Tribunal Determines Fair Rent for Property Under Rent Act 1977

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/43UF/F77/2020/0032

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 10 [ADDRESS], [POSTCODE]

[NAME] Mr [RESPONDENT] [NAME] Mr [APPELLANT]

Landlord [COMPANY]

Tenant Mrs [APPELLANT]

1. The fair [NAME] is £222.50 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 21 January 2021

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 [NAME] allowance is

n/a Per n/a

not applicable

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

6. The capping provisions of the [NAME] ([NAME]) Order 1999 apply (please see calculation overleaf).

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

8. For information only:

(a) The fair [NAME] to be registered is the maximum fair [NAME] as prescribed by the [NAME] ([NAME]) Order 1999. The [NAME] that would otherwise have been registered was £240.00 per week.

[NAME] of decision 21 January 2021

FR24 [NAME] FIGURE X 293.5

PREVIOUS RPI FIGURE Y 259.5

X 293.5 Minus Y 259.5 = (A) 34.0

(A) 34.0 Divided by Y 259.5 = (B) 0.13102

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.18102

Last registered [NAME]* £188.00 Multiplied by (C) = 222.03 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £222.50

Variable service charge NO If YES add amount for services

[NAME] = £222.50 Per Week

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].

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Case Reference : CHI/ 43UF/F77/2020/0032

Property : 10 [ADDRESS], [POSTCODE]

Landlord : [COMPANY] : None

Tenant : [NAME] [COUNSEL]

: None

Type of Application : [NAME] 1977 – Section 70

Appeal of [NAME]

Tribunal Members : [NAME] (Chairman)

[NAME] [NAME]

[NAME] of Inspection : 21st January 2021

Date of Decision : 21st January 2021 ____________________________________________ DECISION ____________________________________ © CROWN COPYRIGHT 2021 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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BACKGROUND

1) On 19th August 2020 the Landlord made an application to register the [NAME] of the property at £206.80 per week.

2) The landlord stated in the application that the [NAME] payable at the time of the application was £140.73 per week.

3) The [NAME] was previously registered on the 19th of October 2015 at £188.00 per week with effect from 15th of September 2018. The [NAME] notes the uncapped [NAME] to be £202.00 per week.

4) On the 26th October 2020 the [NAME] registered a [NAME] of £222.00 per week exclusive of rates with effect from that date. The [NAME] notes the uncapped [NAME] to be £245.00 per week.

5) On the 5th November 2020 the Tenant objected, and the matter was referred to the First-Tier Tribunal (Property Chamber).

6) On 11th December 2020 the Tribunal made Directions informing the parties that in view of the Government’s advice with respect to the Covid 19 outbreak an inspection would not take place. The parties were given the opportunity to provide supporting photographs of the property and if desired make representations to have the case stayed until an inspection was possible.

7) The Directions required the Landlord to send a statement to the Tenant and to the Tribunal supporting the application for an increase in [NAME]. The Tenant was also required to send a statement to the Landlord and to the Tribunal in support of her objection.

8) Neither party requested a Hearing.

9) The Tribunal met on 21st January 2021 to consider the application.

10) The matter was dealt with as a paper determination without hearing. In the current circumstances it has not been possible to inspect the property and the Tribunal relied on submissions from the Landlord and Tenant in correspondence, publicly available housing data online and its own expert knowledge.

EVIDENCE

11) The Tribunal received written representations from the Tenant, and these were copied to the parties. No representations were received from the Landlord. [NAME] supplied some records and copies of correspondence they had had with the parties.

12) The [NAME] and the Landlord’s application to [NAME] both state the tenancy began before 15th January 1985. The Tenant supplied a 2 page document headed “Tenancy Agreement” dated 23rd November 1995. It states

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the tenancy started on 27th November 1995. It also states, “The Tenant has security of tenure under this agreement.”

13) From the information supplied, it is an end-terrace two storey house in a residential area of Horley and the accommodation comprises 4 bedrooms, bathroom/WC, living room, kitchen, ground floor WC. There is a garden to the front and rear of the property. There is gas fired central heating.

Tenant’s Submissions

14) The Tenant stated that she has always maintained the property at her own expense. She has added a conservatory, carried out internal decorating, plastering and tiling. She has fitted a new kitchen and fencing, and carried out gutter maintenance.

15) The Tenant states there has been no updating of the property by the Landlord and the double glazing is old and of a poor standard with broken catches which means the windows are ill fitting and cause drafts. This is further exacerbated by there being inadequate insulation which results in the house being cold. The Landlord has replaced the boiler after asbestos was found.

16) The fascia requires replacing.

17) Although there is some off-street car parking, it is frequently difficult to find any spaces available.

18) The house has been adapted for her adult son.

19) There is a new housing development nearby and the rents being obtained for properties there are about the same level as the [NAME] sought. Because this property does not have the modern insulation and heating qualities, nor the modern kitchen and bathroom, the [NAME] should take into account these deficiencies.

