Tribunal Sets Fair Rent for Property Based on Market Conditions

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/43UB/F77/2019/0020

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

Mr [NAME]

Landlord [NAME] ([COMPANY]) [APPELLANT]

Tenant Ms [APPELLANT]

1. The fair rent is £1,200.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22 August 2019

3. The amount for services is £58.18 Per Calendar Month

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

n/a Per n/a

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

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 £1,214.00 per calendar month including £58.18 per calendar month for services prescribed by the Order.

Chairman Mr [NAME] of decision 22 August 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 289.5

PREVIOUS RPI FIGURE Y 269.3

X 289.5 Minus Y 269.3 = (A) 20.2

(A) 20.2 Divided by Y 269.3 = (B) 0.07501

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.12501

Last registered rent* £1,079.00 Multiplied by (C) = 1213.89 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £1,214.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £1,214.00 Per Calendar 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.

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/43UB/F77/2019/0020 Property : 15, [ADDRESS] [POSTCODE] Type of Application : Decision in relation to Rent Act 1977 Date of Decision : 22 August 2019

Reasons for the decision

Background

1. The landlord made an application to register the rent of the property at £1,207.88 per month inclusive of £30.62 per month.

2. On 20 March 2019 the Rent Officer registered the rent at £1,115 per calendar month exclusive of rates but inclusive of £58.18 services with effect from 30 April 2019. The uncapped rent was stated to be £180 per week.

3. On 15 April 2019 the landlord objected, and the matter was referred to the First Tier Tribunal, Property Chamber.

4. On 24 April 2019 the Tribunal sent standard Directions to both parties requiring the landlord to send to the tenant and the Tribunal a written statement with their assessment of the rent and for the tenant to make a response.

5. Written representations from the landlords was received on 7 May 2019.

2 6. The tenant advised the Tribunal that due to hospital appointments she did not wish to submit representations, that an inspection of the property would not be possible and that the proposed rent should be accepted.

Evidence

7. As requested, the tribunal has not carried out an inspection and takes its description from the Rent Register. The property is described as a purpose-built ground floor flat comprising 4 rooms, kitchen and bathroom /wc with full central heating.

8. In coming to their registration, the Rent Officer relied on open market lettings of 4 room flats in the KT8 post code ranging between £275.77 and £519.23 per week.

9. Representations from the landlord described the property as “a beautiful three bedroom self-contained flat. The property offer (sic) spacious accommodation. Situated in a superb development with communal swimming Pool and [ADDRESS]….”

10. Three comparables were referred to;

a. [ADDRESS], east Molesey: 3 bed, 1 ensuite bathroom & family bathroom, 2 reception – unfurnished - £1,950 pcm b. [ADDRESS]: 3 bed, 1 bath, 1 reception, Communal swimming pool and tennis court – unfurnished - £1,600 pcm c. [ADDRESS]: 3 bed, bathroom, reception, unfurnished - £1,595 pcm

11. To allow for the differences in standard of accommodation between the comparables and the subject flat they deducted the following; Dated kitchen-£50pcm; Dated bathroom-£30pcm; White goods / curtains/ blinds/ internal decorations/ floor coverings-£125pcm leaving an adjusted rent of £1,395 pcm.

The law

12. When determining a fair rent the Tribunal, in accordance with the Rent Act 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 tenant's improvements and (b) the effect of any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy, on the rental value of the property.

13. Case law informs the Tribunal;

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

3 shortage of similar properties in the wider locality available for letting on similar 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. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property). Valuation

14. Thus, in the first instance 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 on the terms and in the condition, that is considered usual for such an open market letting. The Tribunal is assisted by the comparables provided by the landlord particularly the flat in [ADDRESS] available at £1,600 pcm. The landlord refers to the lack of scarcity and that there are 17 properties available within 1- mile radius. Given this situation it is likely that a prospective tenant would expect to negotiate a reduction and the Tribunal therefore takes as its starting point a rent of £1,500 pcm.

15. However, the rent referred to in the above paragraph is on the basis of a modern open market letting with where the tenant has no liability to carry out repairs or decorations, has a modern kitchen and bathroom and the landlord supplies white goods, carpets and curtains. In this case the Tenant supplies white goods, carpets and curtains and the bathroom and kitchen fittings are said to require modernisation.

16. In making its own adjustments to reflect the lower bid a prospective tenant would make to reflect the differences between the property in a modern lettable state and that as provided by the landlord we make a deduction of 20% arriving at a rent of £1,200 pcm.

17. We then considered the question of scarcity as referred to in paragraph 12a above and determined that there was none in this area of Surrey.

18. We therefore determined that the uncapped Fair Rent is £1,200 per calendar month exclusive of council tax and water rates with effect from 22 August 2019.

19. As this amount is below the rent calculated in accordance with the Maximum Fair Rent Order details of which are shown on the rear of the Decision Notice the Order has no effect and we determine that the sum of £1,200 per calendar month inclusive of £58.18 per calendar month is registered as the fair rent with effect from today’s date.

[NAME] (Chairman) 22 August 2019

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1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) 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. 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.

2. 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.

3. 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.