First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

First-tier Tribunal – Property Chamber File Ref No. LON/00AW/F77/2022/0014

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 64 [ADDRESS], [POSTCODE]

[NAME]

Landlord [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair rent is £8677.00 Per Quarter (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 12th April 2022

3. The amount for services is N/A Per

negligible/not applicable

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

N/A 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)/ do not apply because 1st registration/15% exemption.

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 £ 10,400 ......................................................................................................................................................... per Quarter ..................... including £ NIL ................ per ................................ for services (variable).

(b) The fair rent to be registered is not [COMPANY] by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £ ......... per ................... including £ ......................................... per ................................ for services (variable) prescribed by the Order.

[NAME] of decision 12th April 2022

MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 317.7

PREVIOUS RPI FIGURE Y 291.7

X 317.7 Minus Y 291.7 = (A) 26

(A) 26 Divided by Y 291.7 = (B) 0.0891

First [NAME] for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 0.0891 + 1.05 = 1.1391

Last registered rent* £7617 Multiplied by (C) = 1.1391 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £8677

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £8677 Per Quarter

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 [NAME] was the first since 1 February 1999) or 5% (if it is a second or subsequent [NAME] 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 [NAME] of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair rent.

Case Reference

: LON/00AW/F77/2022/0014

Property : 64 [ADDRESS] [POSTCODE]

Tenant

: Mr [APPELLANT]

Landlord : [APPELLANT] of Objection : 12th July 2021

Type of [NAME] : Section 70 Rent Act 1977

Tribunal

: [NAME] (Valuer Chair)

Date of Consideration : 12th April 2022

Date of written reasons: 31st May 2022

_______________________________________________

DECISION

The sum of £ 8677.00 per quarter will be registered as the fair rent with effect from 12th April 2022.

© CROWN COPYRIGHT 2018

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

FULL REASONS

1. Background 1.1. In an [NAME] dated 12th May 2021 the landlord applied to the Rent Officer for a registration of the fair rent to £8759.55 per quarter for the above property. The previous rent of, £7617.00 per quarter, was registered, by the Rent Officer, on 5th July 2019, effective from 11th August 2019. It would appear that the tenant has occupied the property since around 1975. No tenancy agreement was available. Extensive alterations and improvements at the property were made by the tenant, sometime after July 1985.

1.2 On 5th July 2021 the Rent Officer registered a fair rent of £8324.50 per quarter with effect from 11th August 2021.

1.3 By letter dated 12th July 2021 the tenant, objected to the rent determined by the Rent Officer and was referred to the Tribunal.

2. Inspection 2.1 No inspection took place as a result of the restrictions caused by the COVID-19 Pandemic. However, some evidence of the property was available from the rent register. The landlord in their [NAME] for an increased rent, state that the property is a 4-storey terraced property with 7 rooms, 1 kitchen, shower room and 1 bathroom there is also a private garden to the rear. The property is not centrally heated.

3. Evidence 3.1 Neither party requested a hearing. Therefore, this matter was considered on the papers.

3.2 Tenant’s Representations: These were made on the tribunal response form. There were no photographs but Mr [NAME] described the works of improvement undertaken at the property, including, central heating, rear extension, shower/wc and a double reception room. These were shown over a series of plans, prepared in June 1985 by [NAME] and approved by [RESPONDENT] in July 1985. Other evidence includes that the landlord had been informed of a defect in outside balcony wall but no action was taken. However, it had previously been clarified, in correspondence dated 8th June 2021, with the Rent Officer, that the tenant has a full repairing and insuring obligation.

3.3 Landlord’s Representations:

This comprised of the original [NAME] for rent registration form dated 12th May 2021.

4. The law 4.1 A summary of the law in respect of this case is attached to this decision.

5. Determination and Valuation 5.1 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. The Tribunal considered the market in and around the area where the property is situated from its own general knowledge, rather than any specific knowledge of market rent levels in the area. The Tribunal relied upon their expert knowledge and experience and concluded that an open market rent for a refurbished, but un-extended, property in the vicinity would be in the region of £26000 per quarter. This level of rent assumes a property in a refurbished condition to a standard generally expected for properties available to let.

5.2 The Tribunal next considered any deductions that would reflect the terms and conditions, the tenant’s own carpets, curtains and white goods. These we consider would have an adverse effect on the open market rent level. Taking these matters into account we consider that a reduction in the open market rent of £13000.00 per quarter would reflect these issues. This therefore reduces the open market rent to £13000.00 per quarter.

