Tribunal Determines Fair Rent for Property Considering Tenant Improvements

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/19UJ/F77/2019/0002

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 7 St. [ADDRESS], [POSTCODE]

[NAME] Mr [RESPONDENT] [NAME]

Landlord BPT (Bradford Property Trust) Ltd

Tenant Mr [APPELLANT]

1. The fair rent is £139.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 06 March 2019

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

not applicable

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

n/a Per n/a

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 not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £159.00 per week prescribed by the Order.

[NAME] of decision 6 March 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 283.0

PREVIOUS RPI FIGURE Y 267.1

X 283.0 Minus Y 267.1 = (A) 15.9

(A) 15.9 Divided by Y 267.1 = (B) 0.05953

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.10953

Last registered rent* £143.00 Multiplied by (C) = 158.66 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £159.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £159.00 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.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/19UJ/F77/2019/0002 Property : 7 [ADDRESS] [POSTCODE] Type of Application : Decision in relation to Rent Act 1977 Date of Decision : 6 March 2019

Reasons for the decision

Background

1. On 19 October 2018 the landlord made an application to register the rent of the property at £171.60 per week

2. On 13 December 2018 the Rent Officer registered the rent at £147.00 per week exclusive of rates with effect from 21 January 2019.

3. On 7 January 2019 the landlord objected, and the matter was referred to the First Tier Tribunal, Property Chamber.

Inspection

4. We inspected the property in the company of the tenant and his family. The landlord did not attend. We found the property to be a three-storey terraced house built of brick under a slated roof in the late 19th century being part of a terrace facing a narrow road with limited parking. The terrace is at a higher level than the road with access up concrete steps

2 leading to a “platform” off which access to this and the adjoining house is gained.

5. The front door leads into a hall with stairs to the first floor and off which is a small front living room and a rear room with kitchen off. On the first floor is a front double bedroom, rear single bedroom and a bathroom/wc. Steep stairs then lead to the second-floor attic comprising a double bedroom with Velux windows front and rear. To the rear is a small garden with tenant’s shed

6. The windows and external doors have been replaced with double glazed UPVC units and are in good condition. We noted the poor decoration to the guttering, the slipped slates to the roof and the outdated bathroom fittings. The landlord had recently replaced the water heater in the kitchen.

7. The tenant has constructed feature fireplaces in the living rooms, fitted the kitchen after incorporating an adjoining external WC and replaced internal doors throughout. There is no landlord’s heating. The tenant also provides all white goods, carpets and curtains.

Representations/ Hearing

8. In representations dated 27 January 2019 the tenant referred to the extensive works he had carried out since 1977 and that it was unrealistic for the rent to increase by more than the current rate of inflation.

9. In representations dated 22 January 2019 [RESPONDENT] on behalf of the landlord accepted that the property may not be equivalent to modern standards, but that work was undertaken when reported by the tenant. In support of their proposed rent of £171.60 per week they referred to the agreed letting of a property in [ADDRESS] for the equivalent of £229.61 per week. This property was said to differ from the subject in that it had harbour views, was newly redecorated, had a new kitchen and central heating and fireplaces. It was also equipped with blinds, floor coverings and white goods. From the marketing photographs and plan supplied the property also appeared to be somewhat larger than the subject property.

10. The rent of £229.61 per week was then adjusted by “Using the theoretical figure of £10.00pw per benefit/improvement of the comparable property for Harbour Views, New Decoration and Kitchen and a figure of £5.00pw for GCH, Blinds, Floor Coverings, Whitegoods and Fire Places. The Proposed rent of £171.60 is still £3.01 cheaper than the lowest market rent tenancy currently available within less than ½ mile”

The law

3 11. When determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, must have regard to all the circumstances including the age, location and state of repair of the property. It must also disregard the effect of (a) any relevant tenant's improvements and (b) the effect of any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy, on the rental value of the property.

12. Case law informs the Tribunal;

a. That ordinarily a fair rent is the market rent for the property discounted for 'scarcity' (i.e. that element, if any, of the market rent, that is attributable to there being a significant shortage of similar properties in the wider locality available for letting on similar terms - other than as to rent - to that of the regulated tenancy) 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). Valuation

13. Thus, in the first instance the Tribunal determined what rent the landlord could reasonably be expected to obtain for the property in the open market if it were let today on the terms and in the condition that is considered usual for such an open market letting. We inspected the exterior of properties in [ADDRESS] and were able to confirm that they enjoyed harbour views and were larger than the subject property. In the schedule of market rental evidence produced by the Rent Officer and provide to the Tribunal and the parties rents in the DT4 postcode ranged from £138.23 to £230.77 per week. The market rent determined by the Rent Officer was £185 per week and we have no reason to disagree.

14. However, the rent referred to in the above paragraph is on the basis of a modern open market letting of a fully centrally heated property where the tenant has no liability to carry out repairs or decorations and the landlord supplies white goods, carpets and curtains. In this case the Tenant supplies his own heating, white goods, carpets and curtains and has made a number of improvements including extending and fitting the kitchen. We noted the deductions made by the landlord but consider £5 per week for the lack of central heating to be unrealistic and no allowance is made for the apparent size differential

15. In making its own adjustments to reflect the lower bid a prospective tenant would make to reflect the differences between the property in a modern lettable state and that as found by the Tribunal we make a deduction of 25% arriving at a rounded rent of £139.00 per week.

4 16. We then considered the question of scarcity as referred to in paragraph 12a above and determined that there was none in this area of West Dorset.

17. We therefore determined that the uncapped Fair Rent is £139.00 per week exclusive of council tax and water rates with effect from 6 March 2019

18. As this amount is below the rent calculated in accordance with the Maximum Fair Rent Order details of which are shown on the rear of the Decision Notice we determine that the sum of £139.00 per week is registered as the fair rent with effect from today’s date.

[NAME] (Chairman) [NAME] [NAME] 6 March 2019

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) must seek permission to do so by making written application to the First-tier Tribunal at the Regional office, which has been dealing with the case. The application must arrive at the Tribunal within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

2. If the person wishing to appeal does not comply with the 28-day time limit, the person shall include with the application for permission to appeal a request for an extension of time and the reason for not complying with the 28-day time limit; the Tribunal will then decide whether to extend time or not to allow the application for permission to appeal to proceed.

3. The application for permission to appeal must identify the decision of the Tribunal to which it relates, state the grounds of appeal, and state the result the party making the application is seeking.