Tribunal Sets Fair Rent for Property Under Rent Act 1977

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. BIR/39UB/F77/2024/0039

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 1 Old Cottage Grindle Shifnal Shropshire [POSTCODE]

[NAME] [NAME] FRICS

Landlord Trustees of [APPELLANT]

Tenant [APPELLANT]

1. The fair rent is £149.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 22 November 2024

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 rent allowance is

Per

not applicable

5. The rent is not to be registered as variable.

6. The capping provisions of the Rent Acts (Maximum Fair Rent) Order 1999 do not apply (please see calculation overleaf).

7. Details (other than rent) where different from Rent Register entry

8. For information only:

The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999.

[NAME] of decision 22 November 2024

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 388.6

PREVIOUS RPI FIGURE Y 317.7

X 388.6 Minus Y 317.7 = (A) 70.9 (A) 70.9 Divided by Y 317.7 = (B) 0.223166509

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) 1.273166509

Last registered rent* £99.00 Multiplied by (C) = £126.04 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £126.50

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £126.50 Per week

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

© CROWN COPYRIGHT

Case Reference : BIR/39UB/F77/2024/0039

Property : 1 Old Cottage Grindle Shifnal Shropshire [POSTCODE]

Landlord : Trustees of [APPELLANT] : [NAME]

Tenant : Mr [COUNSEL] of Application : An application under section 70 of the Rent Act against the Fair Rent assessed for the Property by the Rent Officer

Tribunal Members : [NAME] [NAME] FRICS

Date of Decision : 22 November 2024

Date of Statement : 14 January 2025 Of Reasons

_____________________________________________________

STATEMENT OF REASONS _____________________________________________________

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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DECISION

1. The fair rent determined by the Tribunal for the purposes of Section 70 is £149.00 per week with effect from 22 November 2024.

BACKGROUND & REASONS FOR THE DECISION

2. On 8 July 2024, the Rent Officer registered a rental of £110.00 per week in respect of the Property, effective from the same date. The rent prior to this registration was £99.00 per week.

3. By way of a letter dated 16 July 204, the Landlord objected to the rent determined by the Rent Officer and the matter was referred to the Tribunal.

THE PROPERTY

4. The Tribunal carried out an inspection of the Property on 22 November 2024.

5. Present at the inspection were:

The Tenant, Mr [APPELLANT] and Mrs [APPELLANT] who were assisted by their daughter, Ms [RESPONDENT].

On behalf of the Landlord, Mr [RESPONDENT], the [NAME], Ms [RESPONDENT], [NAME] Manager and Mr [NAME], Graduate Surveyor (observing) were present.

6. The Property is situated in a rural location approached via a short driveway from the adopted highway. The small village of Grindle is a short distance away to the east whilst the town of Shifnal is approximately 4 miles to the north.

7. The Property is a Grade II listed cottage which forms part of the [NAME] and which is close proximity to some of the agricultural buildings forming part of the [NAME].

8. The accommodation comprises the following:

Ground Floor Hall with access off to kitchen, two reception rooms, small bathroom with suite comprising bath with shower, wash hand basin and WC. First Floor Three bedrooms. Externally Garage, various outbuildings, gardens side and rear, loose surfaced parking area.

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9. The Property benefits from mains electricity. Water is provided by the [NAME] supply whilst drainage is via private means. There is oil fired central heating however currently, hot water is provided by the back boiler to the [NAME]. Windows are partially double glazed.

Submissions of the Parties

10. Both parties requested a hearing and by kind courtesy of Mr and Mrs [NAME], it was held at the Property following the inspection.

11. The submissions of the parties both at the hearing and in their written submissions were as follows.

The Landlord

12. The Landlord stated that over the last two years, they had carried out extensive repairs to the Property including the installation of an oil-fired heating system which related to the specific comment in their objection to the Rent Officer as follows:

“I wish to raise an objection to this increase on the bases that we have upgraded the heating system to an oil fired boiler to heat the property throughout and the hot water system.”

13. Currently, hot water for the Property was provided by the back boiler to the Tenant’s [NAME] at the Tenant’s request, however, the new system would if necessary provide hot water.

14. At the request of the Tribunal, subsequent to the hearing, the Landlord confirmed to the Tribunal and the Tenant, the costs of these works generally and the costs of the heating system specifically. These were given as follows:

Total cost of works (including heating system

£32,229.73 but excluding labour)

Costs relating to the installation of the oil fired

£11,312.32 heating system

15. The Landlord sought a rental of £150.00 per week. In support of this some they had provided details of three other properties on the [NAME] which were also occupied on Rent Act 1977 tenancies.

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These were as follows:

Property Post Code No of Beds Style Rent (pcm) 5 New Houses, Grindle, Shifnal [POSTCODE] 3 Semi - detached £448.00 [ADDRESS] [POSTCODE] 3 Detached £527.00 2 Home Farm Bungalows, [NAME], Shifnal [POSTCODE] 2 Detached £455.00

The Tenant

16. The representations by the Tenant focussed on the fact that they had struggled to get repairs done and had felt it was necessary to contact the Local Authority. This resulted in some works being done. At the time of the hearing, Mr [NAME] stated that the following were outstanding:

 Dampness to the south facing wall.  Garage locking mechanism.

