First-tier Tribunal Sets New Fair Rent After Landlord's Improvements

OUTCOME: Allowed

FR27 First-tier Tribunal – [NAME] No. LON/00BD/F77/2023/0189

Notice of the Tribunal [NAME] 1977 Schedule 11

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

[NAME] A [NAME]

Landlord [APPELLANT] and [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair [NAME] is £1064.00 Per month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 27th October 2023

3. The amount for services is n/a Per n/a

negligible/not applicable

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

n/a Per n/a

negligible/not applicable

5. The [NAME] is not to be registered as variable.

6. The capping provisions of the [NAME] ([NAME]) Order 1999 do not apply because 15% exemption.

7. Details (other than [NAME]) where different from [NAME] entry

The repairs and improvements carried out between the June 1999 registration and the current determination are determined by the tribunal to create an increase of rental value above 15% so the maximum fair [NAME] provisions do not apply.

8. For information only:

(a) The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because the paragraph 7 , 15% rule applies.

[NAME] of decision 27th October 2023

FR27 [NAME] FIGURE X 378.4

PREVIOUS RPI FIGURE Y 165.6

X 378.4 Minus Y 165.6 = (A) 212.8

(A) 212.8 Divided by Y 165.6 = (B) 1.2850

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) 2.335

Last registered [NAME]* 414 Multiplied by (C) = 966.69 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £967.00

Variable service charge YES / NO If YES add amount for services no

[NAME] = £967.00 Per Month

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].

Case Reference

: LON/OOBD/F77/2023/0189 Property : [ADDRESS] [POSTCODE] Tenant

: Mr [APPELLANT] Landlord : [APPELLANT] and [APPELLANT] of Application : Determination of a [NAME] under section 70 of the [NAME] 1977 Tribunal

: Mr [NAME] (Hons) MA [NAME] : Hearing on papers with inspection (paper, video, audio) Date of Decision : 27th October 2023 Date of Statement of Reasons: 27th October 2023

_______________________________________________ FIRST - TIER TRIBUNAL [NAME] ([NAME])

Statement of Reasons

____________________________________

© CROWN COPYRIGHT 2023

Decision 1.The decision of the Tribunal is that the [NAME] of £1064 per month is determined with effect from 27th October 2023 Background 2.The [NAME], received an application from the landlord dated 1st March 2023 to re-register a fair [NAME], at £1600 per month. 3.Prior to the application, the [NAME] had registered a [NAME] of £414.00 per month with effect from 10th June 1999 following a First Tier Tribunal decision. Following the application, the [NAME] registered a fair [NAME] of £1415.00 per month. With effect from 1st March 2023, 4.In a letter dated 11th June 2023 the tenant [APPELLANT] objected to the [NAME] registered and the matter was referred to the First tier Tribunal ([NAME]) ([NAME]). The landlord also objected to the [NAME] by letter dated 19th June 2023. 5.Directions were issued by the Tribunal on the 4th July 2023. The Directions made provision for the filing with the Tribunal of the parties’ respective written submissions and, in particular, for the completion of a reply form giving details of the Property and including any further comments the parties wished the Tribunal to take into account in making its determination. The tenancy is a statutory (protected) periodic tenancy. The tenancy (not being for a fixed tenancy of 7 years or more) is subject to section 11 of the Landlord and Tenant Act 1985 which sets out the landlords statutory repairing obligations; the tenant is responsible for internal decorations.

Relevant Law 7. Provisions in respect of the jurisdiction of the Tribunal and the determination of a fair [NAME] are found in Schedule 11, Part 1, paragraph 9(1) to the [NAME] 1977, as amended by paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the [NAME] 1977. [NAME] 1977 Schedule 11, Part 1, paragraph 9 (as amended) “Outcome of determination of fair [NAME] by appropriate tribunal 9.-(1) The appropriate tribunal shall- (a) if it appears to them that the [NAME] registered or confirmed by the [NAME] officer is a fair [NAME], confirm that [NAME]; (b) if it does not appear to them that that [NAME] is a fair [NAME], determine a fair [NAME] for the dwelling house.” Section 70: Determination of fair [NAME] (as amended) “(1) In determining, for the purposes of the 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 the 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 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 tenant under the regulated tenancy or any predecessor in title of his 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 regulated tenancy or any predecessor in title of his; (c), (d) …[repealed] (e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any predecessor of his 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.”

