First-tier Tribunal Sets Fair Rent for Property Based on Market Conditions

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/24UD/F77/2021/0028

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 3 [ADDRESS], [POSTCODE]

[NAME] [NAME] [RESPONDENT] [NAME] [RESPONDENT] [APPELLANT]

Tenant [NAME] [APPELLANT]

1. The fair rent is £196.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 03 June 2021

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 rent allowance is

n/a Per n/a

not applicable

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

8. For information only:

(a) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £197.00 per Week prescribed by the Order.

[NAME] of decision 3 June 2021

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 301.1

PREVIOUS RPI FIGURE Y 285.1

X 301.1 Minus Y 285.1 = (A) 16.0

(A) 16.0 Divided by Y 285.1 = (B) 0.0561

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.1061

Last registered rent* £178.00 Multiplied by (C) = 196.88 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £197.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £197.00 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.

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Case reference : CHI/24UD/F77/2021/0028 Tenant : [NAME] [APPELLANT] [NAME] Landlord :

[APPELLANT] c/o [NAME] :

3 [ADDRESS], [POSTCODE]

Date of Objection : Referred to First-tier Tribunal

by Valuation Office Agency on

20th April 2021

Type of Application : Section 70 Rent Act 1977 (the Act)

Tribunal

: [NAME] [NAME] [NAME] [NAME] [NAME] [NAME] of Decision : 3rd June 2021

_______________________________________________

REASONS FOR DECISION ____________________________________

© CROWN COPYRIGHT 2021

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Background 1. The Tribunal gave formal notice of its decision by a Notice dated 3rd June 2021 that the rent would be £196.00 per week with effect from the same date.

2. On the 21st January 2021 the landlord's agent of the above property applied to the Rent Officer for registration of a fair rent of £192.50 per week. The rent having been previously determined by the Rent Officer at £178.00 per week on and effective from the 12th March 2019.

3. On the 1st March 2021 the Rent Officer registered a fair rent of £185.00 per week and effective from 12th March 2021.

4. The Tenant objected to the rent determined by the Rent Officer and the matter was referred to the First-tier Tribunal (Property Chamber) (Residential Property).

5. The tenancy was said to have commenced in 1998 but no written agreement was produced to the Tribunal. The tenancy appears to be a statutory protected periodic tenancy. The tenancy (not being for a fixed periodic 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 6. Following the Directions dated 30th April 2021 and the explanation contained therein, the Tribunal did not inspect the premises. A hearing was not requested in the current proceedings.

7. 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:

8. The property comprises a terraced house with full central heating. Accommodation: 1 Reception Room, Kitchen, 3 Bedrooms and Bathroom/w.c. Outside garden. Permit Parking.

9. All mains services are assumed to be connected.

10. The property is assumed in tenantable decorative order.

11. The Tribunal noted during its consideration:

a) The property was let unfurnished and does not include carpets curtains or white goods.

12. The Tenant made no representations.

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13. The Landlord's agent says (summarised):

a) The Fair Rent should be £192.50 per week.

b) In correspondence with the Rent Officer the agent says that the Rent Officer's headline figure of £219.00 per week and a deduction of £34.00 per week is not appropriate because there is wide available evidence of properties let on Assured Shorthold Tenancies on the same estate from £218.00 to £254.00 per week.

c) A market rent for the subject property in March 2021 would be a minimum of £230.77 per week. The property has central heating and is maintained in a good state of repair.

d) There is no marked difference between the subject property and the other properties cited to justify a deduction of £34.00 per week.

e) No deduction should be made for scarcity.

The Law 14. When determining a fair rent the Tribunal, in accordance with section 70 of the Rent Act 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.

15. In [COMPANY] v Chairman 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 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

(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).

16. The Rent Acts (Maximum Fair Rent) Order 1999 restricts the amount by which the rent may be increased to a maximum 5.oo% plus RPI since the last registration.

17. 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 rent by 15% or more of the previous registered rent.

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Tribunal’s deliberations 18. The Tribunal considered the matter with the benefit of the submissions of the parties. The Tribunal notes it 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).

19. The Tribunal checked the National Energy Performance Register and noted that the Energy Performance Certificate (EPC) is D and the certificate expires on28th September 2026. The minimum standard is Rating E (unless exempt) for offering a property to let on the open market and the Tribunal considers that a rating of this level would have an adverse effect on the rent achievable.

20. From information available to the Tribunal this property appears to have been let to [NAME] [NAME] in 1998 and no evidence has been submitted indicating that any modernisation has taken place since that time. The Tribunal concludes that the property in its present condition would be considered below the standard expected today in the market.

21. The Tribunal, acting as an expert tribunal, determined what rent 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 rent levels in the wider area of Southampton. Having done so, it concluded that such a likely market rent for a similar modernised property in fair condition with central heating, modern bathroom and kitchen facilities, floor coverings, curtains and an EPC Rating above F would be £230.00 per week.

22. However, the subject property is not in the condition considered usual for a modern letting at a market rent. It is therefore necessary to adjust that hypothetical rent of £230.00 per week to allow for the differences between the condition considered usual (including responsibility of tenants to maintain decorations as opposed to decorate) 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 the improvements carried out by the Tenant.

23. If this property were to come onto the open market it would of course come on the market in its present condition and not in the condition normally seen in such market lettings. The Tribunal considers that to reflect these matters, a deduction should be made to the hypothetical rent.

24. The [NAME] has made a deduction of £34.00 per week to reflect the tenants decorating liability, the tired bathroom and the lack of white goods carpets and curtains. The Tribunal has been presented with no evidence to justify varying this figure.

25. This leaves a fair rent of £196.00 per week.

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Scarcity 26. The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the conurbation of Southampton (i.e. a sufficiently large area to eliminate the effect of any localised amenity which would, in itself, tend to increase or decrease rent). 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.

27. 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 did not consider that there was a substantial scarcity element and accordingly made no further deduction for scarcity.

28. This leaves a fair rent for the subject property of £196.00 per week

Relevant Law 29. The Rent Act 1977.

30. Rent Acts (Maximum Fair Rent) 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 [NAME], 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.

Rent Acts (Maximum Fair Rent) Order 1999 31. The rent to be registered is not limited by the Fair Rent Acts (Maximum Fair Rent) Order 1999 because it is below the maximum fair rent (see calculation on reverse of decision sheet) of £197.00.00 per week and accordingly the sum of £196.00 per week will be registered as the fair rent on and with effect from 3rd June 2021 being the date of the Tribunal's decision.

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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 Regional office 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 Regional office 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.

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