First-tier Tribunal Determines Fair Rent for North London Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00AC/F77/2022/0073

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 985A [ADDRESS], [POSTCODE]

[NAME]

Landlord [APPELLANT] & The Executors of Mrs [APPELLANT]

Tenant Miss [APPELLANT]

1. The fair [NAME] is 768.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22 July 2022

3. The amount for services is N/A Per

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

N/A Per

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

None

8. For information only:

(a) The fair [NAME] to be registered is the maximum fair [NAME] as prescribed by the [NAME] ([NAME]) Order 1999. The [NAME] that would otherwise have been registered was £ per including £ per for services (variable).

(b) The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because it is the same as/below the maximum fair [NAME] of £850.00 per Calendar Month.

[NAME] of decision 22nd July 2022

FR24 [NAME] FIGURE X 340.0

PREVIOUS RPI FIGURE Y 291.0

X 340.0 Minus Y 291.0 = (A) 49.0

(A) 49.0 Divided by Y 291.0 = (B) 0.168384

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

If yes (B) plus 1.075 = (C) No

If no (B) plus 1.05 = (C) 1.2183

Last registered [NAME]* £697.50 Multiplied by (C) = 849.9 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £850.00

Variable service charge NO If YES add amount for services

[NAME] = £850.00 Per Calendar Month

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].

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AC/F77/2022/0073 HMCTS code (paper, video, audio) : P: PAPERREMOTE Property : 985A [ADDRESS] [POSTCODE] Applicant : [redacted] : None Respondent : [redacted] The Executors of [NAME] [COUNSEL] : [NAME] of application : 5th May 2022 Type of application : [NAME] determination under s70 [NAME] 1977 ( as amended) Tribunal members : Mr [NAME] RICS Registered valuer 0079475 Venue : Remote Date of decision : 22 July 2022

DECISION

2 Covid-19 pandemic: description of hearing This has been a remote Hearing on the papers which has not been objected to by the parties. The form of remote hearing was P: PAPERREMOTE. A face-to-face Hearing was not held because it was not practicable. It was agreed between the parties that all issues could be determined in a remote Hearing or on paper. The documents that the Tribunal was referred to are supplied in a bundle, the contents of which have been noted. Background 1 The Landlord applied to the [NAME] for the registration of a fair [NAME] for this property on 16 March 2022. 2 The fair [NAME] was previously registered on 17 September 2019 at £697.50 per month by the [NAME]. 3 A fair [NAME] of £785 per month was registered on 19 April 2022 and, following the application, Miss [APPELLANT] the Applicant challenged the registered [NAME] and the [NAME] has requested the matter be referred to the Tribunal for determination. 4 Directions were issued on 5th May 2022. The Directions stated that the application was suitable for determination on the basis of a paper determination. 5 The parties were invited to submit any relevant information and submissions and relevant information was received from both the Landlord and the Tenant. Inspection 6 No inspection of the property was carried out due to covid restrictions. The property 7 The Tribunal relies upon the description provided in the written submissions. 8 The property is a first-floor flat above commercial premises with lounge, two bedrooms, WC, utility room, shower room. 9 The Tribunal are told in written submission that the Landlord installed double glazing in 2012-14, and a thermostatic controlled shower in 2018 and upgraded the electrical wiring in 2022. 10 The Tenant in written submission provided photograph of internal dampness and reported open brickwork mortar joints to exterior. The Tenant claimed she has paid for electrical upgrading and met the costs of kitchen improvements. She also emphasised the flat is located above commercial premisses and that no white goods are provided by the Landlord.

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The law 11 When determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, s.70, 'the Act', it 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. 12 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 [NAME] is the market [NAME] for the property discounted for 'scarcity'. This is that element, if any, of the market [NAME] that is attributable to there being a significant shortage of similar properties in the wider locality available for letting on similar terms. 13 In [NAME] –v– [NAME] (1999) the authority also states that where good market rental comparable evidence of recently let assured shorthold tenancies is available this evidence be used to identify market [NAME] as a starting point. It is wrong in those instances to rely on registered rents. The decision stated: 'If there are market [NAME] comparables from which the fair [NAME] can be derived why bother with fair [NAME] comparables at all.' 14 The market rents charged for assured tenancy lettings often form appropriate comparable transactions from which a scarcity deduction is made. 15 These market rents are also adjusted where appropriate to reflect any relevant differences between those of the subject and comparable rental properties. 16 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 [NAME] findings. These Directions are applied in this decision. 17 The [NAME] ([NAME]) Order 1999 applies to all dwelling houses where an application for the registration of a new [NAME] is made after the date of the Order and there is an existing registered [NAME] under part IV of the Act. This article restricts any rental increase to 5% above the previously registered [NAME] plus retail price indexation (RPI) since the last registered [NAME]. The relevant registered [NAME] in this matter was registered on 17 September 2019 at £697.50 per month. The [NAME] registered on 19 April 2022 subject to an Objection and subsequent determination by Tribunal is not relevant to this calculation.

4 Valuation 18 In the first instance the Tribunal determined what [NAME] 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. It did this by having regard to their general knowledge of market [NAME] levels in this area of north London. The Tribunal determine the open market [NAME] as at the date of the determination is £1,200 per month. 19 This hypothetical [NAME] 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. Appropriate adjustments are made to the transaction evidence in assessment of the [NAME] for this property. 20 The responsibility for internal and external maintenance of this property under the tenancy agreement is that of the Landlord. 21 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. North London is now considered to be an appropriate area to use as a yardstick for measuring scarcity and it is clear there is a substantial measure of scarcity in north London. 22 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 [NAME]) and in particular to unfulfilled demand for such accommodation. In doing so, the Tribunal found that there was substantial scarcity in the locality of north London and therefore made a further deduction of 20% from the adjusted market [NAME] to reflect this element. 23 The valuation of a fair [NAME] is an exercise that relies upon relevant market [NAME] comparable transactions and property specific adjustments. The fair rents charged for other similar properties in the locality do not form relevant transaction evidence. 24 Table 1 below provides details of the fair [NAME] calculation:

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Decision 25 The [NAME] ([NAME]) Order will not apply to this determination. The [NAME] is below the capped [NAME] in accordance with the [NAME] ([NAME]) Order 1999. The capped [NAME] under the [NAME] is £850 per month. 26 The statutory formula applied to the previously registered [NAME] is at Appendix A. 27 Details of the maximum fair [NAME] calculations were provided with the original notice of Decision. 28 Accordingly, the sum that will be registered as a fair [NAME] with effect from 22 July 2022 is £768 per month.

Name: [NAME]: 5th September 2022

Valuer Chairman

6

Appendix A The Rents Act ([NAME]) Order 1999 (1) Where this article applies, the amount to be registered as the [NAME] of the dwelling-house under Part IV shall not, subject to paragraph (5), exceed the maximum fair [NAME] 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 [NAME]; • 'LR' is the amount of the existing registered [NAME] to the dwelling-house; • 'x' is the index published in the month immediately preceding the month in which the determination of a fair [NAME] is made under Part IV; • 'y' is the published index for the month in which the [NAME] was last registered under Part IV before the date of the application for registration of a new [NAME]; and • 'P' is 0.075 for the first application for [NAME] registration of the dwelling- house after this Order comes into force and 0.05 for every subsequent application.

(3) Where the maximum fair [NAME] calculated in accordance with paragraph (2) is not an integral multiple of 50 pence the maximum fair [NAME] 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 [NAME] shall be the y existing registered [NAME].