Consequently, when determining a fair [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, has regard to all the circumstances including the age, location and state of repair of the Property. It also disregards the effect of (a) any relevant Tenant’s improvements and (b) the effect of any disrepair or defect attributed to the Tenant of any predecessor in title under the regulated tenancy, on the rental value of the Property. 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 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. (The rents may have to be adjusted where necessary to reflect any differences between the comparables and the subject property).

In considering scarcity under section 70 (2), the Tribunal recognises that: (a) there are considerable variations in the level of a scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustments should be made; the Tribunal, therefore, considers the case on its merits; (b) terms relating to rents are to be excluded. A lack of demand at a particular [NAME] is not necessarily evidence of scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular [NAME]. Fair rents are subject to a capping procedure under the [NAME] ([NAME]) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since last registration. The only exception to this restriction on a fair [NAME] is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the [NAME] by 15% or more of the previous registered [NAME]. Submissions Landlord 8. The application form dated 1st March 2023 included; A document titled “310 [ADDRESS] [POSTCODE]”, A schedule of price and rental levels for flats in [ADDRESS] A floor plan A letter dated 6th January 2022 to Mr [NAME] from [NAME] noting removal of lights as requested by tenant and intended replacement of electrical heaters. There is a note also regarding arranging a contractor to look at an

issue with the bathtub and that the landlord does not supply furniture for [NAME] properties. 9.A second letter dated 17th January 2022 from [NAME] to Mr [NAME] detailing within 12 points and the possibility of moving to a lower floor flat. 10.Lastly with the application, there is a memo dated January 2023 detailing the works carried out by the landlord in 2022. 11.There is a letter from the landlord dated 23rd April 2023, received 4th May 2023 to the [NAME], noting that a similar but inferior property [ADDRESS] had a [NAME] of £ 1005 per month registered in September 2022. Additionally noting that a [NAME] of £2250 per month is likely to be the market [NAME] for the subject property, 12.There are two photographs of repair work to the property, included which appear to show the blocking off, of a doorway.

13. By letter dated 14th August 2023, the landlord noted the tenant wanted an inspection, and the landlord requested for them to attend at the same time. 14.By completed reply form, the landlord did not request an inspection, nor a hearing. Noted also, there is no double glazing nor central heating in the property but there are carpets, curtains and white goods although the form does not note their provider. Under Improvements it is noted that

During 2022 the following items were carried out in the flat by the landlord. Replacement with all carpet with soundproof underlay Painting and decoration of the entire flat Replacement of bathroom and kitchen flooring Instal a new bathtub along with shower enclosure and handheld shower hose, retiled shower area Installed a handle for getting in and out of the shower Installed new panel electric heaters

Provided a bed mattress sofa and hoover. Plumbed and provided a new washer dryer in the bathroom Replaced sash cords to relevant windows as per tenant's request Provide new curtains for bedroom Installed a new entry phone system into the flat Installed new TV ariel to link to communal dish Removed inappropriate doorway to bathroom from landing, to render the flat more self-contained with a conventional single newly decorated access to the interior, previously two doors from the common parts. Redecorated refurbished and recarpeted the access and stairs from the entrance to the building to the door of the flat 15.In the “other comments “section of the Reply Form, there is commentary of the building, its location and comparable levels of [NAME] for properties in contemporary condition on contemporary tenancies. A level of £2250 per month is suggested. 16.Also various notes and invoices relating to the service charge of the property which the landlord is liable for.

Tenant 17. A copy of a letter from the tenant dated 11th April 2023, received 12th April 2023 by the [NAME] expressing concern at the proceedings. 18.An additional letter from the tenant [APPELLANT] to the [NAME] dated 15th March 2023. The letter contending that inflation between 1999 and January 2023

should not be taken into account in settling the fair [NAME]. The tenant suggests an increase of £21.00 per month. 19.A letter dated 19th March 2023 notes the Knight Frank Forecast Data submitted by the landlord which the tenant suggests would indicate a [NAME] of £1100 per month would be the market [NAME] but that these are derived from comparables of superior quality. The tenant submits £414 per month is fair or lower.

