First-tier Tribunal sets fair rent under Rent Act 1977

OUTCOME: Allowed

FR27 First-tier Tribunal – Property Chamber File Ref No.

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[ADDRESS]

Tenant [NAME] [APPELLANT]

1. The fair rent is £265.10 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 7th July 2025

3. The amount for services is £16.60 Per week

negligible/not applicable

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

Per

negligible/not applicable

5. The rent is/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)/ do not apply because 1st registration/15% exemption.

7. Details (other than rent) where different from Rent Register entry

8. For information only:

(a) The fair rent to be registered is the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £ 432.60 per week including £16.60 per week for services (variable).

(b) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £ ................... per .................... including £ ......................................... per ................................. for services (variable) prescribed by the Order.

Chairman Judge Nicol Date of decision 7th July 2025

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 402.9

PREVIOUS RPI FIGURE Y 292

X 402.9 Minus Y 292 = (A) 110.9

(A) 110.9 Divided by Y 292 = (B) 0.38

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) 1.43

Last registered rent* 173.50 Multiplied by (C) = 248.105 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £248.50

Variable service charge YES / NO If YES add amount for services £16.60

MAXIMUM FAIR RENT = £265.10 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.

1

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BK/F77/2025/0142 Property : [ADDRESS] [POSTCODE] Tenants : Mr [RESPONDENT] & Mrs [RESPONDENT] Landlord : [ADDRESS] Date of Objection : 5th March 2025 Type of Application : Fair rent Tribunal : Judge Nicol Date of Decision : 7th July 2025

_______________________________________________

DECISION

The sum of £265.10 per week will be registered as the fair rent with effect from 7th July 2025, being the date the Tribunal made the Decision. ____________________________________

SUMMARY REASONS

Background 1. Following an objection from the Tenant to the determination of a fair rent by the Rent Officer, the Tribunal has made a determination under the provisions of the Rent Act 1977.

Inspection 2. The Tribunal did not inspect the property but considered this case on the basis of the papers provided by the parties.

2 Evidence 3. Neither party provided any evidence or submissions.

Determination and Valuation 4. Having consideration of the Tribunal’s own expert, general knowledge of rental values in the area, it is considered that the open market rent for the property in good tenantable condition would be in the region of £650 per week. From this level of rent I have made adjustments in relation to:

• The lack of white goods • The lack of floor coverings or curtains • Decoration obligations

5. The Tribunal has also made an adjustment for scarcity.

6. The full valuation is shown below:

Market Rent

£650 per week

Less • White goods

} • Floor coverings/curtains

} approx. 20% • Decoration obligations

}

130

520

Less Scarcity

approx. 20%

104

£416

Decision 7. The uncapped fair rent initially determined by the Tribunal, for the purposes of section 70, was £432.60 per week, inclusive of services. The capped rent for the property according to the provisions of the Rent Acts (Maximum Fair Rent) Order 1999 is calculated at £265.10 per week. The calculation of the capped rent is shown on the decision form. In this case the lower rent of £265.10 per week is to be registered as the fair rent for this property.

Chairman: Judge Nicol

Date: 7th July 2025

APPEAL PROVISIONS

These summary reasons are provided to give the parties an indication as to how the Tribunal made its decision. If either party wishes to appeal this decision, they should first make a request for full reasons and the details of how to appeal will be set out in the full reasons. Any request for full reasons should be made

3 within a month. Any subsequent application for permission to appeal should be made on Form RP PTA

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BK/F77/2025/0142 Property : [ADDRESS] [POSTCODE] Tenants : [NAME] [RESPONDENT] Landlord : [ADDRESS] Type of Application : Fair rent under Rent Act 1977 Tribunal : Judge Nicol Date of Decision : 7th July 2025 Date of Reasons : 16th July 2025

REASONS FOR DECISION

Decision The Tribunal determined that the fair rent for the subject property is £265.10 per week with effect from 7th July 2025. Reasons 1. On 12th November 2024 the Respondent landlord applied for a determination of the fair rent under section 70 of the Rent Act 1977 (see the excerpts set out in the Appendix to this decision). They asserted that the weekly rent should be £212.68 instead of the existing registered fair rent of £194.57. The rent actually charged has been £177.97 which is permissible since the fair rent is the maximum which may be charged and a landlord may charge less if they wish.

