Tribunal Sets Fair Rent for Exeter Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/18UC/F77/2021/0016

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 2 [ADDRESS], [POSTCODE]

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

Landlord [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair [NAME] is £760.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22 March 2021

3. The amount for services is £74.63 Per Calendar Month

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 not limited by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £804.50 per Calendar Month prescribed by the Order.

[NAME] of decision 22 March 2021

FR24 [NAME] FIGURE X 294.6

PREVIOUS RPI FIGURE Y 284.2

X 294.6 Minus Y 284.2 = (A) 10.4

(A) 10.4 Divided by Y 284.2 = (B) 0.0365

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.0865

Last registered [NAME]* £740.00 Multiplied by (C) = 804.08 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £804.50

Variable service charge NO If YES add amount for services

[NAME] = £804.50 Per Calendar Month

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/18UC/F77/2021/0016

Property : 2 [ADDRESS] [POSTCODE]

Landlord : [RESPONDENT] : [APPELLANT]

Tenant : Mr [COUNSEL] [NAME]

: [COUNSEL] [NAME] of Application : [NAME] 1977 – Section 70

Appeal of [NAME]

Tribunal Members : [NAME] (Chairman)

[NAME] [NAME] [NAME] of Inspection : 22 March 2021

Date of Decision : 22 March 2021 ____________________________________________ DECISION ____________________________________ © CROWN COPYRIGHT 2021 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Background

1) On 23 July 2020 the Landlord made an application to register the [NAME] of the property at £10,656.00 per annum.

2) The [NAME] payable at the time of the application was £740.00 per month.

3) The [NAME] was previously registered on the 3rd August 2018 at £740.00 per month, with an amount attributed to services of £101.52 per month, with effect from the 14th of September 2018.

4) On the 2nd November 2020 the [NAME] registered a Fair Fent of £760.00 per month exclusive of rates with effect from that date. The [NAME] register notes £74.63 is attributable to services.

5) On the 24th November 2020 the Landlord objected, and the matter was referred to the First-Tier Tribunal (Property Chamber).

6) On 5th February 2021 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 his objection.

8) Neither party requested a Hearing.

9) The Tribunal met on 22nd March 2021 to consider the application.

10) The matter is dealt with as a paper determination without hearing. In the current circumstances it has not been possible to inspect the property and the Tribunal relies 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 the Landlord and these were copied to the parties. The [NAME] Office supplied some records and copies of correspondence they had had with the parties.

12) It is a mid-terrace house close to the centre of Exeter. Local shops are within a few minutes’ walk.

13) The accommodation comprises living room, kitchen, store, 3 bedrooms, and bathroom/WC. There is a garden at the rear of the property. There is full central heating and double glazing. There is an EPC rating of 59D. The [NAME]

supplied the carpets and curtains and white goods. It is understood that the property has a flat roof, which adversely affects the EPC rating.

Landlord’s submissions 14) The Landlord’s agent describes the property as a mid-terrace house in one sentence, and as a flat in the next, but it is assumed this to be a typographical error.

15) Details of five comparable properties were given taken from Rightmove as available on 17th February 2021, four of these were included in the Landlord’s submissions. Four are Student Lets for a period of less than a year and not Assured Shorthold Tenancies. The fifth property is a modern 3 bedroomed terraced house in [ADDRESS] and is advertised at £995.00 per month. Minimal details are given, and it does not state what type of tenancy it is to be let on.

16) From the evidence submitted the agent concludes the market [NAME] for the property is £19,329. This is the average of the rents sought for the four student lets. From this the agent deducts £1,600 for carpets and white goods, together with £2,500 for an outdated kitchen, giving a fair [NAME] of £15,229 per annum.

17) Accepting that this is above the [NAME] the agent computes the new [NAME] to be £9,643 per annum.

18) The Landlord does not think there is any scarcity element in the area.

Tenant’s submissions 19) The Tenant accepts the [NAME] officer’s decision of the fair [NAME].

20) They Landlord has not carried out any maintenance to the building in the past two years.

21) The Tenant has done a similar search of Rightmove on the 12th February and states that only four similar properties with three bedrooms is available within half a mile radius of the property and the asking prices for these is between £950 and £1,150 per month, an average of £1,031.25 per month. No evidence of these were included in the Tenant’s submissions.

22) The Tenant does not agree with the Landlord’s opinion that there is no scarcity in the district. He believes there is scarcity and that it does significantly impact on the local rents achievable.

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 Tenants's improvements and (b) the effect of any disrepair or other defect attributable to the Tenants or any predecessor in title under the 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.

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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 on an Assured Shorthold Tenancy 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.

29) The Tribunal received a copy of the [NAME]’s computations which started with an open market valuation of £950.00 per month from which he made adjustments of £190.00 to give a [NAME] of £760.00. He computed the capping and, as the [NAME] was below this capping it did not apply.

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30) There is no reference to the service charge element as being “variable” and so the Tribunal follows the [NAME]’s decision that this is a “fixed service charge”.

31) The Tribunal found the evidence of the Landlord for comparable rental values to be of no help as four were for a different type of tenancy, Student Lets. The Tenant’s submissions only mentioned rents but without evidence. This left one property from the Landlord as acceptable evidence which is considered to be insufficient evidence for the Tribunal to solely base its decision and therefore also relied on its own knowledge and experience of general [NAME] levels for this type of property in this area.

32) 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 £950.00 per month, in line with the [NAME]’s finding.

33) 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 £950.00 per month to allow for the differences between the condition considered usual for such a letting and the condition of the actual property.

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

(a) Tenant’s Repairing and Decorating Liabilities (b) Tenant supplying White Goods (c) Tenant supplying Carpets and Curtains

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 items 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 separately and then considered whether the overall reduction was justified. We are satisfied that it is.

36) We decided to make a deduction of 20% for these factors which gives a [NAME] of £760.00 per month.

Scarcity 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.

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THE DECISION

38) The Tribunal therefore determined that the uncapped [NAME] is £760.00 per month exclusive of council tax and water rates.

39) As this amount is below 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 £760.00 per month is registered as the [NAME] with effect from 22nd March 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.