Tribunal Sets Fair Rent for Property Based on Condition and Market

OUTCOME: Allowed

FR24 First-tier Tribunal – [NAME] No. JM/LON/00AC/F77/2022/0256

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 17 St. [ADDRESS], [POSTCODE]

[NAME] [NAME] JP

Landlord K [APPELLANT]

Tenant Mrs [APPELLANT]

1. The fair rent is £825.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 17 February 2023

3. The amount for services is £42.50 Per Month

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

not applicable Per

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

8. For information only:

(a) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £899 per month.

[NAME] of decision 17th February 2023

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 360.4

PREVIOUS RPI FIGURE Y 259.5

X 360.4 Minus Y 259.5 = (A) 100.9

(A) 100.9 Divided by Y 259.5 = (B) 0.3888

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.4388

Last registered rent* £624.50 per month Multiplied by (C) = £898.54 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £899.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £899.00 Per Month

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.

Case Reference

: JM/LON/OOAC/F77/2022/0256

Property : 17 [ADDRESS], [POSTCODE]

Tenant

: Mrs [APPELLANT]

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

Tribunal

: Mr [NAME] MA LLM FRICS Mr [NAME] JP

HMCTS Code : On Papers (paper, video, audio)

Date of Decision : 17th February 2023

Date of Statement of Reasons: 17th February 2023

_______________________________________________

Statement of Reasons

____________________________________

© CROWN COPYRIGHT 2021

FIRST - TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY)

Background The Tribunal gave formal notice of its decision by a Notice dated 17th February 2023 of the determined Fair Rent of £825 per month with services of £42.50 per month with effect from same date. By way of application, dated, 6th September 2022 made by the landlord of the property, applied for re registration of a fair rent of £686.95 per month. Previously the Rent Officer had registered a rent of £624.50 per month, with £52.70 per month attributed to services on 2nd October 2015. The Rent Officer registered a fair rent of £862.00 per month, effective from 25th October 2022 with £42.50 per month attributed to services. In a note received by the Rent Officer dated 9th November 2022 the tenant Mrs [APPELLANT] objected to the rent registered and the matter was referred to the First – tier Tribunal ([NAME]) (Residential Property). Directions were issued by the Tribunal on the 22nd November 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 The tribunal inspected the property on 17th February 2023. The property is a second floor flat, comprising, two bedrooms, one living room, a kitchen and a bathroom. The flat has double glazing and has under floor electric heating. There is a communal garden. The inspection found that water penetration, was evidenced from staining on the wall’s junction with the ceiling, to the South of the flat. The exterior down pipe had paint flaking from it, additional window sills were discoloured. It was noted the recycling bins were overflowing. Relevant Law 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.] (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 predecessor in title of his 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 predecessor in title of his; (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 predecessor 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.”

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 predecessor in title under the regulated tenancy, on the rental value of the Property. In [COMPANY] v Chairman of the [NAME] (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 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. Pre hearing Submissions Landlord The Application dated 6th September 2022. The Landlord has completed their Reply Form. Within the form, it is noted that an inspection and a hearing are not required. The form notes, the property comprises a flat on the second floor with no lift access. The flat comprises two bedrooms, one kitchen, a living room, and a bathroom. The

flat has central heating provided by the landlord, double glazing provided by the landlord, carpets, curtains and white goods provided by the tenant. There is a garage and private garden. The form notes under improvements; decorations carried out in august 2013, washbasin replaced 2011, roof warranty leaks 2012, bedroom decorations 2013, decorations 2020, leaking shower 2020 and no hot water 2020. Under disrepairs the landlord notes, several leaks over the years that have been repaired Supporting these copies of an email dated 7th August 2013 outlining decoration to kitchen and master bedroom, and small bedroom. An invoice, sum of £1068.00 dated 30th August 2013 relating to decoration. A further quote, dated 7th November 2022, relating to water ingress for £ 575.00. This was accompanied by photographs of flooded balcony, Tenant The tribunal was also in receipt of the letter of objection from the tenant received by the Rent Officer on 9th November 2022. The letter noted; On the 2nd and 3rd November 2022 rain came through my ceiling, ran down the wall, though the window and on to my carpet causing serious damage to my wallpaper.” “no work has ever been done on the balcony or the roof to my knowledge and the damaged area in my sitting room has never been redecorated.” “the ceiling and walls are wet , which causes damp and the paper to discolour and peel”. Photograph of discoloured wall by door.

The Hearing No hearing was requested by the parties nor one felt proportionate, so the matter was addressed on papers. Reasons for Decision The tribunal has also inspected. The rent to be determined must reflect the condition found on the date of the hearing disregarding all tenants' improvements. 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.

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 such a likely market rent, if a market rent is adopted would be £ 1650 per month. However, 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 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. Market derived rental level - £1650.00 per month Less 20% condition Less 10% for terms and supplied goods inc white goods Less 20% for scarcity. The rent after this final adjustment was £825.00 per month

Rent Acts (Maximum Fair Rent) Order 1999 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 £899 per month. This figure is higher than the figure calculated by reference to the market rent with adjustments, of £825.00 per month.

Accordingly, the sum of £825.00.00 per month will be registered as the fair rent with effect from 17th February 2023, being the date of the Tribunal’s decision. Valuer Chair: [NAME]: 17th February 2023 Extended reasons: 17th February 2023

Appeal to the Upper Tribunal A person wishing to appeal this decision to the Upper Tribunal ([NAME]) 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.