First-tier Tribunal Determines Fair Rent Under Rent Act 1977

OUTCOME: Allowed

1

Case Reference

: MAM/LON/00AE/F77/2023/0257

[RESPONDENT] : 19a [ADDRESS], [POSTCODE]

Tenant

: Mr [APPELLANT]

Landlord : [RESPONDENT] & [RESPONDENT] of Objection : 12 August 2023

Type of Application : Rent Act 1977

Tribunal

: [NAME] Valuer 079475

Date of Summary Reasons

: 17 April 2024

_______________________________________________

DECISION

The sum of £640.50 per month will be registered as the fair rent with effect from 17 April 2024, being the date the Tribunal made the Decision. ____________________________________

© CROWN COPYRIGHT 2023

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

2

SUMMARY REASONS

Background 1. Following an objection from the Tenant to the determination of a fair rent by the Rent Officer, the Tribunal has made a determination under the provisions of the Rent Act 1977.

Inspection 2. The Tribunal did not inspect the [RESPONDENT] but considered this case on the basis of the papers provided by the parties.

Evidence 3. There were no written submissions from the Landlord. The Tenant returned the completed Reply Form issued by the Tribunal.

Determination and Valuation 4. Having consideration of our own expert, general knowledge of rental values in the area, we consider that the open market rent for the [RESPONDENT] in a satisfactory condition would be in the region of £1,650 per month. From this level of rent we have made adjustments to reflect any tenant improvements, disrepair and obsolescence at the [RESPONDENT]. Details of the adjustments made are shown in the valuation table below.

5. The Tribunal has also made an adjustment for scarcity.

6. The full rental valuation is shown below:

3

7. The Tribunal accordingly determines a rent of £640.50 per month.

Decision 8. The uncapped fair rent initially determined by the Tribunal, for the purposes of section 70, was £858.00 per month. The capped rent for the [RESPONDENT] according to the provisions of the Rent Acts (Maximum Fair Rent) Order 1999 is calculated at £640.50 per month. The calculation of the capped rent is shown on the decision form. In this case the lower rent of £640.00 per month is to be registered as the fair rent for this [RESPONDENT].

Chairman: [NAME]: 17 April 2024

APPEAL PROVISIONS

You can only appeal this determination if the First-tier Tribunal decision was wrong on one or more points of law and you must say why the First-tier Tribunal was wrong in law. These summary reasons are provided to give the parties an indication as to how the Tribunal made its decision. If either party wishes to appeal this decision, they should first make a request for full reasons and the details of how to appeal will be set out in the full reasons. Any subsequent application for permission to appeal should be made on Form RP PTA

FR27 First-tier Tribunal – [RESPONDENT] Chamber File Ref No. MAM/LON/00AE/F77/2023/0257

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 19a [ADDRESS], [POSTCODE]

[NAME]

Landlord [RESPONDENT] & [RESPONDENT]

Tenant Mr [APPELLANT]

1. The fair rent is 640..50 Per Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 17 April 2024

3. The amount for services is Nil Per

negligible/not applicable

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

Nil Per

negligible/not applicable

5. The rent iis 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:

(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 £858.00 per month including £nil per months for services prescribed by the Order. (b) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £ ................... per .................... including £ ......................................... per ................................. for services (variable) prescribed by the Order.

[NAME] of decision 17 April 2024

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 381

PREVIOUS RPI FIGURE Y 307.4

X 381 Minus Y 307.4 = (A) 73.6

(A) 73.6 Divided by Y 307.4 = (B) .2394

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

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2894

Last registered rent* 496.50 Multiplied by (C) = 640.20 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 640.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £640.50 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.

1

FIRST-TIER TRIBUNAL [RESPONDENT] CHAMBER ([RESPONDENT]) Case reference : MAM/LON/00AE/F77/2023/0257 [RESPONDENT] : 19a [ADDRESS], [POSTCODE]

Applicant : [redacted] : None Respondent: [redacted] : None Date of application : 12 August 2023 Type of application : Determination of the registered rent under Section 70 Rent Act 1977 Tribunal members :

