First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

Case Reference

: JM/LON/OOBD/F77/2023/0111

[NAME] : [ADDRESS] [POSTCODE]

Tenant

: [APPELLANT]

Landlord : [COMPANY] of [NAME] : Determination of a Fair Rent under section 70 of the Rent Act 1977

Tribunal

: Mr [NAME] MA LLM FRICS

HMCTS Code : On Papers (paper, video, audio)

Date of Decision : 23rd May 2023

Date of Statement of Reasons: 23rd May 2023

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Statement of Reasons

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FIRST - TIER TRIBUNAL [NAME] CHAMBER ([NAME])

© CROWN COPYRIGHT 2023

Background The Tribunal gave formal notice of its decision by a Notice dated 23rd May 2023 of the determined Fair Rent of £258.00 per week with £0 per week with effect from same date. By way of [NAME], dated 20th December 2022, made by the [NAME], applied for re registration of a fair rent of £15921.00 per year with £0.00 per year attributed to services. Previously the Rent Officer had registered a rent of £198.50 per week with £0.00 per week noted as attributed to services with effect from 27th October 2020. The Rent Officer registered a fair rent of £253.00 per week with £0.00 per week attributed to services with effect from 2nd February 2023. The Rent Officer noted an error in their calculation and revised the fair rent to £242.00 per week effective from 2nd February 2023. In a letter dated 6th February 2023 the landlord tenant objected to the rent registered and the matter was referred to the First –tier Tribunal ([NAME] Chamber) ([NAME]). Directions were issued by the Tribunal on the 28th March 2023. Thereafter, the Directions made provision for the filing with the Tribunal of the parties’ respective written submissions and, in particular, for the completion of a reply form giving details of the [NAME] and including any further comments the parties wished the Tribunal to take into account in [NAME] its determination. The tenancy is a statutory (protected) periodic tenancy. The tenancy (not being for a fixed tenancy of 7 years or more) is subject to section 11 of the Landlord and Tenant Act 1985 which sets out the landlords statutory repairing obligations; the tenant is responsible for internal decorations. The [NAME] The tribunal did not inspect the [NAME]. The [NAME] is a semi-detached house, of three rooms on the ground floor, a kitchen and WC, on the first a further three rooms, with a bathroom and WC, there is a garden outside and the [NAME] is centrally heated. Relevant Law Provisions in respect of the jurisdiction of the Tribunal and the determination of a fair rent are found in Schedule 11, Part 1, paragraph 9(1) to the Rent Act 1977, as amended by paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the Rent Act 1977. Rent Act 1977 Schedule 11, Part 1, paragraph 9 (as amended) “Outcome of determination of fair rent by appropriate tribunal

9.-(1) The appropriate tribunal shall- (a) if it appears to them that the rent registered or confirmed by the rent officer is a fair rent, confirm that rent; (b) if it does not appear to them that that rent is a fair rent, determine a fair rent for the dwelling house.” Section 70: Determination of fair rent (as amended) “(1) In determining, for the purposes of the Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to- (a) the age, character, locality and state of repair of the dwelling-house, … (b) if any furniture is provided for the use under the tenancy, the quantity, quality and condition of the furniture [, and (c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy.] (2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.

(3) There shall be disregarded- (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any [NAME] to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any [NAME]; (c), (d) …[repealed] (e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any [NAME] of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any [NAME].”

Consequently, when determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, has regard to all the circumstances including the age, location and state of repair of the [NAME]. It also disregards the effect of (a) any relevant Tenant’s improvements and (b) the effect of any disrepair or defect

attributed to the Tenant of any [NAME] in [NAME] under the regulated tenancy, on the rental value of the [NAME]. In [COMPANY] v Chairman of the Greater Manchester etc. Committee (1995) 28 HLR 107 and [NAME] v [NAME] [1999] QB 92 the Court of Appeal emphasised:

(a) that ordinarily a fair rent is the market rent for the [NAME] 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 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. (The rents may have to be adjusted where necessary to reflect any differences between the comparables and the subject [NAME]).

