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

OUTCOME: Dismissed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/00CT/F77/2020/0019

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 25 [ADDRESS], [POSTCODE]

[NAME] Mrs [APPELLANT]

Landlord [NAME] ([COMPANY]) [APPELLANT]

Tenant Mrs [APPELLANT]

1. The fair [NAME] is £128.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 23 October 2020

3. The amount for services is not applicable N/A Per N/A

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

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:

The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £134.00 per week.

[NAME] of decision 23 October 2020

FR24 [NAME] FIGURE X 293.3

PREVIOUS RPI FIGURE Y 280.7

X 293.3 Minus Y 280.7 = (A) 12.6

(A) 12.6 Divided by Y 280.7 = (B) 0.044888

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.094888

Last registered [NAME]* £122 Multiplied by (C) = 133.5763 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £134

Variable service charge NO If YES add amount for services

[NAME] = £134.00 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

: BIR/00CT/F77/2020/0019

HMCTS Code

: P:PAPERREMOTE

Property : 25 [ADDRESS], [POSTCODE]

Landlord

: [NAME] ([COMPANY]) [APPELLANT]

Tenant

: Mrs [APPELLANT] of Application : Determination of a fair [NAME] under [NAME] 1977 Schedule 11

Tribunal Members : [NAME] (Chair)

Mrs K Bentley

Date of Decision : 23 October 2020

Date of Reasons : 10 November 2020

_______________________________________________

STATEMENT OF REASONS ____________________________________

© CROWN COPYRIGHT 2020

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Covid-19 pandemic: description of hearing: This has been a remote hearing on the papers. The form of remote hearing was P:PAPERREMOTE. Both parties did not object to the Tribunal making their decision on the papers sent in and without a hearing or an inspection.

DECISION

Background

1. By application dated 13 March 2020 the Landlord applied to the [NAME] for registration of a fair [NAME] of £140.30 per calendar week for the property.

2. The [NAME] payable at the time of the application was £122.00 per week.

3. The [NAME] was previously registered on 9 May 2018 with effect from 11 June 2018 at £122.00 per week by the [NAME]

4. On 4 May 2020 the [NAME] registered a fair [NAME] of £128.00 per week with effect from 11 June 2020.

5. By a letter dated 9 July 2020 the Landlord objected to the [NAME] determined by the [NAME] and the matter was referred to First-tier Tribunal (Property Chamber).

6. Neither party requested an oral hearing to determine its objection.

7. The Landlord made written representations dated 23 September 2020.

8. After consideration of the available evidence and the applicable law the Tribunal determined that a sum of £128.00 per week shall be registered as the fair [NAME] with effect from 23 October 2020.

9. The Tribunal’s decision was sent to the parties. By an e-mail dated 5 November 2020 the Landlord requested reasons for the determination.

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The Law

The Jurisdiction of the [NAME]

10. Paragraph 9(1) Part 1 Schedule 11 of [NAME] 1977 provides that;

“The Committee shall make such inquiry, if any, as they think fit and consider any information supplied or representation made to them in pursuance of paragraph 7 or paragraph 8 above and – a) if it appears to them that the [NAME] registered or confirmed by the [NAME] is a fair [NAME], they should confirm that [NAME]; b) if it does not appear to them that the [NAME] is a fair [NAME], they shall determine a fair [NAME] for the dwelling house.”

Determination of a [NAME]

11. Section 70 of the [NAME] 1977 provides that:

“(1) In determining, for the purposes of this Part of this Act, what [NAME] is or would be a fair [NAME] 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 dwelling- house,

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

(c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy.

(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become Tenants of similar dwelling- houses in the locality on the terms (other than those relating to [NAME]) 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.

(3) There shall be disregarded –

(a) any disrepair or other defect attributable to a failure by the Tenants under the regulated tenancy or any [NAME] to comply with any terms thereof:

(b) any improvement carried out, otherwise than in pursuance of the term of the tenancy, by the Tenants under the regulated tenancy or any [NAME]”;

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12. When determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, had regard to all the circumstances including the age, location and state of repair of the property. It also disregarded the effect of (a) any relevant Tenants’ improvements and (b) the effect of any disrepair or other defect attributable to the Tenants or any [NAME] in [NAME] under the regulated tenancy, on the rental value of the property.

13. 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 [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).

