Tribunal Sets Fair Rent for Property Following Objection

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/00ML/F77/2019/0031

Notice of the Tribunal [NAME] 1977 Schedule 11

Address of Premises The Tribunal members were Flat 137, [NAME], [ADDRESS], [POSTCODE]

[NAME] Mr [APPELLANT]

Landlord [APPELLANT]

Tenant Mrs [APPELLANT]

1. The fair [NAME] is £12,684.50 Per Year (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22 July 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 [NAME] allowance is

n/a Per n/a

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

Previous registrations have wrongly included a variable service charge.

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 £12,863.00 per year prescribed by the Order.

[NAME] [NAME] of decision 22 July 2019

FR24 [NAME] FIGURE X 289.2

PREVIOUS RPI FIGURE Y 271.7

X 289.2 Minus Y 271.7 = (A) 17.5

(A) 17.5 Divided by Y 271.7 = (B) 0.064409

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.114409

Last registered [NAME]* £11,542.00 Multiplied by (C) = 12,862.5086 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £12,863.00

Variable service charge YES / NO If YES add amount for services

[NAME] = £12,863.00 Per Year

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 2019 `

Case Reference : CHI/00ML/F77/2019/0031

Property : Flat 137, [NAME], [ADDRESS] [POSTCODE]

Landlord

: [RESPONDENT].

Represented by : [NAME]

Tenant : Mrs. [APPELLANT]. [APPELLANT] of Application : [NAME] 1977 (“the Act”) Determination by a First Tier Tribunal of the fair [NAME] of a property following an objection to the [NAME] registered by the [NAME].

Tribunal Members : [NAME] ([NAME])

[NAME] (Valuer Member)

Date of Inspection : Monday 22nd July 2019

Hearing at [COMPANY], [ADDRESS], Brighton

Date of Decision : Monday 22nd July 2019

_______________________________________________

DECISION AND REASONS ____________________________________

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Background 1. On 5th March 2019 the landlord applied to the [NAME] for registration of a fair [NAME] of £13,850.40 per annum plus variable service charge for the property. The Application states that the additional sum of £2,283.14 per annum is payable in respect of services.

2. On the 26th April 2019, the [NAME] registered a fair [NAME] of £14,942.85 per year, effective from 31st May 2019. This [NAME] includes the sum of £2,258.35 per annum attributable to services and is registered as variable in accordance with the terms of the agreement.

3. The previous registration by the [NAME] on 20th February 2017 was £13,240 per year effective from the same date. This [NAME] includes the sum of £2,015.90 per annum attributable to services and is registered as variable in accordance with the terms of the agreement. Following an appeal, the First Tier Tribunal determined on 31st May 2017 that the fair [NAME] should be £13,557.90 per annum. This [NAME] includes the sum of £2,015.90 per annum attributable to services and registered as variable.

4. The tenant objected to the [NAME] determined by the [NAME] on 26th April 2019 and the matter was referred to the First Tier Tribunal (Property Chamber) Residential Property.

5. Directions for the conduct of the case were issued on 11th June 2019. Neither party complied with the Directions.

Inspection 6. The Tribunal Members inspected the property on Monday 22nd July 2019 in the company of Mrs. [APPELLANT], the tenant. The landlord had been informed of the inspection but was not present or represented.

7. The property is a self-contained, purpose built flat located on the fifth floor of a substantial 6-8 storey block of similar units which was built in about 1968. It is part of an established, predominantly residential area and [NAME] has frontage to local traffic routes. The main entrance to the part of [NAME] which contains this flat is on the west side. Town centre shops

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and amenities, including main line railway station and the sea front, are within easy reach. The tenancy does not include a garage or reserved parking but does include the right to park in an unallocated space on site if available. On street parking in nearby roads is restricted and regulated.

8. The roof is of flat design and the elevations are mainly brick. Windows in the flat are replacement uPVC double glazed casement type. The communal entrance lobby has recently been refurbished and presents an attractive appearance.

9. The accommodation comprises entrance hall, two bedrooms, living room, kitchen, bathroom/WC and separate shower/WC. Space heating and hot water are provided by a central boiler which supplies heating to radiators during the Winter.

