First-tier Tribunal Sets Maximum Fair Rent Under Rent Act 1977

OUTCOME: Allowed

First-tier Tribunal – Property Chamber File Ref No. LON/00AE/F77/2024/0022

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME] [APPELLANT]

Tenant Ms [APPELLANT]

1. The fair rent is £210.50 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 2 April 2024

3. The amount for services is N/a Per

negligible/not applicable

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

N/a Per

negligible/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

None

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 £306.00 per week.

[NAME]- [NAME] of decision 2 April 2024.

MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 381.0

PREVIOUS RPI FIGURE Y 314.3

X 381.0 Minus Y 314.3 = (A) 66.7

(A) 66.7 Divided by Y 314.3 = (B) 0.2122

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) 1.2622

Last registered rent* £166.50 Multiplied by (C) = £210.15 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £210.50

Variable service charge NO If YES add amount for services -

MAXIMUM FAIR RENT = £210.50 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.

Case Reference

: LON/00AE/F77/2024/0022.

Property : Flat A, [ADDRESS], Harlesden, London NW10. 8AH.

Tenant

: [NAME]

Landlord : Network Homes

Date of Objection : 22 November 2023.

Type of Application : Section 70, Rent Act 1977

Tribunal

: Valuer Chair, [NAME].

Date of Summary Reasons

: 2 April 2024

_______________________________________________

DECISION

The sum of £210.50 per week will be registered as the maximum fair rent with effect from 2 April 2024 being the date the Tribunal made the Decision. ____________________________________

© CROWN COPYRIGHT 2023

REASONS FOR THE DECISION

Background FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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. Tribunal did not inspect the property but considered this case based on the papers provided by the parties.

Evidence 3. The Tribunal has considered the written submissions provided by the Tenant in that the rent registered by the Rent Officer was too high, that previously she had been subjected to rent increases of £1-£2 per week and that she had already had an increase in February 2023. The landlord’s response was that the tenant had not had a rent increase in either 2017, 2020 or 2021. The landlord also said that, in line with Government guidelines the rent increase had been ‘capped’ at 7%, and that this had been applied in the first year and a second increase of 7% would be applied in the second year (presumably subject to the level of CPI in September 2024).

The Application

4. By an RR1 dated 10 October 2023 the landlord sought an increase in the rent. At the time of the application the maximum registered rent was £166.50 per week, following a registration on 4 November 2021. It appears however that the rent being charged to the tenant at the time of this new registration was £129.74, and it is this figure that the landlords have applied their 7% increase to – making a total of £138.24 per week.

5. Within the RR1 the landlord sought an increase to £147.90 per week (this is the figure that would be effective, assuming that any rent increase is again capped at 7% in 2024/5).

6. On 10 November 2023, the Rent Officer registered a rent of £209.00 per week, and it is this figure that is objected to by the tenant in her application of 22 November 2023.

7. The matter was referred to this tribunal for a final determination.

8. The tribunal issued directions on 30 January 2024 that requested the parties provide details of any comparable properties that they wished the tribunal to consider, and any other details of the property that should be taken into consideration. Neither party provided any evidence of other properties they wished the tribunal to consider.

9. The difficulty faced by tenants of registered providers is that both the Rent Officer and this Tribunal can only set a maximum fair rent for a property, as in this case. Frequently the landlord does not charge the maximum rent, either because of policy decisions, or Government intervention. In addition, the tribunal must apply the Maximum Fair Rent calculation to the registered rent in existence when the application for re-registration is made. This means that, in this instance the fair rent had been registered at £166.50, while the landlord was charging £129.74., but the tribunal must apply the MFR calculation to £166.50.

10. In addition, the tribunal must consider what the market rent for the property would be, if let on the open market, and then make adjustments from that figure to take into consideration the differences between the open market tenancy and a secure tenancy, and also make an allowance for what is known as ‘scarcity’, the imbalance in the supply and demand for property in a wide area. In this instance the tribunal considers that Greater London provides a sufficiently wide area.

11. Taking the subject property then, the tribunal considers that an appropriate market rent would be £450.00 per week.

12. First of all the tribunal adjusted the market rent to reflect the terms of the tenancy, the lack of carpet, curtains, white goods and lack of modernisation that would be found in an open market letting, and deducted an amount of 15%.

12. The tribunal then had to consider the deduction of ‘scarcity’ as required under the Rent Act 1977, and in this instance deducted 20% to reflect the fact that there is an imbalance in the supply and demand for property in the wide area of Greater London. The calculation of the rent achieved is set out below.

Determination and Valuation

13.

per week Market Rent

£ 450.00

Less

Terms of tenancy and lack of recent Modernisation approx. 15%

(£ 67.50)

£ 382.50

Less Scarcity

approx. 20%

(£ 76.50)

Adjusted market rent: £306.00

14. The Tribunal determines that the fully adjusted market rent (the fair rent) for the subject property would be £306.00 per week. However, the tribunal must then carry out the calculation using the Maximum Fair Rent Order, a copy of that valuation is attached to the decision. The application of the MFR produced a rental of £210.50 per week. The legislation requires the tribunal to register the lower of the rents produced, and therefore registers as the Maximum Fair Rent £210.50 per week. As noted above, this is the maximum figure that the landlord can charge until the rent is re-registered but may not be the rent actually charged by the landlord.

Decision

15. The tribunal registers the Fair Rent for the subject property at £210.50 per week with effect from 2 April 2024. This figure is inclusive of service charge.

Chairman: [NAME]: 2 April 2024.

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