The Landlord had recently installed an oil-fired heating system (see above) however the prior to this, the house was partially heated by the [APPELLANT] which had been installed by the Tenant.

17. In respect of the additional cost information provided by the Landlord, the Tenant made the comment that they did not believe that all of the costs set out in the general schedule related to their Property. In addition, they noted that some works were still outstanding as set out above.

THE LAW

18. When determining a fair rent, the Tribunal, in accordance with the Rent Act 1977, Section 70, had regard to all the circumstances including the age, location and state of repair of the property. It also disregarded the effect of (a) any relevant Tenant’s improvements and (b) the effect of 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.

19. In [COMPANY] v Chairman of the Greater Manchester, etc. Committee [1995] 28HLR107 and [NAME] v [NAME] [1999] QB92, the Court of Appeal emphasised (a) 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

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properties in the wider locality available for letting on similar terms – other than as to rent – to that of the regulated tenancy) and (b) that for the purposes of determining the market rent assured tenancy (market) rents were usually appropriate comparables. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).

VALUATION

20. In the first instance, the Tribunal determined what rent the Landlord could reasonably expect to obtain for the Property in the open market if it were let today in the condition that is considered usual for such open market [NAME]. The evidence provided by the Landlord was not relevant as it related to other properties that were occupied by Tenants on Rent Act 1977 tenancies hence the rents were “registered rents” ie not open market rents.

21. From the Tribunal’s own general knowledge of market rent levels in the east Shropshire area it concluded that such a likely market rent would be in the order of £1,250.00 per calendar month i.e. £290.00 per week. However, the Property is not in the same condition as properties in the general market. To reflect these factors, the Tribunal made deductions as follows (£ per week):

General Condition

£20.00 Kitchen Facilities

£20.00 Small Bathroom

£20.00 Partial Double Glazing £20.00 Total

£80.00

22. A further adjustment of £20.00 per week was made to allow for the Tenant’s fittings (floor coverings, curtains and white goods).

23. To allow for the Tenant’s decorating liability, it was necessary to make an additional deduction of £14.50 per week.

24. The Tribunal then considered the question of scarcity. This was done by considering whether the number of persons genuinely seeking to become tenants of similar properties in the wider area of the West Midlands on the same terms other than rent is substantially greater than the availability of such dwellings as required by section 70(2) of the Rent Act 1977.

25. The Tribunal finds that many landlords dispute that scarcity exists because they are of the opinion that the market is ‘in balance’. Although tenants do not in all cases have difficulty in finding accommodation, this ignores the fact that it is the price of such accommodation which creates a balance in the market. Section 70(2) specifically excludes the price of accommodation from consideration in

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determining whether there are more persons genuinely seeking to become tenants of similar properties than there are properties available.

26. The Tribunal found that there was scarcity, there is a lack of properties available to rent generally and particularly in rural locations and, accordingly, made a further deduction of £26.33 per week representing approximately 15% of the adjusted rental.

27. This leaves a fair rent for the subject property of £149.17 per week (rounded to £149.00 per week) summarised as follows:

Fair Rent with the benefit of central heating

Rental per week

£290.00

Deductions (see above)

£80.00

Tenants Fittings

£20.00. Decorating

£14.50 Rental after deductions

£175.50 Scarcity

£26.33

Fair Rental

£149.17 Say

£149.00

28. The Tribunal then considered the matter of whether the works carried out by the Landlord took the rental out of the capping provisions of the Rent Acts (Maximum Fair Rent) Order 1999 if there has been a change in the condition of the because of repairs or improvements carried out by the landlord, and that change alone would have increased the existing registered rent by at least 15%.

29. Whilst the Tribunal notes that the Landlord has incurred significant costs in the maintenance of the fabric of the Property other than those relating to the installation of the heating system, these are not relevant on this point. Maintenance of the Property in a good state of repair is a statutory obligation of the Landlord. In addition, the fact that the Property benefitted from partial heating installed by the Tenant is not relevant in consideration of this point, for which there was an allowance made in the calculation of the previous registered rent.

30. The Tribunal considered that the installation of central heating would make a significant difference to the rental achieved. There are few properties let without either full or partial heating systems hence there is little hard evidence available. However, the Tribunal is composed of [NAME] both with extensive experience in rural properties and they consider that the installation of a heating system would make a difference of at least 15% and possibly significantly more to the existing registered rent.

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31. Accordingly, the capping rules do not apply, and therefore do not affect the rent payable.

32. Therefore, the fair rent determined by the Tribunal for the purposes of Section 70 was £149.00 per week with effect from 22 November 2024.

33. For information only, the maximum fair rent permitted by the Rent Acts (Maximum Fair Rent) Order 1999 would be £126.50 per week. Details of the maximum fair rent calculation are provided with the decision. As indicated above this is of no effect.

34. In reaching its determination, the Tribunal had regard to the evidence and submissions of the parties, the relevant law and their own knowledge and experience as an expert Tribunal but not any special or secret knowledge.

APPEAL

35. If either party is dissatisfied with this decision, they may apply for permission to appeal to the Upper Tribunal (Lands Chamber) on any point of law arising from this Decision. Prior to making such an appeal, an application must be made, in writing, to this Tribunal for permission to appeal. Any such application must be made within 28 days of the issue of this decision (regulation 52 (2) of The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rule 2013) stating the grounds upon which it is intended to rely in the appeal.

V [NAME]