Mr [NAME] B [NAME] [NAME] Registered Valuer 0079475

Venue : 10 [ADDRESS] [POSTCODE] Date of decision : 17 April 2024

DECISION

The sum of £640.50 per month will be registered as the fair rent with effect from 17 April 2024, being the date, the Tribunal made the Decision. Background 1 An application was made to the Rent Office for the registration of a fair rent by the Landlord. The registered rent was challenged by the Tenant to this application and the Rent Officer has requested the matter be referred to the Tribunal for determination. 2 Directions were issued to both parties following receipt of the objection. 3 The Tribunal informed the parties of their rights to request an oral hearing. 4 A hearing was not held to discuss the application and written submissions on this matter. No hearing was requested by the parties. 5 An inspection of the [RESPONDENT] was not requested or carried out. 6 Prior to the hearing, the parties were invited to submit relevant information on market rents in the area for similar properties. They were also invited to offer any details of [RESPONDENT] dilapidation, repairs or improvements made to the [RESPONDENT] by either the Landlord or Tenant. 7 The parties were invited to provide a full description of the [RESPONDENT] on a reply form provided to them by the Tribunal. The Tenant provided a detailed description of the [RESPONDENT]. [RESPONDENT] 8 The [RESPONDENT] is a flat. The accommodation comprises: First floor: One bedroom, lounge, Kitchen and bathroom/WC Reported defects and obsolescence 9 The Tenant reported a number of specific defects to the [RESPONDENT] in their submissions. 10 The condition of the [RESPONDENT] is a material consideration when carrying out a fair rent determination. The Tribunal has also had regard for any dilapidation and obsolescence at the [RESPONDENT].

Market rental evidence 11 Both parties provided no detail of comparable market rents of similar [RESPONDENT] in the locality. The Tribunal has had to rely upon local knowledge and experience of the members.

The law 12 When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, ('the Act'), it had regard to all the circumstances including the age, location and state of repair of the [RESPONDENT]. It also disregarded the effect of: (a) any relevant Tenant's improvements; and (b) the effect of any disrepair or other defect attributable to the Tenant or any predecessor in title under the regulated tenancy, on the rental value of the [RESPONDENT]. 13 [COMPANY] –v– Chairman of the [NAME] [1995] and [NAME] –v– London Rent Assessment Committee [1999] the Court of Appeal emphasised that ordinarily a fair rent is the Market Rent for the [RESPONDENT] discounted for 'scarcity'. This is 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. 14 The Market Rents charged for assured tenancy lettings often form appropriate comparable transactions from which a scarcity deduction is made. 15 These Market Rents are also adjusted where appropriate to reflect any relevant differences between those of the subject and comparable rental properties. 16 The Upper Tribunal in Trustees of the Israel Moss Children's Trust –v– Bandy [2015] explained the duty of the First-tier Tribunal to present comprehensive and cogent fair rent findings. These directions are applied in this Decision. 17 The Rent Acts (Maximum Fair Rent) Order 1999 applies to all dwelling houses where an application for the registration of a new rent is made after the date of the Order and there is an existing registered rent under part IV of the Act. This article restricts any rental increase to 5% above the previously registered rent. The article is not applied should the Tribunal assess that as a consequence of repairs or improvements carried out by the Landlord the rent that is determined in response to an application for a new rent registration exceeds by at least 15% the previous rent registered. 18 The Upper Tribunal in [COMPANY] – v – [NAME] 2024 addressed the reliance upon the experience and knowledge of a tribunal following an application to the Tribunal. Judge Martin Rodger KC, Deputy Chamber President said: 'The FTT is a specialist tribunal whose members are appointed because of their experience and professional backgrounds in

residential [RESPONDENT] matters. Whilst sitting on the FTT its members will acquire further relevant experience and familiarity with general levels of value or costs in a particular area. This is one of the key strengths of the Tribunal system and it particularly important in dealing with the numerous cases of modest value in which a decision has to be made on very limited information. Rent assessments are typical of those types of cases. Although this decision was concerned with management charges it also specifically addressed the role of the Expert Tribunal when little or no evidence is provided by the parties. The Deputy Chamber President said: 'It was entitled to rely on its general experience of management charges; that is what it was appointed to do and, in the absence of assistance from the parties, there was no other source on which it could rely.' In this matter comparable rental information or scarcity data was not proffered by either party and the Tribunal had to rely upon their general knowledge and expertise. They did not rely upon specific rental transactions or [RESPONDENT] scarcity data sets. This approach accords with the Upper Tribunal guidance on the appropriate role of the Tribunal in such situations.

Valuation 19 In the first instance, the Tribunal determined what rent the Landlord could reasonably be expected to obtain for the [RESPONDENT] in the open market, if it were let today in the condition that is considered usual for such an open market letting. It did this by having regard to their general knowledge of market levels in this area of Greater London.

