Tribunal Sets Fair Rent for Property Based on Market Conditions

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/00CN/F77/2022/0014

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 66 [ADDRESS], [POSTCODE]

[NAME] Mr [RESPONDENT]

Landlord BPT ([APPELLANT]) Limited

Tenant Ms [APPELLANT]

1. The fair [NAME] is £144.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 20 June 2022

3. The amount for services is

Per

not applicable

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

Per

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:

The fair [NAME] to be registered is the maximum fair [NAME] as prescribed by the [NAME] ([NAME]) Order 1999. The [NAME] that would otherwise have been registered was £149.62 per week.

[NAME] of decision 20 June 2022

FR24 [NAME] FIGURE X 334.6

PREVIOUS RPI FIGURE Y 292.6

X 334.6 Minus Y 292.6 = (A) 42

(A) 42 Divided by Y 292.6 = (B) 0.14354

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.19354

Last registered [NAME]* £120.50 Multiplied by (C) = £143.82 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £144.00

Variable service charge NO If YES add amount for services

[NAME] = £144.00 Per Week

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].

1

Case Reference : BIR/00CN/F77/2022/0014

Property : 66 [ADDRESS], [POSTCODE]

Landlord : [NAME] [RESPONDENT]) Limited

Representative : [APPELLANT]

Tenant : Mrs [COUNSEL] of Application : Determination of a fair [NAME] under section 70 of the [NAME] 1977

Tribunal Members : Judge [NAME]

Mr D Douglas

Date of Decision : 20 June 2022

Issue Date : 11 July 2022

_______________________________________________

STATEMENT OF REASONS _______________________________________________

© CROWN COPYRIGHT 2022

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

2 Background

1. This Statement of Reasons is prepared at the request of [RESPONDENT], the [NAME], following the decision made by the Tribunal on 20 June 2022. It should be read in conjunction with that decision.

2. Mrs [APPELLANT] is the tenant of [NAME] known as 66 [ADDRESS], [POSTCODE] (‘[NAME]’). The landlord is BPT ([RESPONDENT]) [RESPONDENT].

3. By an application, received by the [NAME] on 19 January 2022, the Landlord applied to the [NAME] for registration of a fair [NAME] for [NAME] of £144.60 per week (pw). The [NAME] previously registered on 17 March 2020, with effect from 17 April 2020, and payable at the time of the application, was £120.50 pw.

4. On 10 March 2022, the [NAME] registered a fair [NAME] of £132.00 pw, with effect from 17 April 2022.

5. By a letter, received by the [NAME] on 21 March 2022, the Tenant objected to the [NAME] determined by the [NAME] and the matter was referred to the Tribunal on 24 March 2022.

6. The Tribunal received written representations from the Landlord on 1 April 2022 and from the Tenant on 28 April 2022.

7. Neither party requested an oral hearing and the Tribunal inspected [NAME] on 20 June 2022.

8. After consideration of the available evidence and the applicable law, the Tribunal determined that a sum of £144.00 pw was to be registered as the fair [NAME], with effect from 20 June 2022.

The Law

9. The relevant provisions in respect of jurisdiction of the Tribunal and determination of a fair [NAME] are found in Paragraph 9(1) Part 1 Schedule 11 to the [NAME] 1977, as amended by paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the [NAME] 1977.

[NAME] 1977

Paragraph 9(1) Part 1 Schedule 11 (as amended)

“Outcome of determination of fair [NAME] by appropriate tribunal

9. – (1) The appropriate tribunal shall –

3

(a) if it appears to them that the [NAME] registered or confirmed by the [NAME] officer is a fair [NAME], confirm that [NAME]; (b) if it does not appear to them that that [NAME] is a fair [NAME], determine a fair [NAME] for the dwelling house.”

Section 70 Determination of fair [NAME]

“(1) In determining, for the purposes of this Part of this Act, what [NAME] is or would be a fair [NAME] 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 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 the locality on the terms (other than those relating to [NAME]) 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)… (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] 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.”

10. When determining a fair [NAME] the Tribunal, in accordance with the [NAME], section 70, had regard to all the circumstances including the age, location and state of repair of [NAME]. It also disregarded the effect of (a) any relevant tenant’s improvements and (b) the effect of any disrepair or other defect attributable to the Tenant or any [NAME] in [NAME] under the regulated tenancy, on the rental value of [NAME].

4 11. 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 [NAME] is the market [NAME] for [NAME] discounted for ‘scarcity’ (i.e. that element, if any, of the market [NAME], 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 [NAME]- to that of the regulated tenancy) and

(b) that 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 those comparables and the subject property).

12. 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 [NAME] are to be excluded. A lack of demand at a particular [NAME] is not necessarily evidence of no scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular [NAME].

13. Fair rents are subject to a capping procedure under the [NAME] ([NAME]) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since the previous registration.

The Inspection

14. The Tribunal inspected [NAME] on the morning of 20 June 2022. The Tribunal was met by the Tenant, and shown around [NAME] by the Tenant’ son, Mr [APPELLANT]. The Landlord did not attend.

15. [NAME] is a mid-terrace house on the [NAME] in Harborne, built circa. 1910. It is of brick construction with a pitched tiled roof.

16. The accommodation comprises, on the ground floor, an entrance hall, a through lounge, a kitchen and small pantry and, on the first floor, there are two double bedrooms and a third single bedroom. Externally there is a small front garden but a good-sized rear garden. There is also an external store and WC at the rear of [NAME].

17. [NAME] does not have the benefit of a garage or any off-street parking and is accessed via several steep steps. [NAME] does have the benefit of gas-fired central heating but only the front windows have been double- glazed.

