23 Wellington Close, Walton-on-Thames, Surrey KT12 1AZ CHI/43UB/F77/2021/0045
REASONS
[1]The Tribunal gave formal notice of its decision by a Notice dated 26th October 2021 that the rent will be, after applying the Maximum Fair Rent Order, £1,005.00 per calendar month (pcm) including variable service charge of £96.16 pcm with effect from the same date.[2]On the 5th June 2021 the landlord's agent of the above property applied to the Rent Officer for registration of a fair rent of £1,110.00 pcm (including services of £107.13 pcm). The rent having been previously determined by the Rent Officer at £925.00 pcm (including variable service charge of £69.03) on 17th July 2019 and effective from the 3rd September 2019.[3]On the 27th July 2021 the Rent Officer registered a fair rent of £984.00 pcm including variable service charge of £96.16 pcm effective from the 3rd September 2021.[4]The Landlord objected to the rent determined by the Rent Officer and the matter was referred to the First-tier Tribunal (Property Chamber) (Residential Property).[5]The tenancy appears to be a statutory protected periodic tenancy. There is a written tenancy agreement which commenced in 1974. The tenancy (not being for a fixed periodic tenancy of 7 years or more) is subject to Section 11 of the Landlord and Tenant Act 1985 (the landlord's statutory repairing obligations). Factual Background and Submissions[6]Following the Directions dated 24th September 2021 and the explanation contained therein, the Tribunal did not inspect the premises. A hearing was not requested in the current proceedings.[7]Extracting such information as it could from the papers supplied to the Tribunal by the parties, by reference to information publicly available on the internet and with the benefit of its knowledge and experience, the Tribunal reached the following conclusions and found as follows:[8]The property comprises a double glazed centrally heated 4th floor flat located in a 10 storey purpose built block.[9]The accommodation comprises: 1 reception/dining room, kitchen, 2 bedrooms, bathroom and separate W.C. Outside: 1 designated parking space, visitor space, shared cycle shed and gardens. All mains services are assumed to be connected.[11]The Tribunal noted during its consideration: a) The property was let unfurnished.[12]The Tenant did not complete the Reply Form or make any submission.[13]The Landlord completed the Reply Form in which he says (summarised): a) There are no disrepairs or defects. b) The kitchen and bathroom fittings are 15 plus years old. c) There are good bus services and the railway station is 15/20 minutes walk (or 5/10 minutes on bus/cycle). d) The Landlord is responsible for all repairs except internal decoration. e) New windows have been installed and the entire building has been 're-clad' baring 'snagging'. Internal works include: suspended ceilings, cctv, new lighting, flooring and decoration. f) The Landlord has calculated the service charge on the same basis as the Rent Officer but arrives at £107.13 (as against £96.16). g) Some £75,000.00 per flat has recently been spent repairing these flats increasing their desirability from near the bottom of the market to near the top. h) The Landlord questions whether the level of expenditure (£30.000.00 before last review, £30,000.00 before current review and a further £15,000.00 to be spent) raises the level of the rent above the Capping Limit)? i) The works have been protracted by the number of flats involved (32). j) The increase in net rent is 3.17% over 2 years. RPI would be 9.48%. k) As a result of these work the tenant now enjoys better insulation and a reduction in energy bills. l) As a result of these works the Maximum Fair Rent Order should no longer apply. m) The flats are now above average (as proven by the rents being achieved). There is currently one flat on the market asking £1,250 pcm. One let over 1 year ago £1,200.00 pcm and in October 2020 NO: 53 was let for £1,325.00 pcm. n) The Landlord would seek a rent of £1,275.00 in the market. 0) Previously the FTT has deducted the following: Lack of curtains and white goods £55.00, Poor kitchen and bathroom fittings £60.00, Part central heating £20.00, Internal decorating liability £30.00, in total £165.00 pcm. p) After deducting the above the Landlord now seeks a Fair Rent of £1,110.00 pcm. The Law[14]When determining a fair rent the Tribunal, in accordance with section 70 of the Rent Act 1977, had regard to all the circumstances including the age, location and state of repair of the property. It 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.[15]In Spath Holme Ltd v Chairman of the Greater Manchester etc Committee (1995) 28 HLR 107 and Curtis v London Rent Assessment Panel [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 similar 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. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).[16]The Rent Acts (Maximum Fair Rent) Order 1999 restricts the amount by which the rent may be increased to a maximum 5.oo% plus RPI since the last registration.