Tribunal Determines Fair Rent for Property

OUTCOME: Dismissed

First-tier Tribunal – Property Chamber File Ref No. LON/00BK/F77/2023/0047

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

Judge H [NAME]

Landlord [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair rent is £14,415.50 Per annum (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 21 July 2023

3. The amount for services is

Per

not applicable

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

Per

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

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 £ 15,600 Per annum.

Chairman Judge H Carr Date of decision 21 July 2023

MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 375.3

PREVIOUS RPI FIGURE Y 294.3

X 375.3 Minus Y 294.3 = (A) 81

(A) 81 Divided by Y 294.3 = (B) 0.275

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.325

Last registered rent* 10,877.50 Multiplied by (C) = 14,415.18 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 14,415.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £14,415.50 Per Annum

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.

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case reference

: LON/00BK/F77/2023/0047

Property : First Floor Flat, [ADDRESS],

Landlord

: [APPELLANT]

Tenant

: Mr [APPELLANT].[APPELLANT].[APPELLANT]. [APPELLANT] of Application : Rent Act 1977

The Tribunal

: Judge H [NAME] of determination : 21st July 2023

Date of full reasons : 2nd October 2023

DECISION

© CROWN COPYRIGHT 2015

MAN/00FA/F77/2015/0126 1

Decision 1. The fair rent determined by the Tribunal is £14,415.50. The effective date is 21st July 2023

Background 2. The property is a self-contained converted flat with full central heating comprising 2 rooms, a bathroom/WC and a kitchen.

3. The rent was previously registered on 25th September 2020 (effective from that date) at £10877.50 per year.

4. The landlord applied to the Rent Officer for a fresh registration of the rent on 29th September 2022 and a rent of £13,391.50, was registered on 8th November 2022, effective from that date. It may be noted that this was a capped rent and that rent officer noted that the uncapped rent was £15210.0. The landlord had in its application suggested a rent of £13,396.00 per annum

5. The tenant appealed against the rent registration on 5th December 2022. The basis for the appeal was that the 23.11% increase in rent was unjustified.

6. The tenant requested a hearing. He attended the hearing along with Mr [RESPONDENT] representing the landlord.

The Hearing

7. Mr [RESPONDENT] gave evidence as follows: a. The flat is one of five in the block. He is the only rent act tenant and his property is the only one with crittal windows which means his flat is poorly insulated. He also has two skylights, one in the hall and one in the bathroom. Mould and condensation are recurring problems in the property. b. Mr [NAME] said that he put in the original central heating himself in 1987 and has replaced the boiler on a couple of occasions since. The landlord replaced the boiler last year. c. Mr [RESPONDENT] installed an electric shower in the bathroom. He has provided all the furnishings, white goods and floor coverings. d. Mr [NAME] pointed out that the biggest problem with the property was the [NAME] that is run within the courtyard where his flat is situated. The business involves the garaging of high-performance cars which requires the [NAME] to run the car engines at regular intervals. This leads to a lot of noise and that noise can occur at any time of the day or night. It also involves lights being switched on.

MAN/00FA/F77/2015/0126 2

e. There are also problems with people entering the courtyard, urinating there, fiddling with locks. There are some security cameras.

8. Mr [NAME] gave evidence as follows: a. The [NAME] had been on site since the 1950s in one form or another. b. Mr [RESPONDENT] landlord is also the landlord of the other flats in the court. c. There are five flats in total. Three are approached from the street, but the doors of flats 28 and 29 are within the courtyard. All five flats overlook the yard where the [NAME] operates. d. All the flats suffer from poor insulation although the other flats have been upgraded and are let out on [NAME]. They have modernised bathrooms and kitchens. Their rent includes utilities and council tax. e. Mr [NAME] was not sure of the history of the central heating but confirmed that the boiler was replaced in March 2023 by the landlord. f. Mr [RESPONDENT] said that the most comparable flat is flat 29 which is identical to Mr [NAME] flat but the layout is reversed. It is a 1 bedroom flat with double glazing and was let out in September 2022 at a rent of £27, 300 per annum. g. Flat 25 is a 2-bedroom flat which was let out at an agreed rent on 12th August 2021 of £31,200. h. Flat 26 is a 1 bedroom flat which is approached from the street. There has been difficulty letting it out but it was let at a rent of £27,560 in December 2022. i. Flat 27 is a 2 bedroom flat let on 1st July 2023 at a rent of £27,540. j. Whilst the tenant commented that people don’t stay long in the flats, the landlord’s position is that they are often rented by young mobile professionals who inevitably move on. There are very few voids and demands for the lats is very high.

Inspection 9. The Tribunal inspected the property on 21 July 2023 in the presence of the tenant. In general the flat was in adequate condition but unmodernised. The tribunal saw evidence of mould and noted the poor quality of the windows,

10. There is no provision of carpets, curtains and white goods as would be expected in a modern market rent property.

The law 11. When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70: (1) has regard to all the circumstances (other than personal circumstances) including the age, location and state of repair of the property;

MAN/00FA/F77/2015/0126 3

(2) disregards the effect on the rental value of the property of (a) any relevant tenant improvements and (b) any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy; (3) assumes (as required by s.70(2)) that, whatever might be the case, the demand for similar rented properties in the locality does not significantly exceed the supply of such properties for rent. In other words that the effect of any such ‘scarcity’ on rental values is not reflected in the fair rent of the subject property.

12. 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 that section 70 means (a) that ordinarily a fair rent is the market rent for the subject property discounted for ‘scarcity’ and (b) that for the purposes of determining the market rent, 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). Thus once the market rent for the property has been determined by the exercise in (2) above that rent must be adjusted, where necessary, for any scarcity.

13. The Rent Acts (Maximum Fair Rent) Order 1999 (SI 1999/6) is applicable.

Determination 14. The Tribunal determined, having regard to comparable properties available for letting at market rents in the area, that the open market rent for the property in good condition was £27,846 per annum based on the rent achieved for Flat 29 plus a modest 2% uplift to account for flat 29 being let in September 2022.

15. It considered that further deductions of 30% (£8,353.80) should be made for the lack of double glazing, unmodernised bathroom and kitchen, internal decorations and flooring. This 30% deduction also takes into account work undertaken at the tenant’s expense in relation to the central heating system installation and shower.

16. The Tribunal also determined that there was scarcity in the area and made a further deduction of 20% (£3,898.44)

17. This gave an overall deduction from the open market rent to arrive at a rounded fair rent of £15,600 per annum . However because of the applicability of the capping provisions the rent was determined at £14,415.50.