10. The flat was completely refurbished by the landlord immediately before the tenant took occupation four years ago. It is in good decorative order. White goods, carpets and window blinds have been supplied by the landlord.

11. Notwithstanding the Directions, the Tribunal has not been provided with a copy of the Tenancy Agreement. The Application to the [NAME] states that the tenancy began 17th March 2015 and that the landlord is responsible for repairs and external decorations whilst the tenant is responsible for internal decorations – subject to Section 11 Landlord and Tenant Act. The [NAME] confirms that this is the apportionment of responsibility for repairs and decorations. Other than mentioned above, neither party has made any observations on the repairing and decorating liabilities. [NAME]. No written representations have been received from the tenant

[NAME]. The landlord’s managing agent submitted a “pro forma” supporting statement with the application which may be summarised:

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(i) “We manage over 5,000 tenancies…and assist some of our clients with their contribution to the IPD index” (ii) “One of our largest clients has noted a growth in rental levels of 7.5% for Assured Shorthold Tenancies over the past year with even greater increases achieved on Assured Tenancies. The trend shows every sign of continuing for the foreseeable future” (iii) “Fair rents continue to lag substantially behind market rents, more so than the deductions made with reference Section 70(1) warrant. We believe that there is little if any element of scarcity in the private rented sector and this is borne out by the longer void periods that landlords have been experiencing over the past year” (iv) “It is our opinion that the [NAME] continues to represent a substantial discount from the open market [NAME] after adjustments” 14. The landlord also provided with the application a copy of the annual accounts for the block in respect of the year ending 25 December 2017 15. In support of its objection to the registered [NAME], the landlord’s agents wrote a letter dated 24th June 2019 to the Tribunal Office and the following points are extracted therefrom:

(1) “[NAME] A self-contained and purpose built 2 bed flat. The flat benefits from communal heating and hot water, lift access, communal parking with one residents permit provided per flat and the availability of renting an addition [sic] underground space or garage. There is also a residential [sic] caretaker and entry phone system. As you will see from the evidence, comparable properties of the same size in the same block/area are achieving between £16,800 and £18,600 per annum.

Brief details of flats in [NAME] and nearby blocks, each with 2 rooms, kitchen, bathroom/wc and let on an AST are set out as follows:

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[NAME]

£18,[ADDRESS]

£17,[ADDRESS]

£16,800

52 [NAME]

£17,616

70 [NAME]

£17,316

110 [NAME]

£17,316

In view of the above, we consider the market [NAME] for the subject

property to be £17,508 per annum, if let on an Assured Shorthold

tenancy with carpets and white goods. (2) Scarcity

We consider that presently there should be no deduction for

scarcity as the current demand for rented property in the area

does not outstrip supply. (3) Condition

We are not aware of any failure by the landlord to fulfil their

statutory and contractual obligations as defined in the tenancy

agreement. In the event that the tenant has failed to report any

disrepair to the [NAME], we do not feel it appropriate or

in accordance with [NAME] 1977, section 70, to make deductions

under such circumstances. (4) Location

The property is in a prime and sort [sic] after location… (5) Conclusion

We conclude, therefore, that an appropriate fair [NAME] is properly

assessed at a minimum of £16,008 per annum as per the open

market [NAME], allowing for the age, condition and locality of the

property and that it is unfurnished, calculated as follows:

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[NAME]

£17,508

Carpets/decorating

£ 1,500

[NAME]

£16,008

There are minimal adjustments required to the market [NAME] as the

property was in a good and modernised condition throughout

when the tenant moved into the property in 2015. The kitchen,

bathroom and WC are all finished to a modernised specification

with integrated appliances and the work was carried out by the

landlord. Therefore in this instance, the regulated tenancy benefits

from a modernised property and the market [NAME] should not be

discounted for this. [NAME] at the last registration = 271.7, this registration = 288.2. Percentage increase = 6.07% plus 5% enhancement = 11.07% increase. £13,577.9 + 11.07% = £15,058.75 rounded to £15,059 per annum In view of the above, as the [NAME] calculation is the lower of the above two results, we submit that the [NAME] of £15,058.75 per annum should be set as the new fair [NAME] and the [NAME] should be registered at this level.” Variable Service Charge Please note that as Mrs. [NAME]. [NAME] tenancy at [NAME] commenced in 2015, it is not on the same lease agreement as the other regulated tenants at [NAME] and services are not charged to her separately. There is no allowance for variable service charge.

