First-tier Tribunal Sets Market Rent at £1,050 per Month

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference : CAM/00kc/MNR/2024/0153

HMCTS code : P:PAPERREMOTE

Property : 34 [ADDRESS], [POSTCODE]

Applicant (Tenant) : [NAME] [APPELLANT]

Respondent (Landlord) : [COMPANY] of application : Determination of a Market Rent: Sections 13 and 14 Housing Act 1988

Tribunal members : Mr [NAME] [NAME] of Determination : 26 November 2024

DECISION

This has been a remote determination on the papers which the parties are taken to have consented to, as explained below. The form of determination was a paper determination described above as P:PAPERREMOTE The documents that the Tribunal was referred to are in bundles from the Applicant and the Respondent. The Tribunal has noted the contents and the decision is below.

Decision

The Tribunal determined a market rent of £1,050 per calendar month effective from 1 September 2024.

Reasons

Background

1. On 5 September 2024 the Landlord served notice under section 13 (2) of the Housing Act 1988 to increase the passing rent from £900 per calendar month (pcm) to £1,150 per month with effect from 1 September 2024.

2. This rent is stated to be exclusive of Council Tax, Water Charges and fixed service charges.

3. The Tenant made an application to the Tribunal in reliance on section 13 (4) of the Housing Act 1988 on 25 September 2024.

4. The Tribunal issued directions on 27 September 2024, inviting the Parties to submit any further representations (including any photographs and details of rentals for similar properties) they wished the tribunal to consider.

The Property

5. The Tribunal have relied upon the evidence provided by the Parties together with information in the public domain including Google Earth Pro. In addition, the Tribunal member with conduct of this case had previously inspected the Property on 13 November 2023 in connection with case ref: CAM/00KC/MNR/2023/0114 hence was familiar with the Property.

6. The Property comprises a semi-detached house of brick and tile construction providing a sitting room, lounge and kitchen at ground floor level and three bedrooms with a family bathroom and separate WC at first floor level. There is a single garage and external car parking to the front and a garden to the rear.

7. The Property benefits from central heating, double glazing together with carpets and curtains as installed by the Tenant.

8. It was noted during the inspection dated 13 November 2023, that there was evidence of water ingress through the roof and that the Property was prone to mould and mildew.

9. It was also apparent that the Landlord had carried out little, if any maintenance of the Property. In this regard, the garage was full of debris belonging to the Landlord and was in severe disrepair.

10. The Tribunal notes that no evidence has been provided in respect of any works having been carried out by the Landlord since that inspection.

The Tenancy

11. The Tenant occupied the Property by virtue of an Assured Shorthold Tenancy that commenced 10 December 2021 for a term of 12 months.

12. The rent reserved under this Tenancy was £600 pcm.

13. The Tenant’s repair obligations are set out within the Tenancy at clause 5.2. This includes obligations to:

“keep and leave all drains week cleared… …keep and leave the interior of Property including any Fixtures and Fittings and Furniture and Effects clean and tidy and in good and tenantable repair... …report without delay all defects and wats of repair for which the Tenant is not responsible.”

14. Clause 7.1 requires the Landlord to:

“…keep in tenantable repair the structure and the exterior of the Property (including drains gutters and external pipes) and to keep in repair and proper working order the installations (if any) in the Property for the supply of water gas and electricity and for sanitation (including basins and sinks and sanitary conveniences but not any appliances and related fixtures and fittings for making use of water gas or electricity) and for space heating and heating water provided that the Landlord is not required…”

15. The Tribunal also notes that clause 5.6.2 obliges the Tenant

“...to permit the Landlord any superior landlord and all others authorised by them

a. At reasonable times of the day to conduct viewings of the Property with prospective mortgagees, purchasers or (during the last two months of the tenancy) tenants by prior appointment;

b. To put in and maintain in a conspicuous part of the Property during the last two months of the tenancy a notice that it is to be sold, let or otherwise dealt with.”

16. In the absence of a new Tenancy being entered into, an Assured Periodic Tenancy pursuant to Section 5 (2) of the Housing Act 1988 (the 1988 Act) has arisen such that Sections 13 and 14 of the Act now apply.

The Law

17. Section 5 (3) of the Act provides that the periodic tenancy arising on expiry of the Assured Shorthold Tenancy is one:

“(a) taking effect in possession immediately on the coming to an end of the fixed term tenancy;

(b) deemed to have been granted by the person who was the landlord under the fixed term tenancy immediately before it came to an end to the person who was then the tenant under that tenancy;

(c) under which the premises which are let are the same dwelling-house as was let under the fixed term tenancy;

(d) under which the periods of the tenancy are the same as those for which rent was last payable under the fixed term tenancy; and

(e) under which, subject to the following provisions of this Part of this Act, the other terms are the same as those of the fixed term tenancy immediately before it came to an end, except that any term which makes provision for determination by the landlord or the tenant shall not have effect while the tenancy remains an assured tenancy”

18. Section 14 (1) of the 1988 Act provides that the Tribunal is required to determine the rent at which the Property might reasonably be expected to let in the open market by a willing landlord under an assured tenancy:

a. “having the same periods as those of the tenancy to which the notice relates;

b. which begins at the beginning of the new period specified in the notice;

c. the terms of which (other than relating to the amount of rent) are the same as those of the existing tenancy.”

19. Section 14 (2) of the 1988 Act requires the Tribunal to disregard:

a. “Any effect on the rent attributable to the granting of a tenancy to a sitting tenant;

b. Any increase in the value of the dwelling-house attributable to a relevant improvement (as defined by section 14 (3) of the Act) otherwise than as an obligation;

c. Any reduction in the value of the dwelling-house attributable to a failure by the tenant to comply with any terms of the tenancy.”