2. On 5th December 2024 the Rent Officer registered a new fair rent of £257.60 per week, effective from the same date.

2 3. On 6th January 2025, Ms [APPELLANT], on behalf of the [NAME], emailed the Rent Officer and stated, I called a few weeks ago with regards to the letter we received re: fair rent and it going up quite substantially. I reported that the evaluation was wrong and that we do not live in a self contained maisonette but in fact a flat. We do not have our own private entrance as we live in a Block of flats and we do not have a garden or any private space. I believe someone was meant to either pass the message on or be in contact and I’m a little worried as the letter was dated the 5th Dec and it’s passed 28 days for an appeal and I haven’t heard anything.

4. By email dated 5th March 2025 the Rent Officer confirmed that the [NAME] objected to the registered fair rent and that the matter would be referred to the Tribunal.

5. The Tribunal issued directions on 15th May 2025. Neither party responded. Therefore, there was no hearing or inspection of the property and the Tribunal proceeded to determine the matter on the papers.

6. In Curtis -v- London RAC [1997] 4 AllER 842 the court held that the calculation of a fair rent starts with the open market rental value which is then adjusted for statutory disregards under s.70(1) and (3) and scarcity, if any, under s.70(2). The first matter to look at is the market rental value of the subject property if let on an assured shorthold tenancy in the open market in a fully refurbished state.

7. To do this, the Tribunal must look at any available comparable properties currently let on such tenancies. Neither party provided details of any such comparable properties. However, based on its own expert knowledge and experience, the Tribunal determined that the subject property, if let on an assured shorthold tenancy in the open market in a fully refurbished state, would command a weekly rent of around £650.

8. This figure must then be adjusted to take account of the differences between the terms of tenancy and amenities of those properties let on such market rents and those of the subject property. A tenant in the open market would not be prepared to pay the same price for a property suffering from the disadvantages listed below, such as the subject property, as for one without them and these adjustments take into account the fact that the market rent would be lower. The Tribunal took account of:- (a) Non-provision of white goods; (b) Non-provision of floor coverings and curtains; and (c) The difference in decoration obligations.

3 9. In their request for full reasons, the Applicants asked whether their disabilities were taken into account but this is not part of the calculation required under section 70 of the Rent Act 1977.

10. The Tribunal’s conclusion is that the market rent figure given in paragraph 7 above should be reduced by 20% to take account of the matters set out in paragraph 8 above, producing a weekly figure of £520.

11. The next consideration is whether there should be any deduction for scarcity in accordance with s.70(2) of the Rent Act. The Tribunal acknowledges that, since the introduction of the Housing Act 1988, there have been more properties to rent, i.e. there has been an increase in supply. However, scarcity is not just a matter of looking at supply but demand as well. The pressures on the London housing stock are well- documented and have persisted throughout the post-war period. They show no signs of improvement as demand increases from various sources, including immigration into London from other parts of the UK and from abroad and the trend for more separate households. Also, changes in supply and demand since the introduction of the Housing Act 1988 and over the last few years have not been evenly spread over the whole of London or all parts of the market.

12. Further, the real rental market is regulated by price, i.e. by rents, so that supply and demand should always be reasonably close to equilibrium as a result. However, as Ouseley J. remarked in [NAME] [COMPANY] -v- Chairman of the London Rent Assessment Cttee (2002) (at paragraph 75 of the judgment), “Where ‘scarcity’ exists, the purpose of the phrase is to eliminate the effect of an aspect of the real world market and to require the assumption instead of a partly theoretical or idealised market.” He based this comment on the fact that s.70(2) requires the Tribunal to consider those seeking to become tenants of similar dwelling-houses in the locality on the same terms other than those relating to rent. This means considering a hypothetical market which is not regulated by price in the same way as the real market. The assumption is not that rents are ignored as if all properties are free but that the level of rents is not a factor limiting demand. The Tribunal is then required to consider whether this hypothetical market is in equilibrium or not.

