First-tier Tribunal sets fair rent for property

OUTCOME: Allowed

FR27 First-tier Tribunal – Property Chamber File Ref No. LON/00AN/F77/2025/0076

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 12D [ADDRESS] [POSTCODE]

[NAME] Mr [APPELLANT] [NAME]

Landlord [NAME]

Tenant Mr [APPELLANT]

1. The fair rent is £163.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 2 May 2025

3. The amount for services is

Per

None

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

Per

None

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

The property is in an unmodernised condition.

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 £226.80 per week (b)

[NAME] [NAME] of decision 2 May 2025

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 395.3

PREVIOUS RPI FIGURE Y 268.40

X 395.3 Minus Y 268.40 = (A) 126.9

(A) 126.9 Divided by Y 268.40 = (B) 0.47

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

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

If no (B) plus 1.05 = (C) 1.52

Last registered rent* 107.00 Multiplied by (C) = 162.64 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 163.00

Variable service charge No If YES add amount for services

MAXIMUM FAIR RENT = £163.00 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.

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AN/F77/2025/0076 Property : 12D [ADDRESS] [POSTCODE] Applicants (Tenant ) : Mr [COUNSEL] : None Respondent (Landlord) : [NAME] : None Type of application : Section 70 of the Rent ACT 1977 Tribunal members :

Mr [NAME] Mr [NAME] [NAME] of Reasons : 2 May 2025

Reasons

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The Tribunal determines £163 per week is to be registered as the fair rent for the above property with effect from 2 May 2025 being the date of the Tribunal's decision.

Reasons

Background

1 On 20 December 2024 the Landlord, applied to the Valuation Office Agency (Rent Officer) for registration of a fair rent of £173.43 per week.

2 The rent payable at the time of the application was £107 per week effective from 1 February 2017.

3 On 16 December 2024 the Rent Officer registered a fair rent of £161.50 per week effective from the 16 December 2024. The rent increase imposed by the Rent Officer had been “capped” or limited by the operation of the Rent Acts (Maximum Fair Rent) Order 1999 (the Order) and this matter is explained later in this decision.

4 By a letter dated 20 December 2024 from Mr [APPELLANT], the Tenant objected to the rent determined by the Rent Officer and the matter was referred to this Tribunal.

The law

5 When determining a fair rent the Tribunal, in accordance with the Rent Act 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 Rent Act 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 rent) 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 rent is the market rent for the property discounted for 'scarcity' (i.e. 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 - other than as to rent - to that of the regulated tenancy) and

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(b) that for the purposes of determining the market rent, 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 Rent Acts (Maximum Fair Rent) Order 1999 places a “cap” on the permissible amount of the increase of a fair rent 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 Rent Officer and the Tribunal is prevented from increasing the amount of the fair rent that it registers beyond the maximum fair rent 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 rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed.” Hearing and Inspection 6 It had been agreed with the parties in advance that there would be a hearing held at 10 [ADDRESS] [POSTCODE], to be followed by an inspection of the premises later in the day. Following this arrangement, the Tribunal received an email from the Tenant on 2 May 2025 confirming that he would be unable to attend a hearing due to ill health but wished for the inspection to go ahead.

Facts found with Inspection.

8 The Tribunal inspected the property on 2 May 2025 in the presence of the Tenant.

9 The property is a converted second floor flat which forms part of a Victorian five storey (including lower ground floor) mid terrace building with stucco elevations with a pitched roof. At the time of the inspection main walls of the building were covered with scaffold in the anticipation of major works to the fabric of the building. In addition, the communal areas were in the process of redecoration.

10 The property is located in an established road close to local amenities and West Kensington underground station.

11 The accommodation comprises: living room, kitchen, bedroom, bathroom/WC.

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Terms of the tenancy

12 The Tribunal issued Directions on 6 March 2025 which set out a timescale for the proceedings. The Landlord’s Application for Registration of Fair Rent states the most recent tenancy agreement commenced on 14 August 2023 following an original agreement dated 9 February 1987. It is assumed by normal convention, the agreement made the landlord responsible for structural repairs and external decorations. The tenant is responsible for internal decorations. It is assumed the property was let unfurnished.

Condition of the Property

13 The property is in need of general refurbishment and modernisation. The windows are single glazed, poorly fitting and require redecoration. The bathroom and kitchen fittings are dated. There is gas central heating.

Written Evidence

14 The Tribunal had copies of the Valuation Office Agency correspondence including the previous rent registration together with the calculations for the most recent registration.

15 The tenant provided a completed Reply Form with submissions in connection with the condition of the property.

Valuation

16 In the first instance the Tribunal determined what rent 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.

17 Based upon the evidence provided by the Landlord together with its expert knowledge of the West Kensington area, the Tribunal considers that the subject property, if finished to a reasonable standard would be likely to attract a rent let on an assured shorthold tenancy, of £405 per week. (£11,750 per month)

18 Next, the Tribunal needs to adjust that hypothetical rent of £405 per week to allow for the differences between the terms of this tenancy, the unmodernised condition, dated sanitary fittings and kitchen, defective windows, the lack of white goods, carpets and curtains, and the tenant’s decorating responsibilities (disregarding the effect of tenant’s improvements and any disrepair or other defect attributable to the tenant).

5 The Tribunal has considered very carefully the information prepared by the parties.

19 Using its own expertise, the Tribunal considers that a deduction of 30% should be applied in order to take into account the terms of the tenancy, the condition of the property and the lack of carpets, curtains and white goods. This provides a deduction of £121.50 per week from the hypothetical rent. This reduces the figure to £283.50 per week.

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 rent would need to be reduced to attract a tenant.

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 Tribunal's opinion there should be a deduction of 20% for scarcity as it is considered demand outweighs supply of rented properties in the area. This provides a figure of £56.70 and therefore reduces the rent to £226.80 per week.

Conclusion

22 The fair rent to be registered is limited by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £226.80 per week.

23 Therefore, the fair rent to be registered is £163.00 per week. In accordance with the statutory provisions, this takes effect from the 2 May 2025 being the date of the Tribunal’s decision.

Detailed calculations for the capped maximum fair rent are provided on the back of the decision form.

[NAME]

2 May 2025

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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 by email to [EMAIL] 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.