16. The above is a comprehensive summary of the points made by the parties and the Tribunal has considered the whole of the contents of the above documents in making its decision.

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Hearing 17. A hearing took place at [COMPANY], [ADDRESS], Brighton commencing at 13:00 on the day of the inspection. The tenant attended and was accompanied by her son, Mr. [APPELLANT]. The landlord was represented by [RESPONDENT] on behalf of [NAME], [NAME] for the landlord. (Referred to as “[NAME]” below for simplicity)

18. The [NAME] opened by informing [NAME] of what had taken place at the inspection as they had not attended and confirmed that no representations from the tenant had been allowed.

19. Before the matter proceeded, it was necessary to clarify the basis of the tenancy. The Tribunal have not been supplied with a copy of the agreement. The application refers to a proposed [NAME] plus a variable service charge. The registered [NAME] includes an amount for services and such amount is stated to be variable. However, the submissions from [NAME] state “There is no allowance for variable service charge” 20. [NAME] addressed the tribunal on this matter and stated that the basis of the application and the information supplied was incorrect. The tenant pays no service charge contribution.

21. This presented the Tribunal with a significant dilemma. The discussions that took place and the manner in which the application was dealt with are set out below. 22. [NAME] confirmed that the entire basis of the application was incorrect, in that the basis of this tenancy does not include a service charge element.

23. Furthermore, previous applications have been made on the same (incorrect) basis. Registered rents, information on the [NAME] register and the earlier determination by the First Tier Tribunal were also incorrect

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as they had been based on wrong information provided by [NAME]. No copy of the tenancy agreement has been provided to the tribunal.

24. A further complication arises in respect of the calculation of the [NAME] which requires the removal of the variable service charge element from the registered [NAME], applying the appropriate increase and then adding back the variable service charge. Since there is no service charge, there is nothing to add back and thus the [NAME] will be significantly lower than it would otherwise have been.

25. The situation was further complicated by the fact that the tenant, who was not professionally represented, had misunderstood the basis on which she had made the objection to the registered [NAME]. For many years she had been a regulated tenant of a flat in [ADDRESS], London which was owned by the same landlord as [NAME]. The landlord had offered her a “good deal” to move from the flat in London to the flat in [NAME]. The arrangement was that the new flat would be completely refurbished and she would pay the fair [NAME] but make no contribution towards service charges.

26. When she made the objection, she was concerned that the landlord had not complied with the terms of the agreement to move. The tribunal has not seen a copy of this agreement to move and, in any event, has no authority to make any comment on the terms agreed in that respect. The tenant was not objecting to the amount of the registered [NAME] and had not come today with a reasoned case, supporting evidence etc.

27. It seemed to the tribunal that there are various options. One possibility is that the tenant could withdraw the objection but in that event, the registered [NAME] would remain in place which would be incorrect.

28. All the above was openly discussed with the parties as, notwithstanding the accumulation of errors that had occurred, the tribunal needed to

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take the opportunity to regularise the situation so that it will not recur. Clearly, the tribunal cannot make a determination of a fair [NAME] on a basis which it now knows to be wrong.

29. At the conclusion of these initial discussions, the Tribunal invited the parties to retire so that all could consider the best way forward.

30. Once the parties had returned, the matter proceeded as follows:

31. The tenant had made the application and was invited to present her case. She offered no evidence and said that she was content with the [NAME] determined by the [NAME] officer provided it did not include an amount for a service charge contribution. 32. [NAME] admitted that much of the information provided in connection with this and previous applications for registration of a fair [NAME] was on an erroneous basis and apologised to the Tribunal and the tenant. They accepted the implications, with particular regard to the effect upon the [NAME] calculations.

