First-tier Tribunal Sets Fair Rent for Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/45UF/F77/2022/0043

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 71 [ADDRESS], [POSTCODE]

[NAME] Mr [RESPONDENT] Mr [APPELLANT]

Landlord Mr [APPELLANT] S [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair [NAME] is £1,400.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 19 December 2022

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 £1,743.00 per Calendar Month prescribed by the Order.

[NAME] [NAME] of decision 19 December 2022

FR24 [NAME] FIGURE X 358.3

PREVIOUS RPI FIGURE Y 294.3

X 358.3 Minus Y 294.3 = (A) 64.0

(A) 64.0 Divided by Y 294.3 = (B) 0.2174

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2674

Last registered [NAME]* £1,375.00 Multiplied by (C) = 1742.67 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £1,743.00

Variable service charge NO If YES add amount for services

[NAME] = £1,743.00 Per Calendar Month

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].

© CROWN COPYRIGHT 2022

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CHI/45UF/F77/2022/00043 Tenant : Mr [APPELLANT] Landlord : Mr [APPELLANT] : 71 [ADDRESS] [POSTCODE]

Date of Objection : Referred to First-tier Tribunal

by Valuation Office Agency

Type of Application : Section 70 [NAME] 1977 (the Act)

Tribunal

: Mr [NAME] Mr [NAME] Mr [NAME] of Decision : 19th December 2022

_______________________________________________

REASONS FOR DECISION ____________________________________

2 Background 1. The Tribunal gave formal notice of its decision by a Notice dated 19th December 2022 that the [NAME] will be £1,400.00 pcm.

2. On the 15th August 2022 the landlord of the above property applied to the [NAME] for registration of a fair [NAME] of £1,450.00 pcm. The [NAME] having been previously determined by the [NAME] at £1,375.00 pcm on 25th September 2020 and effective from the same date.

3. The Tribunal noted that the Landlord pays water rates and recovers this from the Tenant separately.

4. On the 10th October 2022 the [NAME] registered a fair [NAME] of £1,400.00 pcm effective from the same date.

5. The Tenant objected to the [NAME] determined by the [NAME] and the matter was referred to the First-tier Tribunal (Property Chamber) (Residential Property).

6. The tenancy appears to be a statutory protected periodic tenancy which commenced in 1979. There was no written tenancy agreement but a variation to the terms was entered into in 30th June 2015 wherein the Landlord agreed to undertake certain obligations (including new floor coverings, internal decorations, curtains and a fitted kitchen with integrated appliances). Further, the Landlord agreed the [NAME] would be subject to registration by the [NAME] in the future. The tenancy (not being a fixed tenancy of 7 years or more) is subject to Section 11 of the Landlord and Tenant Act 1985 (the landlord's statutory repairing obligations).

Factual Background and Submissions 7. Following the Directions dated 1st and 15th November 2022 and the explanation contained therein, the Tribunal did not inspect the premises. A hearing was not requested in the current proceedings.

8. Extracting such information as it could from the papers supplied to the Tribunal by the parties, by reference to information publicly available on the internet and with the benefit of its knowledge and experience, the Tribunal reached the following conclusions and found as follows:

The property comprises a two storey detached house with double glazing with full gas central heating.

Local shops and facilities are available.

The accommodation comprises: Hallway, 2 reception rooms, kitchen, shower room/W.C, 3 bedrooms and bathroom/W.C. Outside gardens, workshop (with double glazing and electricity) and off street parking.

9. The property is let unfurnished but with floor coverings, curtains, washing machine, fridge, and cooker.

3 10. All mains services are assumed to be connected.

11. The Tenant completed the Reply Form and says in emails to the [NAME] (summarised)

a) Very limited kitchen with a single oven cooker and 2 x 18inch work tops. b) Ground floor shower room is too small to use. c) The extension has reduced the light space in the living room. d) The Tenant considers the standard of work to be ‘shoddy’.

12. The Landlord says in the Reply Form (summarised).

a) The property was fully refurbished in 2015 including: rear extension, new kitchen and white goods, new bathroom, new floor coverings, decoration and new front drive.

b) The water rates are paid by the landlord and recovered from the tenant.

c) With regard to [NAME], the landlord says that the [NAME] set by the [NAME] does not fairly reflect the terms of the tenancy and the accommodation provided.

d) There are a number of properties similar in size available to [NAME] in RH12 and the surrounding area clear to see on any website.

e) A copy of the agreement reached between the Landlord and Tenant in relation to the refurbishment of the property and the subsequent determination of the [NAME] by the [NAME] are included in the bundle.

f) A schedule of condition dated 10th November 2022 together with floor plans of the current layout is included in the bundle.

The Law

13. When determining a fair [NAME] the Tribunal, in accordance with section 70 of the [NAME] 1977, had regard to all the circumstances including the age, location and state of repair of the property. It 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 property.

