First-tier Tribunal Determines Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00AW/F77/2019/0143

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were Ground floor flat, 45 [ADDRESS], [POSTCODE]

Mr [NAME] Mr [RESPONDENT]

Landlord [APPELLANT]

Tenant [NAME]

1. The fair rent is 732.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 03 October 2019

3. The amount for services is

Per

negligible

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

Per

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).

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 £775 per month.

Chairman C Norman Date of decision 3 October 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 291.7

PREVIOUS RPI FIGURE Y 272.3

X 291.7 Minus Y 272.3 = (A) 19.4

(A) 19.4 Divided by Y 272.3 = (B) 0.07124

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) 1.121245

Last registered rent* 652.50 Multiplied by (C) = 731.61 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 732.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £732 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 [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.

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : FL/LOM/00AW/F77/2019/0143 Property : Ground floor flat, [ADDRESS], London [POSTCODE] Applicant : [redacted] : Ms [COUNSEL] (written representations) Respondent : [redacted] : None Type of [NAME] : Determination of a fair rent under section 70 of the Rent Act 1977 Tribunal Members :

Mr [NAME] (Chairman) [NAME] of Decision : 3 October 2019 Date of Reasons : 31 December 2019

REASONS

2

Background

1. On 28 May 2019 the landlord applied to the Rent Officer for registration of a fair rent of £869.41 per month per month for the above property.

2. The rent payable at the time of the [NAME] was £652.50 per month.

3. On 8 July 2019 the Rent Officer registered a fair rent of £726 per calendar month with effect from 6 August 2019.

4. By a letter dated 26 July 2019 the landlord objected to the rent determined by the Rent Officer and the matter was referred to the Tribunal.

5. On 12 August 2019 the Tribunal issued directions setting the matter down for determination by written representations. The landlord was directed to serve any documents or evidence upon which it sought to rely by 6 September 2019 and the tenant by 20 September 2019. The landlord was permitted to provide a brief reply by 27 September 2019. The Directions stated that the Tribunal would determine the matter on 3 October 2019 and inspect the property on the same day after 10 am.

6. The Tribunal made its determination on 3 October 2019 and the landlord subsequently requested Reasons.

Inspection

7. The Tribunal inspected the property on 3 October 2019 in the presence of the tenant. The landlord was not represented.

8. The property comprises a studio flat forming part of the ground floor comprising bedsitting room, kitchen and bathroom in a converted Victorian building. There is central heating. Windows are single glazed. Electric cables are surface mounted as is pipework. The bedsitting room was of fair size, as was the bathroom. The kitchen was relatively large and fitted, but sparsely. The white goods belong to the tenant. The tenant pointed out that the bedsitting room had been reconfigured and was smaller than previously. The fitted kitchen was installed in around 2011. The Tribunal noted wall damage behind the washing machine. The bathroom comprises bath, WC and wash hand basin and was basic.

Evidence

The Landlord’s Case

3 9. The landlord submitted that it had improved the property by self- containment works at a cost of £23,985.30 and asked for this to be taken into consideration. The landlord supplied a copy invoice from [NAME] dated 1 May 2018. The project was described as “construction work to [ADDRESS] A, Flat B …For the work provided by [COMPANY]”. The total amount payable (with reference to Interim Certificates, not supplied) was £47,970.60 of which exactly half was attributed by manuscript to the subject flat. No further description of the work either from the architects or from the contractor was supplied to the Tribunal.

10. The landlord supplied several comparables of one-bedroom flats in the vicinity in the rental range £365-£450 per week.

The tenant’s case

11. The tenant did not respond to the appeal.

The Law

12. When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, had regard to all the circumstances (other than personal circumstances) including the age, location and state of repair of the property.

13. In [COMPANY] v Chairman of the Greater Manchester etc. Tribunal (1995) 28 HLR 107 and [NAME] v [NAME] Tribunal [1999] QB 92 the Court of Appeal emphasised 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 similar terms - other than as to rent - to that of the regulated tenancy) and 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).

Valuation

14. During its inspection, the Tribunal did not identify any self- containment works that had occurred in relation to the subject flat since the previous registration in 2017. The tenant pointed out that some works had taken place, but these appeared to be minor reconfiguration works. The Tribunal noted that rent register as at 19 June 2017 described the property as being “self-contained”. Therefore, there was no reference to self-containment being new since the previous registration in 2017. This is also consistent with the Rent Officer’s notes which stated that “the landlord has done some works to alter the layout but flat was self-contained prior. Layout altered so

4 tenant has more hallway and door into bedroom from hall rather than via kitchen as before. The landlord has laid new carpets in hallway. The landlord has done some decorating within flat but of poor standard. Bathroom and kitchen have loose fitting windows.” 15. The Tribunal considered that the property was a studio and not a one- bedroom flat as there was no separate living room. The Tribunal found that had the property been in a condition usual for a modern letting at market rent, it would have commanded a rent of £1,385 per month. However, the Tribunal had to take account of the following factors: the tenant’s white goods; the absence of double glazing; the basic bathroom; surface mounted pipes and cabling and the more onerous tenant obligations as compared to an assured shorthold tenancy. The Tribunal considered that these factors required an adjustment of 30% or £415.50 per month.

16. This left an adjusted market rent for the subject property of £969.50 per month.

17. The Tribunal found that there was substantial scarcity in the locality of Greater London and therefore made a deduction of 20% (£193.90 per month) from the adjusted market rent to reflect this element.

18. It follows that the Tribunal found that the fair rent was £969.50 less £193.90 per month, or £775.60, say £775 per month.

19. The Tribunal considered whether Article 2(7) of the Rent Acts (Maximum Fair Rent) Order 1999 would apply. Had it applied, the Maximum Fair Rent cap would have been removed. Without the landlord’s works since the previous registration, the Tribunal found that at an adjustment of 35% rather than 30% would be required for condition. The adjusted market rent would have been £900.25 per month. After adjustment for scarcity at 20%, the fair rent would have been £720.20 per month. The difference would therefore have been £55 per month. This equates to 8.4% of the previous registered rent of £652.50 per month.

Accordingly, the Tribunal found that the Maximum Fair Rent Order still applied.

20. Consequently, the amount of the fair rent to be registered was limited by the Rent Acts (Maximum Fair Rent) Order 1999 to £732 per month, the calculations for which were supplied with the Notice of the Tribunal’s Decision.

21. Accordingly, the sum of £732 per month was determined as the fair rent with effect from 3 October 2019. The Tribunal found that of this the amount attributable to services was negligible.

Mr [NAME]

5 ANNEX - RIGHTS OF APPEAL

• The Tribunal is required to set out rights of appeal against its decisions by virtue of the rule 36 (2)(c) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 and these are set out below.

• If a party wishes to appeal against 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.

• 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].

• 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.

• 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.