PEI Unbundling Utilities from Rent: Why You Need a Tribunal Order

The Problem

Heating oil prices climb, electricity rates go up, and the annual allowable rent increase caps at 2.0% for 2026. The temptation is straightforward: stop including heat in the rent and let the tenant pay the utility directly. That way the rising cost passes through without touching the rent cap.

If heat is a term of the tenancy agreement or is reasonably related to the tenant's use and enjoyment of the unit, the landlord cannot remove or restrict it under Section 21 of the Residential Tenancy Act.

Why It Counts as a Rent Increase

The Residential Tenancy Act defines rent as money or value given in return for the right to possess a rental unit, use common areas, and receive services or facilities. Its definition of service or facility includes utilities, appliances and furnishings, parking, laundry, storage, and heating. If heat was included as a term of the tenancy, removing it is prohibited by Section 21(1).

For a service or facility that is neither reasonably related to the tenant's use and enjoyment of the unit nor a term of the tenancy agreement, Section 21(2) allows termination or restriction with one month's written notice in the approved form and a rent reduction equivalent to the loss in value.

The Only Legal Path

Form 7 is the Landlord Notice of Termination or Restriction of Service. For a service or facility that may legally be removed under Section 21(2), the landlord gives one month's written notice in Form 7 and reduces the rent by the equivalent value; the Act does not require a prior approving order for that notice.

If the landlord removes or restricts a service in breach of Section 21, the tenant can file Form 2A to dispute the service change.

What This Means for Heating Costs

PEI's Atlantic climate makes heating a significant expense. Many older rental agreements include heat, and landlords whose heating oil or electric heat costs have risen sharply feel trapped by the annual cap.

The above-guideline application route (Form 9 and Form 10) is the proper tool for this situation. Heating costs are an eligible operating expense under Regulation Section 5(b). If your fuel costs have increased substantially over the prior three years, that is exactly the kind of expense the above-guideline process was designed for — an additional increase of up to 3.0% per year on top of the annual guideline.

Removing a utility without following Section 21 can lead to a tenant dispute before the Rental Office.

Renovations and Capital Improvements

The same principle applies to renovations. You cannot pass renovation costs directly to a tenant through higher rent unless you go through the Form 9/Form 10 process and receive a Director's order. Capital improvements are eligible expenses on Form 10, but they must be documented with invoices and evaluated against the statutory criteria — including the tenant's expectation that increases will stay within the ordinary guideline.

For the above-guideline application process and expense documentation templates, see the Prince Edward Island Rent Increase Guide.

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