Tribunal Sets Fair Rent for Property in Herne Bay

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/29UC/F77/2020/0024

Notice of the Tribunal [NAME] 1977 Schedule 11

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

[NAME] Miss C [NAME] Mr [RESPONDENT]

Landlord [APPELLANT]

Tenant [NAME] [APPELLANT]

1. The fair [NAME] is £120.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 09 December 2020

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

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 £131.00 per week prescribed by the Order.

[NAME] of decision 9 December 2020

FR24 [NAME] FIGURE X 294.3

PREVIOUS RPI FIGURE Y 281.7

X 294.3 Minus Y 281.7 = (A) 12.6

(A) 12.6 Divided by Y 281.7 = (B) 0.04473

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.09473

Last registered [NAME]* £119.50 Multiplied by (C) = 130.82 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £131.00

Variable service charge NO If YES add amount for services

[NAME] = £131.00 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].

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Case Reference : CHI/29UC/F77/2020/0024

Property : [ADDRESS] [POSTCODE]

Landlord : [RESPONDENT] : [NAME]

Tenants : [NAME]. [COUNSEL]

: None

Type of Application : [NAME] 1977 – Section 70

Appeal of [NAME]

Tribunal Members : [NAME] (Chairman)

[NAME]

[NAME] of Inspection : Not inspected

Date of Decision : 9th December 2020 ____________________________________________ DECISION ____________________________________ © CROWN COPYRIGHT 2020 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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Background

1) On 3 July 1920 the Landlord made an application to register the [NAME] of the property at £145.00 per week.

2) The [NAME] payable at the time of the application was £119.50 per week.

3) The [NAME] was previously registered on the 27th of July 2018 at £119.50 with effect from the 15th of September 2018.

4) On the 22nd of September 2020 the [NAME] registered a Fair Fent of £120.00 per week exclusive of rates with effect from that date.

5) On the 1st of October 2020 the Landlord objected, and the matter was referred to the First-Tier Tribunal (Property Chamber).

6) On 27th October 2020 the Tribunal made Directions informing the parties that in view of the Government’s advice with respect to the Covid 19 outbreak an inspection would not take place. The parties were given the opportunity to provide supporting photographs of the property and if desired make representations to have the case stayed until an inspection was possible.

7) The Directions required the Landlord to send a statement to the Tenants and to the Tribunal supporting the application for an increase in [NAME]. The Tenants were also required to send a statement to the Landlord and to the Tribunal in support of their objection.

8) Neither party requested a Hearing.

9) The Tribunal met on 9th December 2020 to consider the application.

10) The matter is dealt with as a paper determination without hearing. In the current circumstances it has not been possible to inspect the property and the Tribunal relies on submissions from the Landlord and Tenants in correspondence, publicly available housing data online and its own expert knowledge.

Evidence

11) The Tribunal received written representations from the Tenants and the Landlord and these were copied to the parties. The [NAME] supplied some records and copies of correspondence they had had with the parties.

12) It is a self-contained ground floor flat in a converted house in the centre of Herne Bay. Local shops are within a few minutes’ walk.

13) The accommodation comprises hall, living room, 2 bedrooms, bathroom/WC, and kitchen. There is a garden at the rear of the property. There are electric storage heaters. All main services are connected.

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14) The Landlord stated that they had installed a new electric storage heater in the second bedroom in the earlier part of 2020 and the cost together with the fitting of a new consumer unit and additional wiring that was required was £1,530.00.

15) The Tenants stated that the Landlords have not carried out any external decoration or maintenance to the property since they moved in in 1975. Consequently, the property is now in poor decorative state externally, the only maintenance that the Tenants can recall having been undertaken by the Landlord was the replacement of the screws in the bathroom door and the installation of the new storage heater in the second bedroom earlier this year. The external window cill is very rotten and several of the sash cords are broken. The Tenants have painted the exterior windows and front door during their tenancy and are in the process of decorating the outside porch and exterior of the front door. The bathroom is the original one and is very small being only 78 inches by 66 inches. The Tenants have replaced the bath panel.

16) Neither party gave any comparable evidence of rents for flats of this type set in this locality.

17) The Tenants are satisfied that the [NAME] of £120.00 per week is correct as registered by The [NAME].

