Tribunal Sets Fair Rent for Property Considering Condition and Market Comparables

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/00HA/F77/2022/0040

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 9 Steam Mills, Midsomer Norton, Radstock, Somerset, [POSTCODE]

[NAME] [NAME] Mr [RESPONDENT] [NAME]

Landlord [APPELLANT]

Tenant [NAME] [APPELLANT]

1. The fair rent is £160.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 01 December 2022

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

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

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 the maximum fair rent as prescribed by the Rent Acts (Maximum Fair Rent) Order 1999. The rent that would otherwise have been registered was £194.00 per Week.

[NAME] of decision 1 December 2022

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 356.2

PREVIOUS RPI FIGURE Y 294.3

X 356.2 Minus Y 294.3 = (A) 61.9

(A) 61.9 Divided by Y 294.3 = (B) 0.2103

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.2603

Last registered rent* £153.85 Multiplied by (C) = 193.89 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £194.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £194.00 Per Week

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.

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Case reference : CHI/00HA/F77/2022/0040 Tenant : [NAME] [APPELLANT] [NAME] Landlord : [APPELLANT] C/o [NAME] : 9 Steam Mills, Midsomer Norton, Radstock, Somerset [POSTCODE]

Date of Objection : Referred to First-tier Tribunal

by Valuation Office Agency

Type of Application : Section 70 Rent Act 1977 (the Act)

Tribunal

: Mr [NAME] [NAME] Mr [NAME] of Decision : 1st December 2022

_______________________________________________

REASONS FOR DECISION ____________________________________

© CROWN COPYRIGHT 2022

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Background 1. The Tribunal gave formal notice of its decision by a Notice dated 1st December 2022 that the rent will be £160.00 per week (pw).

2. On the 11th July 2022 the landlord of the above property applied to the Rent Officer for registration of a fair rent of £184.62 per week (£800.00 pcm). The rent having been previously determined by the Rent Officer at £153.85 pw (£669.00 pcm) on 10th September 2020 and effective from the 10th October 2020.

3. On the 11th August 2022 the Rent Officer registered a fair rent of £160.77 pw (£697.00 pcm) effective from the 10th October 2022.

4. The Landlord objected to the rent determined by the Rent Officer and the matter was referred to the First-tier Tribunal (Property Chamber) (Residential Property).

5. The tenancy appears to be a statutory protected periodic tenancy which commenced in 1961. There is no written tenancy agreement. The tenancy (not being for a fixed periodic tenancy of 7 years or more) is subject to Section 11 of the Landlord and Tenant Act 1985 (the landlord's statutory repairing obligations).

Factual Background and Submissions 6. Following the Directions dated 28th October 2022 and the explanation contained therein, the Tribunal did not inspect the premises. A hearing was not requested in the current proceedings.

7. Extracting such information as it could from the papers supplied to the Tribunal by the parties, by reference to information publicly available on the internet and with the benefit of its knowledge and experience, the Tribunal reached the following conclusions and found as follows:

8. The property comprises a double glazed semi-detached house without central heating.

9. The accommodation comprises: 1 reception room, kitchen, 3 bedrooms and bathroom/ W.C. Outside gardens and off street parking.

10. The property is let unfurnished without carpets, curtains or white goods.

11. All mains services are assumed to be connected.

12. The Tenant made no submission.

13. The Landlord’s agent says in the Reply Form (summarised):

a) Double glazing installed in 2017.

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b) Original basic unmodernised kitchen, unmodernised bathroom suite with shower over bath.

c) There is an inadequate supply of similar properties so scarcity would apply in this case.

d) The Landlord referred to comparables on Rightmove showing 2 x 3 bedroom properties to let at an asking rent of £231.00 pw (£1,000.00 pcm).

e) In its submission the Landlord said that the minimum market rent achievable is £231.00 per week (£1,000.00 pcm). From which deductions were made to reflect lack of: central heating £10.00 modern bathroom £5.00 floor coverings £2.50 appliances £2.50 tenant improvements/obligations £5.00

A total deduction of £25.00 pw.

f) The requested rent of £184.62 is still £21.38 cheaper than similar market tenancies.

The Law

14. When determining a fair rent the Tribunal, in accordance with section 70 of the Rent Act 1977, had regard to all the circumstances including the age, location and state of repair of the property. It 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 predecessor in title under the regulated tenancy, on the rental value of the property.

15. 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 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).

16. The Rent Acts (Maximum Fair Rent) Order 1999 restricts the amount by which the rent may be increased to a maximum 5.oo% plus RPI since the last

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registration.