14. In considering scarcity under section 70(2) the Tribunal recognised that:

(a) there are considerable variations in the level of scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustment should be made; the Tribunal therefore considered the case on its merits;

(b) terms relating to [NAME] are to be excluded. A lack of demand at a particular [NAME] is not necessarily evidence of no scarcity; it may be evidence that the prospective Tenants are not prepared to pay that particular [NAME]

15. Fair rents are subject to a capping procedure under The Rents Acts ([NAME]) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since the previous registration.

The Property

16. The property is a semi-detached house situated on a cul-de-sac.

17. The property was constructed of brick and tile roof with the benefit of double glazing. The property has gas central heating.

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18. The accommodation provides Two Living Rooms, and Kitchen with Three First Floor Bedrooms and a Bathroom.

19. The property has its own gardens and a store.

20. The Tribunal were not made aware of any specific improvements carried out by the Tenant but noted that the Landlord had made a reference to tenant’s improvements valued at £10.00 per week in their representations dated 23 September 2020.

21. The Tenant owned the white goods, furniture, curtains and carpets.

The Landlord’s Objection

22. The Landlord’s representations dated 23 September 2020 stated that the achievable [NAME] based on comparable evidence would be £173.00 per week. This should be adjusted to reflect the lack of a modernised bathroom £15.00 per week, the supply of furniture £5.00 per week and tenant’s improvements valued at £10.00 per week. The adjusted figure was £140.30.

23. The Landlord regarded there was an adequate supply of property within the area and that scarcity should not apply in this case.

Comparable Evidence

24. The Landlord provided three comparable properties:

25. [ADDRESS], Solihull. 3 bedroom terraced house with an asking [NAME] of £173.00, [NAME] agreed. The property had patio doors from the kitchen/diner and a new family bathroom with shower.

26. [ADDRESS], Sheldon. A 3 bedroom semi detached house with an asking [NAME] of £179.00 per week. Still on the market at the time of the decision this property had a rear garage.

27. [ADDRESS], Shirley. A 3 bedroom semi-detached house with refitted Kitchen, separate Utility Room and modern family bathroom. The [NAME] was reduced to £185.00 per week on 10 September 2020.

Reasons for the Decision

28. In the first instance the Tribunal determined what [NAME] 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. It did this by having regard to the evidence provided and Tribunal’s own general knowledge of market [NAME] levels in the area. Having done so it concluded that such a likely market [NAME] would be £173.00 per week.

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29. However, the actual property is not in the condition considered usual for a modern letting at a market [NAME]. Therefore, it was first necessary to adjust that hypothetical [NAME] of £173.00 per week to allow for the differences between the condition considered usual for such a letting and the condition of the actual property as observed by the Tribunal (disregarding the effect of any disrepair or other defect attributable to the Tenants or any [NAME] in [NAME]). The Tribunal considered that this required a deduction of £15.00 per week in respect of the carpets, curtains and white goods which were provided by the Tenant and a deduction of £21.50 per week to reflect the basic Kitchen and Bathroom and that the property was unfurnished.

30. The Tribunal could find no reference to improvements carried out by the Tenant (see paragraph 20) and noted no deduction by the [NAME] Office for any such improvements.

31. The Tribunal made a further deduction of £8.50 per week for the Tenant’s greater statutory responsibility for internal decoration under the [NAME].

32. The Tribunal found that there was no scarcity in the locality and therefore make no deduction from the market [NAME] to reflect this element. Please see paragraphs 13 and 14 above.

33. This left a fair [NAME] for the subject property of £128.00 per week assuming the landlord’s repairing obligations were in accordance with section 11 of the Landlord and Tenant Act 1985.

The Decision

34. The fair [NAME] confirmed by the Tribunal, for the purposes of section 70 was according £128.00 per week.

35. The section 70 fair [NAME] determined by the Tribunal is below the level which is the maximum fair [NAME] permitted by the [NAME] ([NAME]) Order 1999 and accordingly that [NAME] limit has no effect (details have been provided to the parties with the Tribunal’s decision).

36. Accordingly, the sum of £128.00 per week will be registered as the fair [NAME] with effect from 23 October 2020.

37. If either party believes this decision is incorrect on a point of law, they may apply for permission from the First-tier Tribunal to appeal to the Upper Tribunal (Lands Chamber). Any such application must be made within 28 days of this decision (Rule 52 (2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.

[NAME]

10 November 2020