In considering scarcity under section 70 (2), the Tribunal recognises that: (a) there are considerable variations in the level of a scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustments should be made; the Tribunal, therefore, considers the case on its merits; (b) terms relating to rents are to be excluded. A lack of demand at a particular rent is not necessarily evidence of scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent. Fair rents are subject to a capping procedure under the Rent Acts (Maximum Fair Rent) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since last registration. The only exception to this restriction on a fair rent is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the rent by 15% or more of the previous registered rent. Pre determination Submissions The tribunal was in possession of a letter from the tenant, dated 6th March 2023 objecting to the rate of increase on the basis of inflation. Landlord The landlord submitted a Reply Form noting, the room sizes and their condition. Also that the central heating was supplied by the tenant, the double glazing by the landlord with curtains and carpets fitted by the tenant along with white goods. The Form also noted , a number of repairs addressed; Cracked basin fixed

Leaky tap replaced Cleared blocked drains Window repairs Remedial works as per EICR Works scheduled – loft insulation.

There are also a number of photos of interior, a copy of an Electrical Installation Condition report noting satisfactory condition, a plan. Additionally, a comparable properties marketing details have been included showing a [NAME] of superior condition being marketed at £3600 per month. Tenant No submissions other than objection letter. The Hearing No hearing was requested by the parties nor one felt proportionate, so the matter was addressed on papers. Reasons for Decision The rent to be determined must reflect the condition found on the date of the hearing disregarding all tenants' improvements. The process for determining a fair rent is the [NAME] of Rent Act 1977 section 70 on the subject [NAME] and then comparison with the maximum rent permitted under the Maximum Fair Rent Order 1999. This means that comparison with other properties the subject of Fair Rent is not material. Initially the Tribunal determined what rent the Landlord could reasonably be expected to obtain for the [NAME] in the open market if it were let today in the condition that is considered usual for such an open market letting. Considering evidence submitted and the Tribunal acting in its capacity as an expert tribunal and using its general knowledge of market levels in the area, concluded that such a likely market rent, if a market rent is adopted would be £3400.00 per month However, the [NAME] is not in the condition considered usual for a modern letting at a market rent. Therefore, it is necessary to adjust the above hypothetical rent, a deduction of 20% is made. In addition, the Tribunal determined that there should be a further deduction of 10% to reflect the fact the terms and conditions and goods supplied under the tenancy would differ from those of a contemporary assured shorthold tenancy, from which the rental comparables are derived. Thereafter the Tribunal considered the question of scarcity in section 70 (2) of the Rent Act 1977. A figure of 20% was adopted.

Market derived rental level - £3400 per month Less 20% condition £680.00 per month -------------------------- £2720 per month Less 10% for terms and supplied goods inc white goods £272 per month ------------------------------------------- £2448 per month Less 20% for scarcity. £489.60 per month ------------------------------------------

The rent after this final adjustment was £1958.40 per month, equivalent to £451.93 per week.

Rent Acts (Maximum Fair Rent) Order 1999 The rent to be registered is limited by the Rent Acts (Maximum Fair Rent Order) 1999. The rent calculated in accordance with the Order is £258.00 per week £0 per week attributable for services. This figure is lower than the figure calculated by reference to the market rent with adjustments, of £451.93 per week with £0 per week attributed for services.

Accordingly, the sum of £258.00 per week will be registered as the fair rent with effect from 23rd May 2023, being the date of the Tribunal’s decision. Valuer Chair: [NAME]: 23rd May 2023 Extended reasons: 23rd May 2023

Appeal to the Upper Tribunal A person wishing to appeal this decision to the Upper Tribunal ([NAME] Chamber) on a point of law must seek permission to do so by [NAME] a written [NAME] to the First-tier Tribunal at the Regional Office which has been dealing with the case which [NAME] must: a. be received by the said office within 28 days after the Tribunal sends to the [NAME] written reasons for the decision.

b. identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking. If the [NAME] is not received within the 28 –day time limit, it must include a request for an extension of time and the reason for it not complying with the 28- day time limit; the Tribunal will then decide whether to extend time or not to allow the [NAME] for permission to appeal to proceed.