Tribunal Sets Fair Rent for Property After Adjusting for Condition and Terms

OUTCOME: Allowed

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Case Reference

: MAM/LON/OOAW/F77/2023/0345 Property : 16 [ADDRESS] [POSTCODE] Tenant

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

: Mr [NAME] (Hons) MA LLM

FRICS

HMCTS Code : Determination on papers only. Date of Decision : 10 May 2024 Date of Statement of Reasons: 10 May 2024 _______________________________________________

Statement of Reasons

____________________________________

© CROWN COPYRIGHT 2024

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Application for Permission to Appeal The Tenant through their representative Mr [COUNSEL], made an Application for permission to appeal received on the 3 June 2024. Two grounds were cited the first that the Tribunal has given insufficient weight to the fact the Tenant is responsible for all repairs and second that the Tribunal was not in possession of a document namely a Reply form completed by the Tenant that had been submitted to the Tribunal. Rule 53(1) of the Tribunal Procedure (First–tier Tribunal) (Property Chamber) 2013 provides that on receiving an Application for permission to appeal the Tribunal must first consider, taking into account the overriding objective in rule 3, whether to review the decision in accordance with rule 55 (review of a decision). Rule 55(1) provides that the Tribunal may only undertake a review of a decision— (a) pursuant to rule 53 (review on an Application for permission to appeal); and (b) if it is satisfied that a ground of appeal is likely to be successful. We are satisfied that the grounds of appeal were likely to be successful. Decision 1.The decision of the tribunal is that a fair rent of £7200.00 per quarter , is determined with an effective date of 10 May 2024. Background 2. An Application was made to re-register a fair rent, dated 28 June 2023, by the landlord of the property [RESPONDENT], proposing a fair rent of £7350 per quarter. Prior to the Application to re-register a fair rent, the Rent Officer had registered a rent of £6125.00 per quarter , with effect from 19 September 2021.

3. Subsequently the Rent Officer registered a fair rent of £6300.00 per quarter with effect from 19 September 2023.

4. In an email of 12 September 2024, the landlord objected to the rent registered and the matter was referred to the First –tier Tribunal (Property Chamber) (Residential Property).

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5. Directions were issued by the Tribunal on the 13 November 2023 and amended 12 December 2023. 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 landlords statutory repairing obligations; the Tenant is responsible for internal decorations. The Property 6. The Tribunal did not inspect the property. The property comprises a terraced house, with full central heating comprising, in the basement one room and a kitchen, on the ground floor one room and a WC, on the first floor 2 rooms and a bathroom WC, on the second floor one attic store. Relevant Law 7. 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)

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“(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.] (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 any [NAME] of his 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.”

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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 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).

In considering scarcity under section 70 (2), the Tribunal recognises that: (a) there are considerable variations in the level of a 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 [NAME] 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.

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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. Submissions Landlord 8. No submissions from the landlord were received, other than the Application to Register a Fair Rent and the Objection to the rent registered. The Application noted at box 11 that the Tenant was responsible for all repairs internal external and decorations, and that the tenancy had commenced in 1975. Tenant 9. The Tenant’s representative Mr [COUNSEL] completed a Reply Form. This was supplied to the Tribunal at the date of the first determination but not made available to the Tribunal at the date of the determination. The Reply Form was available at the date of the subsequent determination. The Reply Form noted that neither an inspection nor a hearing was requested. The property is partially centrally heated, and that the central heating was provided by the landlord, the kitchen not having a radiator. There is no double glazing, and that carpets and curtains were supplied by the Tenant. Improvements carried out by the Tenant comprise a new WC installed in 1992 and the boiler being replaced by the Tenant. Finally, from the Reply Form the Tenant notes that access to the attic is via a ladder which is said to be a hazard this makes access effectively unusable. The Determination 10. The property was not inspected. Reasons for Decision 11. The rent to be determined must reflect the condition found on the date of the hearing disregarding all Tenants' improvements.

12. 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.

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13. 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 and using its general knowledge of market levels in the area, concluded that the rent was £5000 per month or £15,000 per quarter if let on a contemporary assured shorthold basis.

14. The Property is not , as let, 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 20% is made. 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 15. The rent prior to adjustment for condition, terms and scarcity; £15,000 per quarter

Less 20% condition (as let in 1975) Less £3000 per quarter -------------------------- £ 12,000 per quarter Less 25% for terms and supplied goods inc white goods and repairing obligations £3000 per quarter ------------------------------------------- £9,000 per quarter Less 20% for scarcity. £1800 per quarter

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17. The rent after this final adjustment was £7200 per quarter. Rent Acts (Maximum Fair Rent) Order 1999 18. The rent to be registered is not limited by the Rent Acts (Maximum Fair Rent Order) 1999. The rent calculated in accordance with the Order is £7907.50 per quarter. This figure is higher than the figure calculated by reference to the market rent with adjustments, of £7200.00 per quarter.

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Accordingly, the sum of £7200.00 per quarter will be registered as the fair rent with effect from 10 May 2024, being the date of the Tribunal’s decision. Valuer Chair: [NAME]: 10 May 2024 reviewed Extended reasons: 10 May 2024 reviewed

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. 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.

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FR27 First-tier Tribunal – Property Chamber File Ref No. MAM/LON/00AW/F77/2023/0345

Notice of the Tribunal Decision Amended under The Tribunal Procedure (First Tier Tribunal) (Property Chamber) Rules 2013, Rule 50 “clerical mistakes, accidental slips or omissions) Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 16 [ADDRESS], [POSTCODE]

R [NAME]

Landlord [APPELLANT]

[NAME]

1. The fair rent is £7907.50 £7200.00 Per quarter (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 10 May 2024

3. The amount for services is n/a Per n/a

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 (please see calculation overleaf).

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 the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £ 7907.50 per quarter.

Chairman R [NAME] of decision 10 May 2024

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 383

PREVIOUS RPI FIGURE Y 308.6

X 383 Minus Y 308.6 = (A) 74,40

(A) 74.40 Divided by Y 308.6 = (B) 0.241

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) 1.291

Last registered rent* £6125 Multiplied by (C) = 7907.37 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 7907.50

Variable service charge YES / NO If YES add amount for services no

MAXIMUM FAIR RENT = £7907.50 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.