Tribunal Sets Fair Rent for Property Considering Condition and Market Value

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00AG/F77/2021/0235

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME]

[APPELLANT]

Tenant Mr [APPELLANT] [NAME]

1. The fair rent is £2850.00 Per Quarter (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 13 September 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 rent allowance is

N/A Per

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

None.

8. For information only:

(a) The fair rent to be registered is not [COMPANY] by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £3238.50 per Quarter.

[NAME] of decision Monday 13th September 2021

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 305.5

PREVIOUS RPI FIGURE Y 289.5

X 305.5 Minus Y 289.5 = (A) 16.0

(A) 16.0 Divided by Y 289.5 = (B) 0.05527

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.10527

Last registered rent* £2930.00 Multiplied by (C) = 1.10527 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £3238.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £3238.00 Per Quarter

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

: LON/00AG/F77/2021/0235

Property : [ADDRESS] [POSTCODE]

Tenant

: Mr [APPELLANT] J [APPELLANT]

Landlord : [APPELLANT] of Objection : 7th July 2021

Type of Application : Section 70 Rent Act 1977

Tribunal

: Mr [NAME] of Determination : 13th September 2021

Date of written reasons: 24th September 2021

_______________________________________________

DECISION

The sum of £2850 per quarter will be registered as the fair rent with effect from 13th September 2021.

© CROWN COPYRIGHT 2018

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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FULL REASONS

1. Background 1.1. In an application dated 13th April 2021 the landlord applied to the Rent Officer for a registration of the fair rent to £3223 per quarter for the above property. The previous rent of, £2930 per quarter, was registered, by the Rent Officer, on 1st September 2019 with effect from 15th July 2019. Mr [NAME] has occupied the property since around May 1978. No tenancy agreement was available.

1.2 On 25th May 2021 the Rent Officer registered a fair rent of £2839 per quarter with effect from the 15th July 2021.

1.3 By e-mail dated 7th July 2021 the landlord’s representative objected to the rent determined by the Rent Officer which was accepted as a late application by the tribunal on 20th July 2021.

2. Inspection 2.1 No inspection took place as a result of the restrictions caused by the COVID-19 Pandemic. However, some evidence of the property was available from the rent register. The landlord in their application for an increased rent, state that the property is a self-contained converted flat with, 2 Living rooms 1 kitchen, 1 bathroom/ WC there is also a private garden. The property is centrally heated.

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

3.2 Tenant’s Representations: These were made to the Rent Officer in a letter dated 17th May 2021 and further amplified in a 16-page submission undated but received by the tribunal on 24th August 2021. This included that the “works “were undertaken in 2012 when all kitchen and bathroom fittings were paid for by the tenant despite these being the landlord’s responsibility who wanted to re-fit damaged and unsuitable existing fittings. There are issues of condition/deterioration of wooden windows, rotted garden access handrail and gate, photographs of these items were attached. There were also observations that the last registered rent appeared to be higher than comparable properties and that there were recent falls in market rents and now difficulty in letting properties without rental discounts.

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3.3 Landlord’s Representations:

This comprised of the original application for rent registration form dated 13th April 2021 and an undated proforma reply to Directions prepared by Mr [NAME]. It lists the extensive works of damp proofing and required remedial works, including new boiler and central heating, new kitchen, new bathroom, electrical re-wire, internal decoration and replacement of floor coverings The tenant had to be re-located on a temporary basis, to remedy damp problems, were undertaken in 2013 at which time the landlord worked with the tenant on its preferred kitchen arrangement.

No evidence of comparable market rents was provided by either party.

Whilst not important, for current purposes, the tenant has provided e-mail evidence in his submission that the works were in fact undertaken in 2012. It is common ground that the boiler and central heating were installed by the landlord. However, working from the evidence and responsibilities originally allocated between the parties, the tribunal considers that it’s valuation assumptions should be that: - There are kitchen and bathroom facilities in existence but these are to be considered in poor condition. There are no floor coverings, curtains or white goods provided by the landlord. There are items of disrepair to external decorations and exterior fittings as listed and evidenced in photographs by the tenant

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

5. Determination and Valuation 5.1 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 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 rents in the area. The tribunal relied upon their expert knowledge and experience and concluded that an open market rent for a property of this type in the vicinity would be in the region of £4600 per quarter. This level of rent assumes a property in a refurbished condition.

5.2 The tribunal next considered any deductions that would reflect the terms and conditions, the tenant’s own carpets, curtains, white goods, bathroom and kitchen fittings paid for by the tenant and the disrepair as per the tenant’s submission. These we consider would have an adverse effect on the open

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market rent level. Taking these matters into account we consider that a reduction in the open market rent of £1100.00 per quarter would reflect these issues. These deductions include £450.00 per quarter for the terms and conditions, white goods, carpets and curtains, and £650.00 per quarter for the issues of disrepair. This reduction fairly reflects the issues. This therefore reduces the open market rent to £3500.00 per quarter.

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 Greater London, there is an imbalance between supply and demand and this impacts upon rental values.

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

£/Quarter Market Rent

4600.00 Less £450.00 per quarter for Tenant’s own carpets curtains and white goods and terms and conditions Less £650.00 per quarter for disrepair

1100.00

3500.00

Less Scarcity 20%

700.00 2800.00

Fair rent Say £2850.00

6. Decision 6.1 The section 70 fair rent determined by the tribunal is below the maximum fair rent permitted by the Rent Acts (Maximum Fair Rent) Order 1999 and accordingly that rent limit does not have effect. Details are provided on the back of the decision form.

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Accordingly, the sum of £2850.00 per quarter will be registered as the fair rent with effect from 13th September 2021 being the date of the Tribunal’s substantive decision.

[NAME]

Tribunal [NAME]: 24th September 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 Rent Assessment Committee) when reaching its decision. It is an integral part of the decision.

2. The definition of Fair Rent is contained in the Rent Act 1977 i.e.:-

70(1) In determining ......a fair rent 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 rent) 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 Rent Act 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 making 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 [NAME] v [NAME] (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 rent for the property taking into account evidence before it from the parties and the Rent Officer. 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 rent 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 rent 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) Rent Act 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 rent were to exclude the scarcity element.

13. The Tribunal must apply the Rent Acts (Maximum Fair Rent) 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 application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The application for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

3. If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed despite not being within the time limit.

4. The application 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 making the application is seeking.