First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00BE/F77/2024/0144

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 10d [ADDRESS] [POSTCODE]

[NAME]

Landlord [APPELLANT]..

Tenant Mr [APPELLANT]

1. The fair rent is £283.50 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 14 August 2024

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.

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

Purpose built 1890’s 3 storey small block of flats between [ADDRESS] and [NAME].. Slate covered double pitched hipped roof. London stock brick walls. Flat on second (top) floor by communal stairwell, no lift. Accom. includes 5 rooms, kitchen/ diner bathroom/ wc and separate wc. Basic bathroom and kitchen, no double glazing, timber DHS and casements. Full CH. Otherwise as 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 and is above the MFR cap of £ 283.50 pw. It is therefore capped. The landlord may charge any rent up to and including this registered Fair Rent but not a figure above it. (The uncapped Fair Rent would have been £420 per week).

[NAME] of decision 14 August 2024

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE (2 months prior) X 387.3

PREVIOUS RPI FIGURE (2 months prior) Y 314.3

X 387.3 Minus Y 314.3 = (A) 73

(A) 73 Divided by Y 314.3 = (B) 0.2323

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2823

Last registered rent* £221 per week Multiplied by (C) = £283.39 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £283.50 per week

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £283.50 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.

© CROWN COPYRIGHT 2013

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BE/F77/2024/0144 Property : 10d [ADDRESS] [POSTCODE] Applicant : [redacted] Representative : None Respondent : [redacted] Representative : [COUNSEL] of Application : S.70 Rent Act 1977 – Determination of a new fair rent Tribunal Member : [NAME] and venue of Meeting : 14 [ADDRESS] [POSTCODE] Date of Decision : 14 August 2024

REASONS FOR DECISION

Background

1 The landlord applied to the Rent Officer for registration of a fair rent. The rent registered as already payable at the time of the application was £221 per week, from 7 January 2022, previously determined by the Rent Officer. The landlord stated in its notice RR1 that the new figure sought was to be an annual rent of £13,215.80 pa.

2 Although the Rent Officer set a rent as a result, subsequently a party objected and sought a re-determination of the application, by the Tribunal.

2

Inspection

3 The Tribunal did not inspect the Property internally. The Property appears from Google Streetview (@June 2022), to be part of a purpose built small block flats (c.1890) on 3 levels, with an internal communal staircase. The front elevation of the building appears to be in fair condition. The block has brick walls and the double pitched hipped roofs are slated. It is located on a side street about midway between the commercial [ADDRESS] and the large [NAME] owned residential Aylesbury Estate. There are three floors of self contained all residential accommodation accessed from ground level.

4 The Property has 5 rooms, kitchen/ diner, bathroom & WC and separate WC. There is full central heating but no double glazing. The Property was let from 3 July 2000 having been modernised around 2000.

5 The Tribunal made the assumption common in older established tenancies such as this one, that there were no carpets or curtains, or white goods included in the letting by the landlord and that the kitchen and bathroom were functional but basic, only. The tenant did not list any particular, substantial or longstanding defects to the Property nor improvements he had carried out.

Directions

6 Directions, for the progression of the case were issued on 17 April 2024. The Tribunal received brief representations. Neither party requested a hearing. The case was determined only on the papers. The Tribunal did not receive the standard Reply Forms back completed.

Law

7 When determining a fair rent the Committee, 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.

8 In [COMPANY] v [NAME] of the Greater Manchester etc. Committee (1995) 28 HLR 107 and [NAME] v [NAME] [1999] QB 92 the Court of Appeal emphasized

(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

3 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 are usually appropriate comparables. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

Decision

9. The Property is considered spacious but otherwise in an inferior condition, to that of comparable properties, so that their rents are substantially higher than the market rent for the Property, it calls into question whether or not those transactions are truly comparable. Would prospective tenants of modernized properties in good order consider taking a tenancy of a relatively unmodernised property in poor repair and with only basic facilities or are they in entirely separate lettings markets? The problem for the Tribunal is that the only evidence of value levels available to us is of modernised properties. We therefore have to use this but make appropriate discounts for the differences, rather than ignore it and determine a rent entirely based on our own knowledge and experience, whenever we can.

10. On the evidence of the Tribunal’s general knowledge of market rent levels in Southwark, the subject property if modernized up to date and in good order would let on normal Assured Shorthold Tenancy (AST) terms, for £700 per week.

11. However the Tribunal makes allowance for an absence of carpet and curtains, for a lack of white goods, only a basic kitchen and bathroom, and no double glazing. These adjustments total a £175 per week deduction. This produces am adjusted market rent of £525 per week prior to considering scarcity.

12. The Tribunal also has to consider the element of scarcity and whether demand exceeded supply. The Tribunal found that there was a substantial scarcity in the locality of Greater London and therefore makes a further deduction of 20% from the adjusted market rent to reflect this element. This deduction results in an uncapped fair rent of £420 per week.

13. The Tribunal is also required to calculate the Maximum Fair Rent Cap (MFRCap) which serves to limit the extent of increase in a fair rent on review. The cap is determined by a formula under statutory regulation, which whilst allowing for an element of inflation may serve to prevent excessive increases. There is no discretion as to how to apply this cap. At the date of the Tribunal’s determination the cap produces a figure of £283.50 per week. This figure is a combination of the previously registered rent being subject to the change in RPI between registration dates, rounded up to the nearest 50p. There is no service charge

4 element. In this case the cap did apply according to the MFRCap regulations.

14. The new rent calculated above is capped. The fair rent is £283.50 per week. It takes effect from and including the date of determination, 14 August 2024. The landlord may charge a rent at any level up to but, not in excess of, this figure

[NAME] 14 August 2024

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 either party is dissatisfied with this decision, they may apply for permission to appeal to the Upper Tribunal (Lands Chamber) on any point of law arising from this Decision.

Prior to making such an appeal, an application must be made, in writing, to this Tribunal for permission to appeal. Any such application must be made within 28 days of the issue of this decision to the person making the application (regulation 52 (2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rule 2013).

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. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).