33. Further open discussion ensued and the landlord stated that she would be willing to agree a fair [NAME] of £12,684.50 with no reference to a service charge contribution. This figure is arrived at by removing the (incorrect) service charge element from the recently registered [NAME]. The proposal was acceptable to the tenant and, in the view of the Tribunal, is at a correct level.

34. As far as the MFR calculations are concerned, the landlord accepts that one of the consequences of their errors is that the MFR will be significantly lower than it would otherwise have been since the variable service charge would be deducted from the previous registered [NAME] but not added back as it was a mistake.

36. In view of the agreement of the parties and the Tribunal on these matters, it was not considered necessary for the landlord to prove their

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case by expanding on the information given in written submissions. The law 37. When determining a fair [NAME], the [NAME], in accordance with section 79 of the [NAME] 1977, had regard to all the circumstances including the age, location and state of repair of the property. The [NAME] also disregarded the effect of (a) any relevant tenant's improvements and (b) any disrepair or other defect attributable to the tenant or any predecessor in title under the regulated tenancy, on the rental value of the property 38. (a) Ordinarily a fair [NAME] is the market [NAME] for the property discounted for 'scarcity' (i.e. that element, if any, of the market [NAME], 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 [NAME] - to that of the regulated tenancy) 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)

39. The [NAME] ([NAME]) Order 1999 applies to all applications for registration of a fair [NAME] (other than a first application for registration) made to the [NAME] on or after 1 February 1999. Its effect is to place a “cap” on the permissible amount of the increase of a fair [NAME] between one registration and the next by reference to the amount of the increase in the retail price index between the date of the two registrations plus 7.5% in the case of a first re-registration and 5% thereafter. The [NAME] must first determine a fair [NAME] (“the uncapped [NAME]”) and then consider whether the Order applies so as to limit the increase in the [NAME] (“the capped [NAME]”)

40. There are two principle exceptions. This is not the first registration so the relevant exception is contained in Art.2(7) of the 1999 Order and is as follows: “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

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result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, 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.” The Tribunal has not been made aware of any relevant works carried out to the property by the landlord since the last registration. Valuation 41. The Tribunal carefully considered the original submissions made by the landlord and the discussions that had taken place during the hearing.

42. The parties have agreed that a fair [NAME] of £12,684.50 per annum is appropriate and the Tribunal is satisfied that this is at the correct level. Both parties agreed at the hearing that the tenant is responsible for internal decorations which is not usually the case with flats let on an AST. The [NAME] has made a deduction to reflect this and no further adjustment is required.

43. We then considered the question of scarcity as referred to in paragraph 38(a) above. The Tribunal did not consider that there was any substantial scarcity element in the area of Greater Brighton and Hove and accordingly no further deduction was made for scarcity.

44. We therefore determined that the uncapped [NAME] is £12,684.50 p.a. exclusive of council tax and water rates.

34. The Tribunal finds that by virtue of the [NAME] ([NAME]) Order 1999 the maximum fair [NAME] that could have been registered in the present case is the sum of £12,863 p.a.

35. As the adjusted [NAME] is below the [NAME] calculated in accordance with the [NAME], we determine that the lower sum of £12,684.50 p.a is registered as the fair [NAME] with effect from Monday 22nd July 2019 36. For information only, details of the [NAME] calculated in accordance with the

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[NAME] details are shown on the rear of the Decision Accordingly, the sum of £12,684.50 per annum will be registered as the fair [NAME] with effect from Monday 22nd July 2019, being the date of the Tribunal's decision. [NAME]: [NAME]:

Monday 22nd July 2019 Appeals 37. A person wishing to appeal this decision to the Upper Tribunal ([NAME]) 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.

38. 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.

39. 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 the time limit, or not to allow the application for permission to appeal to proceed.

40. 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.

41. If the First-tier Tribunal refuses permission to appeal, in accordance with section 11 of the Tribunals, Courts and Enforcement Act 2007, and Rule 21 of the Tribunal Procedure (Upper Tribunal) ([NAME]) Rules 2010, the Applicant/Respondent may make a further application for permission to appeal to the Upper Tribunal ([NAME]). Such application must be made in writing and received by the Upper Tribunal ([NAME]) no later than 14 days after the date on which the First-tier Tribunal sent notice of this refusal to the party applying for permission.