[17]The only exception to this restriction 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 previous registered rent. Tribunal’s deliberations[18]The Tribunal considered the matter with the benefit of the submissions made by the Landlord. The Tribunal does not take into consideration the personal circumstances of the Landlord or Tenant in making its determination (including issues between Landlord and Tenant which do not affect the rental value of the property itself).[19]The Tribunal considered the Landlords argument that the rent should fall outside the MFR on account of the improvements undertaken (to the interior common parts and exterior) but not to the interior of the subject property.[20]The Tribunal concluded that little or no modernisation had taken place to the interior of the flat and the only identifiable benefits to the Tenant were limited to the improved insulation, improved common parts and external environment. As a matter of judgement the Tribunal concluded that the effect of those improvements (without significant improvement to the interior) would not enhance the rent by more than 15.00% and therefore the MFR would apply.[21]The Tribunal considered the Landlord's argument with regard t0 the amount attributed to services. The Tribunal did not have the benefit of the Rent Officer's calculation. However on inspecting the Audited Income and Expenditure Account provided by the Landlord the Tribunal notes that certain items would fall under the Landlord's responsibilities under Section 11 of the Landlord and Tenant Act 1985. Such matters are not recoverable from the Tenant and include for example expenses under the headings: General Repair and Maintenance and General Expenses. In these circumstances the Tribunal accepts the Rent Officers calculation.[22]The Tribunal checked the National Energy Performance Register and noted that the property was rated at C and that Energy Performance Certificate (EPC) expiring on 19th June 2029. The minimum standard is Rating E (unless exempt) for offering a property to let on the open market.[23]The Tribunal looked at the Rent Officer's valuation of the Fair Rent under Section 70 of the Rent Act 1977. The Rent Officer had started with a market rent for the property assuming it was in good repair and available in the market today. He found that the Market Rent would be £1,200.00 pcm.[24]The Rent Officer then considered that certain deductions should be made to reflect the condition, facilities and differing nature of the tenancy. He concluded that the sum of £216.00. pcm should be deducted from the market rent to reflect these matters (which included, but not exclusively): Tenant repairing and decorating liability, no white goods, no floor covering or curtains, un-modernised kitchen and bathroom. He made no adjustment for scarcity (see explanation below). The result was a Fair Rent of £984.00 pcm.[25]The Tribunal, acting as an expert tribunal, determined what rent the landlord could reasonably be expected to obtain for the subject property in the open market if it were let today in the condition and subject to the terms of such a tenancy that is considered usual for such an open market letting. It did this by having regard to the evidence supplied by the parties and the Tribunal’s own general knowledge of market rent levels in the wider area of Surrey. Having done so, it concluded that such a likely market rent for a similar property in fair condition with central heating, modern bathroom and kitchen facilities, floor coverings, curtains and an EPC Rating above E would be £1,200.00 pcm.[26]However, the subject property is not in the condition considered usual for a modern letting at a market rent. It is therefore necessary to adjust that hypothetical rent of £1,200.00 pcm to allow for the differences between the condition considered usual (including responsibility of tenants to maintain decorations as opposed to decorate) for such a letting and the condition of the actual property as stated in the papers (disregarding the effect of any disrepair or other defect attributable to this tenant or any predecessor in title), and the improvements carried out by the Tenant.[27]If this property were to come onto the open market it would of course come on the market in its present condition and not in the condition normally seen in such market lettings. The interior of the property is not currently in that condition and the Tribunal make the following deductions: a) Lack of carpets, curtains and white goods £60.00, b) Dated kitchen and bathroom fittings £65.00, c) Part central heating £30.00, d) Internal decorating liability £40.00, in total £195.00 pcm.