First-tier Tribunal Determines Fair Rent for Protected Tenancy

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/OOCN/F77/2024/0020

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 2B [ADDRESS] [POSTCODE]

Mr [RESPONDENT] Mr [APPELLANT] [NAME]

Landlord [APPELLANT]

Tenant Mr [RESPONDENT]

1. The fair rent is £163.50 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 30 July 2024

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

not applicable

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

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

None

8. For information only:

The fair rent to be registered is limited by the Rent Acts (Maximum Fair Rent) Order 1999. It would otherwise have been registered at £212.50 per week.

Chairman [NAME] B.Sc (Est.Man.) FRICS Date of decision 30 July 2024

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 386.4

PREVIOUS RPI FIGURE Y 320.2

X 386.4 Minus Y 320.2 = (A) 66.2 (A) 66.2 Divided by Y 320.2 = (B) 0.20674

First application for re-registration since 1 February 1999 YES/NO

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

If no (B) plus 1.05 = (C) 1.25674

Last registered rent* £130.00 Multiplied by (C) = £163.37 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £163.50

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

MAXIMUM FAIR RENT = £163.50 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.

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Case Reference : BIR/OOCN/F77/2024/0020

Property

: 2B [ADDRESS], [POSTCODE]

Applicant: [redacted]

: [APPELLANT]

Respondent: [redacted] : Appeal against the Rent Officer's Decision of Fair Rent under

the s.70 Rent Act 1977

Tribunal Members : [NAME].(Est.Man.) FRICS

M. Alexander B.Sc.(Hons.) MRICS

D. [NAME] and Venue of : Not Applicable, paper determination Hearing

Date of Decision : 30 July 2024

____________________________________________________________

DECISION

© CROWN COPYRIGHT 2024

FIRST - TIER TRIBUNAL PROPERTY CHAMBER ([APPELLANT])

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1 The Fair Rent is determined at £163.50 (One Hundred and Sixty Three Pounds Fifty Pence) per week from 30 July 2024.

REASONS

Introduction

2 Mr [RESPONDENT] holds a protected tenancy of 2B [ADDRESS], [POSTCODE]. The rent had previously been registered at £130.00 p.w. on 24 February 2022. On 23 January 2024 the landlord applied for a rent increase to £162.50 p.w. and on 1 March 2024 the Rent Officer registered a new rent of £140.00 p.w. to take effect on 17 April 2024.

3 The landlord appealed against the Decision on 5 April 2024 and the matter was referred to the First-tier Tribunal for Determination. The Tribunal reached its decision on 30 July 2024 and the Decision papers were sent to the parties. On 14 August 2024 the Tribunal received a request for Reasons from the tenant.

The Law

4 Mr [RESPONDENT] is a protected tenant which is acknowledged by the landlord. We have not been provided with a copy of the tenancy agreement but understand the property had been let unfurnished with the landlord responsible for repairs to the structure and exterior and the tenant responsible for internal decorations in accordance with s.11 of the Landlord & Tenant Act 1985.

5 Accordingly, the rent falls to be determined in accordance with s.70 of the Rent Act 1977.

6 S.70(1) states that in determining a fair rent, regard has to be had to all the circumstances of the tenancy (other than personal circumstances) including the age, character, locality and state of repair of the house, whether the property is let furnished and whether a premium had been paid or would be required to renew, continue or assign the tenancy.

7 s.70(2) adds a further qualification that it is assumed that the number of parties seeking to become tenants of similar houses in the locality on the terms of the tenancy (other than the rent) is not substantially greater than the number of houses available to let on such terms. This is usually referred to as 'scarcity' and the Court of Appeal held in [COMPANY]. v Chairman of the Greater Manchester Rent Assessment Committee (1995) 28 HLR 107 and [NAME] v [NAME] (1999) QB 92 that under normal circumstances the fair rent is the market rent discounted for scarcity. [ADDRESS] also held that assured tenancy rents could be considered comparable to market rents.

