Settling Rent and Security Deposit Claims at a Hearing

The Dispute

A landlord and two tenants each came out of the same tenancy believing the other owed them money. The landlord said rent was unpaid and the unit had been damaged, and applied to keep the security deposit against those amounts. The tenants said they were owed compensation and wanted the deposit back, so each side filed its own application and both were heard together.

The Parties’ Positions

The landlord commenced dispute resolution at the Residential Tenancy Branch, seeking a monetary order for unpaid rent under section 67 of the Residential Tenancy Act and a further monetary order for damage to the rental unit and the common areas under sections 32 and 67. Section 32 sets out the obligations of a landlord and a tenant to repair and maintain the unit, and section 38 governs the return of a security deposit at the end of a tenancy. The landlord also sought authorization under section 38 to retain all or part of the deposit in partial satisfaction of the amounts claimed, so that the deposit and the arrears fell to be decided in the same proceeding.

The tenants attended the hearing with counsel and an interpreter, and answered with an application of their own, seeking a monetary order for compensation under section 67 and the return of the security deposit under section 38. Their application reached the same fund the landlord had applied to retain, so the deposit stood at the centre of both cases. The arbitrator recorded no findings on the merits of either application, because the parties settled during the hearing.

The Outcome

Section 63 of the Act offers the parties an opportunity to settle their dispute, and section 64.2 permits the director to record the agreement as a decision or an order. During the hearing the parties agreed that the landlord would pay the tenants a sum in the low four figures, representing a portion of the security deposit, in full and final settlement of all claims arising from the tenancy. Neither party would make any further claim against the other arising from that tenancy. The arbitrator recorded the agreement and granted a monetary order in the tenants’ favour, enforceable in the Provincial Court of British Columbia (Small Claims Court) if the landlord does not comply. For the tenants, the arrears claim, the damage claim and the deposit were resolved in a single enforceable instrument, without the cost and the risk of an adjudicated result on any of them.

Key Lessons for Residential Tenants and Landlords

• Prepare a settlement position, not only a case, before a dispute resolution hearing. Section 63 of the Residential Tenancy Act offers the parties an opportunity to settle during the proceeding, and terms reached there can be recorded as an order with the force of a decided result.
• Fix the scope of the release before agreeing to a figure. The terms recorded here settled every claim arising from the tenancy and barred either party from making a further one, so a head of claim not valued by the time terms are struck is given up.
• Keep the rent account and the condition of the unit documented throughout the tenancy. The landlord’s application put arrears, damage to the unit and the common areas, and the whole of the deposit in issue at once, and what each side can produce sets the settlement range.
• Do not treat the deposit as the measure of the exposure. A landlord may seek authorization to retain the deposit and separately claim arrears and repair costs, and a tenant may seek compensation in the same proceeding.

The outcome of this matter was a settlement the parties agreed and the arbitrator recorded, not a decision on the merits of either application. A similar dispute may resolve differently.

ATAC LAW represents residential landlords and tenants at dispute resolution hearings and in the enforcement of the monetary orders that follow them.

Conducted by Siwei Xu, Associate Lawyer at ATAC LAW, who acted for the tenants at the hearing. His practice includes residential tenancy matters and civil litigation.