First-tier Tribunal Determines Fair Rent for Rural Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/40UF/F77/2024/0020

Notice of the Tribunal [NAME] 1977 Schedule 11

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

[NAME] Mr [RESPONDENT] Mr [APPELLANT]

Landlord [COMPANY]

Tenant Mr [APPELLANT] [NAME]

1. The fair [NAME] is £7039.50 Per Annum (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 30 May 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 [NAME] allowance is

n/a Per n/a

not applicable

5. The [NAME] is not to be registered as variable.

6. The capping provisions of the [NAME] ([NAME]) Order 1999 apply (please see calculation overleaf).

7. Details (other than [NAME]) where different from [NAME] entry

8. For information only:

(a) The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £7980.00 per Annum prescribed by the Order.

[NAME] [NAME] of decision 30 May 2024

FR24 [NAME] FIGURE X 385.0

PREVIOUS RPI FIGURE Y 334.6

X 385.0 Minus Y 334.6 = (A) 50.4

(A) 50.4 Divided by Y 334.6 = (B) 0.15

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

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.20

Last registered [NAME]* £6650.00 Multiplied by (C) = 7980.00 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £7980.00

Variable service charge NO If YES add amount for services

[NAME] = £7980.00 Per Annum

Explanatory Note

1. The calculation of the maximum fair [NAME], in accordance with the formula contained in the Order, is set out above.

2. In summary, the formula provides for the maximum fair [NAME] to be calculated by:

(a) increasing the previous registered [NAME] 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 [NAME] determination was made.

4. The process differs where the tenancy agreement contains a variable service charge and the [NAME] is to be registered as variable under section 71(4) of the [NAME] 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 [NAME].

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CHI/40UF/F77/2024/0020 Property : [ADDRESS], [POSTCODE] Applicant (Tenant) : [NAME] : None Respondent (Landlord) : [COMPANY] : None Type of [NAME] : Section 70 of the [NAME] 1977 Tribunal members : Mr [NAME] Mr [NAME] Mr [NAME] : Paper determination Date of decision : 30th May 2024

DECISION

2 The Tribunal determines £7,039.50 per annum is to be registered as the fair [NAME] for the above property with effect from 30th May 2024 being the date of the Tribunal's decision.

The reasons for this decision are set out below.

Reasons

Background

1 On 19th January 2024 the Landlord, applied to the Valuation Office Agency ([NAME]) for registration of a fair [NAME] of £7,315 per annum for the property.

2 The [NAME] registered at the time of the [NAME] was £6,650 per annum effective from 8th April 2022.

3 On 5th March 2024 the [NAME] registered a fair [NAME] of £6,950 per annum, effective from the 8th April 2024. The [NAME] increase imposed by the [NAME] had not been “capped” or limited by the operation of the [NAME] ([NAME]) Order 1999 (the Order).

4 By an email dated 13th March 2024 from [APPELLANT], Mr [APPELLANT] daughter, the Tenant objected to the [NAME] determined by the [NAME] and the matter was referred to this Tribunal.

The law

5 When determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, must have regard to all the circumstances including the age, location and state of repair of the property. It also must disregard the effect of (a) any relevant tenant's improvements and (b) the effect of any disrepair or other defect attributable to the tenant, on the rental value of the property. Section 70(2) of the [NAME] 1977 imposes on the Tribunal an assumption that the number of persons seeking to become tenants of similar dwelling house in the locality on the terms (other than those relating to [NAME]) 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. This is commonly called ‘scarcity’.

[COMPANY] v [NAME] of the Greater Manchester Council (1995) 28 HLR 107 and [NAME] v [NAME] Tribunal [1999] QB 92 the Court of Appeal emphasised

(a) that ordinarily a fair [NAME] is the market [NAME] for the property discounted for 'scarcity' (i.e. that element, if any, of the market [NAME], 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 [NAME] - to that of the regulated tenancy) and

3

(b) that for the purposes of determining the market [NAME], 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).

The [NAME] ([NAME]) Order 1999 places a “cap” on the permissible amount of the increase of a fair [NAME] between one registration and the next, by reference to the amount of the increase in the United Kingdom Index of Retail Prices between the dates of the two registrations. Where the cap applies the [NAME] and the Tribunal is prevented from increasing the amount of the fair [NAME] that it registers beyond the maximum fair [NAME] calculated in accordance with the provisions of the Order and the mathematical formula set out in the Order. By article 2(7) of the 1999 Order the capping provisions do not apply “in respect of a dwelling-house if because of a change in the condition of the dwelling- house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the [NAME] that is determined in response to an [NAME] for registration of a new [NAME] under Part IV exceeds by at least 15% the previous [NAME] registered or confirmed.”

