Tribunal Sets Fair Rent for Property Considering Market Conditions

OUTCOME: Allowed

FR27 First-tier Tribunal – Property Chamber File Ref No. TR/LON/00AW/F77/2024/0072

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME]

Landlord [COMPANY]

[APPELLANT] [NAME]

1. The fair rent is £11,455.00 Per YEAR (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 26.04.24

3. The amount for services is £661.44 Per YEAR

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

not applicable Per

5. The rent is 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 £ 19,968.00 Per year including £ 661.44 per year for services

(b) The vb# [fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is the same as/below the maximum fair rent of £ ......... per .................... including £ ......................................... per ................................. for services (variable) prescribed by the Order.

Chairman [NAME] of decision 26TH APRIL 2024

FR27 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 383.00

PREVIOUS RPI FIGURE Y 301.10

X 383.00 Minus Y 301.10 = (A) 81.9

(A) 81.9 Divided by Y 301.10 = (B) .27200266

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

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.32200266

Last registered rent* £8,164.36 Multiplied by (C) = 1.32200266 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £10,793.00

Variable service charge YES If YES add amount for services £661.44

MAXIMUM FAIR RENT = £11,455.00 Per Year

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

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference : LON/00AW/F77/2024/0072

Hearing Type : [ADDRESS] of Written Representations

Property : 7 [ADDRESS], [POSTCODE]

Applicant: [redacted]

Respondent : [redacted]

Type of [NAME] : Referral of a Registration of Fair Rent under the Rent Act 1977

Tribunal Member : [NAME], FIRPM

Valuer Chairman

Date of Decision : 26 April 2024

FULL REASONS

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REASONS

Background

1. On 1 November 2023 the landlord sent an RR1 [NAME] for rent registration of a fair rent to the Rent Officer. The previous rent was determined by the Rent Officer on 23 April 2021 at a rent of £8,929 per annum inclusive of £764.64 services.

2. The Rent Officer subsequently registered a fair rent of £12,311.29 per annum inclusive of £661.44 of services and effective from 14 December 2023.

3. By way of a letter dated 9 January 2024 the Valuation Officer wrote to the Tribunal advising that the [APPELLANT] had objected to the rent by way of a letter dated 19 December 2023 (received 27 December 2023).

4. On 22 February 2024 the Tribunal issued Directions to the parties requiring them to produce any evidence on which they wished to rely in support of their respective cases, including by use of a reply form. The matter was set down for determination on papers unless any party requested a Hearing, which neither did. The landlord was directed to return the reply form with any other documents and submissions upon which they wished to rely by 7 March 2024. The [APPELLANT] was directed to do likewise by 21 March 2024 and the landlord then given a final opportunity to respond by 28 March 2024. All documentation, replies and correspondence have been taken into consideration.

5. On 26 April 2024 on the basis of papers and without Hearing, the Tribunal determined the fair rent of the above property at £11,455 per annum including £661.44 of services.

The Law

6. When determining a fair rent, the Tribunal, in accordance with the Rent Act 1977, Section 70, had regard to all circumstances (other than personal circumstances) including the age, location and state of repair of the property. Section 70 is set out in the Appendix below.

7. In [COMPANY] v Chairman of the Greater Manchester, etc Tribunal (1995) 28 HLR 107 and [NAME] v [NAME] Tribunal (1999) QB 92 the Court of Appeal emphasised 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 –

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to that of the regulated tenancy) and that for the purpose of determining the market rent, assured tenancy (market) rents are usually appropriate comparable (these rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

The Property

8. From Google Maps and information included on the Rent Register, the Tribunal found as follows:

The property comprises a self-contained two bedroom flat situated on the top floor of a four storey building, believed to have been built circa 1930 as part of a purpose built block

The building is constructed of brick under a pitched roof.

9. From the Rent Register the flat is understood to comprise a lounge, two bedrooms (one double and one single), kitchen and bathroom and is understood to have a floor area of approximately 600ft².

Valuation

10. From [COMPANY] v Chairman of the Greater Manchester etc Tribunal other registered rents are not relevant as a starting point because they are not market rents.

