Tribunal Sets Fair Rent During Construction Work

OUTCOME: Dismissed

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Case Reference : TR/LON/OOAW/F77/2024/0251

Property : 4 [ADDRESS], [POSTCODE]

Tenant : Mr [APPELLANT] N [APPELLANT]

Landlord : [APPELLANT] of Application : Determination of a Fair Rent under section 70 of the Rent Act 1977

Tribunal

: Mr [NAME] (Hons) MA LLM

FRICS Mr [NAME] JP

HMCTS Code

: Hearing with inspection

Date of Decision : 17 March 2025

_______________________________________________ Full Reasons

____________________________________

© CROWN COPYRIGHT 2025 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Decision 1. The decision of the Tribunal is that a fair rent of £2560.00 per quarter including a service charge of £449.61 per quarter is determined with an effective date of 17 March 2025. Background 2. An application was made to re-register a fair rent, was received, by the landlord of the property, [RESPONDENT]. Prior to the application to re-register a fair rent, the Rent Officer had registered a rent of £1165.50 per quarter including £217.00 per quarter for services with effect from 29 September 2003.

3. Subsequently the Rent Officer registered a fair rent of £2517.00 per quarter including a service charge of £449.61 per quarter with effect from 19 June 2024.

4. In a letter dated 30 June 2024, received by the Rent Officer on 4 July 2024, the tenant objected to the rent registered and the matter was referred to the First– tier Tribunal (Property Chamber) (Residential Property).

5. Directions were issued by the Tribunal on 20 August 2024. Thereafter, the Directions made provision for the filing with the Tribunal of the parties’ respective written submissions and, in particular, for the completion of a reply form giving details of the Property and including any further comments the parties wished the Tribunal to take into account in making its determination. The tenancy is a statutory (protected) periodic tenancy. The tenancy (not being for a fixed tenancy of 7 years or more) is subject to section 11 of the Landlord and Tenant Act 1985 which sets out the landlord's statutory repairing obligations; the tenant is responsible for internal decorations. The Property 6. The property is described by the Rent Register; as a self-contained purpose built flat with partial central heating, comprising two rooms, one kitchen, one bathroom with WC.

The Inspection

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7. The tribunal did attend the property to inspect. The tribunal was not able to gain access to the flat, however carried out an inspection from the outside. The flat is within a block built around 1920s which is situated on a corner plot. The flat can be seem from the road and has single glazed metal framed windows. The second floor and roof of the property is undergoing extensive reconstruction with the building enveloped in scaffolding. Relevant Law 8. Provisions in respect of the jurisdiction of the Tribunal and the determination of a fair rent are found in Schedule 11, Part 1, paragraph 9(1) to the Rent Act 1977, as amended by paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the Rent Act 1977. Rent Act 1977 Schedule 11, Part 1, paragraph 9 (as amended) “Outcome of determination of fair rent by appropriate tribunal 9. (1) The appropriate tribunal shall- (a) if it appears to them that the rent registered or confirmed by the rent officer is a fair rent, confirm that rent; (b) if it does not appear to them that that rent is a fair rent, determine a fair rent for the dwelling house.” Section 70: Determination of fair rent (as amended) “(1) In determining, for the purposes of the Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to- (a) the age, character, locality and state of repair of the dwelling-house, … (b) if any furniture is provided for the use under the tenancy, the quantity, quality and condition of the furniture [, and (c) 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.]

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(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in 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. (3) There shall be disregarded- (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any [NAME] to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any [NAME]; (c), (d) …[repealed] (e) 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.”

9. Consequently, when determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, has regard to all the circumstances including the age, location and state of repair of the Property. It also disregards the effect of (a) any relevant Tenant’s improvements and (b) the effect of any disrepair or defect attributed to the Tenant of any [NAME] in [NAME] under the regulated tenancy, on the rental value of the Property. 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

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available for letting on 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. (The rents may have to be adjusted where necessary to reflect any differences between the comparables and the subject property).

10. In considering scarcity under section 70 (2), the Tribunal recognises 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 adjustments should be made; the Tribunal, therefore, considers the case on its merits; (b) terms relating to rents are to be excluded. A lack of demand at a particular rent is not necessarily evidence of scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent. 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 proportional increase in the Retail Price Index since last registration. The only exception to this restriction on a fair rent is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the rent by 15% or more of the previous registered rent. Hearing 11. The issue was determined following a hearing and an external inspection. The landlord, Mr [APPELLANT], attended the hearing the tenant did not attend the hearing. Landlord Submission.

12. The Landlord submission comprised their application form. A schedule of rents for one-bedroom flats in [ADDRESS] consisting of asking and achieved, achieved rents including [ADDRESS] £2058 pcm to £2167 pcm. A completed Reply Form confirming central heating and that it was supplied by the landlord.

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The service charge as identified above amounts to £449.61 per quarter.

Tenants Submission 13. The tenant objected to the registered rent and supplied a detailed set of reasons by letter dated 30 June 2024 received by the Rent Officer 4 July 2024. The letter cites concern over noise and stress of the construction of additional property on the roof of the existing building.

