Tribunal Sets Fair Rent for Property Based on Market Conditions

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00BB/F77/2020/0154

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were Basement/Ground Flat, [ADDRESS], [RESPONDENT], [POSTCODE]

Ms [NAME] QC Mr [COUNSEL](Hons) LLM Property Law MA

Landlord [RESPONDENT] & [RESPONDENT]

Tenant [APPELLANT]

1. The fair [NAME] is 166.50 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 19 April 2021

3. The amount for services is N/A Per

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

N/A Per

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

None

8. For information only:

(a) 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 £282.46 per Week.

Chairman Ms [NAME] QC Date of decision Monday 19th April 2021

FR24 [NAME] FIGURE X 296.0

PREVIOUS RPI FIGURE Y 264.9

X 296.0 Minus Y 264.9 = (A) 31.1

(A) 31.1 Divided by Y 264.9 = (B) 0.1174028

First [NAME] for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C) NO

If no (B) plus 1.05 = (C) 1.1674028

Last registered [NAME]* £142.50 Multiplied by (C) = 166.3549 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £166.50

Variable service charge NO If YES add amount for services

[NAME] = £166.50 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 [NAME] was the first since 1 February 1999) or 5% (if it is a second or subsequent [NAME] 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 [NAME] 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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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00BB/F77/2020/0154

Property : Basement/Ground floor flat, [ADDRESS], [RESPONDENT] [POSTCODE] Applicant: [redacted] Respondent: [redacted] : Section 70 [NAME] 1977 Tribunal member(s) : Tribunal Judge Brandler Mr Richard Waterhouse BSc MA LLM FRICS Date of decision : 19th April 2021 Date of written reasons : 22nd May 2021

DECISION

The sum of £166.50 per week will be registered as the fair [NAME] with effect from 19th April 2021.

© CROWN COPYRIGHT 2018

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FULL REASONS

1. Background 1.1. In an [NAME] dated 17th July 2020 the landlord applied to the [NAME] for a registration of the fair [NAME] of £156.75 per week for the above property. The [NAME] had previously been registered on 18th July 2016 by the [NAME] at £142.00 per week. The Tenant appealed that registered [NAME] to the First-tier Tribunal who determined a [NAME] of £142.50 per week on 8th September 2016.

1.2. The Landlord charged only £120.40 per week.

1.3. Ms [APPELLANT] has occupied the property since 29th August 1983. No tenancy agreement was available. The property is a basement/ground floor flat in a house converted into two flats. The basement comprises three bedrooms and a bathroom. The ground floor comprises of two living rooms and a kitchen. The property has the benefit of gas central heating and a private garden.

1.4. On 13th October 2020 the [NAME] registered a fair [NAME] of £165.00 per week with effect from the same day.

1.5. On 9th November 2020 Ms [APPELLANT] objected to the [NAME] determined by the [NAME] and the objection was referred to the Tribunal.

2. Inspection 2.1 No inspection took place as a result of the restrictions caused by the COVID- 19 Pandemic.

3. Evidence 3.1 Neither party requested a hearing. Therefore, this matter was considered on the papers.

3.2 Tenant’s Representations: In the Tribunal reply form, the tenant complains of hairline cracks in the living room, damp in the bathroom as well as a problem when using hot and cold taps at the same time. The main reason for appealing the [NAME] registered by the [NAME] officer is because Ms [APPELLANT] says that the Landlord charges less than the [NAME] registered.

3.3 Landlord’s Representations: The Landlord made no representations.

4. The law 4.1 A summary of the law in respect of this case is attached to this decision.

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5. Determination and Valuation 5.1 In the first instance the Tribunal determined what [NAME] 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. The Tribunal considered the market in and around the area where the property is situated from its own general knowledge, rather than any specific knowledge of market [NAME] levels in the area. The Tribunal relied upon their expert knowledge and experience. The Tribunal concluded that an open market [NAME] for a four bedroom property in the vicinity would be in the region of £1800 per month. This level of [NAME] assumes a property in a refurbished condition. This size property equates to the subject property of 3 bedrooms and two living rooms.

5.2 We need to consider any deduction to reflect terms and conditions, tenant’s own carpets, curtains and white goods, which we consider would have an adverse effect on the open market [NAME] level. Taking these matters into account we consider that a reduction in the open market [NAME] of 15% which fairly reflects the issues. This therefore reduces the open market [NAME] to £1530 per month.

