First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – [NAME] Chamber File Ref No. BIR/00CT/F77/2021/0040

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 165 [ADDRESS], [POSTCODE]

[NAME] Mr [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair rent is £612.00 Per Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 11 January 2022

3. The amount for services is N/A Per N/A

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

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

Two storey semi-detached house comprising hall, two living rooms, kitchen, 2 bedrooms (2 double) and 1 box room, WC and shower, rear garden and front driveway with metal garage

8. For information only:

The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £662.50 per month prescribed by the Order.

[NAME] of decision 11 January 2022

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 314.3

PREVIOUS RPI FIGURE Y 290.4

X 314.3 Minus Y 290.4 = (A) 23.9

(A) 23.9 Divided by Y 290.4 = (B) 0.0823

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C) N/A

If no (B) plus 1.05 = (C) 1.1323

Last registered rent* 585 Multiplied by (C) = 1.1323 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £662.50

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

MAXIMUM FAIR RENT = £662.50 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 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.

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Case Reference : BIR/00CT/F77/2021/0040

HMCTS (paper, video : PAPER audio)

[NAME] : 165 [ADDRESS] [POSTCODE]

Landlord : [COMPANY] : [APPELLANT]

Tenant : [NAME] [COUNSEL] of Application : Determination of a fair rent under section 70 of the Rent Act 1977 – Extended Reasons

Tribunal Members : [NAME] (Hons) [NAME]

D Douglas

Date of Decision : 22 February 2022

_____________________________________________________

DECISION _____________________________________________________

© CROWN COPYRIGHT 2022

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

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BACKGROUND

1. This Decision arises as a consequence of an application made by the Landlord for extended reasons arising from the Tribunal’s decision dated 11 January 2022 that the fair rent payable by the Tenant in accordance with Schedule 11 of the Rent Act 1977 shall be £612 per calendar month.

2. By way of background, on 28 July 2021, the Landlord applied to the Rent Officer for registration of a fair rent of £702 (pcm) per calendar month in respect of 165 [ADDRESS] [POSTCODE] (the “[NAME]”).

3. The rent payable at the time of the application was £585 per calendar month which was registered by the Rent Officer on 10 September 2019, effective from 24 October 2019.

4. The Rent Officer registered a rental of £615 per calendar month on 14 September 2021, effective from 24 October 2021.

5. On 14 October 2021, the Applicant objected to the rent determined by the Rent Officer and the matter was referred to the Tribunal.

6. The Tribunal issued its Directions dated 21 October 2021. It advised that the matter would be determined based on written submissions made by the parties and that the Tribunal would carry out an inspection of the [NAME] on 11 January 2022.

7. The Tribunal received a written submission and a completed Reply Form from Mr [NAME] Manager of [COMPANY]. and a completed Reply Form and additional comments from Mr [NAME].

The [NAME]

8. The [NAME] is located approximately 2 miles north of Solihull town centre in a residential area.

9. The accommodation comprises a 2-storey semi-detached house of brick and pitched roof construction. On the ground floor is a front and rear living room, fitted kitchen and on the first floor two bedrooms, a box room and bathroom (with electric shower, WC and wash hand basin). Externally there is a garden area to the front and rear, a prefabricated garage to the side and space for parking a vehicle.

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10. The [NAME] has no central heating, the only source of heating being provided by electric radiators. The Landlord has provided double-glazed windows and re- laid the driveway.

11. The Tenant has installed/ replaced the kitchen units, supplied the white goods, installed the fire place in the front room, refitted the bathroom, fitted carpets and curtains and decorated throughout.

Submissions of the Tenant

12. The Tenant submitted a statement with the Reply Form effectively disputing the proposed rent increase on the basis that the [NAME] should be valued un- modernised as it has no heating and that the kitchen, bathroom, floor coverings, curtains and decorations are all the Tenant’s. Furthermore, the Tenant considers that the Landlord’s evidence of similar properties in the area are not comparable because they vary in size and accommodation.

13. The Tenant also submits that the works undertaken to the driveway by the Landlord were not done at his request and nor were they done to an adequate standard at the outset requiring subsequent remedial works to be carried out by the contractor.

Submissions of the Landlord

14. Submissions for the Landlord were provided by [RESPONDENT], [NAME] Manager for [COMPANY].

15. The submissions briefly set out the location, accommodation and condition of the [NAME]

16. Since the last rent increase the Landlord has carried out works to the driveway at a total cost of £3,060. As regard the rest of the [NAME] the Landlord considers it is in fair condition given its type and age but accepts that it is not up to modern standards and advise they undertake works as and when reported.

17. In the opinion of the Landlord, having regard to the age and condition of the [NAME] the rent should be increased from £585 to £702 per calendar month.

