fair market rent
📖 What is fair market rent? Meaning and definition
When there is a dispute over rent, particularly when a landlord proposes a new rent under Section 13(2) of the Housing Act 1988, the First-Tier Tribunal (Property Chamber) may be asked to determine a 'fair market rent'. This determination is based on what the property would fetch if it were freely available for rent on the open market.
The Tribunal's process involves considering evidence from both the landlord and the tenant, as well as their own expert knowledge of rental values in the specific area. The condition of the property is a significant factor in this determination; for instance, if a tenant alleges that the property's condition affects its rental value, the Tribunal may order an inspection to properly consider these issues, especially if there isn't much supporting evidence like photographs.
The overriding objective of the Tribunal is to deal with cases fairly and justly, ensuring parties can participate fully. Once the Tribunal determines the fair market rent, it also sets the effective date for this new rent. In some cases, if a tenant raises hardship, the Tribunal might direct the new rent to take effect from a later date, such as the date of the Tribunal's decision, rather than the date initially proposed.
This process ensures that the rent reflects the actual market value of the property, taking into account all relevant factors, including its condition and location.
📋 Requirements
- An application for determination of market rent, often following a landlord's Section 13(2) notice proposing a new rent.
- Consideration of comparable evidence provided by both landlord and tenant.
- Expert knowledge of rental values in the specific area by the Tribunal.
- Assessment of the property's current state of repair and condition.
- Potential need for a property inspection if condition is a significant factor and evidence is lacking.
📝 Procedure
- Landlord serves a notice under Section 13(2) of the Housing Act 1988 proposing a new rent.
- Tenant or Landlord makes an application to the First-Tier Tribunal (Property Chamber) for determination of a market rent.
- The Tribunal considers evidence from both parties and their own expert knowledge.
- An inspection of the property may be ordered if its condition is a key factor in the rent determination.
- The Tribunal determines the open market rent for the property in its current state of repair and condition.
- The Tribunal sets the effective date for the new determined rent, potentially adjusting it if hardship is raised.
💡 Examples
- A landlord proposes to increase the rent from £500 to £685 per calendar month, leading the tenant to apply to the Tribunal to determine a fair market rent.
- The Tribunal decides that a property's open market rent is £980 per calendar month after reviewing evidence and considering its condition and location.
- Despite a tenant's claims about poor property condition, the Tribunal orders an inspection because there are no photographs to support these allegations, to ensure a fair assessment.
- A new rent of £980 per calendar month is set, but due to the tenant raising hardship, the Tribunal directs it to take effect from the date of the Tribunal's decision rather than an earlier proposed date.
📚 Legal basis
- Housing Act 1988
- Tribunal Procedure (First-Tier Tribunal) (Property Chamber) Rules 2013
❓ Frequently asked questions
What does 'fair market rent' mean in the UK?
It's the amount a property would reasonably be expected to let for on the open market under an assured tenancy, as determined by the First-Tier Tribunal (Property Chamber).
When is a fair market rent determined?
It's often determined when a landlord proposes a new rent under Section 13(2) of the Housing Act 1988 and either the landlord or tenant applies to the Tribunal to challenge or confirm it.
How does the Tribunal decide the fair market rent?
The Tribunal considers comparable rental evidence from both parties, applies its own expert knowledge of local rental values, and assesses the property's condition and state of repair, sometimes through an inspection.
Can the property's condition affect the fair market rent?
Yes, the condition of the property is a significant factor. If a tenant claims the condition is poor, the Tribunal may inspect the property to properly consider these claims, especially if there's little other evidence.
What if I can't afford the new fair market rent?
If you raise hardship in your submissions, the Tribunal may direct the new rent to take effect from a later date, such as the date of their decision, to provide some relief.
Can I appeal a Tribunal's decision on fair market rent?
Yes, if you are dissatisfied with the decision, you may apply for permission to appeal to the Upper Tribunal (Lands Chamber) on any point of law arising from the decision. This application must first be made in writing to the First-Tier Tribunal.