Tribunal Sets Fair Rent for Tenancy Based on Market Conditions

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. JM/LON/00BA/F77/2022/0059

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

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

[APPELLANT]

Landlord [APPELLANT]

Tenant Mr [APPELLANT]

1. The fair rent is 152.50 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 23 May 2022

3. The amount for services is N/A Per

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

N/A Per

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 the same as/below the maximum fair rent of £152.50 per week prescribed by the Order.

[NAME] of decision 23rd May 2022

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 334.6

[NAME] Y 257.1

X 334.6 Minus Y 257.1 = (A) 77.5

(A) 77.5 Divided by Y 257.1 = (B) 0.301439

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.3514391

Last registered rent* £118.50 Multiplied by (C) = £160.1455 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £160.50 per week

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £152.50 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 [NAME] 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.

Case Reference

: LON/OOBA/F77/2022/0059

Property : [ADDRESS], [POSTCODE]

Tenant

: Mr [APPELLANT]

Landlord : [APPELLANT] of Application : Determination of a Fair Rent under section 70 of the Rent Act 1977

Tribunal

: Mr [NAME] MA LLM FRICS

HMCTS Code : P-Paper (paper, video, audio)

Date of Decision : 23rd May 2022

Date of Statement of Reasons : 23rd May 2022

_______________________________________________

Statement of Reasons

____________________________________

© CROWN COPYRIGHT 2021 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Background The Tribunal gave formal notice of its decision by a Notice dated 23rd May 2022 of the determined Fair Rent of £152.50 per week with effect from the same. By way of application received by Rent Officer on 7 December 2021 the landlord of the property applied for re registration of a fair rent of £1200 per month (pcm), the rent having been previously registered on the 2nd March 2015 of £118.50 per week. The Rent Officer registered a fair rent of £151 per week effective from 27th January 2022. In a letter dated 23rd February 2022 the tenant Mr [APPELLANT] objected to the rent registered and the matter was referred to the First –tier Tribunal (Property Chamber) (Residential Property). Directions were issued by the Tribunal. In those Directions, the parties were informed that in accordance with Public Health England’s advice to avoid unnecessary travel and social interaction for the time being, the Tribunal would not hold an oral hearing, unless so requested by either or both the parties, or would it inspect the property. Neither party has requested a hearing. Thereafter, the Directions made provision for the filing with the Tribunal of the parties’ respective written submissions and, in particular, for the completion of a reply form giving details of the Property and including any further comments the parties wished the Tribunal to take into account in making its determination. In due course, the Landlord and the Tenant filed their written submissions. The tenancy is a statutory (protected) periodic tenancy. The tenancy (not being for a fixed tenancy of 7 years or more) is subject to section 11 of the Landlord and Tenant Act 1985 which sets out the landlords statutory repairing obligations; the tenant is responsible for internal decorations. Following the issue of the Tribunals decision which was based on the written and visual evidence submitted by the parties that was germane to the determination of a fair rent, the landlord sought extended reasons for the Tribunal’s decision. The Property The property comprises one room, one kitchen and a bathroom, there is no central heating. The tenant is responsible for inside repairs, the tenancy ran from 1st January 1975. Relevant Law Provisions in respect of the jurisdiction of the Tribunal and the determination of a fair rent are found in Schedule 11, Part 1, paragraph 9(1) to the Rent Act 1977, as amended by paragraph 34 of the Transfer of Tribunal Functions Order 2013, and section 70 of the Rent Act 1977. Rent Act 1977

Schedule 11, Part 1, paragraph 9 (as amended) “Outcome of determination of fair rent by appropriate tribunal 9.-(1) The appropriate tribunal shall- (a) if it appears to them that the rent registered or confirmed by the rent officer is a fair rent, confirm that rent; (b) if it does not appear to them that that rent is a fair rent, determine a fair rent for the dwelling house.” Section 70: Determination of fair rent (as amended) “(1) In determining, for the purposes of the Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to- (a) the age, character, locality and state of repair of the dwelling-house, … (b) if any furniture is provided for the use under the tenancy, the quantity, quality and condition of the furniture [, and (c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy.] (2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.

(3) There shall be disregarded- (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any [NAME] to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any [NAME]; (c), (d) …[repealed] (e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any [NAME] of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his.”