20) The [NAME] increase from £143.59 per week to £220 is excessive and places a substantial financial burden upon her.

Landlord’s Submissions

21) The Landlord has not made any representations to the Tribunal.

22) Neither party gave any comparable evidence of rents for properties of this type set in this locality.

THE LAW

23) When determining a [NAME] the Tribunal, in accordance with the [NAME] 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 Tenants or any predecessor in title under the

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regulated tenancy, on the rental value of the property. That section also required the Tribunal not to take into account the personal financial and other circumstances of the Tenants.

24) 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 that:

a) Ordinarily a [NAME] is the market [NAME] for the subject property discounted for ‘scarcity’ and b) For the purposes of determining the market [NAME], assured tenancy (market) rents are usually appropriate comparables. (These rents may have to be adjusted where necessary to reflect any relevant differences between these comparables and the subject property).

25) The [NAME] ([NAME]) Order 1999 limits the increase from the previous registered [NAME]. It is worked out by a formula based on the change in Retail Prices Index since the last registration plus a fixed percentage increase set by law. If the [NAME] or the Tribunal decides the property is worth more than the maximum fair [NAME], the maximum fair [NAME] becomes the registered [NAME]. If the valuation is lower than the maximum fair [NAME] that valuation becomes the registered [NAME].

26) There are two occasions when the maximum fair [NAME] will not apply: - If there is no existing registered [NAME], and If the Landlord has improved or repaired the property and the [NAME] and/or the Tribunal considers the improvement or repair has made the [NAME] at least 15% more than the existing registered [NAME].

VALUATION

The [NAME]

27) The Tribunal firstly determined what [NAME] the Landlord could reasonably be expected to obtain for the property in the open market if it were let today in the condition that is considered usual for such an open market letting exclusive of water rates and council tax.

28) The letting market has grown substantially in recent years and there is now ample evidence of open market rents for Assured Shorthold Tenancies. In the competitive market that now exists, such properties need to be in first class structural and decorative order and be equipped with all amenities such as full modern central heating, double glazing and other energy-saving facilities along with white goods, carpets and curtains to ensure the property attains its full rental income potential. Where such items and facilities are missing the [NAME] is found to be correspondingly lower.

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29) Neither party provided any evidence of open market lettings, and the Tribunal therefore relied on its own knowledge and experience of general [NAME] levels for this type of property in this area.

30) The Tribunal’s conclusion was that an appropriate open market [NAME] for the property let on a modern open market letting of an Assured Shorthold Tenancy where the Landlord supplies white goods, carpets and curtains and the Tenant has no liability to carry out repairs or decorations, would be £300.00 per week, in line with the [NAME]’s finding.

31) However, the Tribunal noted from the representations made, together with the notes from the [NAME], that the actual property is not in the condition considered usual for a modern letting at a market [NAME], and it was necessary to adjust that hypothetical [NAME] of £300.00 per week to allow for the differences between the condition considered usual for such a letting and the condition of the actual property.

32) The Tribunal noted that the rating recorded by the Energy Performance Certificate dated 4th December 2012 was 66/D.

33) The Tribunal lists below several items that impact upon the rental value and requires an appropriate adjustment to be made

(a) Tenant’s Improvements – (b) Repairing and Decorating Liabilities (c) White Goods (d) Carpets and Curtains (e) Low EPC rating (f) Disrepair/old double glazing

34) There is no laid down formula for assessing each individual item’s impact on the rental value. The Tribunal has used its own knowledge and experience in assessing the overall impact these times would have when taken into account by a hypothetical tenant who would then require an appropriate reduction in [NAME] to take these into account.

35) The Tribunal considered these factors and decided that a deduction of 20% should be made for these factors which gives a [NAME] of £240.00 per week.

36) The Tribunal noted the Tenant’s concern about the extent of the [NAME] increase. The landlord is entitled to apply for a re-registration of [NAME] every two years but had not done so since 2015. Had this occurred, the interim [NAME] increases would have been smaller at each review. Furthermore the “capping” system keeps the [NAME] payable substantially lower than would otherwise have been the case. The Tribunal notes that in the initial application for registration of [NAME] form the Landlord only appears to be charging a [NAME] of £140.73 per week, the registered [NAME] at the time of his application was £188.00 per week with effect from 19th October 2015.

Scarcity

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37) The Tribunal did not consider that there was any substantial scarcity element for this type of property in this area and accordingly no further deduction was made for scarcity.

THE DECISION

38) We therefore determined that the uncapped [NAME] is £240.00 per week exclusive of council tax and water rates.

39) As this amount is above the [NAME] calculated in accordance with the [NAME] ([NAME]) Order 1999 details of which are shown on the rear of the Decision notice we determine that the lower sum of £222.50 per week is registered as the [NAME] with effect from 21st January 2021.

Appeals

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber), which may be on a point of law only, 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.

2. 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.

3. 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.

4. 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.