Fair Rent Determination for a West London Property

OUTCOME: Dismissed

FR27 First-tier Tribunal – Property Chamber File Ref No. LON/00AW/F77/2024/0676

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

Judge Tueje Mrs A Flynn MA MRICS

Landlord Mr [RESPONDENT]

Tenant Ms B [APPELLANT]

1. The fair rent is £185.50 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 20 January 2025

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

Not known as unable to inspect

Chairman Judge P Tueje Date of decision 14th February 2025

FR27

MAXIMUM [ADDRESS] RPI FIGURE X 390.90

PREVIOUS RPI FIG Y 268.40

X 390.90 Minus Y 268.40 = (A) 127.50

(A) 127.50 Divided by Y 268.40 = (B) 0.475037

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.525037

Last registered rent* 121.50 Multiplied by (C) = 185.29 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 185.50

Variable service charge no If YES add amount for services

MAXIMUM FAIR RENT = 185.50 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 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 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 application of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair rent.

1

Case Reference

: LON/00AW/F77/2024/0676

Property : [ADDRESS], [POSTCODE]

Applicant: [redacted]

: Not represented

Respondent: [redacted]

: Not represented

Date of Objection : 4th October 2024

Type of Application : Determination of registered rent under section 70 Rent Act 1977

Tribunal

: Judge Tueje

Mrs A Flynn MA MRICS

Venue

: 10 [ADDRESS], [POSTCODE]

Date of hearing

: 20th January 2024

Date of Extended Reasons

: 14th February 2025

_______________________________________________

DECISION ____________________________________

© CROWN COPYRIGHT 2023

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

2 Background

1. By an application dated 19th July 2024, the landlords applied to the Valuation Office Agency (Rent Officer) for registration of a fair rent of £250 per week.

2. The rent payable at the time of the application was £121.50 per week, effective from 8th July 2016.

3. On 23rd August 2024 the Rent Officer registered a fair rent of £181.50 per week, effective from the 30 August 2024.

4. By an e-mail from the tenant sent on 22nd September 2024, the tenant objected to the rent determined by the Rent Officer and the matter was referred to this Tribunal.

5. Following receipt on 19th November 2024 of the objection from the Tenant to the determination of a fair rent by the Rent Officer, the Tribunal issued directions dated 22nd November 2024.

6. The Tribunal subsequently notified the parties that the application was listed for a hearing on 20th January 2025, with an inspection on the same day, after the hearing. The law

7. When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, “the Act”, 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.

8. [COMPANY] v [NAME] and Lancashire Rent Assessment Committee (1995) and [NAME] v [NAME] [1999], the Court of Appeal emphasised that ordinarily a fair rent is the market rent for the property discounted for 'scarcity'. This is 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.

9. The Tribunal is aware that [NAME] v [NAME] (1999) QB.92 is a relevant authority in registered rent determination. This authority states where good market rental comparable evidence i.e., assured shorthold tenancies is available enabling the identification of a market rent as a starting point it is wrong to rely on registered rents. The decision stated: “If there are market rent comparables from which the fair rent can be derived why bother with fair rent comparables at all”.

3 10. The market rents charged for assured tenancy lettings often form appropriate comparable transactions from which a scarcity deduction is made.

11. These market rents are also adjusted where appropriate to reflect any relevant differences between those of the subject and comparable rental properties.

12. The Upper Tribunal in Trustees of the Israel Moss Children’s Trust v Bandy [2015] explained the duty of the First Tier Tribunal is to present comprehensive and cogent fair rent findings. These directions are applied in this decision.

13. The Rent Acts (Maximum Fair Rent) Order 1999 applies to all dwelling houses where an application for the registration of a new rent is made after the date of the Order and there is an existing registered rent under part IV of the Act. This Order restricts any rental increase to 5% above the previously registered rent plus retail price indexation (RPI) since the last registered rent.

14. The Tribunal now makes its determination under the provisions of the Rent Act 1977.

15. In reaching its determination, the Tribunal considered the written submissions provided by the tenant (see paragraphs 17.3 and 17.4 below), the written and oral information provided by the landlords.

The Hearing and Inspection

16. Only the respondent attended the hearing, the applicant did not. Although the respondent’s application for registration of a fair rent sought £250 per week, he confirmed he does not seek to challenge the rent officer’s determination of £185.50 per week.

17. Amongst a number of documents submitted by the parties in respect of the application were the following:

17.1 The rent officer’s calculations in respect of the rent registered on 23rd August 2024.

17.2 The rent register showing the previous rent registered on 8th July 2016 being £121.50 per week.

17.3 The tenant’s e-mail sent on 22nd September 2022 objecting to the new rent, which reads:

I have received your registration rent with proposal of 185,- per week. I object to such a big increase. I have spend a lot of money to improve this place. I bought all equipment for kitchen : electric cooker, extraction hood, fridge-freezer, sink, shelfs, table and

4 chairs etc. In the bathroom all items bath, toilet, washing base, hot water boiler, wall tiles I bought and paid for installation. Also I repaired floor joints and laid floor panels. 17.4 An e-mail from the applicant sent on 22nd September 2024 complaining that the roof was leaking, which had been reported to the landlord, who had not carried out repairs during the ensuing six months.

