First-tier Tribunal sets fair rent for regulated tenancy

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00BF/F77/2019/0176

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 51 [ADDRESS], [POSTCODE]

[NAME] Miss [RESPONDENT]

Landlord [COMPANY]

Tenant Mrs [APPELLANT]

1. The fair [NAME] is £183.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 27 November 2019

3. The amount for services is £9.60 Per Week

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

- Per

not applicable

5. The [NAME] is/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 the maximum fair [NAME] as prescribed by the [NAME] ([NAME]) Order 1999. The [NAME] that would otherwise have been registered was £186.00 per week including £9.60 per week for services.

[NAME] of decision 27/11/19

FR24 [NAME] FIGURE X 291.0

PREVIOUS RPI FIGURE Y 275.1

X 291.0 Minus Y 275.1 = (A) 15.9

(A) 15.9 Divided by Y 275.1 = (B) 0.0577971

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

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.1077971

Last registered [NAME]* 165.00 Multiplied by (C) = 182.78 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 183.00

Variable service charge NO If YES add amount for services -

[NAME] = £183.00 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].

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BF/F77/2019/0176 Property : [ADDRESS], Sutton, Surrey. [POSTCODE]. Type of Application : Decision following an objection to a registered [NAME], under the [NAME] 1977. Date of Decision : 27 November 2019. Tenant : Mrs. [APPELLANT]. [APPELLANT] Landlord : [COMPANY] for the decision

Background

1. By an RR1 dated 25 June 2019, the landlord made an application to register the [NAME] of the property at £167.16 per week inclusive of £9.60 per week fixed service charge.

2. On 28 September 2019 the [NAME] registered the [NAME] at £182.50 per week, inclusive of service charge of £5.47 per week, but exclusive of rates. The uncapped [NAME] was stated to be £210.00 per week.

3. On 29 August 2019 the landlord objected, and the matter was referred to the First Tier Tribunal, Property Chamber.

4. On 30 September 2019 the Tribunal sent standard Directions to both parties requiring the landlord to send to the tenant and the Tribunal a written statement with their assessment of the [NAME] and for the tenant to make a response.

5. Written representations were received from the landlords in which they said that they would not be charging the registered [NAME], but would be charging £116.13 inclusive of service charge from 30 September 2019, and that they had served a notice of [NAME] increase on the tenant.

2 6. The landlord’s main objection was that the new registered [NAME] included a service charge of £5.47 per week, whereas the budget figures supplied to the [NAME] officer showed a sum £9.60 and the amount registered was well below that figure. The landlords also said that ‘therefore the new [NAME] has not only been capped to the maximum [NAME] in accordance with the current law, but is also below the registered [NAME]’. It is not clear what the landlord means by this, but it must be assumed that they say the [NAME] they will charge will be below the maximum fair [NAME], and the service element does not reflect the actual costs incurred.

7. The tenant did not provide a statement or any evidence on which they wished to rely.

Evidence

8. The tribunal informed the parties that an inspection would take place on 27 November 2019. On inspection we found the property to comprise three rooms, kitchen, bathroom/w.c. and with the benefit of a garage space. The Register confirms that the property benefits from full central heating however we found on inspection that heating was provided by storage radiators, and water was heated by an immersion unit in the water tank situated in one of the hall cupboards.

9. The property itself is contained within a four-storey block on an estate with communal grounds, parking and an underground garage for some tenants. The grounds were well maintained for the time of year, the common parts were clean. At the time of our inspection contractors were on site carrying out works to other properties. There was also a scaffold tower to one block possibly where roof repairs were being undertaken.

10. The external condition of the property was generally good with no significant signs of deterioration or damage.

11. In coming to their registration, the [NAME] relied on open market lettings of one bungalow and several houses in the South Sutton area with rents ranging from £230.77 to £321.92 per week.

12. Neither party produced comparable evidence, and the tribunal determined based on the inspection and description in the [NAME] that the property would let, on the open market, under the terms of the usual assured shorthold tenancy agreement at £285.00 per week.

The law

13. When determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, must have regard to all the circumstances including the age, location and state of repair of the property. It must also disregard the effect of (a) any relevant tenant's improvements and (b) the effect of any disrepair or other defect attributable to the tenant

3 or any predecessor in title under the regulated tenancy, on the rental value of the property.

14. Case law informs the Tribunal;

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). Valuation

15.Thus, in the first instance the Tribunal as noted above the tribunal determined the market [NAME] for the subject property at £285.00 per week.

16. However, the [NAME] referred to above is based on a modern open market letting, where the tenant has no liability to carry out repairs or decorations, has a modern kitchen and bathroom and the landlord supplies white goods, carpets and curtains. In this case the Tenant supplies white goods, carpets and curtains and although the bathroom and kitchen fittings are in good order, they would not be to the standard of a modern letting and would require modernisation.

17. In making its own adjustments to reflect the lower bid a prospective tenant would make to reflect the differences between the property in a modern lettable state and that as provided by the landlord, together with an adjustment for the additional repair and maintenance obligations of the tenant we make a global deduction of 20% arriving at a [NAME] of £228.00 per week, inclusive of service charge.

18. We then considered the question of scarcity as referred to in paragraph 12a above and determined that taking into the very wide area required by case law for scarcity, and taking into consideration the whole of the Greater London area, we determine that there remains an imbalance in the supply and demand for property, and make a deduction of 20% to reflect that imbalance.

19. We therefore determined that the uncapped [NAME] is £186.00 per week, exclusive of council tax and water rates, but including service charges.

4 20. The tribunal is then required to carry out the calculation in accordance with the [NAME] details of which are shown on the rear of the Decision Notice. We calculate the maximum fair [NAME] at £183.00 per week, inclusive of service charge.

21. As this figure is below the uncapped fair [NAME], we find the [NAME] has the effect of limiting the [NAME] to the lower figure and we determine that the sum of £183.00 per week inclusive of service charge.

22. The landlord sought a service charge of £9.60 per week. The previous registered [NAME] identified an amount of £7.44 per week, and the [NAME] set a figure of £5.47 per week. The tribunal finds the amount set by the [NAME] to be too low, and that sought by the landlord to provide value to the tenant, and accordingly we determine the service charge element within the [NAME] of £183.00 per week to be £9.60. The service charge is not variable in accordance with S.18 of the Landlord & Tenant Act 1985, and is therefore fixed until the next registration.

23. The new registered [NAME] takes effect from 27 November 2019.

24. It appears however that the landlord has already served a notice of increase on the tenant at £116.13 per week, inclusive of service charge, and it appears that this objection by the landlord is only to update their records and not to implement any further [NAME] increase, but the landlord should confirm their intentions to the tenant to clarify this issue.

[APPELLANT], FRICS. 3 December 2019.

5 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 to the First-tier Tribunal at the Regional office, which has been dealing with the case. 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.

2. 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.

3. 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.