17. The only exception to this restriction 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.

Tribunal’s deliberations 18. The Tribunal considered the matter with the benefit of the submissions made by the Landlord and the Tenant. The Tribunal does not take into consideration the personal circumstances of the Landlord or Tenant in making its determination (including issues between Landlord and Tenant which do not affect the rental value of the property itself).

19. The Tribunal checked the National Energy Performance Register and noted that that the property has an Energy Performance Certificate (EPC) of E. The certificate expires on 14th June 2031. The minimum standard is Rating E (unless exempt) for offering a property to let on the open market.

20. The Tribunal looked at the Rent Officer's valuation of the Fair Rent under Section 70 of the Rent Act 1977. The Rent Officer had started with a market rent for the property assuming it was in good repair and available in the market today. The Rent Officer found that the Market Rent would be £230.00 pw (£1,000.00 pcm).

21. The Rent Officer then considered that certain deductions should be made to reflect the condition, facilities and differing nature of the tenancy. The Rent Officer concluded that the sum of £70.00 pw (£303.00 pcm) should be deducted from the market rent to reflect these matters (which included, but not exclusively): Tenant repairing and decorating liability, no white goods, no floor covering or curtains. The Rent Officer made no adjustment for scarcity (see explanation below). The result was a Fair Rent of £160.77 pw. After applying the Maximum Fair Rent Order the rent to be registered was £160.77 pw (£697.00 pcm).

22. The Tribunal, acting as an expert tribunal, determined what rent the landlord could reasonably be expected to obtain for the subject property in the open market if it were let today in the condition and subject to the terms of such a tenancy that is 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 rent levels in the wider area of Somerset. Having done so, it concluded that such a likely market rent for a similar property in fair condition with central heating, modern bathroom and kitchen facilities, floor coverings, curtains and an EPC Rating of E or above would be £230.00 pw (£1,000.00 pcm).

23. However, the subject property is not in the condition considered usual for a modern letting at a market rent. It is therefore necessary to adjust that hypothetical rent of £230.00 pw (£1,000.00 pcm) to allow for the differences between the condition considered usual (including responsibility of tenants to maintain decorations as opposed to decorate) for such a letting and the condition of the actual property as stated in the papers (disregarding the effect of any

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disrepair or other defect attributable to this tenant or any predecessor in title), the Tenant’s improvements and the lack of modernisation referred to above.

24. The Tribunal considered the observations of the Rent Officer and concluded, using its own knowledge and judgement, that it was appropriate to make deductions to reflect the following:

a) Tenant’s decorating liability: £10.00 pw (£43.00 pcm) b) Lack of Carpets curtains £5.00 pw (£22.00 pcm) c) Lack of white goods: £5.00 pw (£22.00 pcm) d) Lack of central heating £25.00 pw (£108.00pcm) e) Dated Kitchen and bathroom fittings: £25.00 pw (£108.00 pcm)

Total deductions at £70.00 pw (£300.00 pcm).

25. The Tribunal determines the fair rent at £160.00 pw (£693.00 pcm).

Scarcity 26. The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the wider area of Somerset as a whole (i.e. a sufficiently large area to eliminate the effect of any localised amenity which would, in itself, tend to increase or decrease rent. b) Local Authority and Housing Association waiting lists. c) House prices which could be an indicator of increased availability of housing and a reduction in scarcity. d) Submissions of the parties.

27. Assessing a scarcity percentage cannot be a precise arithmetical calculation because there is no way of knowing either the exact number of people looking for a particular type of house in the private sector or the exact number of such properties available. It can only be a judgment based on the years of experience of members of the Tribunal. However, the Tribunal considered that there was no substantial scarcity element and accordingly made no deduction.

28. This leaves a fair rent for the subject property of £160.00 pw.

Relevant Law 29. The Rent Act 1977.

30. Rent Acts (Maximum Fair Rent) Order 1999. In particular paragraph 7 which states:

This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed.

Rent Acts (Maximum Fair Rent) Order 1999

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31. The rent to be is not limited by the Fair Rent Acts (Maximum Fair Rent) Order 1999 because it is below the maximum fair rent (see calculation on reverse of decision sheet) of £194.00 pw and accordingly the sum of £160.00 pw will be registered as the fair rent on and with effect from 1st December 2022 being the date of the Tribunal's decision.

RIGHTS OF APPEAL

1. A person wishing to appeal this decision (on a point of law only) 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. Where possible you should send your application for permission to appeal by email to [EMAIL] as this will enable the First-tier Tribunal Regional office to deal with it more efficiently.

2. 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.

3. 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.

4. 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