[28]The Tribunal determined a Fair Rent of £1,005.00 per calendar month. Scarcity[29]The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the wider area of Surrey (i.e. a sufficiently large area to eliminate the effect of any localised amenity which would, in itself, tend to increase or decrease rent. b) Local Authority and Housing Association waiting lists. c) House prices which could be an indicator of increased availability of housing and a reduction in scarcity. d) Submissions of the parties. e) The members of the Tribunal have between them many years of experience of the residential letting market and that experience leads them to the view that there is no substantial shortage of similar houses available to let in the locality defined above.[30]Assessing a scarcity percentage cannot be a precise arithmetical calculation because there is no way of knowing either the exact number of people looking for a particular type of house in the private sector or the exact number of such properties available. It can only be a judgment based on the years of experience of members of the Tribunal. However, the Tribunal did not consider that there was a substantial scarcity element and accordingly made no further deduction for scarcity.[31]This leaves a fair rent for the subject property of £1,005.00 pcm. Relevant Law The Rent Act 1977.[33]Rent Acts (Maximum Fair Rent) Order 1999. In particular paragraph 7 which states: This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed. Rent Acts (Maximum Fair Rent) Order 1999[34]The rent to be registered is not limited by the Fair Rent Acts (Maximum Fair Rent) Order 1999 it is below the maximum fair rent (see calculation on reverse of decision sheet) of £1,051.66 pcm (including variable service charge of 96.16) and accordingly the sum of £1,005.00 pcm (including variable service charge of 96.16) will be registered as the fair rent on and with effect from 26th October 2021 being the date of the Tribunal's decision. RIGHTS OF APPEAL[1]A person wishing to appeal this decision (on a point of law only) 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. Where possible you should send your application for permission to appeal by email to rpsouthern@justice.gov.uk as this will enable the First-tier Tribunal Regional office to deal with it more efficiently.[2]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.[3]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.[4]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 --- decision_2.pdf --- 1 Case reference : CHI/43UB/F77/2021/0045 Tenant : Mrs D Scott Landlord : Mr M Dixon Property : 23 Wellington Close, Walton-on- Thames, Surrey KT12 1AZ Date of Objection : Referred to First-tier Tribunal by Valuation Office Agency on 9th September 2021 Type of Application : Section 70 Rent Act 1977 (the Act) Tribunal : Mr R T Brown FRICS Ms C D Barton MRICS Mr S J Hodges FRICS Date of Decision : 26th October 2021 _______________________________________________ REASONS FOR DECISION ____________________________________ © CROWN COPYRIGHT 2021 FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) 2 Background[1]The Tribunal gave formal notice of its decision by a Notice dated 26th October 2021 that the rent will be, after applying the Maximum Fair Rent Order, £1,005.00 per calendar month (pcm) including variable service charge of £96.16 pcm with effect from the same date.[2]On the 5th June 2021 the landlord's agent of the above property applied to the Rent Officer for registration of a fair rent of £1,110.00 pcm (including services of £107.13 pcm). The rent having been previously determined by the Rent Officer at £925.00 pcm (including variable service charge of £69.03) on 17th July 2019 and effective from the 3rd September 2019.[3]On the 27th July 2021 the Rent Officer registered a fair rent of £984.00 pcm including variable service charge of £96.16 pcm effective from the 3rd September 2021.[4]The Landlord objected to the rent determined by the Rent Officer and the matter was referred to the First-tier Tribunal (Property Chamber) (Residential Property).[5]The tenancy appears to be a statutory protected periodic tenancy. There is a written tenancy agreement which commenced in 1974. The tenancy (not being for a fixed periodic tenancy of 7 years or more) is subject to Section 11 of the Landlord and Tenant Act 1985 (the landlord's statutory repairing obligations). Factual Background and Submissions[6]Following the Directions dated 24th September 2021 and the explanation contained therein, the Tribunal did not inspect the premises. A hearing was not requested in the current proceedings.[7]Extracting such information as it could from the papers supplied to the Tribunal by the parties, by reference to information publicly available on the internet and with the benefit of its knowledge and experience, the Tribunal reached the following conclusions and found as follows:[8]The property comprises a double glazed centrally heated 4th floor flat located in a 10 storey purpose built block.[9]The accommodation comprises: 1 reception/dining room, kitchen, 2 bedrooms, bathroom and separate W.C. Outside: 1 designated parking space, visitor space, shared cycle shed and gardens. All mains services are assumed to be connected.[11]The Tribunal noted during its consideration: a) The property was let unfurnished.[12]The Tenant did not complete the Reply Form or make any submission. 