Tribunal sets fair rent at £812 for Codicote property

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/26UF/F77/2023/0010 HMCTS code : A:BTMMCOURT Property : 148 [ADDRESS], [POSTCODE] Applicant (Tenant) : [APPELLANT] Respondent (Landlord) : [APPELLANT] of application : Determination of a fair rent under section 70 of the Rent Act 1977 Tribunal members : [NAME] of Determination : 3 May 2023

DECISION

Description of hearing The form of determination was a telephone hearing described above as A:BTMMREMOTE The documents that the Tribunal was referred to are in bundles from the Applicant and the Respondent. The Tribunal has noted the contents and the decision is below.

2 Decision The Tribunal determined a fair rent of £812 per month effective from 3 May 2023.

Reasons Background 1. On 6 December 2022 the Landlord made an application to register the rent of the Property at £1,000 per month.

2. The Rent Officer registered a Fair Rent of £747 per month on 7 February 2023 effective from 15 February 2023. This was in lieu of the previous registered rent which was registered on 23 September 2020 and effective from 9 October 2020.

3. The previous registered rent was determined by the Tribunal (case ref: CAM/26UF/F77/2020/0021) without an inspection.

4. The Tenant objected by way of an email dated 27 February 2023. The matter was referred to the First Tier Tribunal, Property Chamber.

5. The Tribunal issued directions on 10 March 2023, inviting the parties to submit any further representations (including any photographs and details of rentals for similar properties) they wished the Tribunal to consider.

The Property 6. The Tribunal inspected the Property on 2 May 2023 accompanied by both the Tenant and the Landlord.

7. The Property comprises a mid-terraced period two-storey cottage of brick and slate construction providing two bedrooms at first floor level together with bathroom, kitchen and lounge at ground floor. There is a garden to the rear which includes a store but no off-street parking.

8. The external elevations appeared to be in reasonable condition although the timber soffits require repair and repainting.

9. The Property benefits from central heating and UPVC double-glazing which had been installed by the Landlord. Although the windows appeared functional there are brown resinous drips within the glass panes which are unsightly.

10. The kitchen, which was installed by the Tenant, is dated and, if the Property was to be let on the open market on an AST basis, would require modernisation. Similarly, the bathroom, whilst functional, does not meet modern market requirements. In this context, the Tribunal was informed that the bathroom was fitted by the Landlord, but the Tenant made a financial contribution.

3 11. The floor finishes and the curtains were installed by the Tenant.

12. A number of disrepair items were referred to in the papers submitted to the Tribunal. However, it was understood, and confirmed during the inspection, that these works had been recently addressed.

13. The Tenant had carried out the internal decoration with the exception of the front first floor bedroom which had been repaired by the Landlord following a water leak through the roof. The Tribunal was informed that the leak was caused by misaligned roof tiles which had been corrected since when there had been no further instances of water ingress.

14. The Council Tax Band for the Property is C.

15. It is a requirement of The Domestic Minimum Energy Standards Regulations that the Property be assessed and entered into the EPC Register. However, the Tribunal noted that there is no online entry for the Property. The Tribunal is therefore unaware as to whether, and to what extent, the Property meets the required standards. The Law

16. The relevant law is set out in section 70 of the Rent Act 1977 (the Act) and The Rent Acts (Maximum Fair Rent) Order 1999 (the Order). 17. Section 70 (1) of The Act provides that in assessing the rent:

“regard shall be had to all the circumstances (other than personal circumstances) and in particular to— i. the age, character, locality and state of repair of the dwelling-house, ii. if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture and iii. 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.” 18. Section 70 (2) of the Act provides that:

“…there shall be disregarded. i. any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or [NAME] to comply with any terms thereof; ii. any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or [NAME]

4 iii. if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or [NAME] 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.” 19. In addition, section 70 (2) of The Act requires the Tribunal to assume:

“that the number of persons seeking to become tenants of similar dwelling- houses in the locality on the terms (other than those relating to rent) 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.” 20. This latter provision requires the Tribunal to assume that the demand for similar rented properties in the locality does not significantly exceed the supply of such properties for rent; in effect, if such scarcity exists, the Tribunal is to adjust the rental figure so that the fair rent is not affected by it.