14. In [COMPANY] v [NAME] of the Greater Manchester etc Committee (1995) 28 HLR 107 and [NAME] v [NAME] [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

4 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).

15. The [NAME] ([NAME]) Order 1999 restricts the amount by which the [NAME] may be increased to a maximum 5.oo% plus RPI since the last registration.

16. The only exception to this restriction is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the [NAME] by 15% or more of the previous registered [NAME].

Tribunal’s deliberations 17. The Tribunal considered the matter with the benefit of the submissions made by the Landlord and the Tenant. The Tribunal does not take into consideration the personal circumstances of the Landlord or Tenant in making its determination (including issues between Landlord and Tenant which do not affect the rental value of the property itself).

18. The Tribunal checked the National Energy Performance Register and noted that that the property has an Energy Performance Certificate (EPC) of G. The certificate expires on 23rd April 2025. The minimum standard is Rating E (unless exempt) for offering a property to let on the open market.

19. The Tribunal looked at the [NAME]'s valuation of the [NAME] under Section 70 of the [NAME] 1977. The [NAME] had started with a market [NAME] for the property assuming it was in good repair and available in the market today. The [NAME] found that the [NAME] would be £1,550.00 pcm.

20. The [NAME] then considered that certain deductions should be made to reflect the condition, facilities and differing nature of the tenancy. The [NAME] concluded that the sum of £75.00 pcm should be deducted from the market [NAME] to reflect tenant’s decorating liability. The [NAME] also made an adjustment for scarcity (see explanation below) 0f £75.00 (5.00%). The result was a [NAME] of £1,400.00 pcm.

21. The Tribunal, acting as an expert tribunal, determined what [NAME] the landlord could reasonably be expected to obtain for the subject property in the open market if it were let today in the condition and subject to the terms of such a tenancy that is considered usual for such an open market letting. It did this by having regard to the evidence supplied by the parties and the Tribunal’s own general knowledge of market [NAME] levels in Horsham and the wider area of West Sussex. Having done so, it concluded that such a likely market [NAME] for a similar property in fair condition with central heating, modern bathroom and kitchen facilities,

5 floor coverings, curtains and an EPC Rating of E or above would be £1,500.00 pcm.

22. However, the subject property is not in the condition considered usual for a modern letting at a market [NAME]. It is therefore necessary to adjust that hypothetical [NAME] of £1,500.00 pcm to allow for the differences between the condition considered usual for such a letting and the condition of the actual property as stated in the papers (disregarding the effect of any disrepair or other defect attributable to this tenant or any predecessor in title) and an updated EPC required to let the property in the open market.

23. The Tribunal considered the observations of the [NAME] and concluded, using its own knowledge and judgement, that it was appropriate to make deductions:

a) No evidence provided of internal redecoration having been completed in accordance with the 2015 agreement. b) Updated EPC to legally offer the property to let in the market place. c) Condition report as provided by the Landlord.

24. The Tribunal determines the total deductions at £100.00 pcm.

Scarcity 25. The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the wider area of West Sussex as a whole (i.e. a sufficiently large area to eliminate the effect of any localised amenity which would, in itself, tend to increase or decrease [NAME]. b) Local Authority and Housing Association waiting lists. c) House prices which could be an indicator of increased availability of housing and a reduction in scarcity. d) Submissions of the parties. e) The members of the Tribunal have between them many years of experience of the residential letting market and that experience leads them to the view that there is no substantial shortage of similar houses available to let in the locality defined above.

26. Assessing a scarcity percentage cannot be a precise arithmetical calculation because there is no way of knowing either the exact number of people looking for a particular type of house in the private sector or the exact number of such properties available. It can only be a judgment based on the years of experience of members of the Tribunal. However, the Tribunal considered that there was no substantial scarcity element.

27. This leaves a fair [NAME] for the subject property of £1,400.00 pcm.

Relevant Law 28. The [NAME] 1977.

6 29. [NAME] ([NAME]) Order 1999. In particular paragraph 7 which states:

This article does 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 application for registration of a new [NAME] under Part IV exceeds by at least 15% the previous [NAME] registered or confirmed.

[NAME] ([NAME]) Order 1999 30. The [NAME] to be is not limited by the [NAME] ([NAME]) Order 1999 because it is below the maximum fair [NAME] (see calculation on reverse of decision sheet) of £1,743.00 pcm and accordingly the sum of £1,400.00 pcm will be registered as the fair [NAME] on and with effect from 19th December 2022 being the date of the Tribunal's decision.

RIGHTS OF APPEAL

1. A person wishing to appeal this decision (on a point of law only) to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the [NAME] which has been dealing with the case. Where possible you should send your application for permission to appeal by email to [EMAIL] as this will enable the First-tier Tribunal [NAME] to deal with it more efficiently.

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.

1. 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.