Tribunal Sets Fair Rent for Property Considering Condition and Scarcity

OUTCOME: Allowed

First-tier Tribunal – Property Chamber File Ref No. LON/00BB/F77/2021/0026

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were 77 [ADDRESS], [POSTCODE]

Judge Dutton Mrs S [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair [NAME] is £205 Per week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 12 August 2021

3. The amount for services is

Per

not applicable

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

Per

not applicable

5. The [NAME] is not to be registered as variable.

6. Details (other than [NAME]) where different from [NAME] entry

8. For information only:

(a) The fair [NAME] to be registered is not [COMPANY] by the [NAME] ([NAME]) Order 1999, because it is below the maximum fair [NAME] of £ 215.50 per week .

Chairman Andrew Dutton Date of decision 12 August 2021

[NAME] FIGURE X 304

PREVIOUS RPI FIGURE Y 281.50

X 304 Minus Y 281.5 = (A) 22.5

(A) 22.5 Divided by Y 281.5 = (B) 0.079928

First [NAME] for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.129928

Last registered [NAME]* £190.50 Multiplied by (C) = £215.25 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £215.50

Variable service charge NO If YES add amount for services

[NAME] = £215.50 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 [NAME] was the first since 1 February 1999) or 5% (if it is a second or subsequent [NAME] 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 [NAME] of the formula is ascertained the service charge is then added to that sum in order to produce the maximum fair [NAME].

Case Reference

: LON/00BB/F77/2021/0026

Property : 77 [ADDRESS] [POSTCODE]

Tenant

: Mr [APPELLANT]

Landlord : [APPELLANT] of Objection : 23 September 2020

Type of [NAME] : Section 70 [NAME] 1977

Tribunal

: Tribunal Judge Dutton

Mrs S Phillips MRICS

Date of Consideration : 12 August 2021

_______________________________________________ FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

DECISION

The sum of £205.00 per week will be registered as the fair [NAME] with effect from 12 August 2021.

© CROWN COPYRIGHT

FULL REASONS

1. Background In an [NAME] dated 1 June 2020 the landlord applied to the [NAME] for a re- registration of the fair [NAME] to £220 per week for the above property.

The [NAME] was previously registered on 7 June 2018 at £190.50 per week, effective from 20 July 2018.

On 17 September 2020 the [NAME] registered a fair [NAME] of £209.50 per week with effect from that date. It was noted that the uncapped [NAME] was £220 per week

By a letter dated 23 September 2020 Mr [NAME] objected to the [NAME] determined by the [NAME] and the objection was referred to the Tribunal.

On 12 August 2021 we held a video hearing involving Mr and Mrs [RESPONDENT]. The landlord did not attend. Prior to the hearing we had the opportunity of considering such responses as the parties had made and to review the documentation provided to us by the [NAME].

2. Inspection The tribunal was not able to inspect the Property due to Covid-19 restrictions. However, we did have the benefit of a tour of the downstairs of the property by use of Mr [NAME] mobile telephone. He showed us what appeared to be an unsatisfactory electrical supply which appeared to have blue tissue stuffed into part of it, apparently to stop, in the words of Mr [NAME], “to stop brown wax dripping on the wall below”. We saw also the lack of finish to the new window and some cracking to a flank wall, which we were told extended to the upper floor. Externally there was evidence of water staining and what appeared to be a blue plastic bag pushed into the external wall by the kitchen, where a brick appeared to be missing. Mr [RESPONDENT] told us that the landlord had not visited the property for more than two years.

3. Evidence Apart from the evidence given to us at the video hearing there was little in the way of written submissions, although Mr [NAME] had in his letter of objection referred to items that were, in his view out of repair and repeated this in a letter received by the [NAME] on 20 July 2020, the contents of which we noted.

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

5. Determination and Valuation In the first instance the Tribunal determined what [NAME] 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 the E16 area of London, from its own general knowledge, rather than any specific knowledge of market [NAME] levels in the area. The Tribunal concluded that an open market [NAME] for two-bedroom inner terraced house in the vicinity would be in the region of £320 per week. This level of [NAME] assumes a property in a refurbished condition. There are issues, not least the electrical supply, which in our view requires attention by the landlord, and possibly the electricity board, and a review of the cracking.

We need to consider any deduction to reflect the condition and the basic level of amenities and any improvements by the tenant. The property is modernised with central heating and double glazing provided by the landlord. The carpets and curtains, together with white goods belong to the tenant. It seems from the [NAME] that Mr [APPELLANT] is responsible for internal decoration which is unlikely to be the case in an open market letting. Taking these matters into account we consider that a reduction in the open market [NAME] of 20%, or £64 fairly reflects these issues. This therefore reduces the adjusted open market [NAME] to £256.00 per week.

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 based on 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 of 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.

£/week [NAME]

320.0 Less (Carpets, Curtains and White Goods

And tenant’s obligations) £64

256.00 Scarcity @ 20%

51.00

[NAME]

£205.00

6. Decision The maximum fair [NAME] was £215.50 per week. (See reverse of Notice) The [NAME] determined by the tribunal fell below that figure. The [NAME] of £205.00 per week is to be registered as the fair [NAME] for this property.

Accordingly, the sum of £205.00 per week will be registered as the fair [NAME] with effect from 12 August 2021 being the date of the Tribunal’s decision.

Judge Dutton

Date: 12 August 2021

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 [NAME]) when reaching its decision. It is an integral part of the decision.

2. The definition of [NAME] is contained in the [NAME] 1977 i.e.:-

70(1) In determining ......a fair [NAME] 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 dwelling house

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 dwelling houses in the locality on the terms (other than those relating to [NAME]) of the regulated

tenancy is not substantially greater than the number of such dwelling houses 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 [NAME] 1977 (primary legislation) the Tribunal will have to follow the wording of the Act if it cannot be read or 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 [NAME] 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 [NAME] for the property taking into account evidence before it from the parties and the [NAME]. 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 [NAME] 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 [NAME] 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) [NAME] 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 [COMPANY] 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 [NAME] were to exclude the scarcity element.

13. The Tribunal must apply the [NAME] ([NAME]) Order 1999 – known as the “capping” provision – unless there is an exemption.

ANNEX - RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written [NAME] for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The [NAME] for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

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

4. The [NAME] 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 [NAME] the [NAME] is seeking.