$25M in tenant security deposits kept in province's grip

Hilary Young is a law professor, so she knows how to read rules and regulations.

But even she was baffled in 2013 when she tried to reclaim the security deposit she'd paid on a Fredericton apartment.

She assumed her landlord had the deposit and would simply return it when she moved out.

"That had been my experience everywhere else that I had lived," she said.

But New Brunswick is different, she discovered.

Landlords here forward rental security deposits to Service New Brunswick, a government agency, which holds them in a "security deposit fund." That appears to be unique in Canada.

"There was definitely a time period when I didn't have my money, and I didn't realize I had to apply to the province to get it," Young said.

She eventually recouped her deposit from Service New Brunswick, but she can imagine that many other tenants don't.

"I can see how it happens," she said. "There's a lot of chaos when you move apartments, and I can see how relatively large amounts of money could be forgotten in that chaos. I think it's unfortunate. People are entitled to that money."

Lee Ellen Pottie is still waiting for her $1,200 deposit. She applied in December 2015, but was still waiting this week.

"I shouldn't have to go after it," Pottie said. "They should just send me my cheque."

Pottie's $1,200, along with thousands of other security deposits, is sitting in that trust account a growing war chest that in 2015-16 was closing in on $25 million.

"Holy mackerel," Pottie said when she heard the total.

New Brunswick appears to be the only province in which security deposits are held by a government agency, according to the Canada Mortgage and Housing Corp.

And while the deposit amounts themselves remain in the fund, the interest earned on the money is skimmed off by the province to be used for other government spending.

Questions about fund

David Boyd, a partner at PricewaterhouseCoopers in Halifax, discovered the existence of the deposit fund while working as a court-appointed liquidator for a Fredericton real-estate company.

"It would appear to me that those monies would belong to the tenants at this stage," he said.

Boyd is helping divide the assets of LPR Investments Ltd., including several apartment buildings, among its three owners. While checking on the company's liabilities, he asked for a list of tenant security deposits.

"We determined that there was a number of deposits held by the rentalsman that were for not-current tenants," Boyd said.

The list, drawn up in February, had 67 deposits totalling $22,903.25. Ten were for current tenants and 57 were for former tenants. One of the deposits dates back to 1986.

"The question occurs to me whether these tenants forgot, remissed, or applied and were not successful in getting their security deposits back," Boyd said.

Larry Chippin, one of three co-owner brothers dividing up the company, said he was stunned to learn Service New Brunswick was holding that much money.

"What are they doing with it?" he said. "That's my question. Is it being held? Or is this just an accounting of it? What is this money being used for?

Province spending interest

Service New Brunswick has been overseeing the fund since 2008-09, but it dates back to 1983, when the Residential Tenancies Act was passed.

Kim Snow, the province's chief residential tenancies officer, told CBC News in a written statement that lawmakers decided the province should collect the money "to provide a level playing field to both parties."

"The program remains unbiased by having both parties contribute and prevent one side from having a stronger voice than the other," said Snow, who refused to do an interview.

In some other provinces, the landlord keeps the deposit, or must put it into a bank account, until the tenant moves out.

In 2008-09, there was $16.5 million in the fund. By 2015-16 it had ballooned to $24.3 million.

Service New Brunswick's annual reports show the total amount of money in the fund but don't show how much money flows into and out of the fund each year or how much interest the fund generates.

If you don't apply immediately to get your money back, you don't get it back.- Larry Chippin

In fact, the reports don't mention the interest at all.

In several provinces where landlords hold on to deposits, they must pay the tenant both the original deposit and the interest.

But in New Brunswick, the interest goes into the province's general revenues.

Snow said landlords pay a fee through property taxes to cover some operating costs of the residential tenancies officers, and "the interest is seen as a means for the tenant to also contribute towards the service without any out-of-pocket expense."

Be more clear, landlord says

One possible explanation for the fund's continuing growth, Chippin said, is that many tenants simply don't apply, or don't know they can apply, or don't know how to apply, for their money back.

He said the province needs to be clear about the process.

The website for the Residential Tenancies Tribunal doesn't say how long tenants have to apply for their deposit after they move out. The receipt issued to tenants for their deposits doesn't mention it either.

"If you don't apply immediately to get your money back, you don't get it back," Chippin said. "But where is this reported?"

Chippin pointed out the list Boyd obtained proved Service New Brunswick does track deposits.

"This was very hard for us to get, a list with actual names, but obviously it exists," he said.

"They have it. Is there any reason why if these people are registered for GST or HST, or anything, anything in this province they didn't return their money? Or even post the list somewhere?"

Many apartment renters scrape by on low incomes, Chippin said, and deserve more help to reclaim a few hundred dollars that can go a long way.

"They're the least capable of getting their own money back," Chippin said. "They have no group that's working for them to get it.

"You've got this money now at it's getting closer to 30 million, I'm sure. That's a lot of money. I mean the 25,000 we just found in our small audit is a lot of money."