Tribunal Sets Fair Rent for Tenancy Considering Market Scarcity

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. LON/00AN/F77/2020/0144

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 14 [ADDRESS], [POSTCODE]

[NAME]

Landlord [RESPONDENT]

Tenant Mr [APPELLANT]

1. The fair rent is 168.00 Per Week (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 30 March 2021

3. The amount for services is 5.03 Per Week

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

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 £ per including £ per for services (variable).

(b) 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 £ per including £ per for services (variable) prescribed by the Order.

[NAME] of decision Tuesday 6th April 2021

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 294.6

PREVIOUS RPI FIGURE Y 284.5

X 294.6 Minus Y 284.5 = (A) 10.1

(A) 10.1 Divided by Y 284.5 = (B) 0.035501

First application for re-registration since 1 February 1999 YES/NO

If yes (B) plus 1.075 = (C) No

If no (B) plus 1.05 = (C) 1.085501

Last registered rent* £168.00 Multiplied by (C) = £182.36 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £182.50

Variable service charge YES / NO If YES add amount for services No

MAXIMUM FAIR RENT = £182.50 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.

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Case Reference : LON/00AN/F77/2020/0144

P:PAPERREMOTE

Property : [ADDRESS] hammersmith London [POSTCODE]

Applicant: [redacted]

Respondent: [redacted] : 2 November 2020

Type of Application : Determination of the registered rent under Section 70 Rent Act 1977

Tribunal

: Mrs [NAME] [NAME] and venue of : 30 March 2021 meeting

Remote hearing on the papers

_______________________________________________

DECISION ____________________________________

The registered rent with effect from 1 March 2021 is £1,130 per month.

This has been a hearing on the papers which has been consented to by the parties. The form of remote hearing was P:PAPERREMOTE, a paper determination which is not provisional. A face to face hearing was not held because it was not practicable and all the issues could be determined on the papers. The documents that I was referred to are in a bundle, the contents of which I have recorded.

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

2 Background

1. On 28 July 2020 the landlord applied to the rent officer for registration of a fair rent of £195 per week for the above property.

2. The rent payable at the date of the application was £168 per week inclusive of £3.59 per month for services which had been determined by the tribunal on 26 October 2018 to take effect from the same date.

3. On 24 September 2020, the rent officer registered a fair rent of £182.50 per week including £5.03 per week services with effect from 26 October 2020.

4. By a letter dated 2 November 2020 the tenant objected to the rent determined by the Rent Officer and requested that the matter be referred to the Tribunal.

5. Directions were issued on 2 February 2021. Owing to the Covid 19 restrictions the parties were asked if they would consent to the application being dealt with on the papers and without the tribunal making an inspection. Neither party objected.

The Evidence

6. The tenant stated that the flat was severely affected by the demolition work being undertaken nearby in connection with a large redevelopment site which included the former town hall. 7. The landlord did not send any representations to the tribunal.

The property

8. The flat is on the second floor of a purpose built terraced block of flats. The accommodation comprises three rooms, kitchen and bathroom/wc. The flat is unmodernised and let without the benefit of white goods, floor and window coverings.

The law

9. 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.

10. 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 0rdinarily a fair rent is the market rent for the property discounted for 'scarcity' (i.e.

3 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 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

11. 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 in the condition that is considered usual for such an open market letting. As neither party supplied any rental evidence of comparable properties the Tribunal had regard to its own general knowledge of market rent levels in the area of Hammersmith. Having done so, it concluded that the likely market rent for the flat would be £320 per week.

12. However, it was first necessary to adjust the hypothetical rent of £320

per week to allow for the differences between the terms and condition

considered usual for such a letting and the condition of the actual

property at the date of the inspection, ignoring tenant’s improvements,

(disregarding the effect of any disrepair or other defect attributable to

the tenant or any predecessor in title). The Tribunal noted that flats

available on the open market were modernised with central heating,

white goods, floor and window coverings. The Tribunal

considered that the lack of floor and window coverings and white goods

together with the tenant’s repairing and decorating liability required a

deduction of £100 per week and made a further deduction of £10 per

week to reflect the disturbance from the major redevelopment scheme

being undertaken nearby.

13. This leaves an adjusted market rent for the subject property of £210 per week. The Tribunal was of the opinion that there was substantial scarcity in the locality of Greater London for similar properties and determided that a deduction of approximately 20% from the market rent to reflect this element would be appropriate. The Tribunal’s uncapped fair rent is £168 per week.

Decision

14. The fair rent determined by the Committee, for the purposes of section 70, was accordingly £168 per week inclusive of £5.03 services.

4 15. The rent assessed by the Tribunal is below the capped rent calculated in accordance with the Rent Acts (Maximum Fair Rent) Order (Details are provided on the back of the decision form).

16. Accordingly, the sum of £168 per week will be registered as the fair rent with effect from 30 March 2021 being the date of the Tribunal's decision

Chairman: [NAME]: 30 March 2021

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