20 This hypothetical rent is adjusted as necessary to allow for the differences between the terms and conditions considered usual for such a letting and the condition of the actual [RESPONDENT] at the date of the inspection. Any rental benefit derived from Tenant’s improvements is disregarded. It is also necessary to disregard the effect of any disrepair or other defects attributable to the Tenant or any predecessor in title. 21 The provisions of section 70(2) of the Rent Act 1977 in effect require the elimination of what is called 'scarcity'. The required assumption is of a neutral market. Where a Tribunal considers that there is, in fact, substantial scarcity, it must make an adjustment to the rent to reflect that circumstance. In the present case neither party provided evidence with regard to scarcity. 22 The Tribunal then considered the decision of the High Court in [COMPANY] –v– London Rent Assessment Committee [2002] EWHC 835 (Admin), which required it to consider scarcity over a wide area rather than limit it to a particular locality. North London is now considered to be an appropriate area to use as a yardstick for measuring scarcity and it is clear that there is a substantial measure of scarcity in North London.

23 Assessing a scarcity percentage cannot be a precise arithmetical calculation. It can only be a judgement based on the years' of experience of Members of the Tribunal. The Tribunal therefore relied on its own combined knowledge and experience of supply and demand for similar properties on the terms of the regulated tenancy (other than as to rent) and, in particular, to unfulfilled demand for such accommodation. In doing so, the Tribunal found there was substantial scarcity in the locality of North London and, therefore, made a further deduction of 20%. The valuation of a fair rent is an exercise that relies upon relevant Market Rent comparable transactions and [RESPONDENT] specific adjustments. The fair rents charged for other similar properties in the locality do not form relevant transaction evidence. 24 The Tribunal has had regard for any comparable transaction rental evidence presented by the parties. They have relied upon their knowledge and experience of Market Rents in the locality to determine the appropriate Market Rent for this [RESPONDENT] to be used in the fair rent calculation. 25 Table 1 below provides details of the fair rent calculation:

Decision 26 The Rent Acts (Maximum Fair Rent) Order will apply to this determination. The uncapped fair rent initially determined by the Tribunal for the purposes of Section 70 is £858 per month by virtue of the Rents Act (Maximum Fair Order) 1999 the maximum fair rent that can be registered for this [RESPONDENT] is £640.50 per month.

27 Details of the maximum fair rent calculations were provided with the original Notice of Decision. The statutory formula applied to the previously registered rent is at Appendix A. 28 Accordingly, the sum that will be registered as a fair rent with effect from 17 April 2024 is £650.50 per month.

Name: [NAME]: 14 June 2024

Valuer Chairman

7 Appendix A The Rents Act (Maximum Fair Rent) Order 1999 2 (1) Where this article applies, the amount to be registered as the rent of the dwelling-house under Part IV shall not, subject to paragraph (5), exceed the maximum fair rent calculated in accordance with the formula set out in paragraph (2).

(2) The formula is:

MFR = LR [1 + (x-y) +P]

y

where:

• 'MFR' is the maximum fair rent; • 'LR' is the amount of the existing registered rent to the dwelling-house; • 'x' is the index published in the month immediately preceding the month in which the determination of a fair rent is made under Part IV; • 'y' is the published index for the month in which the rent was last registered under Part IV before the date of the application for registration of a new rent; and • 'P' is 0.075 for the first application for rent registration of the dwelling- house after this Order comes into force and 0.05 for every subsequent application.

(3) Where the maximum fair rent calculated in accordance with paragraph (2) is not an integral multiple of 50 pence the maximum fair rent shall be that amount rounded up to the nearest integral multiple of 50 pence.

(4) If (x-y) + P is less than zero the maximum fair rent shall be the y existing registered rent.

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([RESPONDENT] Chamber) Rules 2013, the Tribunal is required to notify the parties about any right of appeal they may have. You can only appeal this determination if the First-tier Tribunal decision was wrong on one or more points of law, and you must say why the First-tier Tribunal was wrong in law. Any subsequent application for permission to appeal should be made on Form RP PTA. If a party wishes to appeal this Decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28-days after the Tribunal sends written reasons for the Decision to the person making the application. If the application is not made within the 28-day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application for permission to appeal must identify the Decision of the Tribunal to which it relates (ie, give the date, the [RESPONDENT] and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).