18. In support, the Landlord has had regard to the following evidence:

[RESPONDENT] A 2-storey unfurnished semi-detached house comprising two reception rooms, fitted kitchen, utility, downstairs WC, three bedrooms and a fourth bedroom/ playroom in the loft and a large rear garden as well as a side garage.

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The [NAME] was to let at £950pcm through [NAME] Solihull A 2-storey unfurnished semi-detached house comprising two large reception rooms, downstairs WC, fitted kitchen, family bathroom (including bath and separate shower) and three double bedrooms. Externally there is a rear garden and to the front off-road parking

The [NAME] was to let at £975pcm through [NAME].

[ADDRESS] A 2-story unfurnished semi-detached house comprising through living room, fitted kitchen, two bathrooms, three bedrooms with gardens to the front and rear and off-road parking

The [NAME] was to let at £1,095pcm through [NAME].

19. To reflect the differences between the subject [NAME] and the evidence the Landlord made the following adjustments:

Gas Central Heating

£50pcm Loft Room

£25pcm Utility Area

£15pcm Downstairs WC

£10pcm

20. In total the above deductions amount to £100 per calendar month. In addition, the Landlord made a further adjustment of £100 per calendar month for the Tenant improvements/ obligations.

21. The Landlord also considered that no adjustment is necessary for scarcity.

THE LAW

22. The relevant provisions in respect of jurisdiction of the Tribunal and determination of a fair rent are found in Paragraph 9(1) Part 1 Schedule 11 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.

23. Rent Act 1977

24. Paragraph 9(1) Part 1 Schedule 11 (as amended)

“Outcome of determination of fair rent by appropriate tribunal

9. – (1) The appropriate tribunal shall –

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if it appears to them that the rent registered or confirmed by the rent officer is a fair rent, confirm that rent;

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

“(1) In determining, for the purposes of this 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- the age, character, locality and state of repair of the dwelling-house… if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and 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 the 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)…

(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.”

25. When determining a fair rent the Tribunal, in accordance with the Rent Act, section 70, had regard to all the circumstances including the age, location and state of repair of the [NAME]. It also disregarded the effect of (a) any relevant

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Tenant’s improvements and (b) the effect of any disrepair or other defect attributable to the Tenant or any [NAME] in [NAME] under the regulated tenancy, on the rental value of the [NAME].

26. 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 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 [NAME]).

27. In considering scarcity under section 70 (2) the Tribunal recognised that:

(a) there are considerable variations in the level of scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustment should be made; the Tribunal therefore considers the case on its merits;

(b) terms relating to rent are to be excluded. A lack of demand at a particular rent is not necessarily evidence of no scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent.

28. 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 the previous registration.

VALUATION

29. In the first instance, the Tribunal determined what rent the Applicant could reasonably expect to obtain for the [NAME] in the open market if it were let today in the condition that is considered usual for such open market lettings. It did this from its own general knowledge of market rent levels in the local area and by considering the evidence provided within the representations.

30. The Tribunal considered the evidence adduced by the Landlord and made various adjustments to reflect the differences in the accommodation and in

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particular that the [NAME] lacked central heating and the third bedroom/ box room was too small. The adjustments produced an adjusted market rent of £850pcm.

31. The Tribunal then made adjustments for the condition/ disrepair of the [NAME] in addition to the Tenant’s improvements/obligations including floor coverings & curtains, kitchen white goods, bathroom, fireplace, fence and redecoration liability totalling £185pcm.

32. The Tribunal then considered the question of scarcity. This was done by considering whether the number of persons genuinely seeking to become tenants of similar properties in the wider area of Birmingham 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.

33. The Tribunal is aware 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 price of such accommodation which creates a balance in the market. Section 70(2) specifically excludes the price 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. The Tribunal is of the view that there was scarcity and, accordingly, made a deduction of 8% amounting to £53.20pcm.

34. This leaves a fair rent for the subject [NAME] of £612pcm.

35. The Tribunal then considered whether the capping provisions of the Rent Acts (Maximum Fair Rent) Order 1999 apply and based on this calculated that the maximum fair rent permitted is £662.50 per calendar month. Accordingly, the capping provisions did not apply.

DECISION

36. The fair rent determined by the Tribunal for the purposes of Section 70 is, therefore £612 per calendar month with effect from 11 January 2022, being the date of the Tribunal’s decision.

37. In reaching its determination, the Tribunal has only had regard to the evidence and submissions of the parties, the relevant law and their own knowledge and experience as an expert Tribunal but not any special or secret knowledge.

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APPEAL

38. 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 (regulation 52 (2) of The Tribunal Procedure (First-tier Tribunal) ([NAME] Chamber) Rule 2013) stating the grounds upon which it is intended to rely in the appeal.

[NAME] (Hons) [NAME]