Tribunal Upholds Fair Rent Determination for Shared Ownership Property

OUTCOME: Allowed

FR24 First-tier Tribunal – Property Chamber File Ref No. CHI/29UH/F77/2019/0056

Notice of the Tribunal Decision

Rent Act 1977 Schedule 11

Address of Premises The Tribunal members were 41 [ADDRESS], [POSTCODE]

[NAME]

Landlord Orbit

Tenant Mrs [APPELLANT]

1. The fair rent is £280.95 Per Calendar Month (excluding water rates and council tax but including any amounts in paras 3&4)

2. The effective date is 18 November 2019

3. The amount for services is £3.81 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 £291.00 per calendar month including £3.81 per calendar month for services prescribed by the Order.

[NAME] of decision 18 November 2019

FR24 MAXIMUM FAIR RENT CALCULATION

LATEST RPI FIGURE X 291.0

PREVIOUS RPI FIGURE Y 275.3

X 291.0 Minus Y 275.3 = (A) 15.7

(A) 15.7 Divided by Y 275.3 = (B) 0.05703

First application for re-registration since 1 February 1999 NO

If yes (B) plus 1.075 = (C)

If no (B) plus 1.05 = (C) 1.10703

Last registered rent* £262.81 Multiplied by (C) = 290.94 *(exclusive of any variable service charge)

Rounded up to nearest 50p = £291.00

Variable service charge NO If YES add amount for services

MAXIMUM FAIR RENT = £291.00 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.

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CHI/29UH/F77/2019/0056 Property : 41 [ADDRESS] [POSTCODE] Type of Application : Decision in relation to Rent Act 1977 Date of Decision : 18 November 2019

Reasons for the decision

Background

1. On 9 July 2019 the landlord made an application to register the rent of the property at £287.84 per month inclusive of £12.94 per month for services.

2. The rent currently being charged was indicated to be £232.20 per month.

3. On 10 September 2019 the Rent Officer registered a Fair Rent of £280.95 per calendar month inclusive of £3.81 per month for services with effect from 7 November 2019. This being a shared ownership property the Gross Rent was noted as £538.11 per calendar month (50% ownership)

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

2 5. The Tribunal made standard directions on 15 October 2019 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 sent to the tenant which indicated that the rent to be charged from 1 November 2019 would be £233.64 and that the reason for the appeal was that the Rent Officer had registered the service charge significantly lower than had been applied for.

7. In support of their objection the landlord provided a Budget Statement for 2018/19 with the following amounts shown as the tenant’s contribution;

Grounds maintenance

£45.72

Building Insurance £68.16 Management fee £28.80 Sinking Funds

£12.60 Property specific

£109.56 Annual Service Charge

£155.28 Monthly Service Charge

£12.94

8. On receipt of these submissions a procedural judge reviewed the file and in view of the limited scope of the appeal decided that the matter could be determined without an inspection following which both parties were notified that the inspection would not now take place.

9. This determination is therefore made on the papers received from the Rent Officer and the landlord’s submission.

10. As it was not clear how the Rent Officer had calculated the shared equity proportion the Tribunal sought clarification from the Rent Officer who provided the following calculation.

Equivalent Fair Rent

£680 per calendar month Less; Insurance £5.68 Management £2.40 Services

£3.81 Adjustments

£11.89 Less Repair liability

£130.00 Gross Rent

£538.11 50% Equity

£269.06 Add back adjustments £11.89 Fair rent to be registered £280.95

3 The law

11. 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. Section 72A requires the Rent Officer to note their opinion of the amount of rent (if any) attributable to the provision of services to the tenant “to assist authorities to give effect to the housing benefit scheme”

Decision

12. In determining this objection, the Tribunal have solely addressed the grounds of the objection namely the amount of service charge registered.

13. Whilst both the Rent Officer and the Tribunal are required to provide a sum for “services”, as it is included in the overall rent assessed and therefore not payable in addition to that rent its level may be considered somewhat academic.

14. In this instance it is clear that the Rent Officer has allowed the Grounds Maintenance Charge whereas the charges for Insurance, Management and Sinking Fund have been excluded.

15. The Tribunal agrees with this approach. The amount noted for services should reflect their value to the tenant which may or may not be the same as the cost to the landlord. In this case clearly the tenant receives the benefit of grounds maintenance and as such this charge may be properly noted as included in the rent. However, the costs of insurance, management and sinking fund cannot be so classified as the benefit received is to the landlord not the tenant.

16. This “cost of ownership” will no doubt be reflected by the landlord when considering what rent to charge to secure his required return on capital invested and may therefore be included in the overall rent.

17. The Tribunal therefore determines that the amount of service to be registered as included within the Fair Rent is £3.81 per calendar month.

18. In the absence of a challenge to the Rent Officer’s assessment of the overall rent to be registered the Tribunal accepts that the calculation set out at paragraph 10 has been properly applied and confirms that the uncapped Fair Rent is £280.95 per calendar month inclusive of £3.81 per calendar month for services.

4 19. 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 no further adjustment is required and we determine that the sum of £280.95 per calendar month inclusive of £3.81 per calendar month for services is registered as the fair rent with effect from today’s date.

D [NAME] 18 November 2019

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.