First-tier Tribunal Determines Fair Rent for London Property

OUTCOME: Allowed

FR27 First-tier Tribunal – Property Chamber File Ref No. FR/LON/00AG/F77/2025/0128

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 1st [ADDRESS], [POSTCODE]

[NAME] Mr [APPELLANT]

Landlord [APPELLANT]

Tenant [NAME]

1. The fair rent is £812 Per Cal Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 18 June 2025

3. The amount for services is N/A Per

not applicable

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

N/A 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.

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

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 below the maximum fair rent of £961 per calendar month prescribed by the Order.

[NAME] of decision 18 June 2025

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 402.2

PREVIOUS RPI FIGURE Y 323.5

X 402.2 Minus Y 323.5 = (A) 78.7

(A) 78.7 Divided by Y 323.5 = (B) 0.243277

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.293277

Last registered rent* £743 Multiplied by (C) = £960.90 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £961

Variable service charge NO If YES add amount for services N/A

MAXIMUM FAIR RENT = £961 Per Cal 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.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : FR/LON/00AG/F77/2025/0128 Property : 1st [ADDRESS], [POSTCODE] Landlord : [COMPANY] Tenant : [NAME] of objection : 11 February 2025 Type of application : Determination of the registered rent under Section 70 Rent Act 1977 Tribunal member(s) : [NAME] [NAME] : 10 [ADDRESS], [POSTCODE] Date of decision : 18 June 2025

REASONS FOR DECISION

© CROWN COPYRIGHT 2025

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DECISION 1. The sum that will be registered as a fair rent with effect from 18 June 2025 is £812 per calendar month. Background 2. The Landlord applied to the Rent Officer for the registration of a fair rent for this property on 24 October 2024.

3. An (uncapped) fair rent of £864 per calendar month was registered on 13 December 2024 following the application, such rent to have effect from that date. The tenant subsequently challenged the registered rent on 11 February 2024, and the Rent Officer requested the matter be referred to the tribunal for determination.

4. Directions were issued on 24 April 2025 by the Tribunal. The parties were directed to provide reply forms, and invited to submit any relevant information and submissions. The tenant provided a reply form and further submissions. The landlord provided neither a reply form nor any other submissions.

5. In their reply form, the tenant indicated that she wished the Tribunal to hold a hearing in this matter, but did not require an inspection. Accordingly, the Tribunal arranged for a face-to-face hearing at 10 [ADDRESS], [POSTCODE] in this matter on 18 June 2025.

The Property

6. The property is located on the 1st floor of a larger, period building on [ADDRESS]. [ADDRESS] runs between Regent’s [ADDRESS] (on the Eastern side of [ADDRESS] itself) and [ADDRESS] in the desirable [ADDRESS] area of the London Borough of Camden.

7. The property, we were told in uncontested evidence, is a studio flat with a bathroom and kitchen (though we note the tenant had incorrectly used the term ‘bedsit’ instead of studio flat which we clarified with her at the hearing). The living/sleeping area measures approximately 5 x 4 meters. The fixtures of the bathroom and kitchen are basic and have not been updated since at least 1982. The tenant provided the white goods in the kitchen, as well as the carpets and curtains at the property. The property is single glazed and does not have central heating.

8. The condition of the property, we were told, has not changed since the last registration – and in any case the tenant is responsible for internal decorations and repairs.

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The Hearing

9. We held a face-to-face hearing in this matter on 18 June 2025, which was attended by the tenant Ms [APPELLANT] alongside her friend Mr [APPELLANT], but not the landlord. The Tribunal had received no contact from the landlord at all in this matter, and after allowing a few minutes for potential lateness we proceeded with the hearing; having considered that the landlord had been given sufficient notice of the hearing and that it was in the interests of justice to proceed.

10. The absence of the landlord aside, though this is by no means unusual in these matters, the hearing was a straightforward one. We were told that the condition of the property was largely unchanged since the last registration. The property does not have central heating nor double glazing, and the fixtures provided in the bathroom and kitchen are very basic.

11. Ms [NAME] and Mr [NAME] had prepared submissions regarding the valuation, to assist us, though were visibly relieved when we told them that they didn’t have to ‘prove a case’ as regards the value, and that the Tribunal’s role was to determine a rent with the assistance of the submissions of the parties.

12. Mr [NAME] had conducted a wide-ranging review of the residential market in Central London, including his view that the rental market in the area was becoming negative. We were grateful for those submissions, but they were general observations and there was nothing really in them which assisted in the valuation of the property directly; or, in truth, advanced further than our existing knowledge of the rental market in the area as an expert Tribunal.

13. There was also discussion of the maximum fair rent order, and the tenant’s concerns about setting some form of new ‘base line’ in relation to this. In truth, though, these submissions were (and we say this in the nicest possible way, as we are aware that Ms [NAME] and Mr [NAME] were simply trying their best with what they had available to them) a little ill-informed about how the fair rent systems works; though we note this was not helped by the Valuation Office Agency’s Rent Officer apparently referring the tenant to the maximum fair rent capping provisions, given those provisions didn’t have any bearing on the rent the Rent Officer determined.