5.3 Next, we need to consider the issue of scarcity. We were not provided with any specific evidence on this issue. However, the issue of scarcity is considered on the basis of the number of properties available to let and also considering the demand for such properties and over a really large area. Therefore, using our general, rather than any specific knowledge and experience, we consider that in the wide geographical area being the area around Greater London, there is an imbalance between supply and demand and this impacts upon rental values.

Accordingly, we make a deduction of 20% for scarcity. The full valuation is shown below.

£/quarter Market Rent

26000.00 Less £13000.00 per quarter for

Tenant’s own carpets curtains and white goods, terms and conditions & original condition

13000.00

13000.00

Less Scarcity 20%

2600.00

Uncapped Fair rent £10400.00

6. Decision 7.1 The section 70 fair rent determined by the Tribunal is above the maximum fair rent permitted by the Rent Acts (Maximum Fair Rent) Order 1999 and accordingly that rent limit has effect. Details are provided on the back of the decision form.

Accordingly, the sum of £8677.00 per quarter will be registered as the fair rent with effect from 12th April 2022 being the date of the Tribunal’s substantive decision.

[NAME]

[NAME] (Valuer Chair)

Date: 31st May 2022

First-tier Tribunal Property Chamber (Residential Property)

The Law Relating to the Assessment of Fair Rents

INTRODUCTION

1. This is a brief summary of the law applied by the Tribunal(formerly call a Rent Assessment Committee) when reaching its decision. It is an integral part of the decision.

2. The definition of Fair Rent is contained in the Rent Act 1977 i.e.:-

70(1) In determining ......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 dwellinghouse

b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and

c) any premium, or sum in the nature of a premium……

70(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwellinghouses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwellinghouses in the locality which are available for letting on such terms

70(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]……

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]

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] 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 sub-tenant of his

3. The Tribunal also has to take into account the Human Rights Act 1998. However, when interpreting the Rent Act 1977 (primary legislation) the Tribunal will have to follow the wording of the Act if it cannot be read or

given effect in a way which is compatible with rights contained in the European Convention on Human Rights. Any party dissatisfied will then have to refer the matter to the High Court for the [NAME] of a Declaration of Incompatibility.

4. All other rights granted by the Convention such as the right to a fair and public hearing by an independent tribunal and the right to respect for a person’s private and family life are to be observed by the Tribunal

5. There have been a number of cases decided over the years most of which have been either unreported or reported only in professional journals. However in 1997 a Court of Appeal decision was reported as [NAME] v [NAME] (No. 2) [1997]4 AER 842 where the Court reviewed the various authorities and provided guidance to Tribunals to assist them in reaching decisions.

6. [ADDRESS] confirmed that a Tribunal must first find an open market rent for the property taking into account evidence before it from the parties and the Rent Officer. It will not consider other registered rents unless there are very exceptional circumstances which will be set out in the decision if appropriate.

7. A Tribunal can use such factors as comparable rents being paid for similar properties in the locality, capital values and return on expenditure as well as the experience and expertise of its members.

8. Having established an open market rent the Tribunal then has to consider the deductions and allowances referred to above

9. In all cases the Tribunal will try its best to give the parties details of its calculations. The [NAME] case (above) made it clear that a Tribunal’s decision must be supported by some workings out, but precise arithmetical calculations are not possible in all cases. There are many properties where the deductions and allowances are of such proportions that a Tribunal must simply take a view as to how much a rent would have to be reduced in order to obtain a tenant. This may not be the same as the sum total of the Statutory deductions/allowances.

10. If the Tribunal considers that the demand for similar properties in the locality is substantially greater than the supply then a deduction has to be made in accordance with Section 70(2) Rent Act 1977. This is the so-called “scarcity factor”. The Tribunal is obliged to look at scarcity in terms of people wanting regulated tenancies. However the reality is that no new regulated tenancies are created nowadays and scarcity is therefore considered using the types of tenancy currently in use.

11. The word “locality” in Section 70(2) has a different meaning to that in Section 70(1). In the case of [COMPANY] v Finegold [1975] 1 WLR 349 it was decided that the “locality” for this purpose should be a really large area. A Tribunal must define the extent of that “locality” when reaching its decision.

12. In determining scarcity, Tribunals can look at local authority and housing association waiting lists but only to the extent that people on such lists are likely to be genuine seekers of the type of private rented accommodation in question if the rent were to exclude the scarcity element.

13. The Tribunal must apply the Rent Acts (Maximum Fair Rent) Order 1999 – known as the “capping” provision – unless there is an exemption.

ANNEX - RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written [NAME] for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The [NAME] for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

3. If the [NAME] is not made within the 28 day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed despite not being within the time limit.

4. The [NAME] 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 [NAME] the [NAME] is seeking.