Tribunal Sets Fair Rent for Property Considering Condition and Scarcity

OUTCOME: Allowed

FR24 First-tier Tribunal – [NAME] No. LON/00AZ/F77/2019/0187

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 185 [ADDRESS], [POSTCODE]

Mr Robert Latham Mrs [RESPONDENT] MA MRICS

Landlord [APPELLANT]

Tenant Mrs [APPELLANT]

1. The fair [NAME] is £213.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 06 December 2019

3. The amount for services is N/A Per

negligible/not applicable

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

N/A Per

negligible/not applicable

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

8. For information only:

(a) The fair [NAME] to be registered is not limited by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £234.50 per week.

Chairman Mr Robert Latham Date of decision 6/12/2019

FR24 [NAME] FIGURE X 290.4

PREVIOUS RPI FIGURE Y 275.1

X 290.4 Minus Y 275.1 = (A) 15.9

(A) 15.3 Divided by Y 275.1 = (B) 0.055616

First application for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.05616

Last registered [NAME]* 212 Multiplied by (C) = 234.39 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 234.50

Variable service charge NO If YES add amount for services

[NAME] = £234.50 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 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 [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 application of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair [NAME].

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY) Case Reference : LON/00AZ/F77/2019/0187 Property : 185 [ADDRESS], [POSTCODE] Landlord : [COMPANY] : [APPELLANT] Tenant : Mrs [COUNSEL] of Application : Assessment of [NAME] Tribunal Members : Judge Robert Latham Mrs [NAME] MA MRICS Date and venue of Determination : 10 [ADDRESS] [POSTCODE] 6 December 2019 Date of Reasoned Decision : 6 December 2019

EXTENDED REASONS

Background

1. On 11 August 2019, the landlord applied to the [NAME] for re-registration of a fair [NAME] of £244 pw for 185 [ADDRESS], [POSTCODE] (“the property”) pursuant to Part IV of the [NAME] 1977 (“the Act”). The existing [NAME] was £212.00 pw.

2. On 24 September 2019, the [NAME] assessed a fair [NAME] of £223 pw with effect from 12 November 2019. He first assessed the market [NAME] to be £334.62 pw. He then made adjustments of £100 (30%), having regard to four factors:

2 tenants repair/decoration liability; no furniture; no white goods; no floor covering/curtains. He finally made a deduction of £12 pw (5%) for scarcity.

3. The landlord’s agent, [RESPONDENT], requested the [NAME] to refer the matter to the First-tier Tribunal ([NAME]) (the “Tribunal”). The landlord made written representations. Neither party requested an oral hearing.

The Inspection

4. The Tribunal inspected the property. The tenant was present. She is aged 87. There was no representative from the landlord. The tenancy was granted on 10 September 1955.

5. The property is a two storey Late Victorian terraced house. It is brick contraction under a pantile roof. There are splay bays to both storeys. On the ground floor, there is a through living room and a rear kitchen. On the first floor, there are two bedrooms and a utility room leading to the rear bathroom. The bathroom is extremely basic.

6. There is an external toilet. This was locked to prevent its use. The original window has not been replaced.

7. Some years ago, the landlord installed UPVC double glazed windows. The external cills were in an extremely poor condition at both the front and rear of the property. The two rear down pipes were in poor condition and appeared to be leaking. There is evidence of some recent re-pointing, but more work is required.

8. Internally, there was evidence of damp in all the rooms, save for the bathroom. There was extensive dampness in the kitchen. There was blown plaster in the middle bedroom.

9. In 2015, the landlord installed central heating and new kitchen units. These were reflected in the fair [NAME] which was registered in 2015. At some stage, the property was partially rewired. However, some of the old wiring remains. There were exposed redundant pipes on the landing. The tenant has provided the fire in the front living room.

The Law

10. When determining a fair [NAME] in accordance with section 70 of the Act, the Tribunal:

(1) has regard to all the circumstances (other than personal circumstances) including the age, location and state of repair of the property;

(2) disregards the effect on the rental value of the property of (a) any relevant tenant improvements and (b) any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy;

3 (3) assumes (as required by s.70(2)) that, whatever might be the case, the demand for similar rented properties in the locality does not significantly exceed the supply of such properties for [NAME]. In other words that the effect of any such ‘scarcity’ on rental values is not reflected in the fair [NAME] of the subject property.

11. 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 that section 70 means that:

(a) ordinarily a fair [NAME] is the market [NAME] for the subject property discounted for ‘scarcity’ and

(b) for the purposes of determining the market [NAME], 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).

12. Thus, once the market [NAME] for the property has been determined by the exercise in (2) above that [NAME] must be adjusted, where necessary, for any scarcity.

13. Having assessed a fair [NAME], a Tribunal must consider the effect of the [NAME] ([NAME]) Order 1999. We annexe this as Appendix 2.

14. In reaching our determination, the Tribunal has taken into account the documents provided by the [NAME], the representations provided by the parties and our findings on viewing the property.

