First-tier Tribunal Determines Fair Rent for Ground-Floor Flat

OUTCOME: Allowed

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Case Reference

: TR/LON/OOBJ/F77/2023/0372 Property : [ADDRESS] [POSTCODE] Tenant

: [APPELLANT] [NAME] represented by Ms [APPELLANT] Landlord : [RESPONDENT] [NAME] represented by Mr [RESPONDENT] of Application : Determination of a Fair Rent under section 70 of the Rent Act 1977 Tribunal:

Mr [NAME] (Hons) MA LLM FRICS Mr [NAME] JP HMCTS Code : Hearing only followed by Inspection Date of Decision : 22nd February 2024 Date of Statement of Reasons: 22nd February 2024 Amended 22nd April 2024 _______________________________________________

Statement of Reasons

____________________________________

© CROWN COPYRIGHT 2024

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Decision 1. The decision of the tribunal is that a fair rent of £713.00 per month, is determined with an effective date of 22nd February 2024. Background 2. An application was made to re-register a fair rent, dated 11th July 2023, by the landlord of the property [RESPONDENT] [NAME]. Prior to the application to re-register a fair rent, the Rent Officer had registered a rent of £570.00 per month, with effect from 6th June 2017.

3. Subsequently the Rent Officer registered a fair rent of £630 per month with effect from 3rd October 2023 4. In a letter undated the landlord tenant objected to the rent registered and the matter was referred to the First–tier Tribunal (Property Chamber) (Residential Property).

5. Directions were issued by the Tribunal on the 21st November 2023 amended 11th January 2024. Thereafter, the Directions made provision for the filing with the Tribunal of the parties’ respective written submissions and, in particular, for the completion of a reply form giving details of the Property and including any further comments the parties wished the Tribunal to take into account in making its determination. The tenancy is a statutory (protected) periodic tenancy. The tenancy (not being for a fixed tenancy of 7 years or more) is subject to section 11 of the Landlord and Tenant Act 1985 which sets out the landlords statutory repairing obligations; the tenant is responsible for internal decorations. The Property 6. The property is a ground floor, non-self-contained room, in building around 1919 to 1944 without central heating, comprising; one room, one bathroom, one WC and a kitchen/diner. The Inspection 7. An inspection was not requested by the tenant. Relevant Law 8. Provisions in respect of the jurisdiction of the Tribunal and the determination of a fair rent are found in Schedule 11, Part 1, paragraph 9(1) to the Rent Act 1977, as amended by

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paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the Rent Act 1977. Rent Act 1977 Schedule 11, Part 1, paragraph 9 (as amended) “Outcome of determination of fair rent by appropriate tribunal 9.-(1) The appropriate tribunal shall- (a) if it appears to them that the rent registered or confirmed by the rent officer is a fair rent, confirm that rent; (b) if it does not appear to them that that rent is a fair rent, determine a fair rent for the dwelling house.” Section 70: Determination of fair rent (as amended) “(1) In determining, for the purposes of the Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to- (a) the age, character, locality and state of repair of the dwelling-house, … (b) if any furniture is provided for the use under the tenancy, the quantity, quality and condition of the furniture [, and (c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy.] (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 locality on the terms (other than those relating to rent) 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.

(3) There shall be disregarded- (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with any terms thereof;

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(b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any predecessor in title of his; (c), (d) …[repealed] (e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any predecessor of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his.”

9. Consequently, when determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, has regard to all the circumstances including the age, location and state of repair of the Property. It also disregards the effect of (a) any relevant Tenant’s improvements and (b) the effect of any disrepair or defect attributed to the Tenant of any predecessor in title under the regulated tenancy, on the rental value of the Property. 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 emphasised: (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 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. (The rents may have to be adjusted where necessary to reflect any differences between the comparables and the subject property).

10. In considering scarcity under section 70 (2), the Tribunal recognises that: (a) there are considerable variations in the level of a scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustments should be made; the Tribunal, therefore, considers the case on its merits;

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(b) terms relating to rents are to be excluded. A lack of demand at a particular rent is not necessarily evidence of scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent. Fair rents are subject to a capping procedure under the Rent Acts (Maximum Fair Rent) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since last registration. The only exception to this restriction on a fair rent is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the rent by 15% or more of the previous registered rent. Submissions 11. The tribunal identified the following issues; The extent of the tenancy in particular the status of the passage area which exists from the mutual front door to the door at the base of the stairs. The repair obligations of the parties. The extent of disrepair. The rent requested by both parties.