21. 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 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).” 22. In considering scarcity under section 70 (2) the Tribunal recognised that: (a) “there are considerable variations in the level of scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustment should be made; the Tribunal therefore considers the case on its merits; (b) terms relating to rent are to be excluded. A lack of demand at a particular rent is not necessarily evidence of no scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent.” 23. Section 71 (1) of the Act provides that the registration of the rent takes effect from the date that the Tribunal makes its decision.

24. Fair rents are subject to a capping procedure under the Rent Acts (Maximum Fair Rent) Order 1999 which limits increases by a formula based on the increase in the Retail Price Index since the previous registration.

5 25. Section 72 (1) (b) of the Act provides that the registration of a rent takes effect: “…if the rent is determined by the appropriate tribunal, from the date when the tribunal make their decision” Representations – Tenant 26. The Tenant’s objection centred on items of disrepair that were considered to be the responsibility of the Landlord. However, it was established during the Hearing that these items had now been addressed and that there were no outstanding items of concern in this regard.

27. The Tenant did not direct the Tribunal towards any comparable evidence but considered that the increase was excessive. Representations – Landlord

28. The Landlord confirmed that he had addressed the disrepair referred to by the Tenant.

29. With respect to rental values, the Landlord provided examples of letting particulars and explained that he was of the opinion that a rental value in the region of £1,200 per month was appropriate.

30. The Landlord accepted that there were differences between the Property and other properties on the market in respect of fit out and modernity but considered that the cost of bringing the Property up to a commensurate standard would be fairly small when considered over the lifetime of the works such that any reduction in rent comparative to the evidence should be similarly limited.

Determination

31. The Tribunal is unable to take into account the personal circumstances of the Parties. As such, the assessment of rent has no regard to the personal, financial or health circumstances of either party both of whom are considered to be hypothetical. The Tribunal has therefore had regard to hypothetical, willing parties in the open market.

32. As set out in the [NAME] case as referred to above, the first step is to determine the rent which a landlord could reasonably expect to obtain for the Property in the open market if it were let today in the condition and on the terms now usual for open market lettings. The rent currently paid and/or registered is not relevant to this exercise.

33. The Tribunal has noted that there are two similar (in terms of age, configuration and size) properties available to let in the locality as follows:

a. 104 High Street - an attractive two-bedroom mid terraced period property of brick and slate construction with a good sized garden available from 7 July 2023 at an advertised rent of

6 £1,200 per month. This property is in Council Tax Band D, has an EPC rating of E and extends to circa 61 sqm GIA.

b. 122 High Street - an attractive modernised mid terraced two- bedroom cottage of brick and slate construction with a garden to the rear available from 14 June 2023 at an advertised rent of £1,300 per month. This property is in Council Tax Band D, has an EPC rating of D and extends to circa 83 sqm GIA.

34. Taken together, these indicate that the asking rent for a two-bedroom, well maintained period terraced property in the locality is in the region of £1,200 to £1,300 per month.

35. However, both these properties are of a high standard of modern fit-out and decoration. It would therefore be the case that, if the Property was to be placed on the market together with 104 and 122 High Street, the market would consider the Property to be far less attractive and would bid accordingly. As such, the advertised rents are helpful in that they indicate the maximum levels of rent likely to be achieved in the market, but adjustments are required to take account of the differences.

36. In this regard, a landlord would have to refurbish the Property with such works including a new kitchen, bathroom, carpets, curtains and full redecoration even before regard is had to whether or not the Tenant has carried out any improvements.

37. The Landlord argued, during the Hearing, that the cost of these improvements would be relatively little and would be spread over a number of years such that any discount should be limited.

38. However, prospective tenants will not be concerned with the capital cost and write-off period of the improvements but will reduce their bid according to the availability of alternative premises in the market having regard to the term of their lease.

39. A prospective tenant will only take the Property if they can secure a rent reduction comparative to 104 and/or 122 High Street that, in their opinion, compensates them for the Property being less attractive and lacking modern facilities.

40. In this regard, the value of improvements by way of increased rent over the lifetime of refurbishment works tends to be in excess of the cost of those works amortised over the same period. Conversely, the reduction in value in the absence of such works will tend to be greater than the cost of carrying out those works when spread over the same period.

