First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. TR/LON/00AW/F77/2023/0241

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME]

Landlord [APPELLANT]

Tenant [NAME] [APPELLANT] [NAME]

1. The fair rent is £295.50 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 02 April 2024

3. The amount for services is £7.46 Per Week

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

N/A Per

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:

(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 £385 per week including £7.46 per week for services.

[NAME] of decision 2 April 2024

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 381.0

PREVIOUS RPI FIGURE Y 304.0

X 381 Minus Y 304 = (A) 77

(A) 77 Divided by Y 304 = (B) 0.253289

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) 1.303289

Last registered rent* £226.50 Multiplied by (C) = £295.19 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £295.50

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

MAXIMUM FAIR RENT = £295.50 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.

1

Case Reference

: MAM/LON/00AW/F77/2023/0241

Property : First and [ADDRESS], [POSTCODE]

Tenant

: [NAME] [APPELLANT]

Landlord : [APPELLANT] : [COMPANY] of Objection : 18 July 2023

Type of Application : Section 70, Rent Act 1977

Tribunal

: Mr [NAME] of Summary Reasons

: 4 April 2024

_______________________________________________

DECISION

The sum of £295.50 per week will be registered as the fair rent with effect from 2 April 2024, being the date the Tribunal made the Decision. ____________________________________

© CROWN COPYRIGHT 2024 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

2 SUMMARY REASONS

Background 1. Following an objection from the Landlord to the determination of a fair rent by the Rent Officer, the Tribunal has made a determination under the provisions of the Rent Act 1977.

Inspection 2. The Tribunal did not inspect the property but considered this case on the basis of the papers provided.

Evidence 3. There were no written submissions from the parties.

Determination and Valuation 4. Having consideration of our own expert, general knowledge of rental values in the area, we consider that the open market rent for the property in good tenantable condition would be in the region of £600 per week. From this level of rent we have made adjustments in relation to:

• The lease terms of the tenancy being less attractive to a potential tenant than those which are generally expected in the market • The Tenant’s provision of white goods, floor coverings, curtains and other similar furnishings • The property’s windows being single glazed • The kitchen being dated

5. The Tribunal has also made an adjustment for scarcity.

6. The full valuation is shown below:

3 7. The Tribunal determines a rent of £385 per week and this equates to approximately £1,668 per calendar month.

Decision 8. The uncapped fair rent initially determined by the Tribunal, for the purposes of section 70, was £385 per week. The capped rent for the property according to the provisions of the Rent Acts (Maximum Fair Rent) Order 1999 is calculated at £295.50 per week. The calculation of the capped rent is shown on the decision form. In this case the lower rent of £295.50 per week is to be registered as the fair rent for this property.

Chairman: [NAME]: 4 April 2024

APPEAL PROVISIONS

These summary reasons are provided to give the parties an indication as to how the Tribunal made its decision. If either party wishes to appeal this decision, they should first make a request for full reasons and the details of how to appeal will be set out in the full reasons. Any request for full reasons should be made within a month. Any subsequent application for permission to appeal should be made on Form RP PTA

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : TR/LON/00AW/F77/2023/0241 Property : First and [ADDRESS], [POSTCODE] Tenant : [NAME] [APPELLANT] [NAME] Landlord : [APPELLANT] : [COMPANY] of application : 18 July 2023 Type of application : Determination of the registered rent under Section 70 Rent Act 1977 Tribunal member(s) : [NAME] : 10 [ADDRESS], [POSTCODE] Date of decision : 2 April 2024

REASONS FOR DECISION

© CROWN COPYRIGHT 2024

Background 1. The Landlord applied to the Rent Officer for the registration of a fair rent for this property on 18 May 2023.

2. A fair rent of £241.45 per week (including £7.46 per week for services) was registered on 6 July 2023 following the application, such rent to have effect from 6 August 2023. The landlord subsequently challenged the registered rent on 18 July 2023, and the Rent Officer has requested the matter be referred to the tribunal for determination.

3. Directions were issued on 15 August 2023 by the Tribunal. The parties were invited to submit any relevant information and submissions, neither of whom did so. The only information before the Tribunal was therefore that provided by the Rent Officer in referring the objection to the Tribunal, including things such as the application form and the landlord’s letter of objection.

4. The Tribunal’s directions also informed the parties that, if no hearing was requested, the matter would be dealt with on paper. Neither party requested a hearing, nor an inspection. Considering that a determination on the basis of the papers provided was appropriate in this matter, the Tribunal therefore made its decision without a hearing nor an inspection.

The Property

5. The subject property is a maisonette over 1st and 2nd floors in a larger, mid-terrace period conversion. The property is located on [ADDRESS], a residential street off the [ADDRESS], close to Brompton Cemetery in the Royal Borough of Kensington and Chelsea.

6. Internally, the property offers 2 bedrooms, an additional ‘room’, a bathroom and a kitchen. The property is centrally heated, and appears to be single glazed. The Tribunal understands that the kitchen at the property is dated, and that the tenant provided the white goods, floor coverings and curtains.

The Law 7. When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, “the Act”, 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 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.

9. The Tribunal are aware that [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 stated: “If there are market rent comparables from which the fair rent can be derived why bother with fair rent comparables at all”.

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

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

12. 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.

13. 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 30 June 2021 at £226.50 per week. The rent registered on 6 July 2023 subject to the current objection and subsequent determination by the Tribunal is not relevant to this calculation.

Valuation

14. 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 and on the terms that are considered usual for such an open market letting.

15. Neither party provided any evidence of value for the Tribunal to consider.

Accordingly, the Tribunal considered the rent in line with its own expert knowledge of rents in the local area of the subject. The Tribunal determined that a rent of £600 per week (approximately £2,600 per calendar month) for the subject property, were it let on the open market in the condition and on the terms considered usual for such a letting, would be appropriate.

16. 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.

17. The responsibility for internal fixtures, fittings and decoration at the property under the tenancy agreement is borne by the tenant. This is a material valuation consideration and a deduction of 7.5% from the hypothetical rent is made to reflect this liability.

18. The Tribunal made a deduction of 5% from the hypothetical rent to account for the tenant’s providing white goods, floor coverings, curtains and other similar furnishings at the property.

19. The Tribunal made a deduction of 5% to account for the single glazing at the property.

20. The Tribunal made a deduction of 2.5% to account for the property’s dated kitchen.

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 [NAME] [2002] EWHC 835 (Admin) which required it to consider scarcity over a wide area rather than limit it to a particular locality. West 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 West London.

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 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, the Tribunal found that there was substantial scarcity in the locality of West London and therefore made a further deduction of 20% from the adjusted market rent to reflect this element.

24. 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.

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

Table 1

Decision 26. As the value of £385 per week (including £7.46 per week for services) arrived at by the Tribunal is higher than the maximum rent prescribed by The Rent Acts (Maximum Fair Rent) Order of £295.50 per week, the Fair Rent that can be registered is capped by that order to the lower figure of £295.50 per week (including £7.46 for services).

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

28. Details of the maximum fair rent calculations were provided with the notice of the Tribunal’s decision.

29. Accordingly, the sum that will be registered as a fair rent with effect from 2 April 2024 is £295.50 per week including £7.46 per week for services.

Valuer Chairman: [NAME]: 11 June 2024

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.

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 [NAME] 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 [NAME] 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 [NAME] 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).