Tribunal Sets Fair Rent for Property Under Rent Act 1977

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00BF/F77/2019/0172

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 8 [ADDRESS], [POSTCODE]

[NAME] Miss [RESPONDENT]

Landlord [COMPANY]

Tenant Mrs [APPELLANT]

1. The fair rent is £186.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 27 November 2019

3. The amount for services is 5.89 Per Week

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 apply (please see calculation overleaf).

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

None

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 £200 per week including £5.89 per week for services.

[NAME] of decision 27.11.19

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 291.0

PREVIOUS RPI FIGURE Y 275.1

X 291.0 Minus Y 275.1 = (A) 15.9

(A) 15.9 Divided by Y 275.1 = (B) 0.057797

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) 1.107797

Last registered rent* 167.50 Multiplied by (C) = 185.55 *(exclusive of any variable service charge)

Rounded up to nearest 50p = 186.00

Variable service charge NO If YES add amount for services -

MAXIMUM FAIR RENT = £186.00 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

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BF/F77/2019/0172 Property : 8 [ADDRESS], [POSTCODE]. Type of Application : Decision following an objection to a registered rent, under the Rent Act 1977. Date of Decision : 27 November 2019. Tenant : Mrs. [APPELLANT]. [APPELLANT]. Landlord : [COMPANY] for the decision

Background

1. By an RR1 dated 25 June 2019, the landlord made an application to register the rent of the property at £168.84 per week inclusive of £7.23 per week fixed service charge.

2. On 28 September 2019 the Rent Officer registered the rent at £186.50 per week, inclusive of service charge of £2.96 per week, but exclusive of rates. The uncapped rent was stated to be £230.00 per week.

3. On 29 August 2019 the landlord objected, and the matter was referred to the First Tier Tribunal, Property Chamber.

4. On 30 September 2019 the Tribunal sent standard Directions to both parties requiring the landlord to send to the tenant and the Tribunal a written statement with their assessment of the rent and for the tenant to make a response.

5. Written representations were received from the landlords in which they said that they would not be charging the registered rent, but would be charging £122.06 inclusive of service charge from 30 September 2019, and that they had served a notice of rent increase on the tenant.

2 6. The landlord’s main objection was that the new registered rent included a service charge of £2.96 per week, whereas the budget figures supplied to the rent officer showed a sum £7.23, and the amount registered was well below that figure. The landlords also said that ‘therefore the new rent has not only been capped to the maximum rent in accordance with the current law, but is also below the registered rent’. It is not clear what the landlord means by this, but it must be assumed that they say the rent they will charge will be below the maximum fair rent, and the service element does not reflect the actual costs incurred.

7. The tenant did not provide a statement or any evidence on which they wished to rely.

Evidence

8. The tribunal informed the parties that an inspection would take place on 27 November 2019. However, upon arriving at the property the tenant was not present, and the tribunal was therefore only able to carry out an external visual inspection, and the description of the property from the Rent Register.

9. On inspection we found the property was a single-storey bungalow forming part of a larger estate complex on which appeared to be other bungalows and blocks of flats. The buildings were surrounded by well- tended lawned grounds, with access roads and blocks of garages to the rear. There was a small seating area as well as on-site parking for several vehicles, including those for people with disabilities. According to the Rent Register the property comprises three rooms, kitchen and bathroom/w.c. No mention is made of central heating, but it appears likely that the property is heated by Economy-7 type heaters, because these have been installed in the adjacent blocks, which were part of the inspection carried out on the same day.

10. The external condition of the property was generally good with no significant signs of deterioration or damage.

11. In coming to their registration, the Rent Officer relied on open market lettings of one bungalow and several houses in the South Sutton area with rents ranging from £283.08 to £346.15 per week.

12. Neither party produced comparable evidence, and the tribunal determined based on the inspection and description in the Rent Register that the property would let, on the open market, under the terms of the usual assured shorthold tenancy agreement at £320.00 per week.

The law

13. When determining a fair rent the Tribunal, in accordance with the Rent Act 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 tenant's improvements and

3 (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.

14. Case law informs the Tribunal;

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 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 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). Valuation

15.Thus, in the first instance the Tribunal as noted above the tribunal determined the market rent for the subject property at £320.00 per week.

16. However, the rent referred to above is based on a modern open market letting, where the tenant has no liability to carry out repairs or decorations, has a modern kitchen and bathroom and the landlord supplies white goods, carpets and curtains. In this case the Tenant supplies white goods, carpets and curtains and although the bathroom and kitchen fittings are in good order, they would not be to the standard of a modern letting and would require modernisation.

17. In making its own adjustments to reflect the lower bid a [NAME] would make to reflect the differences between the property in a modern lettable state and that as provided by the landlord, together with an adjustment for the additional repair and maintenance obligations of the tenant we make a global deduction of 22% arriving at a rent of £249.60 (£250.00) per week, inclusive of service charge.

18. We then considered the question of scarcity as referred to in paragraph 12a above and determined that taking into the very wide area required by case law for scarcity, and taking into consideration the whole of the Greater London area, we determine that there remains an imbalance in the supply and demand for property, and make a deduction of 20% to reflect that imbalance.

19. We therefore determined that the uncapped Fair Rent is £200 per week, exclusive of council tax and water rates, but including service charges.

4 20. The tribunal is then required to carry out the calculation in accordance with the Maximum Fair Rent Order details of which are shown on the rear of the Decision Notice. We calculate the maximum fair rent at £180.00 per week, inclusive of service charge.

21. As this figure is below the uncapped fair rent, we find the Maximum Fair Rent Order has the effect of limiting the rent to the lower figure and we determine that the sum of £186.00 per week inclusive of service charge.

22. The landlord sought a service charge of £7.20 per week. The previous registered rent identified an amount of £5.89 per week, and the Rent Officer set a figure of £2.96 per week. The tribunal finds the amount set by the Rent Officer to be too low, and that sought by the landlord to be too high. The tenant benefits from estate services but no internal common parts, Entryphone or other services provided to the adjacent blocks. On balance we find the previous figure of £5.89 provides value to the tenant, and accordingly we determine the service charge element within the rent of £186.00 per week to be £5.89. The service charge is not variable in accordance with S.18 of the Landlord & Tenant Act 1985, and is therefore fixed until the next registration.

23. The new registered rent takes effect from 27 November 2019.

24. It appears however that the landlord has already served a notice of increase on the tenant at £122.06 per week, inclusive of service charge, and it appears that this objection by the landlord is only to update their records and not to implement any further rent increase, but the landlord should confirm their intentions to the tenant to clarify this issue.

[APPELLANT] [NAME], FRICS. 3 December 2019.

5 RIGHTS OF APPEAL

1. A person wishing to appeal this decision to the Upper Tribunal (Lands Chamber) 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. 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.

2. 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.

3. 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.