Landlord The extent of the tenancy in particular the status of the passage area which exists from the mutual front door to the door at the base of the stairs. 12.The Landlord submitted that the tenants had used the hallway to store personal artefacts, and that the Landlord considered the hallway not in the area covered by the tenancy. The landlord had sought and obtained an injunction to remove the material from the hallway for fire purposes for access to the flat above. The repairing obligations of the parties.

13. The landlord purchased the property in auction around November 2018, and there was no documentary evidence of the repairing liabilities of the parties. The landlord therefore submitted that the Landlord and Tenant 1985 Sch 11 statutory provisions applied.

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The extent of disrepair.

14. The landlord explained that work had been carried out to improve and extend the separate upper floor flat. These works had resulted in some damage to the ceilings of the ground floor flat. The landlord noted that they had been willing to improve the ground floor flat but their offer had not been accepted. FD30 fire doors were installed to the mutual front door, the two doors leading off the internal rooms and the door at the base of the stairs leading to the flat above. The landlord noted the ceilings had been replaced with standard plaster board rather than fire protection board as offered. The landlord noted that no disrepair existed in the ground floor flat. The landlord noted the delay in repairing the damage to the ceilings of the ground floor flat caused by the works was held up for a number of reasons including Covid 19. Did the improvements constitute sufficient for waiver of the maximum fair rent cap- “15% rule” and the level of Fair Rent 15. The landlord sought £822 per month. Tenant The extent of the tenancy in particular the status of the passage area which exists from the mutual front door to the door at the base of the stairs.

16. The tenant viewed the passageway as being part of their tenancy’s area and had used it as such for the storage of artefacts mainly reference books. The repairing obligations of the parties.

17. The tenant submitted there was no tenancy only a rent book. However, from their occupancy 44 years ago the tenant had assumed responsibility for internal decorations. Any more structural repairs had fallen and been undertaken by the landlord. The extent of disrepair 18. The tenant was concerned that works from November 2018 had caused damage to their bathroom ceiling, which had to be removed. Additionally, damage to a second ceiling occurred but was more minor. The landlord repaired the ceiling which had minor damage but did not repair the bathroom ceiling until recently.

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The tenant noted that fire doors had been installed but these were unpainted. In summary the tenant agreed that the property was neither in disrepair compared with pre works or improved. However, the tenant expressed concern over the delays in the repairs and wished these to be taken into account in the determination of the rent. Did the improvements constitute sufficient for waiver of the maximum fair rent cap- “15% rule”, and the level of rent requested.

19. The tenant considered the rent determined by the Rent Officer on 3rd October 2023 of £630 per month to be fair. Reasons for Decision The extent of the tenancy in particular the status of the passage area which exists from the mutual front door to the door at the base of the stairs. 20.The tenant is of the view the hallway is within the scope of their tenancy. The landlord disagrees. There is no documentary evidence of the original tenancy. What we do know is that previously the tenants stored artefacts, books, in the area and now they are debarred from doing so. The tribunal does not have the power to rule on the scope of a tenancy but from a valuation point previously the tenants had in addition to the areas of the tenancy not in dispute, the ability to store material in the hallway, and now at the date of this hearings determination they do not. There is a valuation implication which the tribunal will consider. The repairing obligations of the parties.

21. In the absent of any written agreement to the contrary the statutory provisions prevail and the performance of the tenant over the 44 years and the previous and current land support the responsibilities as identified by the Landlord and Tenant Act 1985. The extent of the disrepair 22. It was conceded by both parties the property was not in disrepair. The tribunal noted the improved fire doors, but these were for the benefit of the building as a whole and did not constitute a material improvement for the ground floor flat. The condition of the flat needs to be ascertained at the date of the decision that is 22nd February 2024 and so the fact the works took a long time to be carried out is not material to the determination.

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Did the improvements constitute sufficient for waiver of the maximum fair rent cap- “15% rule”, and the level of rent requested.

