Fair Rent Determination for a Property Under the Rent Act 1977

OUTCOME: Allowed

FR24 First-tier Tribunal – [NAME] No. LON/00BK/F77/2019/0130

Notice of the Tribunal [NAME] 1977 Schedule 11

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

[NAME] Mr [RESPONDENT]

Landlord [APPELLANT]

Tenant Miss [APPELLANT]

1. The fair [NAME] is £16500.00 Per Year (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 13 September 2019

3. The amount for services is £222.06 Per Annum

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

Per

not applicable

5. The [NAME] is not to be registered as variable.

6. The capping provisions of the [NAME] ([NAME]) Order 1999 apply (please see calculation overleaf).

7. Details (other than [NAME]) where different from [NAME] entry

-

8. For information only:

(a) The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £18036.56 per annum including £222.06 per annum for services prescribed by the Order.

[NAME] of decision 13/9/19

FR24 [NAME] FIGURE X 289.5

PREVIOUS RPI FIGURE Y 272.3

X 289.5 Minus Y 272.3 = (A) 17.2

(A) 17.2 Divided by Y 272.3 = (B) 0.063166

First application for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C) -

If no (B) plus 1.05 = (C) 1.113166

Last registered [NAME]* 16, 003.40 Multiplied by (C) = 17,814.43 *(exclusive of any variable service charge) 178.10

Rounded up to nearest 50p = 17, 814.50

Variable service charge YES If YES add amount for services 222.06

[NAME] = £18036.56 Per Per Annum

Explanatory Note

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

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

(a) increasing the previous registered [NAME] 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 application was the first since 1 February 1999) or 5% (if it is a second or subsequent application 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 [NAME] determination was made.

4. The process differs where the tenancy agreement contains a variable service charge and the [NAME] is to be registered as variable under section 71(4) of the [NAME] 1977. In such a case the variable service charge is removed before applying the formula. When the amount determined by the application of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair [NAME].

1

Case Reference

: LON/00BK/F77/2019/0130

[NAME] : [ADDRESS] [POSTCODE]

Tenant

: Miss B [APPELLANT]

Landlord : [COMPANY] of Application : [NAME] 1977

Tribunal

: [NAME] of Determination : 13 September 2019

_______________________________________________

DECISION

1. The registered [NAME] for [ADDRESS] [POSTCODE], is determined at £16,500 per year (to include £222.06 for services). 2. The registration of the [NAME] takes effect from 13 September 2019, being the date of the Tribunal’s decision.

____________________________________

FIRST - TIER TRIBUNAL [NAME] ([NAME])

2 © CROWN COPYRIGHT 2019

Reasons

The Background 3. The Applicant is the landlord of [ADDRESS] [POSTCODE] (the “[NAME]”). Miss [APPELLANT] is the [NAME] protected tenant of the [NAME].

4. On 11 April 2019, the Landlord applied under s.67 of the [NAME] 1977 for the registration of a fair [NAME] of £19,417.63 per annum. The [NAME] had previously been registered on 8 June 2017 at £16,181.50 per year (including £178.10 for services).

5. Pursuant to the application, the [NAME] registered a [NAME] of 16,690.00 per year (including £222.06 for services).

6. Subsequently, the Landlord’s representative appealed against the [NAME]’s determination and accordingly, the matter has been referred to the First Tier Tribunal ([NAME]).

7. A hearing was held on 13 September 2019. This was attended by [RESPONDENT] and Ms [RESPONDENT] on behalf of the Landlord. The Tribunal inspected the [NAME] later the same day in the presence of the Tenant. The law 8. Section 70 of the [NAME] 1977 sets out the factors to be considered when determining a fair [NAME]. In particular, and of relevance to this application, we are required to have regard to the age, character, locality and state of repair of the [NAME].

9. Further, s.70 requires the Tribunal to disregard: a) The personal circumstances of the parties; b) Any disrepair or other defect attributable to a failure by the tenant under the terms of the tenancy;

3 c) Any improvements carried out by the tenant, other than as required under the tenancy.

10. Pursuant to section 70(2), “For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to [NAME]) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms”. In other words, we must make certain assumptions regarding scarcity and demand.

11. In addition, further regulation of [NAME] rents is provided by the [NAME] ([NAME]) Order 1999 (‘the [NAME]’), which places a cap on the permissible amount of the increase of a fair [NAME] between one registration and the next. The cap is based upon the amount of increase in the Retail Prices Index between the dates of the two registrations.

12. By virtue of section 72 of the [NAME] 1977, the registration of the [NAME] takes effect from the date when the Tribunal reached our decision. Inspection 13. As noted above, the Tribunal inspected the [NAME] on 13 September 2019, at which the Tenant was present.

14. The [NAME] comprises a lower-ground floor 2-bedroom flat located in Maida Vale.

15. The [NAME] is located in a converted terrace [NAME] comprising four flats. It has its own entrance, accessed via stairs at the front of the [NAME]. There is a garden to the rear. The flat has two bedrooms, a living room, bathroom (with bath, washbasin and WC) and kitchen. There are also two storage cupboards in the hall way. The [NAME] has central heating and has its own boiler. Windows are single glazed throughout.

