Fair Rent Determination for a Property Under the Rent Act 1977

OUTCOME: Allowed

First-tier Tribunal – Property Chamber File Ref No. LON/00BJ/F77/2021/0085

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 36 [ADDRESS], [POSTCODE]

Judge I Mohabir Mrs S Phillips

Landlord [COMPANY]

Tenant Ms [APPELLANT] [NAME]

1. The fair rent is £227.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 05 May 2021

3. The amount for services is

Per

not applicable

4. The amount for fuel charges (excluding heating and lighting of common parts) not counting for rent allowance is

Per

not applicable

5. The rent is not to be registered as variable.

6. The capping provisions of the Rent Acts (Maximum Fair Rent) Order 1999 apply (please see calculation overleaf).

7. Details (other than rent) where different from Rent Register entry

None.

8. For information only:

(a) The fair rent to be registered is the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £319.20 per week.

Chairman Judge I Mohabir Date of decision 5 May 2021

MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 296.9

PREVIOUS RPI FIGURE Y 248.7

X 296.9 Minus Y 248.7 = (A) 48.2

(A) 48.2 Divided by Y 248.7 = (B) 0.1938

First [NAME] for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2438

Last registered rent* £182.50 Multiplied by (C) = 1.2438 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £227

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £227.00 Per week

Explanatory Note

1. The calculation of the maximum fair rent, in accordance with the formula contained in the Order, is set out above.

2. In summary, the formula provides for the maximum fair rent to be calculated by:

(a) increasing the previous registered rent by the percentage change in the retail price index (the RPI) since the date of that earlier registration and

(b) adding a further 7.5% (if the present [NAME] was the first since 1 February 1999) or 5% (if it is a second or subsequent [NAME] since that date).

A 7.5% increase is represented, in the calculation set out above, by the addition of 1.075 to (B) and an increase of 5% is represented by the addition of 1.05 to (B).

The result is rounded up to the nearest 50 pence.

3. For the purposes of the calculation the latest RPI figure (x) is that published in the calendar month immediately before the month in which the Tribunal’s fair rent determination was made.

4. The process differs where the tenancy agreement contains a variable service charge and the rent is to be registered as variable under section 71(4) of the Rent Act 1977. In such a case the

variable service charge is removed before applying the formula. When the amount determined by the [NAME] of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair rent.

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BJ/F77/2021/0085 Property : 36 [ADDRESS], [POSTCODE] Applicant : [redacted] Representative : N/A Respondent : [redacted] (Landlord)

Representative : N/A Type of [NAME] : Section 70 Rent Act 1977 – determination of a new fair rent Tribunal Members : Tribunal Judge Mohabir Mrs S Phillips MRICS Date of Decision : 5 May 2021

REASONS FOR DECISION

Background

1 By an [NAME] dated 19 August 2020, the landlord applied to the Rent Officer for registration of a fair rent £200.75 per week for the Property. The rent stated by the landlord, to have been payable at the time of the [NAME] was £102.92 per week, although the rent registered was £182.50 per week on 19 March 2013.

2 On 18 November 2020, the Rent Officer registered a fair rent of £225.50 per week effective from the same date. By a letter dated 5 December 2020 the tenant objected to the rent determined by the Rent Officer and the matter was referred to the Tribunal for a fresh determination of the rent.

3 Directions dated 10 March 2021 for the progression of the case were issued. Neither party filed any written submissions in relation to the rental figure contended for.

4 There was no hearing or inspection of the property due to the current

COVID-19 pandemic.

Law

5 When determining a fair rent the Committee, in accordance with the Rent Act 1977, section 70, had regard to all the circumstances including the age, location and state of repair of the property. It also disregarded the effect of (a) any relevant tenant's improvements and (b) the effect of any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy, on the rental value of the property.

6 In [COMPANY] v Chairman of the Greater Manchester etc. Committee (1995) 28 HLR 107 and [NAME] v [NAME] [1999] QB 92 the Court of Appeal emphasized

(a) that ordinarily a fair rent is the market rent for the property discounted for 'scarcity' (i.e. that element, if any, of the market rent, that is attributable to there being a significant shortage of similar properties in the wider locality available for letting on similar terms - other than as to rent - to that of the regulated tenancy) and

(b) that for the purposes of determining the market rent, assured tenancy (market) rents are usually appropriate comparables. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

Decision

7 The problem for the Tribunal was that its valuation of the market rent for the property, as the starting point, had to be made without the benefit of written submissions or having internally inspected the property to assess its condition. It was, therefore, obliged to assume that the property was in a fair condition and not in disrepair. In the absence of any evidence filed by the parties about market rents, the Tribunal had to apply its own knowledge and experience where appropriate.

8 Based on the Tribunal’s own general knowledge of market rent levels in the London, SW11 postcode, it concluded that the subject property if modernized and in good order would let on normal Assured Shorthold Tenancy (AST) terms, for £650 per week. This then, is the appropriate starting point from which to determine the rent of the property as it falls to be valued.

9 A normal open market letting would include carpets, curtains and “white goods” and would not include a tenant’s repairing obligation, but they are absent here. To reflect this and the following, we make allowances.

10 When adjustments were made for no floor coverings and curtain being provided (deduction of 15%), no white goods being provided (deduction of 15%) and the tenant's repairing liabilities within the tenancy agreement (deduction of 5.5%). An additional 5% was then deducted for the property requiring modernisation in the event of re- letting. This resulted in the market rent being reduced by £251 (when rounded). The scarcity of property within the area resulted in a further adjustment of 20% bringing the fair rent to £319.20 per week.

11 The Tribunal also has to consider the element of scarcity and whether demand exceeded supply. The Tribunal found that there was a substantial scarcity in the locality of Greater London and therefore makes a further deduction of 20% from the adjusted market rent to reflect this element. The uncapped fair rent to be registered would therefore be £319.20 per week.

12 However the Tribunal is also required to calculate the Maximum Fair

Rent Cap. This is determined by a formula under statutory regulation,

which whilst allowing for an element of inflation may serve to prevent

excessive increases. The cap as the date of the Tribunal’s determination is £227.00 per week.

13 As this cap is below than the uncapped rent, the fair rent determined by the Tribunal for the purposes of section 70, is £227.00 per week. This new rent will take effect from and including the date of determination, being 5 May 2021.

Name: Tribunal Judge Mohabir Date: 17 August 2021

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case.

The [NAME] for permission to appeal must arrive at the [NAME] within 28 days after the Tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the Tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).