The Law 14. When determining the fair rent, in accordance with the Rent Act 1977, section 70, “the Act”, we had regard to all the circumstances (other than personal circumstances) including the age, location and state of repair of the property. We also disregarded the effect of (a) any relevant tenant's improvements and (b) the effect of any disrepair or

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other defect attributable to the tenant or any predecessor in title under the regulated tenancy, on the rental value of the property.

15. In [COMPANY] v Chairman of the Greater Manchester etc. 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.

16. [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 provides that: “If there are market rent comparables from which the fair rent can be derived why bother with fair rent comparables at all”.

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

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

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

20. 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 article restricts any rental increase to 5% above the previously registered rent plus retail price indexation (RPI) since the last registered rent. The relevant registered rent in this matter was registered on 31 March 2022 at £743 per calendar month. The rent registered on 13 December 2024 subject to the current objection and subsequent determination by the Tribunal is not relevant to this calculation.

Valuation

21. In terms of the valuation itself, we weren’t provided with any comparable transactional evidence to consider. Instead, we were provided with the general market commentary provided by Mr [APPELLANT] outlined above, and the tenant highlighted that the rent registered by the Rent Officer represented a 16.5% uplift from that registered 2

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years before, or an 8.25% per annum increase (though we note, of course, the latter is not strictly correct because of the compounding of the increases). That increase, they averred, seemed too high – and it suggested to them something was wrong.

22. We were also provided with the rent registrations of 4 properties in the local area, though as we said at the time these carry no weight in the valuation of the subject – in line with the decision in [NAME] v [NAME] referred to in paragraph 15 above – as the property is located in an area with an active transactional rental market.

23. Accordingly, we considered the valuation of the property in line with our own general knowledge of rental levels in the local area as an expert Tribunal. We considered that the property would let for approximately £1,400 per calendar month, were it let on the open market in the condition, and on the terms considered usual for such a letting.

24. This hypothetical rent is adjusted as necessary to allow for the differences between the terms and conditions considered usual for such a letting and the condition of the actual property at the date of the determination. 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.

25. The lease terms of the tenancy are such that the tenant is responsible for internal repairs and decoration at the property. This is a material valuation consideration, and we made a deduction of 7.5% from the hypothetical rent to reflect these lease terms.

26. We made a deduction of 5% to account for the kitchen and bathroom at the property being basic and dated.

27. We made a deduction of 5% to account for the tenant’s having provided the white goods, carpets, curtains and other similar furniture which would usually be provided by a landlord in the open market.

28. We made a 10% deduction to account for the property being single glazed and not having central heating.

29. 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.

30. The decision of the High Court in [COMPANY] v [NAME] [2002] EWHC 835 (Admin)

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requires us to consider scarcity over a wide area rather than limit it to a particular locality. Greater 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 Greater London.

31. Assessing a scarcity percentage cannot be a precise arithmetical calculation. It can only be a judgement based on the experience of members of the Tribunal. We therefore relied on our own 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, we found that there was substantial scarcity in Greater London and therefore made a further deduction of 20% from the adjusted market rent to reflect this element.

32. 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.

33. Table 1 below provides details of the fair rent calculation:

Table 1

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Decision 34.

For the reasons given above, we arrive at an initial fair rent value of £812 per calendar month.

35. As the value we arrived at is lower than the maximum rent prescribed by The Rent Acts (Maximum Fair Rent) Order of £961 per calendar month, the Fair Rent that can be registered is not capped by that order.

36. The statutory formula applied to the previously registered rent is at Appendix A.

37. Details of the maximum fair rent calculations are provided with the accompanying notice of our decision.

38.

Accordingly, the sum that will be registered as a fair rent with effect from 18 June 2025 is £812 per calendar month.

Valuer Chairman: [NAME]: 11 August 2025

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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 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-for- permission-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. Please note that if you are seeking permission to appeal against a decision made by the Tribunal under the Rent Act 1977, the Housing Act 1988 or the Local Government and Housing Act 1989, this can only be on a point of law. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

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Appendix A The Rents Act (Maximum Fair Rent) Order 1999 (1) Where this article applies, the amount to be registered as the rent of the dwelling-house under Part IV shall not, subject to paragraph (5), exceed the maximum fair rent calculated in accordance with the formula set out in paragraph (2).

(2) The formula is:

MFR = LR [1 + (x-y) +P]

y

where:

• 'MFR' is the maximum fair rent; • 'LR' is the amount of the existing registered rent to the dwelling- house; • 'x' is the index published in the month immediately preceding the month in which the determination of a fair rent is made under Part IV; • 'y' is the published index for the month in which the rent was last registered under Part IV before the date of the application for registration of a new rent; and • 'P' is 0.075 for the first application for rent registration of the dwelling-house after this Order comes into force and 0.05 for every subsequent application.

(3) Where the maximum fair rent calculated in accordance with paragraph (2) is not an integral multiple of 50 pence the maximum fair rent shall be that amount rounded up to the nearest integral multiple of 50 pence.

(4) If (x-y) + P is less than zero the maximum fair rent shall be the y existing registered rent.