41. In addition to directly comparing the Property as it exists to properties available on the market on the basis of ASTs, the Tribunal also has to consider whether there is an excess of demand for such properties relative to supply. On the basis that there does not appear to be a lack of supply having regard to

7 the catchment area generally, the Tribunal does not consider that an allowance is warranted on this occasion.

42. Taking all these matters into account, the Tribunal is of the opinion that the fair rent for the Property as it actually exists (i.e., taking account of existing disrepair) and disregarding the Tenant’s improvements is £900 per month.

43. The provisions of the Rent Acts (Maximum Fair Rent) Order 1999 require that the registered rent is either the capped Fair Rent, details of which are attached to this Decision, or the Fair Rent decided by the Tribunal, whichever is the lower.

44. The Tribunal notes that the previous rent detailed on the Rent Register is £622.50 per month whereas the Landlord has stated £625.50 within the Application for Registration of Fair Rent RR1. However, the previous Tribunal Decision (as referred to at paragraph 3) was £625.50 per month.

45. This Tribunal has therefore calculated the capped Fair Rent by reference to the previous Tribunal Decision rather than the entry in the Rent Register which appears to have been made in error.

46. The calculated capped rent is £812 per month. This is lower than the Fair Rent assessed by the Tribunal.

47. Therefore, the capped Rent of £812 per month is to be registered.

Name: [NAME]: 3 May 2023

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 application for permission must be made to the First-tier Tribunal at the regional office which has been dealing with the case. 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

8 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. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).

FR27 First-tier Tribunal – Property Chamber File Ref No. CAM/26UF/F77/2023/0010

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal member(s) 148 [ADDRESS], [POSTCODE]

[NAME]

Landlord [APPELLANT]

Tenant [APPELLANT]

1. The fair rent is £812 per month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 3 May 2023

3. The amount for services included in the rent is Nil Per N/A

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

Nil 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

7. Details (other than rent) where different from Rent Register entry

The Property comprises a mid-terraced period two-storey cottage of brick and slate construction providing two bedrooms at first floor level together with bathroom, kitchen and lounge at ground floor. There is a garden to the rear which includes a store but no off-street parking. The external elevations appeared to be in reasonable condition although the timber soffits require repair and repainting. The Property benefits from central heating and UPVC double-glazing which had been installed by the Landlord. Although the windows appeared functional there are brown resinous drips within the glass panes which are unsightly.

8. For information only:

(a) The fair rent to be registered is less than the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was [N/A]

[NAME] of decision 3 May 2023

FR27 MAXIMUM FAIR RENT CALCULATION

Address of premises 39 [ADDRESS], [POSTCODE]

LATEST RPI FIGURE

x

PREVIOUS RPI FIGURE

y

x

minus y

= (A)

(A)

divided by y

= (B)

First application for re-registration since 1 February 1999

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C)

Last registered rent*

Multiplied by (C) = *(exclusive of any variable service charge)

Rounded up to the nearest 50 pence =

Variable service charge (Yes/No)

If YES add amount for services =

MAXIMUM FAIR RENT =

per

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 Committee’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.

812 month N/A 625.50 811.71 1.297706 N/A 294.3 367.2 294.3 294.3 0.247706 72.9 367.20 72.9 No 812 No

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

[NAME]

Landlord [APPELLANT]

Tenant [APPELLANT]

2. The effective date is 3 May 2023

Nil Per N/A

not applicable

5. The rent is not to be registered as variable.

8. For information only:

[NAME] of decision 3 May 2023

FR27 MAXIMUM FAIR RENT CALCULATION

Address of premises 148 [ADDRESS], [POSTCODE]

LATEST RPI FIGURE

x

PREVIOUS RPI FIGURE

y

x

minus y

= (A)

(A)

divided by y

= (B)

First application for re-registration since 1 February 1999

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C)

Last registered rent*

Rounded up to the nearest 50 pence =

Variable service charge (Yes/No)

If YES add amount for services =

MAXIMUM FAIR RENT =

per

Explanatory Note

The result is rounded up to the nearest 50 pence