First-tier Tribunal Determines Fair Rent for Protected Tenancy

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/44UF/F77/2019/0001

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 27 [ADDRESS], [POSTCODE]

[NAME] Mrs [APPELLANT]

Landlord [APPELLANT]

Tenant Mr & Mrs [APPELLANT] [NAME]

1. The fair rent is £115.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 11 February 2019

3. The amount for services is not applicable N/A Per N/A

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

End terraced house

8. For information only:

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 £158.00 per week.

[NAME] of decision 11 February 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 285.6

PREVIOUS RPI FIGURE Y 265.5

X 285.6 Minus Y 265.5 = (A) 20.1

(A) 20.1 Divided by Y 265.5 = (B) 0.0757

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.1257

Last registered rent* £102.00 Multiplied by (C) = £114.82 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £115.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £115.00 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/44UF/F77/2019/0001

Property

: 27 Bridge St., Kenilworth, Warwickshire, [POSTCODE]

Applicant: [redacted]

: Mrs [COUNSEL].[NAME], Director of [APPELLANT]

Respondents

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

the s.70 Rent Act 1977

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

Mrs [NAME]. [NAME] and Venue of : 11 February 2019 at the Property Hearing

Date of Decision : 11 February 2019

____________________________________________________________

DECISION

© CROWN COPYRIGHT 2019

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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1 The Fair Rent is determined at £115.00 (One Hundred and Fifteen Pounds) per week from 11 February 2019.

REASONS

Introduction

2 [NAME] [NAME] hold a protected tenancy of [ADDRESS], Kenilworth, Warks.,

[POSTCODE] that they have leased since 1973. The rent had previously been registered by the Rent Officer at £102.00 per week on 25 January 2017 to take effect from the same date. On 6 November 2018 the landlord applied for an increase to £136.60 per week and on 23 November 2018 the Rent Officer registered a new rent of £108.00 per week to take effect on 25 January 2019.

3 The landlord appealed against the Decision by email to the Valuation Office Agency on 20 December 2018 and the matter was referred to the First-tier Tribunal for Determination. The Tribunal inspected the property and reached its decision on 11 February 2019 and the Decision papers were sent to the parties with a copy of the Maximum Fair Rent calculation. On 18 February 2019 the Tribunal received an email from the landlord requesting reasons for the Decision which are the subject of this document.

The Law

4 [NAME] are protected tenants as 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 with the tenant responsible for internal decoration 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 would be 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 tenants or their predecessor in title.

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Facts Found

9 The Tribunal inspected the property on 11 February 2019. It is located in a popular residential area of Kenilworth opposite Abbey Fields, within half a mile of the town centre.

The property comprises a two bedroom 1960s house built at right angles to houses on the road frontage and is effectively a rear wing, attached to the main block and could therefore be described as end-terraced.

It is in good external condition although some of the roof tiles are starting to shale and need replacement. The internal condition is excellent.

10 The accommodation comprises a hall, living room and kitchen on the ground floor with two bedrooms and a bathroom on the first floor. It has central heating and double glazing. There is a small garden with a lawn and path and a detached single garage included in the tenancy.

11 [NAME] [NAME] have carried out extensive improvements including refitting the kitchen and bathroom, fitting built-in wardrobes, replacing flooring, fitting a new gas fire in the lounge, building a shed and fitting an electrically powered garage door.

Submissions

12 The landlord requested a Hearing which was arranged for 12.00 pm on the day of inspection in Coventry Magistrates Court but as the tenants would have been unable to attend, and by agreement with the parties, was heard in the living room of the property at which each party was invited to present their case.

13 Mrs [RESPONDENT] for the landlord submitted a written submission and also presented her case orally. The submission referred to several properties to let in Kenilworth and Coventry including terraced and semi-detached houses, flats and maisonettes, all with two bedrooms where the weekly asking rents ranged from £150 to £213. Photographs of the comparables were attached.

At the Hearing, Mrs [NAME] submitted:

1 that in her view a Fair Rent should help 'tenants in need';

2 that she could not afford to lose £40 per week;

3 she accepted that the property was let unfurnished with no white goods included;

4 she was concerned about the Rent Officer's base figure used in his assessment;

5 she submitted that the tenants' improvements were of no benefit to the landlord;

6 she did not consider scarcity relevant;

7 the house needed 'a new roof' which required a substantial rent increase to cover

the cost and

8 she said a fair rent had to be fair to both parties.

In her submission, Mrs [NAME] said that having considered the asking rents of other houses to let, in her opinion the market rent of the subject house would be £190.00 per week without the garage or £207.00 per week with the garage included.

14 [NAME] [NAME] did not make any submissions but drew attention to the improvements they had carried out, preferring to leave rent assessment to the Tribunal.

15 Both parties were at pains to say that there was no animosity between them and they were on good terms, the dispute related purely to the rent.

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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.

17 Based on the evidence supplied by Mrs [NAME] and the Tribunal's own general knowledge and experience, the Tribunal assessed the market rent of the property comprising the house and garage, in good condition, at £200.00 per week.

18 However, it had not been let in that condition. The Tribunal deducted for the value of the tenants' improvements at £5.00 per week for the kitchen refurbishment, £4.00 per week for the bathroom refurbishment, £10.00 per week for the lack of carpets or curtains included in the tenancy and £5.00 per week for the lack of white goods provided by the landlord. This left a net rent of £176.00 per week.

19 [NAME] considered the question of scarcity in s.70(2) of the Rent Act 1977. At the hearing, Mrs [NAME] said there was good demand for property in the area which the Tribunal agreed, and applying its own general knowledge of the market the Tribunal found that the number of potential tenants looking for accommodation of this type in the area would have been significantly higher than the number of units available to let. The Tribunal found there was excess demand and deducted £18.00 per week from the market rent to arrive at the statutory basis.

20 Deducting £18.00 for scarcity left a net rent of £158.00 per week.

21 However, The Rent Acts (Maximum Fair Rent) Order 1999 caps the rate determined by the Tribunal at the level of the previous Registered Rent plus inflation since the date of last registration in January 2017 plus 5%, details of which were provided on the calculation sheet provided with the Decision. Applying this formula, the rent was capped at £115.00 per week at the date of the Decision.

22 There were no services to take into account.

23 Accordingly, the Tribunal determined the Fair Rent at £115.00 (One Hundred and Fifteen Pounds) per week with effect from 11 February 2019.

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