20. Section 11 of the Landlord and Tenant Act 1985 (the 1985 Act), provides that the Tribunal is to imply a covenant by the Landlord:

a. “to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes),

b. to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and

c. to keep in repair and proper working order the installations in the dwelling-house for space heating and heating water.”

21. Section 14 (7) of the 1988 Act states:

“Where a notice under section 13(2) above has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) above applies, to the addition of the appropriate amount in respect of rates) shall be the rent under the tenancy with effect from the beginning of the new period specified in the notice or, if it appears to the appropriate tribunal that that would cause undue hardship to the tenant, with effect from such later date (not being later than the date the rent is determined) as the appropriate tribunal may direct.”

Representations – The Tenant

22. The Tenant referred to the previous Tribunal Hearing (ref CAM/00KC/MNR/2023/0114) at which the current passing rent was determined following an inspection of the Property by the Tribunal.

23. The Tenant stated in that context that “…nothing has changed to increase the value of the property.”

24. The Tenant also referred to various works undertaken by the Landlord in 2018 and enclosed a selection of photographs.

Representations – The Landlord

25. Ms [RESPONDENT] of [COMPANY] ([COMPANY]) [RESPONDENT] submitted written representations as follows.

“The subject premises is in an unmodernised condition, due to the long-term nature of the tenancy and the current tenant wishing to keep the rent low. There are a limited number of unmodernised properties currently on the market, therefore the selected properties above are comparable to the subject property in terms of the size and location. The selected properties vary to show the different levels of modernisation of similar sized properties currently on the market and recently let.

This gives a rental value of between £1,450 to £1,600 per month for other three-bedroom properties recently let in this area (based on property size and type). Similarly to the subject premises, all comparable properties have gas central heating and double glazing. The main differences in the subject premises and the comparable properties listed above are the level of modernisation and the decoration.

In light of this comparable evidence and the differences mentioned above, it is considered the Section 13 application to £1,150 per calendar month is fair and reasonable, considering it is significantly lower than properties currently on the market.”

26. This representation included details of properties on [ADDRESS] (£1,500 pcm), [ADDRESS] (£1,450 pcm) [ADDRESS] (£1,600 pcm) and [ADDRESS] (£1,450 pcm).

27. Ms [NAME] also completed the Reply Form.

Determination

28. In determining the market rent, the Tribunal has regard to prevailing levels of rent in the general locality and achieved rental values in respect of other properties of comparable accommodation and provision that would be likely to be considered by a prospective tenant. The current rent, and the period that has passed since that rent was agreed or determined is not relevant.

29. Previous changes in rent are not, therefore, relevant as the Tribunal is required to assess the rent that would be offered by a prospective tenant who has no knowledge of the existing or previous rents.

30. The legislation requires the Tribunal to have regard to market demand assuming that the landlord is willing. The Tribunal is therefore unable to have any regard to the personal circumstances or identities of the actual landlord and tenant in assessing the level of rent.

31. In that regard, it is irrelevant whether or not the Landlord requires the rent to be at a certain level to fund its repair obligations under the lease or whether the Tenant feels that the services provided by the Landlord are “value for money”. As such, the cost of property maintenance to the Landlord does not affect the rent that would be offered by a prospective tenant in the market and must be disregarded.

32. However, as set out above, the Tribunal is required to have regard to the obligations of the Landlord and Tenant in respect of the repair, maintenance and upkeep of the Property and take into account the extent to which these obligations have been complied with.

33. As set out above, section 14 (2) (c) of the 1988 Act requires the Tribunal to disregard any failure by the Tenant to comply with their lease obligations. However, the Tribunal is to have regard to matters that do not arise as a direct consequence of the Tenants’ failure to comply with any of their obligations.

34. In the absence of any evidence or dispute that the Property has not been improved or altered since the Tribunal last inspected it is clear that a discount would be required to incentivise prospective tenants to accept a below market standard of accommodation. This point appears to have been accepted by Ms [NAME] in that she has assessed the rental value assuming that the Property was in a state of repair and decoration commensurate with market expectations of £1,450 to £1,600 pcm but has then discounted to arrive a rental estimate of £1,150 pcm.

35. The Tribunal notes the points made by the Tenant in respect of the locations and settings of the comparable properties cited by Ms [NAME] but, in the absence of any evidence of any actual or prospective lettings closer to the Property, there is no option but to have regard to what evidence is available and make adjustments to account for the differences.

36. The Tribunal considers that adjustments would be required to take account of the fact that the evidence provided by Ms [NAME] comprises asking rather than agreed rents and that her snapshot of the market was taken as at 3 October 2024 (i.e., 1 month after the effective date of the proposed rent increase).

37. In addition, it is highly unlikely that a family or persons funding the rental payments wholly from their own sources would be interested in taking the Property in its current state. As such, it is relevant, in considering the potential tenant and the level of offer that they would make, to take into account that the prospective tenant on an unrestricted open market basis may be reliant upon the Local Housing Allowance to fund the rent payments.

38. The Tribunal has therefore reviewed all the evidence provided and determines the market rental of the Property to be £1,050 pcm. The rent payable may not, therefore, exceed this figure. However, this does not prevent the Landlord from charging a lower figure.

39. This rent is to be effective from 1 September 2024.

Name: [NAME] [NAME]: 26 November 2024

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have.

If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case.

The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application.

If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed, despite not being within the time limit.

The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e., give the date, the property, and the case number), state the grounds of appeal and state the result the party making the application is seeking.

If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).