3[13]The Landlord completed the Reply Form in which he says (summarised): a) There are no disrepairs or defects. b) The kitchen and bathroom fittings are 15 plus years old. c) There are good bus services and the railway station is 15/20 minutes walk (or 5/10 minutes on bus/cycle). d) The Landlord is responsible for all repairs except internal decoration. e) New windows have been installed and the entire building has been 're-clad' baring 'snagging'. Internal works include: suspended ceilings, cctv, new lighting, flooring and decoration. f) The Landlord has calculated the service charge on the same basis as the Rent Officer but arrives at £107.13 (as against £96.16). g) Some £75,000.00 per flat has recently been spent repairing these flats increasing their desirability from near the bottom of the market to near the top. h) The Landlord questions whether the level of expenditure (£30.000.00 before last review, £30,000.00 before current review and a further £15,000.00 to be spent) raises the level of the rent above the Capping Limit)? i) The works have been protracted by the number of flats involved (32). j) The increase in net rent is 3.17% over 2 years. RPI would be 9.48%. k) As a result of these work the tenant now enjoys better insulation and a reduction in energy bills. l) As a result of these works the Maximum Fair Rent Order should no longer apply. m) The flats are now above average (as proven by the rents being achieved). There is currently one flat on the market asking £1,250 pcm. One let over 1 year ago £1,200.00 pcm and in October 2020 NO: 53 was let for £1,325.00 pcm. n) The Landlord would seek a rent of £1,275.00 in the market. 0) Previously the FTT has deducted the following: Lack of curtains and white goods £55.00, Poor kitchen and bathroom fittings £60.00, Part central heating £20.00, Internal decorating liability £30.00, in total £165.00 pcm. p) After deducting the above the Landlord now seeks a Fair Rent of £1,110.00 pcm. The Law[14]When determining a fair rent the Tribunal, in accordance with section 70 of the Rent Act 1977, had regard to all the circumstances including the age, location and state of repair of the property. It 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.[15]In Spath Holme Ltd v Chairman of the Greater Manchester etc Committee (1995) 28 HLR 107 and Curtis v London Rent Assessment Panel [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 4 in the wider locality available for letting on similar 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. (These rents may have to be adjusted where necessary to reflect any relevant differences between those comparables and the subject property).[16]The Rent Acts (Maximum Fair Rent) Order 1999 restricts the amount by which the rent may be increased to a maximum 5.oo% plus RPI since the last registration.[17]The only exception to this restriction 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 previous registered rent. Tribunal’s deliberations[18]The Tribunal considered the matter with the benefit of the submissions made by the Landlord. The Tribunal does not take into consideration the personal circumstances of the Landlord or Tenant in making its determination (including issues between Landlord and Tenant which do not affect the rental value of the property itself).[19]The Tribunal considered the Landlords argument that the rent should fall outside the MFR on account of the improvements undertaken (to the interior common parts and exterior) but not to the interior of the subject property.[20]The Tribunal concluded that little or no modernisation had taken place to the interior of the flat and the only identifiable benefits to the Tenant were limited to the improved insulation, improved common parts and external environment. As a matter of judgement the Tribunal concluded that the effect of those improvements (without significant improvement to the interior) would not enhance the rent by more than 15.00% and therefore the MFR would apply.[21]The Tribunal considered the Landlord's argument with regard t0 the amount attributed to services. The Tribunal did not have the benefit of the Rent Officer's calculation. However on inspecting the Audited Income and Expenditure Account provided by the Landlord the Tribunal notes that certain items would fall under the Landlord's responsibilities under Section 11 of the Landlord and Tenant Act 1985. Such matters are not recoverable from the Tenant and include for example expenses under the headings: General Repair and Maintenance and General Expenses. In these circumstances the Tribunal accepts the Rent Officers calculation.[22]The Tribunal checked the National Energy Performance Register and noted that the property was rated at C and that Energy Performance Certificate (EPC) expiring on 19th June 2029. The minimum standard is Rating E (unless exempt) for offering a property to let on the open market.