23. The landlord requested in the alternative that first; if the tribunal believed either by repair or improvement the level of increase in rent was 15% or more then the capping mechanism should be waived, and the rent determined solely on the section process. In the alternative the landlord requested the cap identified by the Maximum Fair Rent Order. Did the improvements constitute sufficient for waiver of the maximum fair rent cap- “15% rule”, and the level of rent requested? 24. The tribunal viewed the works as putting back into repair that which was out of repair by dint of the landlord’s works. No material increases in value had in the tribunal’s view been established. As such the capping mechanism by the Order was applicable and its outcome should be compared with the section 70 procedure. The lesser of the two being selected.

25. The rent to be determined must reflect the condition found on the date of the hearing disregarding all tenants' improvements.

26. The process for determining a fair rent is the application of Rent Act 1977 section 70 on the subject property and then comparison with the maximum rent permitted under the Maximum Fair Rent Order 1999. This means that comparison with other properties the subject of Fair Rent is not material.

27. Initially 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 market letting. Considering evidence submitted and the Tribunal acting in its capacity as an expert tribunal and using its general knowledge of market levels in the area, concluded that the rent was £2,200 per month if let on a contemporary assured shorthold basis.

28. The Property is not in the nature or condition considered usual for a modern letting at a market rent, in particular not being self-contained, therefore, it is necessary to adjust the above hypothetical rent, a deduction of 50 % is made. In addition, the Tribunal determined that there should be a further deduction of 10% to reflect the fact the terms and conditions and goods supplied under the tenancy would differ from those of a contemporary assured shorthold tenancy, from which the rental comparables are derived.

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Thereafter the Tribunal considered the question of scarcity in section 70 (2) of the Rent Act 1977. A figure of 20% was adopted. The calculation 29. The rent prior to adjustment for condition, terms and scarcity is; Open market Rent / Letting; £2,200 per month Less 50% for non-self-contained and no central heating £1,100 per month Less 10% terms and conditions

£110 per month

-----------------------

Leaves: £990 per month

----------------------- Less 10% for terms and supplied goods inc white goods

£99 per month -----------------------

Leaves: £891 per month Less 20% for scarcity.

£178.20 per month -----------------------

Leaves: £712.80 per month 30. The rent after this final adjustment was £713.00 per month. Rent Acts (Maximum Fair Rent) Order 1999 31. The rent to be registered is not limited by the Rent Acts (Maximum Fair Rent Order) 1999. The rent calculated in accordance with the Order is £822.00 per month. This figure is higher than the figure calculated by reference to the market rent with adjustments, of £713.00 per month.

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Accordingly, the sum of £713.00 per month will be registered as the fair rent with effect from 22nd February 2024, being the date of the Tribunal’s decision. Valuer Chair: [NAME]

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Decision Date: 22nd February 2024 Extended reasons: 22nd February 2024 Amended decision: 22nd April 2024

Appeal to the Upper Tribunal A person wishing to appeal this decision to the Upper Tribunal (Property Chamber) on a point of law must seek permission to do so by making a written application to the First- tier Tribunal at the Regional Office which has been dealing with the case which application must: a. be received by the said office within 28 days after the Tribunal sends to the person making the application written reasons for the decision. b. 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. If the application is not received within the 28 –day time limit, it must include a request for an extension of time and the reason for it 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.

FR27 First-tier Tribunal – Property Chamber File Ref No. TR/LON/00BJ/F77/2023/0372

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

R [NAME] C Piarroux JP

Landlord [APPELLANT]

Tenant [NAME]

1. The fair rent is £713.00 Per month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22nd February 2024

3. The amount for services is n/a Per n/a

negligible/not applicable

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

n/a Per n/a

negligible/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

The property has use of the rear garden

8. For information only:

(a) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £ 822.00 per month as prescribed by the Order.

Chairman R [NAME] of decision 22nd February 2024 Amended 22nd April 2024

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 379.00

PREVIOUS RPI FIGURE Y 272.30

X 379.00 Minus Y 272.30 = (A) 106.70

(A) 106.70 Divided by Y 272.30 = (B) 0.39185

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) 1.4418

Last registered rent* £570.00 per month Multiplied by (C) = £821.85 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £822.00

Variable service charge YES / NO If YES add amount for services no

MAXIMUM FAIR RENT = £822.00 Per Month

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.