11. The Tribunal must first determine the market rent for a property of this size, in this location and in its current condition. It must also disregard the personal circumstances of either party. The Tribunal notes that the Rent Officer adopted a starting point of £31,200 per annum. Using its own general knowledge of the Greater London property market, the Tribunal agrees with this as a starting point.

12. However, all white goods, carpets and curtains are presumed to be the property of the [APPELLANT]. In addition, a [APPELLANT] of a Rent Act property has more onerous repairing obligations than those under an assured shorthold tenancy.

13. The Tribunal, therefore, made the following deductions from the market rent of £31,200 per annum to reflect those differences:

Market Rent: £31,200 per annum

• Less 10% for more onerous repairing liability

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• Less 5% for the provision of white goods • Less 5% for the provision of carpets and curtains .

This aggregated to 20% or £6,240.00 per annum leaving a net rent of £24,960 per annum.

14. The Tribunal found that there was substantial scarcity in the locality of Greater London, having taken judicial notice of long [COMPANY] and Local Authority waiting lists in Greater London. It, therefore, made deduction in respect of scarcity of 20% (£4,992.00 per annum) from the adjusted market rent to reflect this element. This resulted in rent of £19,968.00 per annum.

15. The Tribunal is then required to apply the Rent Act (Maximum Fair Rent) Order 1999. The calculation was included on the Decision sheet and produced a maximum fair rent of £11,455.00 per annum.

16. The Tribunal must register the lower of the adjusted market rent or maximum fair rent as the fair rent for the property. In this instance, the maximum fair rent produced the lower figure and the Tribunal, therefore, registered the rent at £11,455.00 per annum for this property with effect from 26 April 2024 being the date of the Tribunal Decision.

Name: Mr [NAME]: 26 April 2024

ANNEX – RIGHTS OF APPEAL

By Rule 36(2) of the Tribunal procedure, (First-tier Tribunal) (Property Chamber) Rules 2013 the Tribunal is required to notify the parties about any right of appeal they might have.

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 this case

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].

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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.

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. Any appeal in respect of the Housing Act 1988 should be on a point of law.

If the Tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

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APPENDIX

Rent Act 1977

Section 70 Determination of Fair Rent

(1) In determining, for the purpose of this part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwellinghouse, 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…F1

(b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture (F2 and)

(c) (F2(c)) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy)

(2) For the purpose 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 rent) 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.

(3) There shall be disregarded:

(a) any disrepair or other defect attributable to a failure by the [APPELLANT] under the regulated tenancy or any predecessor in title of his to comply with any terms thereof;

(b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy; by the [APPELLANT] under the regulated tenancy or any predecessor in title of his;

(c) (d)………………………………………………………………………F3

(d) If any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the [APPELLANT] under the regulated tenancy or any predecessor in title of theirs or, as the case may be, any deterioration

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in the condition of the furniture due to any ill-treatment by the [APPELLANT], any person residing or lodging with them, or any sub-[APPELLANT] of theirs.

(e) F4 [(3a) in any case where under Part 1 of the Local Government Finance Act 1992 the landlord or a [NAME] is liable to pay Council Tax in respect of a hereditament (“the relevant hereditament”) of which the dwelling-house forms part, regard shall also be had to the amount of Council Tax which, as at the date on which the [NAME] to the rent officer was made, was set by the billing authority –

(a) for the financial year in which that [NAME] was made, and

(b) for the category of dwelling within which the relevant hereditament fell on that date,

but any discount or other reduction affecting the amount of Council Tax payable shall be disregarded.

(3b) In subsection (3a) above –

“hereditament” means a dwelling within the meaning of Part 1 of the Local Government Finance Act 1992.

“billing authority” has the same meaning as in that part of the Act, and

“category of dwellings” has the same meaning as in Section 30(1) and (2) of that Act.]

(4) In this section “improvement” includes the replacement of any fixture or fitting.

[F5 (4a) in this section “premium” has the same meaning as in part IX of this Act and “sum in the nature of a premium” means –

(a) any such loan as is mentioned in Section 119 or 120 of this Act,

(b) any such excess over the reasonable price of furniture as is mentioned in Section 123 of this Act, and

(c) Any such advance payment or rent as is mentioned in Section 126 of this Act.]

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(5) ………………………………………………………………………………….