Facts found without Inspection

6 The parties did not request the Tribunal to inspect the property and the Tribunal were satisfied this was not required and relied on the information provided by the parties together with its expert knowledge.

7 The property is a three bedroom detached cob and stone built cottage under a tiled roof located in a small rural village which lies in a Conservation Area and within the boundaries of [ADDRESS]. Limited local amenities are available with further facilities in Minehead about 5 miles distant.

8 The accommodation comprises - Ground Floor: 2 reception rooms, kitchen, bathroom/WC. First Floor: 3 bedrooms. There is a good size rear garden with outbuildings and parking area.

9 There is a multi- fuel central heating system to radiators and timber secondary glazed windows.

Terms of the tenancy

10 The Periodic Protected Tenancy commenced on the 8th April 1991 and a copy of the agreement was provided in the bundle of documents. It is agreed that the landlord is responsible for structural repairs and external decoration; the tenant is responsible for internal decorations. The property was let unfurnished.

4

Tenant's improvements and Condition

11 The [NAME] inspected the property 15th February 2024. The kitchen and bathroom fittings are approximately 6 and 8 years old respectively. There have been ongoing damp issues to the property including via the chimney breast and possible rising damp. The Landlord confirmed some current repairs were completed the week commencing the 8th April 2024. The tenant provided carpets, curtains and white goods.

Evidence

12 The Tribunal had copies of the Valuation Office Agency correspondence including the [NAME] registers effective 8th April 2022 and 8th April 2024 together with the calculations for the most recent registration. The Tribunal issued Directions for the conduct of the case on the 12th April 2024.

13 The parties provided information in connection with the property in the form of completed [NAME], the tenancy agreement, photographic evidence and comparable evidence provided by the landlord but with no precise addresses, no date of transaction or specification.

Valuation

14 In the first instance the Tribunal determined what [NAME] 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.

15 Based upon the comparable evidence provided by the landlord together with its expert knowledge, the Tribunal consider that the subject property, if finished to a reasonable standard would be likely to attract a [NAME] let on an assured shorthold tenancy, for £11,400 per annum (£950 per month)

16 We now need to adjust that hypothetical [NAME] of £11,400 per annum to allow for the differences between the terms of this tenancy, the lack of white goods, carpets and curtains, the effects of the damp referred to as well as the tenants decorating responsibilities disregarding the effect of any tenant’s improvements and any disrepair or other defect attributable to the tenant.

17 The Tribunal has considered very carefully the parties’ submissions and the notes prepared by the [NAME].

18 Using our own expertise, we considered that deductions of 35% should be applied to take into account the terms of the tenancy and the condition of the property. This provides a deduction of £3,990 per annum from the hypothetical [NAME]. This reduces the figure to £7,410 per annum.

19 It should be noted that this figure cannot be a simple arithmetical calculation and is not based upon capital costs but is the tribunal’s estimate of the amount by which the [NAME] would need to be reduced to attract a tenant.

5

Scarcity

20 Thirdly, the tribunal then went on to consider whether a deduction falls to be made to reflect scarcity within the meaning of section 70(2) of the 1977 Act. The Tribunal followed the decision of the High Court in [COMPANY] v [NAME], in which it was held that scarcity over a wide area should be considered rather than scarcity in relation to a particular locality.

21 In the Tribunals opinion there should be a deduction of 5% for scarcity as it is considered demand outweighs supply of rented properties in the area. In fact, the Landlord confirmed in their evidence that demand outweighed three bedroom houses in the Minehead area. This provides a figure of £370.50 and therefore reduces the [NAME] to £7039.50 per annum.

Conclusion

22 The capping provisions of the [NAME] ([NAME]) Order do not apply and therefore the above figure applies. The fair [NAME] in accordance with the attached calculations is £7,039.50 per annum.

23 Therefore, this is the fair [NAME] to be registered with effect from the 30th May 2024 being the date of the Tribunals decision.

Detailed calculations for the capped maximum fair [NAME] are provided attached to the decision.

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. 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. 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].

6 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. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).