Our Assessment of the [NAME]

(i) The [NAME]

15. The Tribunal first determines the fair [NAME] in accordance with section 70 of the Act. Our starting point is to determine the [NAME] which the landlord could reasonably expect to obtain for the premises in the open market if it were let today in the condition that is considered usual for such an open market letting in this locality.

16. In their written representations, the landlord provided three comparables of £381, 386 and £390 pw. They suggest a range of £380 to £400 pw. The [NAME] has provided particulars of the comparables upon which he relied in computing a market [NAME] of £334.62. These range from £230.77 to £403.85 pw.

17. Applying our knowledge as an expert tribunal, we determine the market [NAME] to be £380 pw. We consider the figure adopted by the [NAME] to be too low and £400 pw to be at the top end of the range.

(ii) The [NAME]

4 18. Secondly, this property is not let under the terms or in the condition considered usual for a modern letting at a market [NAME] in this highly desirable area. Substantial adjustments must be made for this. The landlord suggests deductions of £130 pm (£30 pw). We consider these to be much too low.

19. We have decided to make a deduction of 30% (£114 pw) in respect of the following and determine an adjusted [NAME] of £165 pw having regard to:

(i) Terms and conditions: 5%;

(ii) No modern bathroom: 7.5%;

(iii) No carpets or curtains and white goods: 5%;

(iv) Disrepair: 10%;

(v) [NAME]: 2.5%.

20. We considered these factors separately and then considered whether the overall reduction is justified. We are satisfied that it is.

(iii) Scarcity

21. Finally, we must consider the issue of scarcity. The [NAME] made a reduction of 10% in respect of this.

22. In [COMPANY] v [NAME] [2002] All ER (D) 148 (Apr), [NAME] held that scarcity must be considered over a wider area than a particular locality. Greater London is now considered to be an appropriate area to use as a yardstick for measuring scarcity.

23. Applying our own general knowledge, and having regard to the collective knowledge of our expert members on Tribunals in London, we conclude that 20% is the appropriate reduction to make for scarcity in Greater London.

24. We therefore reduce the adjusted [NAME] by £53 pw (20%). This results in our assessment of a fair [NAME] of £213 per week.

The [NAME]

25. It is then necessary for the Tribunal to compute the “capped [NAME]” applying the [NAME]. We annexe our calculation to our decision and computed a figure of £234.50 pw. As the capped [NAME] is higher than the fair [NAME] that we have determined, it is the fair [NAME] that is payable.

Decision

26. The Tribunal determines a fair [NAME] of £213 per week.

5

Judge Robert Latham 6 December 2019

Appendix 1: Calculation of fair [NAME]

1. [NAME] in good condition with modern amenities £380 pw

2. Less adjustments for the following (30%): £114 pw

(i) Terms and conditions: 5%;

(ii) No modern bathroom: 7.5%;

(iii) No carpets or curtains and white goods: 5%;

(iv) Disrepair: 10%;

(v) [NAME]: 2.5%;

[NAME]: £266 pw

3. Less scarcity in locality (Greater London) (20%): £53

[NAME]: £213 pw

[NAME] limit provided for by the [NAME] ([NAME]) Order 1999

£234.50pw

[NAME] £213 pw

Appendix 2

The [NAME] ([NAME]) Order 1999 (SI 1999 No.6)

Article 2

(1) Where this article applies, the amount to be registered as the [NAME] of the dwelling- house under Part IV shall not, subject to paragraph (5), exceed the maximum fair [NAME] calculated in accordance with the formula set out in paragraph (2).

6

(2) The formula is: MFR = LR [1 + (x−y)/y + P

where–

MFR is the maximum fair [NAME]; LR is the amount of the existing registered [NAME] for the dwelling-house; x is the index published in the month immediately preceding the month in which the determination of a fair [NAME] is made under Part IV; Y is the published index for the month in which the [NAME] was last registered under Part IV before the date of the application for registration of a new [NAME]; and P is 0.075 for the first application for [NAME] registration of the dwelling-house after this Order comes into force and 0.05 for every subsequent application.

(3) Where the maximum fair [NAME] calculated in accordance with paragraph (2) is not an integral multiple of 50 pence the maximum fair [NAME] shall be that amount rounded up to the nearest integral multiple of 50 pence.

(4) If (x−y)/y + P is less than zero the maximum fair [NAME] shall be the existing registered [NAME].

(5) In applying this article no account shall be taken of any variable sum to be included in the registered [NAME] in accordance with section 71(4) of the 1977 Act.

(6) Subject to paragraph (7), this article applies where an application for the registration of a new [NAME] in respect of a dwelling-house is made after this Order comes into force and, on the date of that application, there is an existing registered [NAME] under Part IV in respect of that dwelling-house.

(7) 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 [NAME], the [NAME] that is determined in response to an application for registration of a new [NAME] under Part IV exceeds by at least 15% the previous [NAME] registered or confirmed.

(8) For the purposes of this article:

(a) references to Part IV are to be Part IV of the 1977 Act; (b) “common parts in relation to a building, includes the structure and exterior of the building and common facilities provided for the occupiers of the dwelling-houses in the building; (c) “index” means the monthly United Kingdom Index of Retail Prices (for all items) published by the Office for National Statistics.