First-tier Tribunal Determines Fair Rent for Poor Condition Property

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : GB/LON/00AY/F77/2024/0675 Property : [ADDRESS], Brixton, [RESPONDENT] [POSTCODE] Applicant : [redacted] : None Respondent: [redacted] Representative : None Date of application : 3 October 2024 Type of application : Determination of the registered rent under Section 70 Rent Act 1977 Tribunal members : Mr [NAME] B [NAME] RICS Registered Valuer 0079475 [NAME] : [ADDRESS], [RESPONDENT] [POSTCODE] Date of decision : 23 June 2025

DECISION

2 Background 1 An application was made to the Rent Office for the registration of a fair rent on 15 August 2025. The registered rent was challenged by the Tenant to this application and the Rent Officer has requested the matter be referred to the Tribunal for determination. 2 Directions were issued to both parties following receipt of the objection. 3 The Tribunal informed the parties of their rights to request an oral hearing. The Tenant requested a hearing. 4 A face-to-face hearing was held to discuss the application and written submissions on this matter. This was held at his home due to his ambulant disability. The landlord did not attend. 5 An inspection of the property was carried out prior to the hearing. 6 Prior to the domiciliary hearing, the parties were invited to submit relevant information on market rents in the area for similar properties. They were also invited to offer any details of property dilapidation, repairs or improvements made to the property by either the Landlord or Tenant. 7 The parties were invited to provide a full description of the property on a reply form provided to them by the Tribunal. The Landlord provided a detailed description of the property. Property Description 8 The property is a flat. The accommodation comprises: Ground floor: Sitting Room, Bedroom, Kitchen bathroom/wc. Private rear garden Defects and obsolescence 9 The Tenant reported several specific and more comprehensive defects to the property in his submissions. 10 The condition of the property is a material consideration when carrying out a fair rent determination. The Tribunal has also had regard for any dilapidation and obsolescence at the property. 11 The inspection revealed a ground floor flat in poor condition with extensive penetrating and rising dampness to internal walls. There was water ingress from the flat above which had caused the collapse of the ceiling in the bathroom/wc. Water was leaking into the subject property at the time of the inspection. Other defects include poor sound insulation, failed window glazing and frames, and damaged radiators. It is the opinion of the Tribunal the overall condition of the dwelling fell below that reasonably expected of a social housing provider being unlikely to satisfy the Decent Homes standards with no working bathroom facilities at inspection.

3 Market rental evidence 12 The parties did not submit any Market Rental evidence of similar properties to the Tribunal for consideration. The law 13 When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 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. 14 In [COMPANY] –v– Chairman of the Greater Manchester etc. [NAME] [1995] and [NAME] –v– [RESPONDENT] [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. 15 The Market Rents charged for assured tenancy lettings often form appropriate comparable transactions from which a scarcity deduction is made. 16 These Market Rents are also adjusted where appropriate to reflect any relevant differences between those of the subject and comparable rental properties. 17 The Upper Tribunal in Trustees of the [COMPANY] –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. 18 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. The article is not applied should the Tribunal assess that as a consequence of repairs or improvements carried out by the Landlord the rent that is determined in response to an application for a new rent registration exceeds by at least 15% the previous rent registered. Valuation 19 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 market letting. It did this by having regard to their general knowledge of market levels in this area of [RESPONDENT].

4 20 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 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. 21 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. 22 The Tribunal then considered the decision of the High Court in [COMPANY] –v– [RESPONDENT] [NAME] [2002] EWHC 835 ([NAME]), which required it to consider scarcity over a wide area rather than limit it to a particular locality. [RESPONDENT] 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 [RESPONDENT]. 23 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 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 there was substantial scarcity in the locality of [RESPONDENT] and, therefore, made a further deduction of 20%. 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. 24 They have relied upon their knowledge and experience of Market Rents in the locality to determine the appropriate Market Rent for this property to be used in the fair rent calculation. The parties submitted no comparable transaction evidence. 25 Table 1 below provides details of the fair rent calculation:

5

Decision 26 The Rent Acts (Maximum Fair Rent) Order will not apply to this determination. The uncapped fair rent initially determined by the Tribunal for the purposes of Section 70 is £88.00 per week virtue of the Rents Act (Maximum Fair Order) 1999 the maximum fair rent that can be registered for this property is £149.50 per week. 27 Details of the maximum fair rent calculations were provided with the original Notice of Decision. The statutory formula applied to the previously registered rent is at Appendix A. 28 Accordingly, the sum that will be registered as a fair rent with effect from 23 June 2025 is £88.00 per week.

Name: [NAME]: 25 June 2025

Valuer Chairman

6 Appendix A The Rents Act (Maximum Fair Rent) Order 1999 2 (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.

7 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 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 (ie, 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).

FR27 First-tier Tribunal – Property Chamber File Ref No. GB/LON/00AY/F77/2024/0675

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME] [NAME] [APPELLANT]

Landlord [RESPONDENT] and Quadrant Group

Tenant Mr [APPELLANT]

1. The fair rent is 88.00 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 23 June 2025

3. The amount for services is Nil Per

negligible/not applicable

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

Nil Per

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

None

8. For information only:

(a) The fair rent to be registered is the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £ ............................ per ................................... including £ ...................... per ................................. for services (variable).

(b) 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 £ 149.50 per week including £ Nil per Week for services prescribed by the Order.

[NAME] of decision 23 June 2025

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 402.9

PREVIOUS RPI FIGURE Y 293.5

X 402.9 Minus Y 293.5 = (A) 109.4

(A) 109.4 Divided by Y 293.5 = (B) 0.37274276

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) 1.42274276

Last registered rent* 105 Multiplied by (C) = 149.38798 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 149.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £149.50 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.