5 18. [NAME] was in a fair condition but in need of complete modernisation and the windows to the rear elevation were in need of some repair.

19. The Tenant and [NAME] had, since their occupation of [NAME], plastered and decorated throughout, created the through lounge and fitted the kitchen and the bathroom. Additionally, the Tenant had installed the boiler and gas central heating; installed the fireplace; supplied the white goods in the kitchen and provided the carpets and curtains.

20. The Landlord had, since the last inspection, provided double-glazing to the windows on the front elevation.

Submissions

Landlord

21. The Landlord's Representative sent a written submission describing [NAME] and providing details of six properties advertised to let in the area that they described as comparable. They comprised:

[ADDRESS], [NAME]

A two-bedroom maisonette, with gas central heating and timber windows, with a let agreed at £254.00 pw;

[NAME], [NAME]

A two-bedroom mid-terrace house, with gas central heating and timber/UPVC windows, with a let agreed at £254.00 pw;

[ADDRESS], [NAME]

A two-bedroom end terrace house, with gas central heating and timber windows, with a let agreed at £323.00 pw;

[ADDRESS], Moor Pool Estates

A three-bedroom terrace house, with gas central heating and timber/UPVC windows, with a let agreed at £335.00 pw;

[ADDRESS], [NAME] A three-bedroom terrace house, with gas central heating and timber/UPVC windows, with a let agreed at £358.00 pw; and

[ADDRESS], [NAME] A three-bedroom end terrace house, with gas central heating and timber windows, advertised to let at £358.00 pw.

Based on this information, the Landlord considered the minimum achievable market [NAME] to be £254.00 pw. The Landlord noted that the comparable properties would benefit from the following:  Modernised bathroom  Double glazing

6  Modernised kitchen  Landlord supplied floor coverings/curtains  White goods/furnishing

Using a theoretical figure of £20.00 pw per item, they considered the [NAME] requested by the Landlord of £144.60 still to be less than the comparable [NAME].

22. The [NAME] also supplied a copy of two invoices, dated 18 March 2020 and 14 October 2020 respectively, for the installation of the partial double glazing to [NAME].

Tenant

23. The Tenant’s written submissions confirmed that the central heating, carpets and curtains and white goods had been provided by the Tenant during her occupation. The submissions also referred to the Tenant’s personal financial circumstances – that she was 96 years old and reliant on her teachers’ pension and state pension, which had only increased by 3.1%. Although the submissions acknowledged that rents of similar properties were higher, they submitted that the increase by the [NAME] of 8.7%, would cause financial strain, particularly in light of the recent increase in living costs.

Reasons for the Decision

24. The Tribunal noted the Tenant’s submissions regarding her personal circumstances but was specifically excluded from taking these into account when determining the fair [NAME], under section 70(1) of the [NAME] 1977.

25. In relation to the Landlord’s submissions, the Tribunal noted that, although the Landlord had installed partial double glazing, they had failed to take into account that the Tenant had installed the central heating. In addition, the Tribunal considered that scarcity did apply.

26. In the first instance, the Tribunal determined what [NAME] the Landlord could reasonably be expected to obtain for [NAME] in the open market if it were let today in the condition that was considered usual for such an open market letting. It did this by having regard to the evidence supplied by the parties and the Tribunal’s own general knowledge of market levels in Harborne.

27. The Tribunal noted that the comparables supplied by the Landlord did include three bedroom properties with partial double glazing on the [NAME]. The Tribunal considered that the downstairs living accommodation at [NAME] was relatively small and that the steep access to [NAME] would also have a detrimental effect on the rental which could otherwise be achieved. The Tribunal considered that a likely market [NAME] for [NAME] would be £300.00 pw.

7 28. That being said, the Tribunal considered that the actual property was not in the condition considered usual for a modern letting at a market [NAME]. Therefore, it was first necessary to adjust the hypothetical [NAME] of £300.00 pw to allow for the differences between the condition considered usual for such a letting and the condition of [NAME], as observed by the Tribunal (disregarding the effect of any disrepair or other defect attributable to the Tenant or any [NAME] in [NAME]), and any Tenant’s improvements.

29. The Tribunal considered that this required a deduction of £133.75 pw in respect of the floor coverings, curtains and white goods (which were all provided by the Tenant), the lack of a modern kitchen and bathroom, the internal decorating liability and the Tenant’s improvements (as detailed above).

30. The Tribunal considered the question of scarcity in section 70(2) of the [NAME] 1977 and found that the number of potential tenants looking for accommodation of this type in the area would have been greater than the number of units available to let. The Tribunal found that the excess demand represented around 10% of the rental value or £16.63 pw and deducted this from the adjusted market [NAME] to arrive at the statutory basis for a fair [NAME].

31. This left a fair [NAME] for [NAME] of £149.62 pw.

Decision

32. The fair [NAME] initially determined by the Tribunal, for the purposes of section 70, was £149.62 pw.

33. However, under The [NAME] ([NAME]) Order 1999, the maximum [NAME] that could be registered was £144.00 pw, as advised in the calculation sheet sent with the Decision Notice.

34. There was no service charge and the [NAME] was not registered as variable.

35. Accordingly, the sum of £144.00 pw was registered as the fair [NAME] with effect from 20 June 2022, being the date of the Tribunal’s decision.

Appeal

36. If any party is dissatisfied with this decision, they may apply to the Tribunal for permission to appeal to the Upper Tribunal (Lands Chamber) on a point of law only. Such an application must be made within 28 days of this decision being sent to the parties in accordance with Rule 52(2) of The Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013, and must state the grounds on which that party intends to rely in the appeal.

8 [NAME] …………………………

Judge [NAME]