[23]The Tribunal looked at the Rent Officer's valuation of the Fair Rent under Section 70 of the Rent Act 1977. The Rent Officer had started with 5 a market rent for the property assuming it was in good repair and available in the market today. He found that the Market Rent would be £1,200.00 pcm.[24]The Rent Officer then considered that certain deductions should be made to reflect the condition, facilities and differing nature of the tenancy. He concluded that the sum of £216.00. pcm should be deducted from the market rent to reflect these matters (which included, but not exclusively): Tenant repairing and decorating liability, no white goods, no floor covering or curtains, un-modernised kitchen and bathroom. He made no adjustment for scarcity (see explanation below). The result was a Fair Rent of £984.00 pcm.[25]The Tribunal, acting as an expert tribunal, determined what rent the landlord could reasonably be expected to obtain for the subject property in the open market if it were let today in the condition and subject to the terms of such a tenancy that is considered usual for such an open market letting. It did this by having regard to the evidence supplied by the parties and the Tribunal’s own general knowledge of market rent levels in the wider area of Surrey. Having done so, it concluded that such a likely market rent for a similar property in fair condition with central heating, modern bathroom and kitchen facilities, floor coverings, curtains and an EPC Rating above E would be £1,200.00 pcm.[26]However, the subject property is not in the condition considered usual for a modern letting at a market rent. It is therefore necessary to adjust that hypothetical rent of £1,200.00 pcm to allow for the differences between the condition considered usual (including responsibility of tenants to maintain decorations as opposed to decorate) for such a letting and the condition of the actual property as stated in the papers (disregarding the effect of any disrepair or other defect attributable to this tenant or any predecessor in title), and the improvements carried out by the Tenant.[27]If this property were to come onto the open market it would of course come on the market in its present condition and not in the condition normally seen in such market lettings. The interior of the property is not currently in that condition and the Tribunal make the following deductions: a) Lack of carpets, curtains and white goods £60.00, b) Dated kitchen and bathroom fittings £65.00, c) Part central heating £30.00, d) Internal decorating liability £40.00, in total £195.00 pcm.[28]The Tribunal determined a Fair Rent of £1,005.00 per calendar month. Scarcity[29]The matters taken into account by the Tribunal when assessing scarcity were:- a) The Tribunal interpreted the ‘locality’ for scarcity purposes as being the wider area of Surrey (i.e. a sufficiently large area to eliminate the effect of any localised amenity which would, in itself, tend to increase or decrease rent. 6 b) Local Authority and Housing Association waiting lists. c) House prices which could be an indicator of increased availability of housing and a reduction in scarcity. d) Submissions of the parties. e) The members of the Tribunal have between them many years of experience of the residential letting market and that experience leads them to the view that there is no substantial shortage of similar houses available to let in the locality defined above.[30]Assessing a scarcity percentage cannot be a precise arithmetical calculation because there is no way of knowing either the exact number of people looking for a particular type of house in the private sector or the exact number of such properties available. It can only be a judgment based on the years of experience of members of the Tribunal. However, the Tribunal did not consider that there was a substantial scarcity element and accordingly made no further deduction for scarcity.[31]This leaves a fair rent for the subject property of £1,005.00 pcm. Relevant Law The Rent Act 1977.[33]Rent Acts (Maximum Fair Rent) Order 1999. In particular paragraph 7 which states: This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed. Rent Acts (Maximum Fair Rent) Order 1999[34]The rent to be registered is not limited by the Fair Rent Acts (Maximum Fair Rent) Order 1999 it is below the maximum fair rent (see calculation on reverse of decision sheet) of £1,051.66 pcm (including variable service charge of 96.16) and accordingly the sum of £1,005.00 pcm (including variable service charge of 96.16) will be registered as the fair rent on and with effect from 26th October 2021 being the date of the Tribunal's decision. RIGHTS OF APPEAL[1]A person wishing to appeal this decision (on a point of law only) 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. Where possible you should send your application for permission to appeal by email to rpsouthern@justice.gov.uk as this will enable the First-tier Tribunal Regional office to deal with it more efficiently. 7[2]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.[3]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.[4]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