Tribunal Sets Fair Rent for Regulated Tenancy

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/24UF/F77/2020/0001

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[NAME] Mr [APPELLANT] [NAME]

Landlord [COMPANY]

Tenant Mr [APPELLANT]

1. The fair rent is £242.31 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 16 March 2020

3. The amount for services is £84.63 Per Calendar Month

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

n/a Per n/a

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

8. For information only:

(a) The fair rent to be registered is not limited by the Rent Acts (Maximum Fair Rent) Order 1999, because it is below the maximum fair rent of £271.63 per calendar month including £84.63 per calendar month for services (variable) prescribed by the Order.

[NAME] of decision 16 March 2020

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 290.6

PREVIOUS RPI FIGURE Y 276.0

X 290.6 Minus Y 276.0 = (A) 14.6

(A) 14.6 Divided by Y 276.0 = (B) 0.05290

First application for re-registration since 1 February YES/NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.1029

Last registered rent* £169.50 Multiplied by (C) = 186.94 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £187.00

Variable service charge YES If YES add amount for services £84.63

MAXIMUM FAIR RENT = £271.63 Per Calendar Month

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 : CHI/24UF/F77/2020/0001 Property : [ADDRESS] [POSTCODE] Type of Application : Decision in relation to Rent Act 1977 Date of Decision : 16 March 2020

Reasons for the decision

2 Background

1. On 23 October 2019 the landlord made an application to register the rent of the property at £226.46 per month inclusive of £84.63 per month for services made up of; £ Building insurance

4.24 Cleaning

10.67 Communal electric

1.08 Management fee

19.80 Reserves/sinking fund

37.57 Repairs

8.27 Service charge admin eligible 3.00 Total charge

84.63

2. The rent currently being charged was indicated to be £132.54 per month.

3. On 26 November 2019 the Rent Officer registered a Fair Rent of £248.09 per calendar month inclusive of £60.59 per month for services with effect from 7 November 2019. This being a shared ownership property the Gross Rent was noted as £352.37 per calendar month (50% ownership). The uncapped rent was £260.82 per calendar month.

4. The tenant objected and the matter was referred to the First Tier Tribunal, Property Chamber.

5. The Tribunal made standard directions on 13 January 2020 requiring the landlord to send to the tenant and to the tribunal a written statement as to their assessment of the rent and for the tenant to respond.

6. The Tribunal received a copy of the landlord’s statement dated 22 January 2020 sent to the tenant which indicated that the rent to be charged from 1 February 2020 would be £226.46 and that the full market rent of the property was £650 pcm based on a desktop valuation from Openrent.co.uk (with 50% ownership equating to £325 pcm)

7. The tenant made no submissions to the Tribunal as to the reason for his objection.

8. From the papers provided by the Rent Officer their open market rent starting point was £500 pcm from which an allowance of £40 was made to reflect the tenant’s repairing obligations and the lack of white goods, curtains and floor coverings

Inspection

9. We inspected the property in the company of the tenant, the landlord had previously indicated that they would not attend.

3 10. The property comprises a first floor flat in a block of similar units. Access was through a door entry system into a common hall and stairs with landings on each floor. The front door led into a narrow hall leading to the bedsitting room off which was a galley kitchen with stainless steel sink unit and a range of very dated cupboards with built in oven and hob. The walls are part tiled and there is an extractor fan.

11. The bathroom has a panelled bath, pedestal wash basin, low level WC and electric heated towel rail.

12. Heating is from a storage radiator and water is heated by an immersion heater.

13. The lease includes parking space No 8 located in the car park.

14. Internal decoration required attention, externally it is fair.

The law

15. 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 (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.

16. 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).

Decision

17. Thus, in the first instance the Tribunal determined what rent the landlord could reasonably be expected to obtain for the property in the open market if it were let today on the terms and in the condition that is considered usual for such an open market letting. The landlord’s “desktop” valuation is £650pcm, the Rent Officer’s £500 before adjustments and the tenant makes no submissions.

4 18. This is a small “bedsit” with night storage heating, galley kitchen and bathroom. In the Tribunal’s collective experience such properties do not command the level of rent referred to by the landlord. Using our own general knowledge and experience we determine that the starting point should be as indicated by the Rent Officer to be £500 per calendar month.

19. However, the rent referred to in the above paragraph is on the basis of a modern open market letting where the tenant has no liability to carry out repairs or decorations and the landlord supplies white goods, carpets and curtains. In this case the Tenant supplies white goods, carpets and curtains and clause 3.(3) of the lease places onerous repairing obligations on the tenant.

20. In making its own adjustments to reflect the lower bid a prospective tenant would make to reflect the differences between the property in a modern lettable state and that as provided by the landlord we make a deduction of 20% arriving at a rent of £400.00 per calendar month.

21. In the absence of any challenge to the level of service charge the Tribunal allows it in full.

22. We then considered whether there should be an adjustment for “scarcity” as referred to in paragraph 16(a) and decided that there was none in this area of Hampshire.

23. Adjustments have to be made to reflect that the tenant owns 50% of the equity in the property as follows;

Equivalent Fair Rent

£400 Less Service charge

£84.63 Gross Rent

£315.37 x 50% to reflect shared ownership

£157.68 Add back Service Charge

£84.63 Fair Rent

£242.31

24. We therefore determined that the uncapped Fair Rent is ££242.31 per calendar month exclusive of council tax and water rates with effect from 16 March 2020.

25. As this amount is below the rent calculated in accordance with the Maximum Fair Rent Order details of which are shown on the rear of the Decision Notice we determine that the sum of £242.31 per calendar month is registered as the fair rent with effect from today’s date.

[NAME] (Chairman) [NAME] [NAME] 16 March 2020

5

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.