First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/00CT/F77/2024/0030

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 46 [ADDRESS], [POSTCODE]

[NAME] [RESPONDENT] [NAME]

Landlord [APPELLANT]

Tenant [NAME]

1. The fair rent is £776.50 Per month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 31 October 2024

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

8. For information only:

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 £ 805.00 per month

Chairman [NAME] of decision 31/10/2024

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 389.9

PREVIOUS RPI FIGURE Y 337.1

X 389.9 Minus Y 337.1 = (A) 52.8 (A) 52.8 Divided by Y 337.1 = (B) 0.1566

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2066

Last registered rent* £643.50 Multiplied by (C) = 776.44 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £776.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £776.50 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 [NAME] 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

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : BIR/OOCT/F77/2024/0030 Property : 46 [ADDRESS] [POSTCODE]

Applicant : [redacted] ([APPELLANT]) Representative : None Respondent : [redacted] : None Type of application : Application under Section 70 of the Rent Act 1977 by the Applicant against the rent assessed for the property by the Rent Officer Tribunal members : Mr [NAME] (Chairman) [NAME] [NAME]/Hearing : Neither party requested an inspection or hearing Date of original decision : 31st October 2024

DETAILED REASONS

2 BACKGROUND

1. On 12th March 2024, the Applicant Landlord applied to the Rent Officer for registration of a fair rent of £772.20 per month for the property 46 [ADDRESS], [POSTCODE]. The rent payable at the time of the application was stated as being £643.50 per month.

2. The rent was previously registered at a rental of £643.50 per month with effect from 19th May 2022 following a determination by the Tribunal.

3. The Rent Officer registered a rental of £686.00 per month with effect from 19th May 2024.

4. By letter dated 23rd May 2024, the Applicant objected to the rent determined by the Rent Officer and the matter was referred to the Tribunal.

5. The Tribunal made a determination of the rent payable on 31st October 2024 and these Detailed Reasons are given in response to a request for same by the Applicant.

INSPECTION

6. Neither party requested the Tribunal to carry out an inspection of the property and the determination was therefore made based upon the submissions received by the Tribunal.

7. Based on the submissions provided, the Tribunal understands that the property comprises of a semi-detached house with hallway, one reception room and kitchen on the ground floor. On the first floor the landing leads to three bedrooms and shower room.

8. There are gardens, a car parking space, store and outside W.C.

9. The Tribunal understands that the property has central heating.

EVIDENCE

10. The Tribunal received written representations from the Applicant which were copied to the Respondent. No representations were received from the Respondent

11. Neither party requested a hearing and the matter was therefore dealt with by a paper determination.

THE APPLICANT’S SUBMISSIONS

12. The Applicant submitted that the property was in fair condition given its age and type and supplied a schedule of properties in the area which were both on the market and had been let. It was acknowledged that the property was not equivalent to modern standards and in making its application for a fair rent had taken account of the fact that the tenant had provided carpets, curtains and white goods.

13. The Applicant further submitted that a deduction of £100.00 was appropriate for the better condition of a property let on the open market as opposed to this house.

14. The Applicant confirmed that the Respondent had built the conservatory.

3 15. To determine a Market Rental the Applicant referred to several similar three- bedroom semi-detached properties in the area with rentals ranging from £1,200.00 per month to £1,550.00 per month.

THE RESPONDENT’S SUBMISSIONS

16. Although the Respondent did not make any written representation the Tribunal understands from the papers submitted to it that the Respondent did write to the Rent Officer when the initial Application was made by the Landlord confirming that in his opinion, the rent proposed was excessive.

17. The Tribunal also understands form the various submissions that in addition to the conservatory which the Respondent built, the house as let to the Respondent required a new kitchen and bathroom. Based on the Rent Officers inspection papers the Tribunal understands that the heating system was fitted by the tenant.

THE LAW

18. When determining a fair rent, the Tribunal, in accordance with the Rent Act 1977, Section 70, 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.

19. In [COMPANY] v Chairman of the Greater Manchester, etc. Committee [1995] 28HLR107 and [NAME] v [NAME] [1999] QB92 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 similar 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 were usually appropriate comparables. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

VALUATION

20. In the first instance, the Tribunal determined what rent the Applicant 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 open market lettings. It did this by having regard to the Tribunal’s own general knowledge of market rent levels in the area of Birmingham.

21. Having taken the various matters into consideration it determined that the open market value of the property in good condition would be the sum of £1,100.00 per month.

22. The Tribunal then considered the improvements carried out by the Respondent tenant and assessed these as follows:

Carpets and curtains 40.00 White goods 25.00 Modernised kitchen 50.00 Modernised bathroom 30.00

4 Conservatory 35.00 Decorating liability 55.00 Total £235.00

23. The Tribunal noted that in its submission the Applicant referred to a property being to let in the open market as being worth £100.00 more per month than a Regulated tenancy. The Tribunal considered this and agrees with the principle behind this submission in that a modern open market letting property is likely to be in better general condition than an older Regulated tenancy. Such a property is likely to have, for example, addition electrical sockets, more modern internal fittings and be generally better presented. In this case the Tribunal is of the opinion that a further deduction of £60.00 is appropriate.

24. The Tribunal then considered the question of scarcity. This is done by considering whether the number of persons genuinely seeking to become tenants of similar properties in the wider area of the West Midlands on the same terms other than rent is substantially greater than the availability of such dwellings as required by section 70(2) of the Rent Act 1977.

25. The Tribunal finds that many Landlords dispute that scarcity exists because they are of the opinion that the market is ‘in balance’. Although Tenants do not in all cases have difficulty in finding accommodation this ignores the fact that it is the [NAME] of such accommodation which creates a balance in the market. Section 70(2) specifically excludes the [NAME] of accommodation from consideration in determining whether there are more persons genuinely seeking to become Tenants of similar properties than there are properties available. Although the rental market for Assured Shorthold properties may be in balance many potential Tenants may be excluded from it for various reasons such as age, poor credit history or because they are on housing benefit.

26. In this case the Tribunal, having carried out appropriate research, is satisfied that it is not appropriate to make a deduction for scarcity. This leaves a fair rent for the subject property of £805.00 per month (£1,100.00 - £235.00 - £60.00)

27. The Section 70 fair rent determined by the Tribunal is above the level of the maximum fair rent permitted by the Rent Acts (Maximum Fair Rent) Order 1999 and accordingly the rent is therefore determined at £776.50 per month being the maximum allowed by the Maximum Fair Rent Order.

DECISION

28. The fair rent determined by the Tribunal for the purposes of Section 70 was accordingly £776.50 per month.

APPEAL

29. If either of the parties is dissatisfied with this decision, they may apply to this Tribunal for permission to appeal to the upper Tribunal (Lands Chamber), on a point of law only. Any such application must be received within 28 days after these written reasons have been sent to them (Rule 52 of The Tribunal Procedure (First- tier Tribunal) (Property Chamber) Rules 2013).

[NAME] First-tier Tribunal Property Chamber (Residential Property)