5.3 Next we need to consider the issue of scarcity. We were not provided with any specific evidence on this issue. However, the issue of scarcity is considered on the basis of the number of properties available to let and also considering the demand for such properties and over a really large area. Therefore, using our general, rather than any specific knowledge and experience, we consider that in the wide geographical area being the area around [RESPONDENT], there is an imbalance between supply and demand and this impacts upon rental values.

Accordingly, we make a deduction of approximately 20% for scarcity. The full valuation is shown below.

£/month [NAME]

1800.00 Less 15% for tenant’s own carpets curtains and white goods, and terms and conditions

270.00

1530.00

Scarcity 20%

306.00

[NAME]

£1224.00 pm

This equals a weekly fair [NAME] of £282.46

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6. Decision 6.1 The section 70 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 £282.45 per week. Details are provided on the back of the decision form.

Accordingly the sum of £166.50 per week will be registered as the fair [NAME] with effect from 19th April 2021 being the date of the Tribunal’s decision.

D. Brandler

Tribunal Judge Brandler

Date: 22nd May 2021

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First-tier Tribunal Property Chamber (Residential Property)

The Law Relating to the Assessment of Fair Rents

INTRODUCTION

1. This is a brief summary of the law applied by the Tribunal(formerly call a [NAME]) when reaching its decision. It is an integral part of the decision.

2. The definition of [NAME] is contained in the [NAME] 1977 i.e.:-

70(1) In determining ......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 dwellinghouse

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……

70(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwellinghouses 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 dwellinghouses in the locality which are available for letting on such terms

70(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]……

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]

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

3. The Tribunal also has to take into account the Human Rights Act 1998. However, when interpreting the [NAME] 1977 (primary legislation) the Tribunal will have to follow the wording of the Act if it cannot be read or

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given effect in a way which is compatible with rights contained in the European Convention on Human Rights. Any party dissatisfied will then have to refer the matter to the High Court for the [NAME] of a Declaration of Incompatibility.

4. All other rights granted by the Convention such as the right to a fair and public hearing by an independent tribunal and the right to respect for a person’s private and family life are to be observed by the Tribunal

5. There have been a number of cases decided over the years most of which have been either unreported or reported only in professional journals. However in 1997 a Court of Appeal decision was reported as Curtis v [RESPONDENT] (No. 2) [1997]4 AER 842 where the Court reviewed the various authorities and provided guidance to Tribunals to assist them in reaching decisions.

6. [ADDRESS] confirmed that a Tribunal must first find an open market [NAME] for the property taking into account evidence before it from the parties and the [NAME]. It will not consider other registered rents unless there are very exceptional circumstances which will be set out in the decision if appropriate.

7. A Tribunal can use such factors as comparable rents being paid for similar properties in the locality, capital values and return on expenditure as well as the experience and expertise of its members.

8. Having established an open market [NAME] the Tribunal then has to consider the deductions and allowances referred to above

9. In all cases the Tribunal will try its best to give the parties details of its calculations. The [NAME] case (above) made it clear that a Tribunal’s decision must be supported by some workings out, but precise arithmetical calculations are not possible in all cases. There are many properties where the deductions and allowances are of such proportions that a Tribunal must simply take a view as to how much a [NAME] would have to be reduced in order to obtain a tenant. This may not be the same as the sum total of the Statutory deductions/allowances.

10. If the Tribunal considers that the demand for similar properties in the locality is substantially greater than the supply then a deduction has to be made in accordance with Section 70(2) [NAME] 1977. This is the so-called “scarcity factor”. The Tribunal is obliged to look at scarcity in terms of people wanting regulated tenancies. However the reality is that no new regulated tenancies are created nowadays and scarcity is therefore considered using the types of tenancy currently in use.

11. The word “locality” in Section 70(2) has a different meaning to that in Section 70(1). In the case of [COMPANY] v Finegold [1975] 1 WLR 349 it was decided that the “locality” for this purpose should be a really large area. A Tribunal must define the extent of that “locality” when reaching its decision.

12. In determining scarcity, Tribunals can look at local authority and housing association waiting lists but only to the extent that people on such lists are likely to be genuine seekers of the type of private rented accommodation in question if the [NAME] were to exclude the scarcity element.

13. The Tribunal must apply the [NAME] ([NAME]) Order 1999 – known as the “capping” provision – unless there is an exemption.

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ANNEX - RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written [NAME] for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The [NAME] for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

3. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed despite not being within the time limit.

4. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.