maximum fair rent order
📖 What is maximum fair rent order? Meaning and definition
The Rent Acts (Maximum Fair Rent) Order 1999 introduces 'capping provisions' that limit the fair rent which can be registered for a property. This means that even if a tribunal assesses a higher 'fair rent', the amount actually registered might be capped at a lower figure determined by this Order. The purpose of these provisions is to prevent excessive increases in rent for tenants whose tenancies fall under the Rent Act 1977.
When a fair rent is being re-registered, the tribunal will perform a calculation to determine if the capping provisions apply. This calculation involves using the latest and previous Retail Price Index (RPI) figures. The difference between these figures, divided by the previous RPI, gives a factor (B). This factor is then adjusted depending on whether it's the first application for re-registration since 1 February 1999 or not.
If it's the first re-registration since 1 February 1999, factor (B) is increased by 1.075 to get factor (C). If it's not the first re-registration, factor (B) is increased by 1.05 to get factor (C). The last registered rent (excluding any variable service charge) is then multiplied by factor (C) to arrive at the maximum fair rent. The registered fair rent will either be the tribunal's assessed fair rent or this calculated maximum fair rent, whichever is lower. If the assessed fair rent is below the maximum fair rent, the capping provisions do not limit it.
It's important for tenants and landlords to understand that the registered rent may include amounts for services, which can sometimes be variable, but fuel charges (excluding heating and lighting of common parts) are typically not counted for rent allowance and do not factor into the maximum fair rent calculation.
📋 Requirements
- The tenancy must be subject to the Rent Acts (Maximum Fair Rent) Order 1999.
- The calculation involves the latest and previous Retail Price Index (RPI) figures.
- The last registered rent (exclusive of any variable service charge) is a key component of the calculation.
- The application for re-registration must be assessed to determine if it is the first since 1 February 1999.
📝 Procedure
- Identify the latest RPI figure (X) and the previous RPI figure (Y).
- Calculate the difference between X and Y (A = X - Y).
- Divide (A) by (Y) to get factor (B).
- Determine if it is the first application for re-registration since 1 February 1999.
- If yes, add 1.075 to (B) to get (C); if no, add 1.05 to (B) to get (C).
- Multiply the last registered rent (excluding variable service charges) by (C) to find the maximum fair rent.
💡 Examples
- A tribunal determines a fair rent of £410 per week, but after applying the Rent Acts (Maximum Fair Rent) Order 1999, the registered rent is capped at £253.50 per week.
- A landlord applies for re-registration of rent, and the tribunal calculates the maximum fair rent using RPI figures, finding that the assessed fair rent of £257 per week is below the maximum, so the capping provisions do not apply.
- A tenant's rent is being reviewed, and the tribunal notes that the property includes central heating and a rear garden for the tenant's sole use, factors that might influence the initial fair rent assessment before any capping is applied.
- The maximum fair rent calculation for a property shows that the last registered rent of £172.50, multiplied by the calculated factor (C) of 1.4666979, results in a capped rent of £253.01.
📚 Legal basis
- Rent Acts (Maximum Fair Rent) Order 1999
- Rent Act 1977
❓ Frequently asked questions
What does 'capping provisions' mean in relation to fair rent?
Capping provisions refer to the rules set out in the Rent Acts (Maximum Fair Rent) Order 1999 that limit the amount of fair rent that can be registered for a property, even if the tribunal assesses a higher rent.
How is the maximum fair rent calculated?
The maximum fair rent is calculated using a formula involving the latest and previous Retail Price Index (RPI) figures and the last registered rent, with adjustments depending on whether it's the first re-registration since 1 February 1999.
Does the maximum fair rent always apply?
No, the maximum fair rent only applies if the fair rent assessed by the tribunal would otherwise be higher than the maximum fair rent calculated under the Order. If the assessed fair rent is below the maximum, the capping provisions do not limit it.
Are services and fuel charges included in the maximum fair rent calculation?
Amounts for services can be part of the registered fair rent, but the maximum fair rent calculation itself uses the last registered rent 'exclusive of any variable service charge'. Fuel charges (excluding heating and lighting of common parts) are generally not counted for rent allowance and do not factor into the calculation.
What is the significance of 1 February 1999 in the calculation?
The date 1 February 1999 is a key reference point in the calculation. The factor used to adjust the RPI-derived figure (B) changes depending on whether the current application for re-registration is the first one since that date.
Where can I find the RPI figures needed for the calculation?
RPI figures are published by the Office for National Statistics. You would need to refer to the specific RPI figures relevant to the dates of your previous rent registration and the current application.