Consequently, when determining a fair rent the Tribunal, in accordance with the Rent Act 1977, section 70, has regard to all the circumstances including the age, location and state of repair of the Property. It also disregards the effect of (a) any relevant Tenant’s improvements and (b) the effect of any disrepair or defect attributed to the Tenant of any [NAME] in [NAME] under the regulated tenancy, on the rental value of the Property. 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:

(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 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. (The rents may have to be adjusted where necessary to reflect any differences between the comparables and the subject property).

In considering scarcity under section 70 (2), the Tribunal recognises that: (a) there are considerable variations in the level of a scarcity in different parts of the country and that there is no general guidance or “rule of thumb” to indicate what adjustments should be made; the Tribunal, therefore, considers the case on its merits; (b) terms relating to rents are to be excluded. A lack of demand at a particular rent is not necessarily evidence of scarcity; it may be evidence that the prospective tenants are not prepared to pay that particular rent.

Fair rents are subject to a capping procedure under the Rent Acts (Maximum Fair Rent) Order 1999 which limits increases by a formula based on the proportional increase in the Retail Price Index since last registration. The only exception to this restriction on a fair rent is provided under paragraph 7 of the Order where a landlord carries out repairs or improvements which increase the rent by 15% or more of the [NAME] registered rent. Submissions Landlord The landlord noted they had improved the property by rewiring the hallway, painting the flat and replacing the boiler.

Tenant In a letter dated 7th January 2022 from the tenant received by the Rent Officer dated 11th January 2022, the tenant noted; (i) The flat does not contain a bedroom and I think it is classified as a studio flat (ii) Painting in the flat has been carried out by myself and the boiler has not been replaced. It is the same one installed by the [NAME].” Also noting;

“ Mr [RESPONDENT] said that he is responsible for decorating in the flat and he painted during the recent lockdowns. The landlord is responsible for outside which was done about 8 years ago, but flaky now. The boiler has not been replaced, the one in place was fitted by the [NAME] many years ago and is still going. When the tenancy began there was some furniture but this has gradually come to the end of its life and been replaced by the tenant. The carpets are the original. [NAME] registered rent every two years and the increase was manageable but felt the last increase was a big jump. There has been no changes to the flat paid for by the landlord.”

Reasons for Decision The tribunal considered all relevant material submitted including reference to [NAME] decisions which are not binding on the tribunal but were considered for wider context. Initially 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 in the condition that is considered usual for such an open market letting. Considering evidence submitted and the Tribunal acting in its capacity as an expert tribunal and using its general knowledge of market levels in the area, concluded that such a likely market rent, if a market rent is adopted would be £1100 per month. However, the Property is not in the condition considered usual for a modern letting at a market rent. Therefore, it is necessary to adjust the above hypothetical rent, a deduction of 10% is made. In addition, the Tribunal determined that there should be a further deduction of 10% to reflect the fact the terms and conditions and goods supplied under the tenancy would differ from those of a contemporary assured shorthold tenancy, from which the rental comparables are derived. Thereafter the Tribunal considered the question of scarcity in section 70 (2) of the Rent Act 1977. A figure of 20% was adopted.

Market derived rental level - £1100.00 pcm

Less 10% condition Less 10% for terms and supplied goods inc white goods Less 20% for scarcity. The rent after this final adjustment was £660.00 pcm or £152.50 per week

Rent Acts (Maximum Fair Rent) Order 1999 The rent to be registered is not limited by the Rent Acts (Maximum Fair Rent Order) 1999. The rent calculated in accordance with the Order is £ 160.50 per week. This figure is more than the figure calculated by reference to the market rent with adjustments of £152.50 per week.

Accordingly, the sum of £152.50 per week will be registered as the fair rent with effect from 23rd May 2022, being the date of the Tribunal’s decision. Valuer Chair: [NAME]: 23rd May 2022 Extended reasons : 23rd May 2022

Appeal to the Upper Tribunal A person wishing to appeal this decision to the Upper Tribunal (Property Chamber) on a point of law must seek permission to do so by making a written application to the First-tier Tribunal at the Regional Office which has been dealing with the case which application must: a. be received by the said office within 28 days after the Tribunal sends to the person making the application written reasons for the decision. b. 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. If the application is not received within the 28 –day time limit, it must include a request for an extension of time and the reason for it 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.