13. In considering this hypothetical market, the Tribunal feels that the “waiting lists” held by local authorities and registered social landlords such as housing associations are relevant. Judicial notice can be taken of the fact that these waiting lists are lengthy at local authorities throughout London with many waiting, for up to years at a time, more in hope than expectation. Those who apply for such social housing include many different groups, including those wanting to transfer from what they regard as unsatisfactory social housing, people with special needs due to old age, disability or illness, people on low incomes and public service workers such as teachers and police who find it hard to afford private sector rents. There can be no doubt that some of these people would not try to enter the private market even if rents were at more affordable

4 levels. However, there can equally be no doubt that some of them would. Many apply for social housing simply because they cannot access elsewhere the kind of housing they want at a price they can afford. There are also people who do not appear on social housing or any other waiting lists because they put up with housing that they regard as unsatisfactory for the same reason – sometimes referred to as “the hidden homeless”, these include, for example, young adults who wish to leave the family home but cannot. These factors indicate the existence of demand which is hidden in the real market due to the regulating effect of rental levels but would appear in the hypothetical market envisaged in s.70(2). In quantifying this demand, the Tribunal is aware it must be limited to those genuinely seeking to become market tenants of similar accommodation or whose accommodation needs would affect the level of rents.

For these reasons, the Tribunal considers that this demand is substantial.

14. In considering scarcity, the Tribunal acknowledges the need to look, as [NAME]. put it (at paragraph 67 of the [NAME] judgment), at “an area large enough, not just to eliminate the rental impact of the immediate area’s particular attraction and amenity, but large enough for a broad and general appraisal of whether there is a shortage of similar accommodation which is affecting rents payable by potential tenants of the subject accommodation; the area to be examined is that over which reasonable alternatives are available to potential tenants of the subject property.” The Tribunal feels it can achieve a sufficiently accurate assessment by looking at a large part of west central London, including the Boroughs of Westminster, Kensington & Chelsea, and Hammersmith & Fulham, and adjacent parts of Hounslow, Ealing, Brent and Camden. While some might regard this area as geographically insufficiently large, that is not the relevant test rather than the density of dwellings and the size of the rental market within the area.

15. There is no completely scientific or mathematical method for calculating scarcity. As [NAME]. also said (at paragraph 75), “the theoretical nature of the exercise and the imprecision inherent in establishing both the existence of ‘scarcity’ and its effect on rent in a theoretical world, preclude there being a realistic expectation of detailed reasoning.” The Tribunal has used its own knowledge and experience of the factors listed above and concludes that the number of persons seeking to become tenants of dwelling-houses similar to the subject property in the locality referred to in the paragraph above on the terms (other than those relating to rent) of the [NAME] is substantially greater than the number of dwelling-houses which are available for letting on such terms. The Tribunal considers the imbalance between supply and demand on the basis defined above would be very substantial in the locality identified, placing the deduction in the higher level of the range of such deductions for the London area, and would put the figure at 20%, thereby reducing the weekly market rent figure of £520 to a figure of £416.

5 16. To this must be added the service charges of £16.60, giving a fair rent figure of £432.60 per week.

17. The last matter to consider is the application of the Rent Acts (Maximum Fair Rent) Order 1999 which limits rises in fair rents by a strict mathematical calculation and, according to Art.2(6), “applies where an application for the registration of a new rent in respect of a dwelling- house is made after this Order comes into force and, on the date of that application, there is an existing registered rent under [the Rent Act 1977] in respect of that dwelling-house.” In accordance with the mathematical calculation set down under the Order, the details of which have already been supplied to the parties, the maximum fair rent which may be registered is limited to £265.10 per week. That is lower than the figure calculated above and so is registered as the fair rent.

Name: Judge Nicol Date: 16th July 2025

6 APPENDIX

Rent Act 1977

S70 Determination of fair rent. (1) In determining, for the purposes of this Part of this Act, what rent is or would be a fair rent under a [NAME] 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 quantity, 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 rent), of the [NAME] 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 tenant under the [NAME] or any [NAME] to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the [NAME] or any [NAME]; … (e) if any furniture is provided for use under the [NAME], any improvement to the furniture by the tenant under the [NAME] or any [NAME] or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his.