14. The tenant submitted a Reply Form, identifying the landlord had fitted a new bath in 2021. Also confirming the property had no double glazing, any carpets and curtains were supplied to the extent they were present by the tenant and no white goods were supplied by the landlord. The tenant supplied several photographs of the internal features of the property. An e mail dated 2 November 2024 and Application to the tribunal requesting permission to withdraw their case. Noting the tenant's wish to withdraw the case, followed by a letter dated 17 November 2024 noting their wish to continue the case. An Applications and Requests for Case Management Orders form received 3 December 2024, was completed by the Tenant identifying they were content to continue with their appeal. Reasons for Decision 15. The rent to be determined must reflect the condition found on the date of the hearing disregarding all tenants' improvements.

16. The process for determining a fair rent is the application of Rent Act 1977 section 70 on the subject property and then comparison with the maximum rent permitted under the Maximum Fair Rent Order 1999. This means that comparison with other properties the subject of Fair Rent is not material.

15. Initially 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 in the condition that is considered usual for such an open market letting. Considering evidence submitted and the Tribunal acting in its capacity as an expert tribunal

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and using its general knowledge of market levels in the area, concluded that the rent was £ 2600 per month if let on a contemporary assured shorthold basis.

16. The Property is not in the condition considered usual for a modern letting at a market rent, therefore, it is necessary to adjust the above hypothetical rent, a deduction of 10% is made and an additional 40% is deducted owing to the extensive rebuilding works taking place above the subject property. In addition, the Tribunal determined that there should be a further deduction of 10% to reflect the fact the terms and conditions and goods supplied under the tenancy would differ from those of a contemporary assured shorthold tenancy, from which the rental comparables are derived. Thereafter the Tribunal considered the question of scarcity in section 70 (2) of the Rent Act 1977. A figure of 20% was adopted. The calculation 17. The rent prior to adjustment for condition, terms and scarcity: £2600.00 per month Less 1o% condition £260.00 per month and 10% for terms white and goods and internal decoration responsibilities £260.00 per month -------------------------------------------------------------- Subtotal of deductions £540.00 per month £ 2060.00 per month -------------------------------------------------------------- Deduction for overhead building work say 40%

£824.00 per month --------------------------------------------------------------------- £1236 per month ----------------------------------------------------------------------- Scarcity 20% deduction £247.20 per month --------------------------------------------------------------

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Subtotal

£988.80 per month ---------------------------------------------------------------------

Add back the cost of gas £1197 pa which is paid for by the landlord, but which covers the hot water and heating per year which is equivalent to £99.75 per month. This gives a revised market rent of £1088.55 per month equivalent to £3264.75 per quarter. This figure includes the liability to pay a service charge of in respect of items normally inclusive of a contemporary assured shorthold tenancy namely the communal items. A tenant would increase their rental bid to cover the benefit of the hot water some £99.75 per month. Rent Acts (Maximum Fair Rent) Order 1999 18. The rent to be registered is limited by the Rent Acts (Maximum Fair Rent Order) 1999. The rent calculated in accordance with the Order is £2560.00 per quarter, including a service charge of £449.61 per quarter, this figure is lower than the figure calculated by reference to the market rent with adjustments, of £3264.75 per quarter including a service charge of £449.61 per quarter.

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Accordingly, the sum of £2560.00 per quarter including a service charge of £449.61 per quarter is registered from 17 March 2025, being the date of the Tribunal’s decision.

Valuer Chair: [NAME]: 17 March 2025

Appeal to the Upper Tribunal A person wishing to appeal this decision to the Upper Tribunal (Property Chamber) on a point of law must seek permission to do so by making a written application to the First-tier Tribunal at the Regional Office which has been dealing with the case which application must: a. be received by the said office within 28 days after the Tribunal sends to the person making the application written reasons for the decision.

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b. 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. If the application is not received within the 28 –day time limit, it must include a request for an extension of time and the reason for it 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.

FR27 First-tier Tribunal – Property Chamber File Ref No. TR/LON/00AW/F77/2024/0251

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 4 [ADDRESS], [POSTCODE]

[NAME] [NAME] JP

[APPELLANT]

Tenant Mr [APPELLANT]

1. The fair rent is £2560.00 Per Quarter (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 17 March 2025

3. The amount for services is £449.61 Per Quarter

negligible/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

negligible/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

n/a

8. For information only:

(a) The fair rent to be registered is not the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999 because the rent determined under the market approach is equal or less.

[NAME] of decision 17 March 2025

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 391.70

PREVIOUS RPI FIGURE Y 182.50

X 391.70 Minus Y 182.50 = (A) 209.20

(A) 209.20 Divided by Y 182.50 = (B) 1.1463

First application for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 2.196

Last registered rent* 1165.50 Multiplied by (C) = 2.196 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 2560.00

Variable service charge no If YES add amount for services no

MAXIMUM FAIR RENT = £2560.00 Per quarter

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.