First-tier Tribunal Determines Fair Rent Using Maximum Fair Rent Order Method

OUTCOME: Allowed

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 61A [ADDRESS], [POSTCODE]

Ms [NAME]-Farey

Landlord [RESPONDENT]

Tenant Mr A [APPELLANT]

1. The fair [NAME] is £142.50 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 16 December 2020

3. The amount for services is n/a Per

negligible/not applicable

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

n/a Per

negligible/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

None

8. For information only:

(a) The fair [NAME] to be registered is the maximum fair [NAME] as prescribed by the [NAME] ([NAME]) Order 1999. The [NAME] that would otherwise have been registered was £250 per week.

Chairman Judge Hamilton- Farey Date of decision 16 December 2020

First-tier Tribunal – Property Chamber File Ref No. LON/00BE/F77/2020/0053

[NAME] FIGURE X 294.3

PREVIOUS RPI FIGURE Y 276.0

X 294.3 Minus Y 276 = (A) 18.3

(A) 18.3 Divided by Y 276 = (B) 0.0663

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) 1.1163

Last registered [NAME]* 127.50 Multiplied by (C) = £142.32 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £142.50

Variable service charge NO If YES add amount for services

[NAME] = £142.50 Per week

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 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 [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 application of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair [NAME].

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

:

LON/00BE/F77/2020/0053 Type of Determination : P (Paper) Remote.

Property

:

61a [ADDRESS] [POSTCODE]

Applicant: [redacted]

: In person.

Respondent: [redacted]

: In person.

Type of Application

:

[NAME] 1977 (“the Act”) Determination of the fair [NAME] of a property following an objection to the [NAME] registered by the [NAME]

Tribunal Member(s)

: Ms. A. Hamilton-Farey

Date of Decision

: 16 December 2020 Reasons 27 January 2021.

REASONS FOR THE TRIBUNAL’S DECISION

Covid-19 pandemic: description of hearing: This has been a remote determination on the papers which has not been objected to by the parties. The form of remote hearing was P: PAPERRMOTE. A face-to-face hearing was not held because it was not practicable, and all issues could be determined on paper. Background:

1. By an RR1 dated 29 November 2019 the landlord made an application to the Valuation Office Agency (the [NAME] “RO”) to re-register the [NAME] of the property at £117.24 per week. The fair [NAME] registered prior to this application was £143.00 per week. This [NAME] had been set by a previous tribunal and was effective from 10 January 2018. It appears from the documents supplied that the landlord is not charging the tenant the registered [NAME], and the [NAME] actually charged by the landlord at the time of the application for re- registration was £110.51.

2. The tribunal is unable to take into consideration any that the landlord may have applied to the registered [NAME], and for the purposes of the [NAME] calculation, the tribunal must start with the actual registered [NAME].

3. On 17 January 2020, the [NAME] registered the [NAME] at £158.99 per week, with effect from that date.

4. The tenant objected and the matter was referred to the First Tier Tribunal, Property Chamber.

5. The Tribunal gave directions that required the parties to supply copies of any evidence on in which they wished to rely in support of a [NAME] increase. With the exception of the original statement by the tenant to say that the increase was too high, no other evidence was supplied. The landlord provided copies of Right Move details of two properties, one with a [NAME] of £1,450 per month and the other £1800 per month. These are considered below.

6. In addition, the tribunal is unable to take into consideration the circumstances of the landlord or tenant and must apply the legislation.

Inspection

7. In accordance with the directions already given, the tribunal did not inspect the property due to the COVID-19 restrictions, but was able to use Google Earth for location purposes, and the applicants photographs and submissions.

8. The property is a three-bedroom, one reception room, kitchen/diner, bathroom/w.c. and shared garden flat situated on the first floor. It has full gas central heating. It is accepted by the parties that no modernisation has been undertaken. Under the terms of the tenancy, the landlord is liable for the external repairs and redecoration, and the tenant liable for internal

decorations. The landlord is also responsible for the maintenance of the apparatus providing heating and hot water, all in accordance with S.11 of the Landlord and Tenant Act 1985.

The tenant’s submission:

9. The tribunal has taken into consideration the tenant’s statement to the [NAME]. It does not appear that any improvements have been carried out by the tenant, that should be disregarded by the tribunal. Similarly, no improvements have been carried out by the landlord that would negate the [NAME].

The landlord’s submission:

10. As noted above, the landlord provided RightMove evidence of two properties they consider to be comparable. These were both converted flats, similar to the subject, but modernised and in the condition/with the usual amenities that one would find in an open market letting,

The law

11. When determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, must have regard to all the circumstances, except the personal circumstances of the tenant, but including the age, location and state of repair of the property. It must also disregard 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 property.

12. Case law informs the Tribunal -

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

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).

Consideration and Valuation

13. In the first instance the tribunal must determine what [NAME] the Landlord could reasonably expect 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, i.e., with carpets, curtains, white goods and in a good decorative condition, and with the tenant having little repairing obligation internally.

14. The Tribunal did this by having regard to the data provided by the [NAME] officer, and the comparable [NAME] details supplied by the landlord. From this the tribunal assessed that the market [NAME] for the property in good condition on the usual AST would be in the region of £375.00 per week.

15. However, the [NAME] referred to in the above paragraph is on the basis of a modern open market letting where the tenant has no liability to carry out repairs or decorations, that there are up to date bathroom and kitchen fittings, the landlord supplies white goods, carpets and curtains and there are no wants of repair. In my view a deduction from the market [NAME] should be made to reflect the differences of the terms of tenancy, and the hypothetical market letting.

16. The tribunal adjusts the market [NAME] by 15%, to reflect the different terms of the tenancy, and the lack of modernisation, white goods, flooring etc. The tribunal arrived at an adjusted market [NAME] of £318.75 per week.

17. The tribunal then considered the question of scarcity as referred to in paragraph 9a above and determined that there remained significant levels of demand over supply in this area and therefore make a deduction from the adjusted market [NAME] of 20% to reflect this scarcity, leaving a balance in the region of £255.00.

18. The tribunal therefore determines that the uncapped [NAME] for this property would be in the region of £250 - £255 per week.

19. This would be the [NAME] that, in the tribunal’ opinion would be payable by the tenant, if the capping mechanism either did not apply, or produced a higher [NAME].

20. The capping mechanism of the [NAME] must be applied to the fair [NAME] that existed prior to the registration in December 2020 (£143.00 per week). The mechanism produced a [NAME] of £142.50 per week, and a copy of the calculation was appended to the decision.

21. Under the MFR Order, the tenant is liable for the lower of either the adjusted market [NAME], in this case £250.00 per week, or the capped [NAME] under the MFR (£142.50), in this instance the [NAME] is lower than the adjusted market [NAME], and accordingly the [NAME] was registered at £142.50 per week with effect from 16 December 2020.

22. It may well be that the landlord will not charge the full registered [NAME], as it has not done so in the past, however, this is not a matter for the tribunal, and is between the landlord and tenant.

Name: Ms. [APPELLANT]. [APPELLANT] 26 January 2021.

RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

3. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking