Tribunal Reduces Rent Due to Property Condition

OUTCOME: Allowed

MR24 First-tier Tribunal – Property Chamber File Ref No. JM/LON/00BK/MDR/2022/0019

Notice of the Tribunal Decision and Register of Rents under Assured Shorthold Tenancies (Section 22 Determination)

Housing Act 1988 Section 22

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

Chair R [NAME] [ADDRESS], [POSTCODE]

Tenant [APPELLANT]

1. The rent is: £ 2100.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3)

2. The date the decision takes effect is: 2 January 2023

*3. The amount included for services is not applicable

Per

*4. Service charges are variable and are not included

5. Date assured shorthold tenancy commenced 2nd November 2022

6. Length of the term or rental period 24 Months

7. Allocation of liability for repairs Landlord

8. Furniture provided by landlord or [NAME] items of furniture

9. Description of premises Ground floor two bedroom, two bathrooms, one living room flat within converted church, central heating and outside garden/space.

Chairman R Waterhouse FRICS Date of Decision 29th March 2023

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : JM/LON/00BK/MDR/2022/0019 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] : In Person Respondent : [redacted] : Mr. [COUNSEL] of [NAME] : Market Rent under s22 of the Housing Act 1988 Tribunal member(s) : Mr [NAME] MA LLM FRICS Mr [NAME] [NAME] JP Date and venue of hearing : 20th March 2023 Hearing at [ADDRESS] adjourned and reconvened 29th March 2023. Date of decision : 29th March 2023

DECISION

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Background 1. On the 8th November 2022 the Tenant of the above property made an [NAME] under section 22(1) of the Housing Act 1988.

2. The tenancy of number [ADDRESS] commenced on 2nd November 2022 for 24 months, expiring on the 1st November 2024, With a rent of £2500 per month payable on the 2nd of the month.

3. The tribunal were provided with a copy of the tenancy agreement with the [NAME].

4. On the 11th November 2022 and supplemented 25th January 2023, the tribunal made Directions informing the parties of the timetable for exchange of documents.

5. The Directions required the tenant to send a reply form to the tribunal with a copy to the landlord. The landlord was also required to send a completed reply form to the tenant with copy to the tribunal. The tenant had the opportunity to comment on the landlords reply form copied to the landlord and the tribunal.

6. A hearing was requested.

7. The tribunal met on 20th March 2023 to consider the [NAME], in the morning the tribunal inspected the property. There was an urgent need to postpone the hearing from the afternoon of the 20th March before the hearing commenced.

8. The hearing was heard on the 29th March 2023 by video. The Property 9. The property is a two-bedroom, two bathrooms flat, with a kitchen and a living room, situated on the ground floor with substantial outside space for a flat of this nature. The flat is situated in a converted church. The Evidence Appellants Evidence 10. The applicant submitted evidence comprising correspondence with the respondent, receipts for items purchased and photographs.

11. The applicants' contents fall into several main areas.

3 12. The property on occupation was not of an appropriate standard of cleanliness, a number of fittings were broken or lose including leaking kitchen sink.

13. There was furniture and utensils beyond that anticipated and these were placed in storage. Additionally, some items were broken or in disrepair for including microwave, dishwasher and a bed.

14. The garden was overgrown to an extent that made use of it extremely limited, and that despite correspondence this matter had not been rectified. The Applicant undertook the work themselves.

15. In one bedroom there was black mould around the skirting boards and black mould in near windows in both bedrooms.

16. In summary the applicant felt they had been put to considerable time and effort to make the property to an appropriate standard.

17. The applicant submitted evidence of several comparables of two- bedroom flats. Of particular relevance was number [ADDRESS] a similar ground floor flat with outside space/ garden. The particulars included in the Applicants evidence shows the property comprises a two bed two-bathroom property with wraparound outside space. The property was marketed through [NAME] at £494 per week. The applicant submitted it was recently successfully let at, £1980 per month on a three-year contract.

18. Additionally during the hearing it emerged that the Applicant and the Respondent were in discussions over an arrangement for the Respondent to compensate the Applicant over the works to the outside garden space.

19. The Respondents Case 20. The respondent notes that an end of tenancy clean had been carried out. A further clean of specific aspects was arranged following the applicant noting their dissatisfaction with the first clean and further specific upholstery cleaning was carried out.

21. The respondent submitted repairs had been carried out to electrical items as requested.in terms of the applicant's perception of excess furniture and utensils, the respondent noted the challenge for the landlord over holding sufficient furniture to meet the needs of various potential tenants.

4 22. It was acknowledged the garden was overgrown, and it was noted by the tribunal that discussions were underway to compensate the applicant for the works carried out in respect of the outside space.

23. The respondent acknowledged that they were extremely concerned regarding the presence of black mould and intimated further remedial action would be considered.

24. With regards to comparable properties, the respondent noted that most two-bedroom properties in the vicinity would be around 600 square feet. Also, that locality was a very important factor in the determination of rental level. The Law 25. In accordance with the terms of section 22 of the Housing Act 1988 ( The Act) the tribunal proceeded to determine the rent at which it considered that the subject property might reasonably be expected to be let on the open market by a willing landlord under an assured shorthold tenancy exclusive of water rates and/or council tax.

26. The tribunal cites the relevant section below: 22 Reference of excessive rents to appropriate tribunal. (1)Subject to section 23 and subsection (2) below, the tenant under an assured shorthold tenancy may make an [NAME] in the prescribed form to the appropriate tribunal for a determination of the rent which, in the appropriate tribunal’s opinion, the landlord might reasonably be expected to obtain under the assured shorthold tenancy. (2) No [NAME] may be made under this section if— (a)the rent payable under the tenancy is a rent previously determined under this section; (aa)the tenancy is one to which section 19A above applies and more than six months have elapsed since the beginning of the tenancy or, in the case of a replacement tenancy, since the beginning of the original tenancy; or (b)the tenancy is an assured shorthold tenancy falling within subsection (4) of section 20 above (and, accordingly, is one in respect of which notice need not have been served as mentioned in subsection (2) of that section). (3)Where an [NAME] is made to the appropriate tribunal under subsection (1) above with respect to the rent under an assured shorthold tenancy, the

5 appropriate tribunal shall not make such a determination as is referred to in that subsection unless they consider— (a)that there is a sufficient number of similar dwelling-houses in the locality let on assured tenancies (whether shorthold or not); and (b)that the rent payable under the assured shorthold tenancy in question is significantly higher than the rent which the landlord might reasonably be expected to be able to obtain under the tenancy, having regard to the level of rents payable under the tenancies referred to in paragraph (a) above. (4)Where, on an [NAME] under this section, the appropriate tribunal make a determination of a rent for an assured shorthold tenancy— (a)the determination shall have effect from such date as the appropriate tribunal may direct, not being earlier than the date of the [NAME]; (b)if, at any time on or after the determination takes effect, the rent which, apart from this paragraph, would be payable under the tenancy exceeds the rent so determined, the excess shall be irrecoverable from the tenant; and (c)no notice may be served under section 13(2) above with respect to a tenancy of the dwelling-house in question until after the first anniversary of the date on which the determination takes effect. (5) Subsections (4), (5) and (8) of section 14 above apply in relation to a determination of rent under this section as they apply in relation to a determination under that section and, accordingly, where subsection (5) of that section applies, any reference in subsection (4)(b) above to rent is a reference to rent exclusive of the amount attributable to rates.

27. In so doing the tribunal, as required by section 14(1) ignored the effect on the rental value of the property of any relevant tenant’s improvements as defined in section 14(2) of that Act. Consideration 28. The first consideration to be addressed by the tribunal was Section 22(3)(a) of the Act. The tribunal must find there to be a sufficient number of similar dwelling houses in the locality. Law does not define “sufficient”. Similarly, there is no definition of “similar” or “locality” , but there is considerable case law to give the tribunal guidance.

29. The second consideration to be considered is whether the rent is “considerably higher than the rent which the landlord might reasonably

6 be expected to be able to obtain under the tenancy, having regard to the level of rents payable under the tenancies in the locality”.

30. The tribunal using the evidence supplied by the parties and the tribunals own expertise. The Decision 31. The appellants contention in essence is that the property was taken on at £2500 per month, on the understanding that various actions were taken, and the property was in repair. The appellant has waited a period of time for rectification of the issues, some have been resolved within the time some not. The applicant has undertaken remedial action themselves. Outstanding matters remaining is mould in second bedroom. Given this it renders the second bedroom less useable, which has an impact on rental value.

32. The tribunal is satisfied that there are sufficient similar properties in the locality to make a determination.

33. It has considered the comparable evidence of the appellant and the respondent and used its own expertise. In particular another ground floor property, number 2, in the same block currently available for £2145 per month, with [NAME]. The tribunal understands it was recently let on a three-year contract for £1980 per month.

34. The tribunal is of the view that the longer the contract period the more willing a landlord may be to lower the price. The tribunal notes the extent of the outside space is smaller than the subject property, noting also the size of number 2 is 1108 square feet, and it appears from the particulars to be in good condition.

35. Taking into account the comparables and the condition of the subject property, [ADDRESS], the tribunal determines the rent is £2100.00 per month. The tribunal is satisfied that the current rent of £2500.00 per month is significantly higher than the rent assessed by the tribunal and so the rent of £2100.00 is determined. The tribunal has discretion on the date the determination should have effect from. Neither party gave representations on what the date of any re determined rent should be. The tribunal considers a reasonable period of time for the issues to have been sorted out to be say 2 months; this opportunity was not fully utilised. The re determined rent can have an effective date no earlier than the date of [NAME]. The tribunal determines £2100.oo should have an effective date of the 2nd January 2023 given the circumstances of the case.

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R. Waterhouse

Name: Tribunal Judge Waterhouse Date: 29th March 2023

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Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) 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 [NAME] for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28 day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] 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 [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

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THE LEGISLATION Housing Act 1988 s.13.— Increases of rent under assured periodic tenancies. (1) This section applies to— (a) a statutory periodic tenancy other than one which, by virtue of paragraph 11 or paragraph 12 in Part I of Schedule 1 to this Act, cannot for the time being be an assured tenancy; and (b) any other periodic tenancy which is an assured tenancy, other than one in relation to which there is a provision, for the time being binding on the tenant, under which the rent for a particular period of the tenancy will or may be greater than the rent for an earlier period. (2) For the purpose of securing an increase in the rent under a tenancy to which this section applies, the landlord may serve on the tenant a notice in the prescribed form proposing a new rent to take effect at the beginning of a new period of the tenancy specified in the notice, being a period beginning not earlier than— (a) the minimum period after the date of the service of the notice; and (b) except in the case of a statutory periodic [tenancy—] [ (i) in the case of an assured agricultural occupancy, the first anniversary of the date on which the first period of the tenancy began; (ii) in any other case, on the date that falls 52 weeks after the date on which the first period of the tenancy began; and ] (c) if the rent under the tenancy has previously been increased by virtue of a notice under this subsection or a determination under section 14[below—] [ (i) in the case of an assured agricultural occupancy, the first anniversary of the date on which the increased rent took effect; (ii) in any other case, the appropriate date. ] (3) The minimum period referred to in subsection (2) above is— (a) in the case of a yearly tenancy, six months; (b) in the case of a tenancy where the period is less than a month, one month; and (c) in any other case, a period equal to the period of the tenancy. [ (3A) The appropriate date referred to in subsection (2)(c)(ii) above is— (a) in a case to which subsection (3B) below applies, the date that falls 53 weeks after the date on which the increased rent took effect; (b) in any other case, the date that falls 52 weeks after the date on which the increased rent took effect. (3B) This subsection applies where— (a) the rent under the tenancy has been increased by virtue of a notice under this section or a determination under section 14 below on at least one occasion after the coming into force of the Regulatory Reform (Assured Periodic Tenancies) (Rent Increases) Order 2003; and

10 (b) the fifty-third week after the date on which the last such increase took effect begins more than six days before the anniversary of the date on which the first such increase took effect. ] (4) Where a notice is served under subsection (2) above, a new rent specified in the notice shall take effect as mentioned in the notice unless, before the beginning of the new period specified in the notice,— (a) the tenant by an [NAME] in the prescribed form refers the notice to [the appropriate tribunal] ; or (b) the landlord and the tenant agree on a variation of the rent which is different from that proposed in the notice or agree that the rent should not be varied. (5) Nothing in this section (or in section 14 below) affects the right of the landlord and the tenant under an assured tenancy to vary by agreement any term of the tenancy (including a term relating to rent).

s.14.— Determination of rent by [tribunal] . (1) Where, under subsection (4)(a) of section 13 above, a tenant refers to [the appropriate tribunal] a notice under subsection (2) of that section, the [appropriate tribunal]3 shall determine the rent at which, subject to subsections (2) and (4) below, the [appropriate tribunal]3 consider that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy— (a) which is a periodic tenancy having the same periods as those of the tenancy to which the notice relates; (b) which begins at the beginning of the new period specified in the notice; (c) the terms of which (other than relating to the amount of the rent) are the same as those of the tenancy to which the notice relates; and (d) in respect of which the same notices, if any, have been given under any of Grounds 1 to 5 of Schedule 2 to this Act, as have been given (or have effect as if given) in relation to the tenancy to which the notice relates. (2) In [NAME] a determination under this section, there shall be disregarded— (a) any effect on the rent attributable to the granting of a tenancy to a sitting tenant; (b) any increase in the value of the dwelling-house attributable to a relevant improvement carried out by a person who at the time it was carried out was the tenant, if the improvement— (i) was carried out otherwise than in pursuance of an obligation to his immediate landlord, or (ii) was carried out pursuant to an obligation to his immediate landlord being an obligation which did not relate to the specific improvement concerned but arose by reference to consent given to the carrying out of that improvement; and (c) any reduction in the value of the dwelling-house attributable to a failure by the tenant to comply with any terms of the tenancy. (3) For the purposes of subsection (2)(b) above, in relation to a notice which is referred by a tenant as mentioned in subsection (1) above, an improvement is a relevant improvement if either it was carried out during the tenancy to which the notice relates or the following conditions are satisfied, namely— (a) that it was carried out not more than twenty-one years before the date of service of the notice; and

11 (b) that, at all times during the period beginning when the improvement was carried out and ending on the date of service of the notice, the dwelling-house has been let under an assured tenancy; and (c) that, on the coming to an end of an assured tenancy at any time during that period, the tenant (or, in the case of [NAME], at least one of them) did not quit. [ (3A) In [NAME] a determination under this section in any case where under Part I of the Local Government Finance Act 1992 the landlord or a [NAME] is liable to pay council tax in respect of a hereditament (“the relevant hereditament”) of which the dwelling-house forms part, the [appropriate tribunal] shall have regard to the amount of council tax which, as at the date on which the notice under section 13(2) above was served, was set by the billing authority— (a) for the financial year in which that notice was served, and (b) for the category of dwellings within which the relevant hereditament fell on that date, but any discount or other reduction affecting the amount of council tax payable shall be disregarded. (3B) In subsection (3A) above— (a) “hereditament” means a dwelling within the meaning of Part I of the Local Government Finance Act 1992, (b) “billing authority” has the same meaning as in that Part of that Act, and (c) “category of dwellings” has the same meaning as in section 30(1) and (2) of that Act. (4) In this section “rent” does not include any service charge, within the meaning of section 18 of the Landlord and Tenant Act 1985 , but, subject to that, includes any sums payable by the tenant to the landlord on account of the use of furniture [, in respect of council tax] or for any of the matters referred to in subsection (1)(a) of that section, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house concerned or are payable under separate agreements. (5) Where any rates in respect of the dwelling-house concerned are borne by the landlord or a [NAME], the [appropriate tribunal] shall make their determination under this section as if the rates were not so borne. (6) In any case where— (a) [the appropriate tribunal] have before them at the same time the reference of a notice under section 6(2) above relating to a tenancy (in this subsection referred to as “the section 6 reference”) and the reference of a notice under section 13(2) above relating to the same tenancy (in this subsection referred to as “the section 13 reference”), and (b) the date specified in the notice under section 6(2) above is not later than the first day of the new period specified in the notice under section 13(2) above, and (c) the [appropriate tribunal]9 propose to hear the two references together, the [appropriate tribunal] shall make a determination in relation to the section 6 reference before [NAME] their determination in relation to the section 13 reference and, accordingly, in such a case the reference in subsection (1)(c) above to the terms of the tenancy to which the notice relates shall be construed

12 as a reference to those terms as varied by virtue of the determination made in relation to the section 6 reference. (7) Where a notice under section 13(2) above has been referred to [the appropriate tribunal] , then, unless the landlord and the tenant otherwise agree, the rent determined by [the appropriate tribunal] (subject, in a case where subsection (5) above applies, to the addition of the appropriate amount in respect of rates) shall be the rent under the tenancy with effect from the beginning of the new period specified in the notice or, if it appears to [the appropriate tribunal] that that would cause undue hardship to the tenant, that that would cause undue hardship to the tenant, with effect from such later date (not being later than the date the rent is determined) as the committee may direct. (8) Nothing in this section requires [the appropriate tribunal] to continue with their determination of a rent for a dwelling-house if the landlord and tenant give notice in writing that they no longer require such a determination or if the tenancy has come to an end. (9) This section shall apply in relation to an assured shorthold tenancy as if in subsection (1) the reference to an assured tenancy were a reference to an assured shorthold tenancy.