The law

18) When determining a [NAME] the Tribunal, in accordance with the [NAME] 1977, section 70, must have regard to all the circumstances including the age, location and state of repair of the property. It must also disregard the effect of (a) any relevant Tenants's improvements and (b) the effect of any disrepair or other defect attributable to the Tenants or any predecessor in title under the regulated tenancy, on the rental value of the property. That section also required the Tribunal not to take into account the personal financial and other circumstances of the Tenants.

19) 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 [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 these comparables and the subject property).

20) The [NAME] ([NAME]) Order 1999 limits the increase from the previous registered [NAME]. It is worked out by a formula based on the change in Retail Prices Index since the last registration plus a fixed percentage increase set by law. If the [NAME] or the Tribunal decides the

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property is worth more than the maximum fair [NAME], the maximum fair [NAME] becomes the registered [NAME]. If the valuation is lower than the maximum fair [NAME] that valuation becomes the registered [NAME].

21) There are two occasions when the maximum fair [NAME] will not apply: - If there is no existing registered [NAME], and If the Landlord has improved or repaired the property and the [NAME] and/or the Tribunal considers the improvement or repair has made the [NAME] at least 15% more than the existing registered [NAME].

VALUATION

The [NAME]

22) The Tribunal firstly 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 exclusive of water rates and council tax.

23) The letting market has grown substantially in recent years and there is now ample evidence of open market rents for Assured Shorthold Tenancies. In the competitive market that now exists, such properties need to be in first class structural and decorative order and be equipped with all amenities such as full modern central heating, double glazing and other energy-saving facilities along with white goods, carpets and curtains to ensure the property attains its full rental income potential. Where such items and facilities are missing the [NAME] is found to be correspondingly lower.

24) The [NAME] has provided a brief redacted list of comparables upon which he relied in computing his market [NAME]. The list does not give full postcode addresses and so we were unable to see if any were in the immediate locality. There were 20 different comparables on the list ranging between £109.62 and £196.15 per week. The [NAME] officer’s computations started with an open market valuation of £170.00 per week from which he made adjustments of £50.00 to give a [NAME] of £120.00. He computed the capping and, as the [NAME] was below this capping it did not apply.

25) Neither party provided any evidence of open market lettings, and the Tribunal therefore relied on its own knowledge and experience of general [NAME] levels for this type of property in this area.

26) The Tribunal’s conclusion was that an appropriate open market [NAME] for the property let on a modern open market letting of an Assured Shorthold Tenancy where the Landlord supplies white goods, carpets and curtains and the Tenants has no liability to carry out repairs or decorations would be £170.00 per week, in line with the [NAME]’s finding.

27) However, the Tribunal noted from the representations made, together with the notes from the [NAME], that the actual property is not in the condition considered usual for a modern letting at a market [NAME], and it was necessary to adjust that hypothetical [NAME] of £170.00 per week to allow for

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the differences between the condition considered usual for such a letting and the condition of the actual property.

28) One item that is important in this particular case is the rating recorded by the Energy Performance Certificate dated 28th January 2020 being 32/F. This is such a low rating that the property could not be re-let under the current MEES Regulations.

29) The Tribunal takes into account several items to arrive at the [NAME] that it decides is the market [NAME]. These are broken down in the decision to show the proportional effect of each of these items on the adjusted rental value. Whilst there is no laid down formula for arriving at the sums to be allocated towards these items the Tribunal has used its own knowledge and experience in arriving at these figures.

(a) Tenants’ Improvements – (b) Repairing and Decorating Liabilities (c) White Goods (d) Carpets and Curtains (e) Low EPC rating (f) Disrepair

30) The Tribunal considered these factors separately and then considered whether the overall reduction was justified. We are satisfied that it is.

31) We decided to make a deduction of 30% for these factors which gives a [NAME] of £119.00 per week, which the Tribunal decided should be rounded to £120.00 per week.

Scarcity

32) The Tribunal did not consider that there was any substantial scarcity element for this type of property in this area and accordingly no further deduction was made for scarcity.

THE DECISION

33) We therefore determined that the uncapped [NAME] is £120.00 per week exclusive of council tax and water rates

34) As this amount is below the [NAME] calculated in accordance with the [NAME] ([NAME]) Order 1999 details of which are shown on the rear of the Decision notice, we determine that the lower sum of £120.00 per week is registered as the [NAME] with effect from 9th December 2020.

Appeals

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber), which may be on a point of law only, must seek permission to do so

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by making written application to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. 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.

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

4. 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.