18. After the hearing, the Tribunal visited the property, the landlords did so too as they intended to be present during the inspection. However, no one answered the door at the property when the Tribunal visited.

19. The Tribunal left its card confirming the visit which invited the applicant to contact the Tribunal. The applicant has not contacted the Tribunal regarding non-attendance at the hearing or being unavailable to provide access for the inspection.

20. Absent an inspection, we were unable to view the condition of the property. However, we note that the landlord did not dispute the information contained in the tenant’s e-mail sent on 22nd September 2024.

The property

21. The property is a one bedroom second floor flat, within a building containing a total of 4 flats. It is located on a quiet mews, around ¼ mile from Kensington High Street underground station and shops; it has no residents’ parking.

22. Externally, the property appeared to be well maintained. As stated, the Tribunal was unable to inspect the interior. The landlords could not provide any current information regarding the interior, having visited the property when they purchased it in January 2020, but they have not had access to the property since then.

Terms of the tenancy

23. The landlord’s application for Registration of Fair Rent states the tenancy agreement began on 25th March 1987. It states the landlord is responsible for structural and external repairs, and the tenant is responsible for minor repairs and redecoration.

24. The landlords do not have a copy of the tenancy agreement, and a copy was not provided to the Tribunal. Valuation – An Overview

25. In the first instance the Tribunal determined what rent the landlord could reasonably be expected to obtain for the property in the open market if it were let today in the condition that is considered usual for such an open

5 market letting. Neither party provided documentation showing comparable properties to let in the area. We determined the open market rent based on our own expert, general knowledge of rental values in the area, assisted by having visited the location. We consider that the open market rent for the property in good tenantable condition would be in the region of £450 per week.

26. This hypothetical rent is adjusted as necessary to allow for the differences between the terms and condition considered usual for such a letting and the condition of the actual property at the date of the inspection. Any rental benefit derived from Tenant’s improvements is disregarded. It is also necessary to disregard the effect of any disrepair or other defects attributable to the Tenant or any predecessor in title.

27. The provisions of section 70(2) of the Rent Act 1977 in effect require the elimination of what is called “scarcity”. The required assumption is of a neutral market. Where a Tribunal considers that there is, in fact, substantial scarcity, it must make an adjustment to the rent to reflect that circumstance. In the present case neither party provided evidence with regard to scarcity.

28. The Tribunal then considered the decision of the High Court in [COMPANY] v [NAME] [2002] EWHC 835 (Admin) which required it to consider scarcity over a wide area rather than limit it to a particular locality. West London is now considered to be an appropriate area to use as a yardstick for measuring scarcity and it is clear that there is a substantial measure of scarcity in West London.

29. Assessing a scarcity percentage cannot be a precise arithmetical calculation. It can only be a judgement based on the years of experience of members of the Tribunal. The Tribunal therefore relied on its own combined knowledge and experience of the supply and demand for similar properties on the terms of the regulated tenancy (other than as to rent) and in particular to unfulfilled demand for such accommodation. In doing so, the Tribunal found that there was substantial scarcity in the locality of West London and therefore made a further deduction of 20% from the adjusted market rent to reflect this element.

30. The valuation of a fair rent is an exercise that relies upon relevant market rent comparable transactions and property specific adjustments. The fair rents charged for other similar properties in the locality do not form relevant transaction evidence.

Valuation of the Property

31. As stated, having considered our own expert, general knowledge of rental values in the area, we consider that the open market rent for the property in good tenantable condition would be in the region of £450 per week. From this level of rent we have made adjustments to reflect the condition

6 of the property, the terms of the tenancy, and that the landlords have not supplied any white goods, carpets or curtains.

32. The Tribunal has also made an adjustment for scarcity (see paragraph 29 above).

33. The valuation is shown below:

Market Rent

£450 per week

Less adjustments for the:

Tenant’s works carried out to the bathroom

5% Tenant’s repair liability under the tenancy

5% No white goods provided by the landlord

5% No floor coverings/curtains provided by the landlord 5% Flooring provided by the tenant (floor joists and floor panels)

5%

Total deductions

25% or (£112.50)

Adjusted market rent

£337.50

Less Scarcity

approx. 20%

(£67.50)

£270.00 Decision

34. The provisions of the Rent Acts (Maximum Fair Rent) Order 1999 require that the registered rent is the lower of either the capped fair rent: the calculation of the capped rent is shown on the decision form, or the fair rent decided by the Tribunal, as set out above.

35. The uncapped fair rent initially determined by the Tribunal, for the purposes of section 70, was £270.00 per week. The capped rent for the property according to the provisions of the Rent Acts (Maximum Fair Rent) Order 1999 is calculated at £185.50 per week. In this case the lower rent of £185.50 per week is to be registered as the fair rent for this property. Tribunal Judge: Judge Tueje

Date: 14th February 2025

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.

7 If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the Regional Office which has been dealing with the case. The application should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-application- forpermission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber The application for permission to appeal must arrive at the Regional Office within 28 days after the Tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28-day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application 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 making the application is seeking. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).