20. A letter dated 22nd March, raising concerns over the processing of the application to register a fair [NAME]. 21.A letter dated 30th April 2023, raising further concerns regarding the arrangement of a consultation by the [NAME]. 22.A completed Reply Form from the tenant - The tenant requests an inspection but does not request a hearing. The form confirms there is no central heating, nor double glazing, but that the landlord has provided carpets and curtains. The Form confirms the list of improvements above shown in the landlord's submission. The tenant also notes, the repairs that have been undertaken constitute largely cosmetic and do not constitute major changes as defined by the [NAME]. The submission includes a number of photographs of the interior of the property.

The Inspection 23.The inspection took place on 27th October before the determination on papers. The inspection confirmed the repairs and improvements noted by the landlord and the tenant. Notably the kitchen has new flooring, but the units supplied by the tenant remain from 1950s 1970s, the sink is small and dated. The bathroom, has a replaced bath with shower over, supplied by the landlord. The bathroom also contains a new water immersion tank, supplied by the landlord and also a new washing machine again supplied by the landlord. Additionally, the bathroom previously had a door to the external landing of the building's common parts. The flat does not have a car

parking space. There is a leak through the flat roof over the bay window area of the living room. Determination Reasons for Decision 24. The Tribunal first had to determine discrepancies in the factual evidence provided by the parties. The Tribunal finds the carpets, curtains are supplied by the landlord, and the microwave is supplied by the tenant but the washing machine and oven hob by the landlord. Lampshades supplied by the tenant. 25.The tribunal notes the repairs and improvements carried out by the landlord. [NAME] ([NAME]) Order 1999 provides for a limit on the increase of a fair [NAME]. 26.The only exception to this restriction on a fair [NAME] is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the [NAME] by 15% or more of the previous registered [NAME]. 27.The Tribunal next needed to determine whether the works carried out by the landlord between the last registration in 1999 and the date of the hearing constitute sufficient to reach the 15% threshold. 28.The test must be carried out at one point of time, the date of the determination. The fact that the [NAME] was last set in 1999 and market movements and inflation will have caused an increase is not material. The test is whether the property taken at the date of determination, comparing the rental value with and without the repairs and improvements. 29.The works are itemised in the landlord's evidence and confirmed in the evidence of the tenant. Whilst none of them in themselves is altering the nature of the property, they do amount collectively to an increase of its rental level. 30.The rental value of the property determined under section 70 without repairs and without improvements is; [NAME] - derived from comparable properties in contemporary letting condition

£2000 per month.

Deduction for condition 40% £800 per month -------------------------- £1200 per month Deduction for terms and conditions of the tenancy compared with assured shorthold comparables 10% £120 per month ------------------------------- £1080 per month Deduction for scarcity under Act 20% £210 per month ------------------------------ £864 per month. 31.The rental value of property determined under section 70 with landlords' repairs carried out since last registration in June 1999. [NAME] - derived from comparable properties in contemporary letting condition

£2000 per month. Deduction for condition 30% £600 per month -------------------------- £1400 per month Deduction for terms and conditions of the tenancy compared with assured shorthold comparables 5% £70 per month ------------------------------- £1330 per month Deduction for scarcity under Act 20%

£266 per month ------------------------------ £ 1064 per month. 32.Comparing the outcome of the before repairs and improvement, Without repairs £864 per month, with repairs £1064 per month. Increase in value £1064 minus £864 gives £ 200, this as a percentage of the pre repaired and pre improvements £200/£864 is 23% The figure of 23% is in excess of 15% so the limit provided by the Rents Act ([NAME]) Order 1999 is by paragraph 7 of the Order. The Rents Act ([NAME]) Order 1999 does not apply in this case as the landlord's improvements and repairs are determined in excess of 15% of the rental value. [NAME] ([NAME]) Order 1999 33. The [NAME] to be registered is not limited by the [NAME] ([NAME]) 1999, paragraph 7 applying. The [NAME] calculated in accordance with section 70 of the Act is £1064 per month. 34.Accordingly, the sum of £1064 per month will be registered as the fair [NAME] with effect from 27th October 2023, being the date of the Tribunal’s decision. Valuer Chair: [NAME]: 27th October 2023 Extended reasons: 27th October 2023

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) 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 should be made on Form RP PTA available at https://www.gov.uk/government/publications/form-rp-pta-application-for- permission-to-appeal-a-decision-to-the-upper-tribunal-lands-chamber 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. Please note that if you are seeking permission to appeal against a decision made by the Tribunal under the [NAME] 1977, the Housing Act 1988 or the Local Government and Housing Act 1989, this can only be on a point of law. If the First-tier Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber). _____________________________________________________