8 s.70(3) requires the valuation to disregard any disrepair due to a tenant's failure to comply with the terms of the tenancy and any improvements carried out by either the tenant or their predecessor in title.

Facts Found

9 The Tribunal did not inspect the property but relied on the parties' submissions where it was described as a semi-detached house with hall, lounge, dining room, kitchen, three bedrooms and bathroom. It had a garage which was a tenant's improvement to be disregarded from the valuation. It is located in the popular [APPELLANT] suburb of Harborne, about three miles west of Birmingham city centre.

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10 The house is of two storey brick and tile construction. It has central heating installed by the landlord although the tenant advises that it is not full central heating.

11 The tenant has built a garage.

Submissions

12 Neither party requested a Hearing.

13 The landlord's agents sent a written submission. The submission described the property and provided details of four comparable properties in the area as a basis of valuation:

Address

Agreed Rent £ pw

[ADDRESS], Harborne 3 bedroom, mid-terraced, modern kitchen and bathroom 368.00 with central heating and white goods. Unfurnished.

West Pathway, Harborne 3 bedroom, mid-terraced, modern kitchen and bathroom 358.00 with central heating and white goods. Unfurnished.

[ADDRESS], Harborne 3 bedroom, mid-terraced, modern kitchen and bathroom 335.00 (asking rent) with central heating and white goods. Unfurnished.

[ADDRESS], Harborne 3 bedroom, mid-terraced, modern kitchen and bathroom 346.00 (asking rent) with central heating and white goods. Unfurnished.

In the Landlord's opinion the open market rental value would be £335.00 p.w. from which they deducted £60.00 p.w. for facilities enjoyed by the comparable properties that were not provided by the landlord for the subject property. They comprised:

modernised bathroom

£15.00 per week

double glazing

£10.00 per week

modernised kitchen

£15.00 per week

carpets and curtains

£10.00 per week

white goods

£10.00 per week

total for lack of amenity

£60.00 per week

They requested a new rent of £162.50 p.w. which was still £172.50 p.w. less than comparable rents after allowing for the lack of amenity.

14 The landlords considered there was an adequate supply of property to let in the area and that there should be no discount for 'scarcity' under the terms of section 70(2) of the Rent Act 1977.

15 The tenant, Mr [APPELLANT], advised that he had built the garage. He said there was a problem with the windows that were rotten and draughty and there was mould on internal walls. He said the slate roof needed attention and the gas fire in the front room had been condemned.

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Decision

16 To assess the Fair Rent the Tribunal need to assess the rental value of the house in good condition as a starting point, assuming it had been well maintained and modernised with central heating, reasonable kitchen units and a bathroom suite in fair condition, fully

equipped with carpets and curtains and ready to let in the open market. The Tribunal considered the submission and found the full rental value in good condition, excluding any value attributable to the garage, to be £320.00 p.w.

17 However, the property had not been let in that condition. The Tribunal accepted the landlord's deductions for lack of amenity in full at £60.00 p.w., but deducted a further £10.00 p.w. for the generally poor standard of maintenance.

18 £320 .00 full market value less £70.00 for lack of amenity leaves £250.00 p.w.

19 The Tribunal considered the question of scarcity in s.70(2) of the Rent Act 1977 and found the number of potential tenants looking for accommodation of this type in the area would be greater than the number of units available to let. We found that the excess demand represented 15% of the market rent and deducted this from the full market rent to arrive at the statutory basis for a 'fair rent'.

20 Deducting 15% for scarcity, £37.50, leaves a net rent of £212.50 p.w.

21 The Maximum Fair Rent Order limits the amount that can be charged by increasing the previous registered rent by inflation, measured by increases in the retail price index since the last registration and adding 5%, which limits the maximum new rent to £163.50 per week.

22 There is no service charge included in the rent.

23 Accordingly, the Tribunal determines the Fair Rent at £163.50 per week with effect from the date of its decision, 30 July 2024.

[NAME].(Est.Man.) FRICS Chairman