First-tier Tribunal Sets Fair Rent for Property

OUTCOME: Allowed

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Case Reference : CAM/22UG/F77/2018/0043

[RESPONDENT] : 8 [ADDRESS] [POSTCODE]

Applicant: [redacted]

Respondent: [redacted] : 26 November 2018

Type of Application : Determination of the registered rent under Section 70 Rent Act 1977

Tribunal

: Mrs [NAME]

Mr [NAME] and venue of : 8 March 2019 hearing

Colchester County Court Falkland

House 25 Southway Colchester CO3

3EG

_______________________________________________

DECISION ____________________________________

The registered rent with effect from 8 March 2019 is £630 per month.

© CROWN COPYRIGHT

S E C FIRST - TIER TRIBUNAL [RESPONDENT] CHAMBER ([RESPONDENT])

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Background

1. On 19 October 2018 the landlord applied to the rent officer for registration of a fair rent of £695 per month for the above [RESPONDENT].

2. The rent payable at the date of the application was £641.50 per month which had been registered by the rent officer on 22 August 2016 with effect from 23 September 2016.

3. On 21 November 2018, the rent officer registered a fair rent of £715 per week with effect from the same date.

4. The tenant objected to the rent determined by the Rent Officer.

5. The tribunal inspected the bungalow on the morning of 8 March 2019.

The Evidence

6. On 26 November 2018 the tenant objected to the registered rent since it was higher than that sought by the landlord.

7. No representations were made by or on behalf of the landlord.

Inspection

8. The premises comprise a detached bungalow, built c1960, a small single garage in the rear garden and a car port to the side of the [RESPONDENT] which had been erected by the tenant. Externally the bungalow is in good order except for the gutters. Internally the tenant has maintained the bungalow in excellent condition.

9. The accommodation comprises three rooms, kitchen, bathroom, separate wc and a conservatory constructed by the tenant. The tenant has modernised the bungalow which would otherwise be as built with no heating and only one electrical socket in each room.

10. The tenant’s improvements include a fully fitted and tiled kitchen with the usual white goods, replacement sanitary ware, wall tiling in the bathroom, gas fired central heating, additional electric sockets and double glazing throughout, except for the kitchen window which is the original single glazed Crittall framed window and opens into the tenant’s conservatory.

Valuation

11. 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 the evidence supplied by the parties and the Tribunal's own general

3 knowledge of market rent levels in West Mersea. Having done so, it concluded that the likely market rent for the flat would be £1000 per month.

12. However, it was first necessary to adjust the hypothetical rent of £1000 per month to allow for the differences between the terms and condition considered usual for such a letting and the condition of the actual [RESPONDENT] at the date of the inspection, ignoring the tenant’s

improvements, (disregarding the effect of any disrepair or other defect

attributable to the tenant or any [NAME] in [NAME]). The Tribunal

noted that bungalows and houses available on the open market were all

either modern or modernised and centrally heated with white goods,

floor and window coverings. The rent officer’s survey notes made no

mention of the tenant’s double glazing or the [COMPANY] number of power

points without the tenant’s additions. The Tribunal considered

that these differences plus the terms and conditions of the tenancy

required a deduction of £300 per month.

13. This leaves an adjusted market rent for the subject [RESPONDENT] of £700 per month. The Tribunal was of the opinion that there was substantial scarcity in Essex for similar properties and therefore made a deduction of approximately 10% from the market rent to reflect this element. The Tribunal’s uncapped fair rent is £630 per month.

Decision

14. The uncapped fair rent initially determined by the Committee, for the purposes of section 70, was accordingly £630 per month.

18. This is below the maximum fair rent that can be registered by virtue of the Rent Acts (Maximum Fair Rent) Order 1999 (Details are provided on the back of the decision form).

19. Accordingly the sum of £630 per month will be registered as the fair rent with effect from 8 March 2019 being the date of the Tribunal's decision.

Chairman: [NAME]: 11 March 2019

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First-tier Tribunal [RESPONDENT] Chamber ([RESPONDENT])

The Law Relating to the Assessment of Fair Rents

INTRODUCTION

1. This is a brief summary of the law applied by the Tribunal (formerly call a Rent Assessment Committee) when reaching its decision. It is an integral part of the decision.

2. The definition of Fair Rent is contained in the Rent Act 1977 i.e.:-

70(1) In determining ......a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to:-

a) the age, character, locality and state of repair of the dwellinghouse

b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and

c) any premium, or sum in the nature of a premium……

70(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwellinghouses 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 dwellinghouses in the locality which are available for letting on such terms

70(3) There shall be disregarded:

a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any [NAME]……

b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any [NAME]

3. The Tribunal also has to take into account the Human Rights Act 1998. However, when interpreting the Rent Act 1977 (primary legislation) the Tribunal will have to follow the wording of the Act if it cannot be read or given effect in a way which is compatible with rights contained in the European Convention on Human Rights. Any party dissatisfied will then have to refer the matter to the High Court for the making of a Declaration of Incompatibility.

4. All other rights granted by the Convention such as the right to a fair and public

5 hearing by an independent tribunal and the right to respect for a person’s private and family life are to be observed by the Tribunal

5. There have been a number of cases decided over the years most of which have been either unreported or reported only in professional journals. However in 1997 a Court of Appeal decision was reported as [NAME] v [NAME] (No. 2) [1997] 4 AER 842 where the Court reviewed the various authorities and provided guidance to Tribunals to assist them in reaching decisions.

6. [ADDRESS] confirmed that a Tribunal must first find an open market rent for the [RESPONDENT] taking into account evidence before it from the parties and the Rent Officer. It will not consider other registered rents unless there are very exceptional circumstances which will be set out in the decision if appropriate.

7. A Tribunal can use such factors as comparable rents being paid for similar properties in the locality, capital values and return on expenditure as well as the experience and expertise of its members.

8. Having established an open market rent the Tribunal then has to consider the deductions and allowances referred to above

9. In all cases the Tribunal will try its best to give the parties details of its calculations. The [NAME] case (above) made it clear that a Tribunal’s decision must be supported by some workings out, but precise arithmetical calculations are not possible in all cases. There are many properties where the deductions and allowances are of such proportions that a Tribunal must simply take a view as to how much a rent would have to be reduced in order to obtain a tenant. This may not be the same as the sum total of the Statutory deductions/allowances.

10. If the Tribunal considers that the demand for similar properties in the locality is substantially greater than the supply then a deduction has to be made in accordance with Section 70(2) Rent Act 1977. This is the so-called “scarcity factor”. The Tribunal is obliged to look at scarcity in terms of people wanting regulated tenancies. However the reality is that no new regulated tenancies are created nowadays and scarcity is therefore considered using the types of tenancy currently in use.

11. The word “locality” in Section 70(2) has a different meaning to that in Section 70(1). In the case of [RESPONDENT] [COMPANY] v Finegold [1975] 1 WLR 349 it was decided that the “locality” for this purpose should be a really large area. A Tribunal must define the extent of that “locality” when reaching its decision.

12. In determining scarcity, Tribunals can look at local authority and housing association waiting lists but only to the extent that people on such lists are likely to be genuine seekers of the type of private rented accommodation in question if the rent were to exclude the scarcity element.

13. The Tribunal must apply the Rent Acts (Maximum Fair Rent) Order 1999 – known as the “capping” provision – unless there is an exemption.

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