Tribunal Sets Fair Rent for Property Considering Condition and Market Comparables

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/00HG/F77/2018/0077

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 7 [ADDRESS], [POSTCODE]

[NAME] Mr [APPELLANT]

Landlord [APPELLANT] & [COMPANY]

[RESPONDENT] [NAME]

1. The fair rent is £600.00 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 27 February 2019

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 not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £647.50 per calendar month prescribed by the Order.

[NAME] of decision 27 February 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 283.0

PREVIOUS RPI FIGURE Y 265.5

X 283.0 Minus Y 265.5 = (A) 17.5

(A) 17.5 Divided by Y 265.5 = (B) 0.0659

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.1159

Last registered rent* £580.00 Multiplied by (C) = 647.22 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 647.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £647.50 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.

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Case Reference : CHI/00HG/F77/2018/0077

Property : 7 [ADDRESS] [POSTCODE]

Applicant: [redacted]

Representative : [RESPONDENT] (A Royle MRICS)

Respondent: [redacted] Referred to First-tier Tribunal by Valuation Office Agency on 21st December 2018

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

Tribunal

: Mr [NAME] T [NAME] Mr [NAME] of inspection and Consideration

: 27th February 2019

_______________________________________________

REASONS FOR DECISION ____________________________________

© CROWN COPYRIGHT 2019

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 27th February 2019 that the rent would be £600.00 per calendar with effect from the same date.

2. On the 11th October 2018 the Landlord of the above property applied to the Rent Officer for registration of a fair rent of £667.00 per calendar month. The rent having been previously been determined by the Rent Officer at £580.00 per calendar month 16th November 2016 and effective from the 7th January 2017.

3. On the 29th November 2018 the Rent Officer registered a fair rent of £600.00 per calendar month effective from 7th January 2019.

4. The Landlord, on the 18th December 2018, 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. The tenancy (not being for a fixed periodic tenancy of 7 years or more) is subject to Section 11 of the Landlord and [RESPONDENT] 1985 (the landlord's statutory repairing obligations).

Inspection 6. The Tribunal inspected the premises on the 27th February in the presence of the [RESPONDENT] [NAME]. The Landlord was neither present nor represented.

7. The property comprises an inter-war semi detached house constructed in rendered cavity brick and block with a slate roof and upvc windows and doors (except the under stair cupboard). It forms part of an established suburban area on the northern side of Plymouth. Local amenities are readily available.

8. The accommodation comprises: Ground Floor: Entrance Hallway, Lounge, Dining Room and Kitchen (range of worktops and cupboards with a sink unit). First Floor: Landing, 2 double and 1 single bedrooms, Shower Room (with shower cubicle, w/c and wash basin). Outside: Gardens to front, side and rear. Under-floor storage area and external cupboard. There is no garage or on-site parking.

9. Mains gas, electricity, water and drainage are connected to the property. There is full gas fired central heating (including hot water) via a Worcester Bosch combi boiler in the hallway. Hard wired smoke detectors but there is no Carbon Monoxide alarm. The electric wiring was last inspected on 6th June 2013 and is due for re-inspection in 2023.

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10. The [RESPONDENT] has maintained the property in good decorative order and has fitted the kitchen units and all floor coverings.

11. The Tribunal noted during its inspection:

a) The external render was falling off the side elevation and is also broken/damaged to the chimney.

b) The remaining old gutters, downpipes, soil pipe and external joinery is in poor repair and repainting is required.

c) Active wood boring insect infestation was noted in the underfloor storage area.

d) The property was part scaffolded and evidence of a small 'patch repair' to the front roof hip had been recently carried out.

e) The use of polystyrene ceiling tiles in the Dining Room and Single Bedroom were noted

12. No hearing was requested by either party.

13. The [RESPONDENT] made no formal submissions to the Tribunal.

14. The Landlord's agent in its objection says the increase to £600.00 pcm is too low. Apart from the application no figure is specified. The Landlord's representative refers in its submission to 3 x three bedroomed semi - detached properties apparently available in the market at rents of £825.00 and £850.00 pcm. No explanation or analysis is given as to how these comparables are relevant to the subject property.

The Law

15. 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 [RESPONDENT]’s improvements and (b) the effect of any disrepair or other defect attributable to the [RESPONDENT] or any predecessor in title under the regulated tenancy, on the rental value of the property.

16. 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

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rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

17. 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 registration.

18. 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 19. The Tribunal considered the matter with the benefit of its inspection and the submissions of the parties.

20. After considering the rental evidence submitted by the Landlord' agent the 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 Plymouth and the wider area of South West Devon. 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 would be £775.00 pcm.

21. 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 £775.00 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 observed by the Tribunal (disregarding the effect of any disrepair or other defect attributable to this [RESPONDENT] or any predecessor in title), and the improvements carried out by the [RESPONDENT].

22. If this property were to be let on the open market it would of course come on the market in its present condition and as recorded by the Tribunal and not in the condition normally seen in such market lettings. The Tribunal considers that to reflect these matters a deduction should be made to the hypothetical rent.

23. The Tribunal considers that a deduction should also be made to reflect the lack of floor coverings, curtains and white goods.

24. The Tribunal considers that to reflect these matters the following deductions should be made:

a) Decoration liability £35.00 b) Lack of fitted kitchen £25.00 c) White goods £20.00 d) Carpets and curtains £35.00 e) No garage or on-site parking £30.00

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f) General disrepair (including rendering and other external parts) £30.00

25. A total deduction of £175.00 pcm to the hypothetical rent.

26. This leaves a fair rent of £600.00 pcm.

Scarcity 27. The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the whole area of Plymouth and the wider area of South West Devon and South East Cornwall 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. e) The members of the Tribunal have between them many years of experience of the residential letting market and that experience leads them to the view that there is no substantial shortage of similar houses available to let in the locality defined above.

28. 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 did not consider that there was a substantial scarcity element and accordingly made no further deduction for scarcity.

29. This leaves a fair rent for the subject property of £600.00 pcm.

Relevant Law 30. The Rent Act 1977.

31. 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 32. The rent to be registered 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 £647.50 pcm and

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accordingly the sum of £600.00 pcm will be registered as the fair rent on and with effect from 27th February 2019 being the date of the Tribunal's decision.

[NAME] 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.

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