R. Equities Ltd. (unreported, C.H. No. 60541, dated May 31, 1988). [Emphasis Supplied] [6] A similar conclusion was made in the Small Claims decision of Quon v. Johnson, 2007, SSSM 80, where Adjudicator Slone stated: [15] It is my view that the time limits set out in the Residential Tenancies Act are mandatory. If no application to retain the securitydeposit is made within ten days, the obligation to return the deposit is mandatory.

The Tenant should not have to make an application, asshe did, to the Director to obtain the return of the deposit. Accordingly, upon this second, procedural ground, it is my finding that theDirector’s order was correct and the Landlord must return that portion of the security deposit that he retained without legal right. [7] These rulings are, of course, consistent with Section 9(3) of the

Interpretation Act, R.S.N.S. 1989, c. 235, which reads:

(3) In an enactment, “shall” is imperative and “may” is permissive. [8] Security deposits are given special prominence in the Residential Tenancies Act.

Section 12 of the Act deals with security deposits. It reads, in full: Security deposit 12

(1) Where a landlord obtains from a tenant any sum of money or other value that is in addition to the rent payable in respect of the residential premises the sum of money or value is deemed to be a security deposit.

(2) No landlord shall demand, accept or receive from a tenant as a security deposit a sum of money or other value that is in excess of one half of the rent per month that is or would be required to be paid for the residential premises.

(3) Subject to subsection (6), a security deposit or the proceeds thereof shall be held in trust by the landlord and deposited in a trust account in a chartered bank, trust company or credit union or invested in such securities as are authorized by regulation and may be applied to outstanding rent or to expenses incurred in respect of damage to residential premises that is the responsibility of the tenant.

(4) The landlord shall credit interest to the tenant on the full amount or value of the security deposit at the rate per annum determined by the Governor in Council from time to time by regulation with respect to any period of time, whether before or after the coming into force of this subsection, while the

security deposit is held by the landlord.

(5) Subject to subsection (6), the security deposit, together with interest, shall be returned to the tenant within ten days of the date of the termination of the lease.

(6) Where the landlord seeks to apply all or part of the security deposit and interest to outstanding rent or to expense incurred in respect of any damage for which the tenant is responsible and the tenant does not consent in writing the landlord may make an application under

Section 13 in the form prescribed in the regulations.

(7) An application pursuant to subsection (6) shall be made within ten days of the date of termination of the lease and, if no application is made, the security deposit shall be returned in accordance with subsection (5).

(8) A landlord shall from time to time file such reports as may be required by the regulations of the amount of the security deposit or proceeds thereof which are held in trust. NOTE - Subsections (9) to (12), enacted by

Section 6 of

Chapter 31 of the Acts of 1992, have not been proclaimed.

(13) An owner, partner or director of a company which owns or manages residential premises is personally liable for any breach of the Act or the regulations governing security deposits.

(14) Upon trusteeship, receivership, bankruptcy, sale, transfer, abandonment, foreclosure or sale of land under execution, the security deposits of the tenants held by the landlord are deemed to have been transferred to the receiver, trustee, mortgagee in possession or the new landlord and that receiver, trustee, mortgagee or landlord is responsible for the tenant’s security deposits.

(15) A claim for damages from a security deposit shall not include any costs associated with ordinary wear and tear of the residential premises.

(16) Notwithstanding

Section 23, any landlord who violates this

Section is guilty of an offence punishable on

summary conviction and upon conviction is liable to a fine of not more than five thousand dollars.

[ 9 ] I note in subsection 12(3) that owners, partners and directors of companies are personally liable for any breach of the Act governing security deposits. This is the only subject area where the Act imposes personal liability for corporate landlords. [ 10 ] I also note that under subsection 12(16), the fine for a breach of

Section 12 is set at a maximum of $5,000. This is to be contrasted with

Section 23 for other breaches of the Act which are limited to a fine of $1,000. [ 11 ] There are also the Residential Tenancies Regulations , N.S. Reg. 190/89 . These contain detailed provisions governing security deposits, including that they be held in separate trust accounts and various other requirements. [ 12 ] The degree of detail and comprehensiveness of all of these provisions show the particular significance that is to be accorded to the subject of security deposits.

It is clear that the Legislature had a particular concern about security deposits and the potential for abuse that might be visited on tenants. For example, a tenant of modest means and moving from one residence to another residential premise would have a vital interest in receiving back his or her security deposit within 10 days. An unscrupulous landlord could, without doing anything, retain the funds and take a wait and see approach, and then only if challenged or ordered to do so, release the funds. Or, they might use the possession of the security deposit as negotiating leverage in settling with the tenant.

There can be other scenarios imagined. [ 13 ] To permit this to occur reverses the statutory intention for a speedy release of the money which must happen unless the landlord makes the required application. [ 14 ] In this present case, and I emphasize that I attribute no bad faith or intention to the Landlord, the facts are that the Landlord has neither returned the security deposit nor filed an application pursuant to

Section 13 to retain the security deposit. Rather, it is the Tenant who has been put to the task of filing an application pursuant to

Section 13 seeking the return of the security deposit. In response to that application, and without filing his own application, the Landlord then seeks to justify the retention of the security deposit on the basis of various items which he has referred to. At the hearing before me I heard evidence from both parties on those items.

Given my ruling here, I make no comment on that evidence. [ 15 ] In my view, allowing the Landlord to raise these issues at this stage without filing his own application, is inappropriate and is not countenanced by the provisions referred to above. [ 16 ] In this case, the tenancy terminated on August 31, 2020. The security deposit should have been returned no later than September 10, 2020.

It is now nearly five months since then. [ 17 ] I will order the return of the security deposit. [ 18 ] In so ruling, I should not be taken as suggesting that a landlord, who does not file a claim within the 10 days of lease termination, forfeits his or her right to make a subsequent claim for damages, or for that matter, for unpaid rent. What is forfeited is the legal right to withhold the security deposit. The landlord (or the tenant) still has a one (1) year period in which to otherwise file a complaint (Section 13(b)).

It may well be that legitimate items of physical damage are not reasonably or capable of being detected at the time of termination of the lease or even within a week or 10 days thereafter. The landlord’s rights in this regard are preserved. [ 19 ] In a case where a tenant has applied for the return of the security deposit and the landlord has filed their own complaint claiming damages, it is suggested that the two hearings he heard together.

This approach was suggested by Justice Nathanson in his concluding comments in the Singh case, referenced above. [ 20 ] I note that here the Landlord asserted that the Tenant had not provided him with a forwarding address and that therefore he was unable to file an application. I reject that argument.

Firstly, the Landlord could still have filed the application within the 10 days and either sought some form of substituted service or completed the tenant’s address once he had exercised due diligence in learning it. [ 21 ] Secondly, the Landlord here certainly had the Tenant’s address once the Tenant filed his complaint on September 14. So, the Landlord could have the filed an application to retain the security deposit to be heard at the same time as the Tenant’s application. [ 22 ] For the above reasons, I find that the decision of the Director was correct and I would affirm it.

ORDER [ 23 ] It is hereby ordered that: - the decision of the Director dated November 16, 2020, is affirmed; - the Landlord shall pay to the Tenant the sum of $825.00. DATED at Halifax, Nova Scotia, this 5th day of February, 2021.

__________________________ MICHAEL O’HARA ADJUDICATOR