16. According to the Tenant, all furniture and furnishings in the [NAME] has been provided by her. She has also maintained the decoration of the [NAME]. In particular, she has redecorated and fitted a new kitchen and

4 supplied all units, white goods and cooker. She has also fitted a new bathroom, as well as cupboards and wardrobes and sanded and stained the floorboards. Miss [NAME] also pointed out that she has fitted security bars to the doors and windows. In addition, she made various submissions as to the condition of the [NAME] including: there had been a rat problem which the Landlord took considerable time to resolve (albeit this appeared to have been resolved by the date of inspection) and caused damage; there was damp in the hallway; the installation of the boiler by the Landlord had led to damage to floorboards in the hallway; the electrics were an old system which had not been updated since she moved in. Determination 17. The starting point in assessing a fair [NAME] under s.70 of the [NAME] 1977 is to establish the market [NAME] for the [NAME]. To that [NAME], a number of adjustments are made, to reflect the requirements of s.70.

18. The [NAME] had determined the market [NAME] to be £25,740 per annum. However, the [NAME] then made adjustments of £8,000 to reflect the condition of the [NAME] and deducted 6% for scarcity.

19. At the hearing, Ms [NAME] argued that the [NAME] was too low. On the half of the Landlord, she provided various comparables and it was submitted that comparable properties of the same size and area are achieving £40,296 and £44,196 per annum. In response, Miss [NAME] submitted that these properties were of completely different specification and were not all in the immediate locality.

20. In contrast, Miss [NAME] produced comparables of [NAME] lettings in the locality. These showed rents ranging from a little over £7,400 per year to £14,600 per year. At the hearing, Ms [NAME] accepted that potential comparables, although it is also true that the Tribunal has no knowledge of the condition of the properties or whether the rents were subject to capping under the [NAME] ([NAME]) Order 1999.

21. The [NAME] had also provided information on a range of properties, showing rentals between £19,500 and £48,100 per annum. However,

5 aside from the number of bedrooms, there is little information about any of the properties.

22. Taking into account all of the evidence, using our own skill and expertise and having regard to the size and location of the [NAME], we determine the market [NAME] to be £27,500 per annum as a starting point. However, we consider there should deductions to allow for the differences between the condition considered usual (including the responsibility of tenants to maintain decorations as opposed to decorate) for such a letting and the condition of the actual [NAME], and to take account of the improvements carried out by the Tenant.

23. It should be noted that this figure cannot be a simple arithmetical calculation and is not based specifically upon capital cost but is the Tribunal’s estimate of the amount by which the [NAME] would have to be reduced to attract a tenant to this [NAME]. In the circumstances, the Tribunal considers that a total deduction of 25% would be appropriate – this is made up of 10% in respect of the Tenant’s improvements in relation to the kitchen as referred to above and 5% in respect of the bathroom. In addition, the Tribunal allows 5% in respect of the Tenant’s additional furnishings and taking account of general condition of the [NAME] as noted above, and a further 5% due to the fact that decorating is to be carried out by the Tenant.

24.

Accordingly, the Tribunal determines the adjusted market [NAME] to be £20,625 per annum. Of this sum, the Tribunal accepts the assertion of £222.06 for services, noting that there was no evidence to the contrary.

25. In assessing a fair [NAME] for the [NAME], the Tribunal must also assume that the number of people seeking to become tenants of similar properties in the area on terms identical to the Tenant’s tenancy (save as to [NAME]) is not substantially greater than the number of such properties which are available to [NAME] on such terms. In other words, we must make certain assumptions regarding scarcity and demand. The [NAME] officer states that he has adjusted the market [NAME] by 6% to take scarcity into account. On behalf of the Landlord, it was asserted that scarcity should be zero on the basis that that there were 200 comparable properties to

6 [NAME] within a half mile radius and 10,000 within 5 miles. However, crucially, no evidence was provided as to levels of demand.

26. In the Tribunal’s experience and knowledge of the rental market, a deduction for scarcity is indeed required. In particular, having regard to the wider locality, social housing is still very much in demand with long waiting lists in London, no doubt aided by the fact that rents are generally lower than in the private sector. The shortage of available properties has the effect of increasing market rents and the fair [NAME] regime was introduced with a view to counter-balancing this. Assessing the correct percentage for scarcity cannot be a precise arithmetical calculation, because there is no way of knowing the precise number of people seeking to become tenants of similar properties in the area. It is principally a judgment based on the knowledge and experience of the Tribunal and in the circumstances, the Tribunal considers that a figure of 20% would be more appropriate.

27. We therefore determine the [NAME] at £16,500 per annum (deducting the sums attributable for services before applying scarcity and then adding them to determine the level of fair [NAME]).

28. We are required to consider whether the provisions of the [NAME] ([NAME]) Order 1999 apply. As noted above, the existing [NAME], registered in June 2017, was £16,003.40 per year (excluding the amount attributable to services). The Retail Prices Index (RPI) published for June 2017 was 272.3. The RPI published for the month immediately preceding the month in which the determination of a fair [NAME] is made was 289.5. The relevant increase in the RPI was 17.2. The appropriate enhancement factor in accordance with the Order is 0.05. To calculate the maximum fair [NAME] we apply the formula as set out in the Order as follows: [NAME] = £16,003.40 x (1+ 0.05 + (17.2/272.3)) + £222.06 attributable to services = £18,036.56.

29.

Accordingly, under the [NAME], the capped fair [NAME] is £18,036.56 per year. As the [NAME] we have determined does not exceed the maximum fair [NAME], the Order does not apply.

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Chairman: [NAME]: 15 October 2019

APPEAL PROVISIONS

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) on a point of law must seek permission to do so by making written application to the First Tier Tribunal at the Regional office which has been dealing with the case.

2. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.