First Floor Flat 24 Drayton Green London W13 0JF LON/00AJ/MNR/2019/0072

FIRST-TIER TRIBUNAL
PROPERTY CHAMBER (RESIDENTIAL PROPERTY)
Case No LON/00AJ/MNR/2019/0072
Between
Mr J N PrestonApplicantArea Estates LimitedRespondentMr J PrestonTenantArea Estates LtdLandlord
Before
Mrs E Flint DMS FRICSMr O N Miller BScDate 5 August 2019Property: First Floor Flat, 24 Drayton Green, London, W13 0JF

DECISION

The rent payable from 1 June 2019 is £1,000 per month. © CROWN COPYRIGHT Background[1]On 28 May 2019 the tenant of the above flat, Mr J N Preston, referred to the Tribunal a notice of increase of rent served by the landlord under section 13 of the Housing Act 1988.[2]The landlord's notice, which proposed a rent of £1,170 per month with effect from 1 June 2019, is dated 24 April 2019.[3]Mr Preston occupies under an assured periodic tenancy which commenced in 1995. At that time the flat was in very poor condition and the landlord lacked the finances to put it into good condition. He carried out substantial works of repair and improvement, making what would have been an uninhabitable flat into a habitable one.[4]At a later date the freehold was purchased by Area Estates Limited following service of a schedule of works issued by the London Borough of Ealing. In 2012 Area Estates carried out works to the property, including installing central heating in the subject flat.[5]Directions in respect of this application were issued on 3 June. A hearing was offered however neither party wished to attend.[6]Mr Preston was concerned that the timetable might result in the Tribunal’s determination being made before his appeal to the Upper Tribunal in respect of the 2018 rent was issued. On 12 June 2019 Upper Tribunal Judge Cooke granted permission to Appeal the 2018 determination on the grounds that the FTT used its own expertise to determine the rent and did not explain why it was disregarding the applicant’s evidence. Permission was refused in respect of Mr Preston’s other grounds of appeal and Directions issued.[7]Mr Preston sent a copy of the Upper Tribunal determination in respect of leave to appeal to this Tribunal in relation to the procedure to be followed in the 2019 Application. Judge Powell confirmed that the conduct of the 2018 appeal should have no bearing on the outcome of the 2019 application. He explained that in dealing with the 2019 application the tribunal would consider the appropriate market rent for the flat at that time, which will take effect from the date specified in the landlord’s notice to increase the rent, or such other date as the tribunal may direct. He confirmed that the determination of a market rent in 2019 is not dependant on any earlier period and in particular the market rent in mid-2018.[8]Mr Preston expressed his concern that the Upper Tribunal decision might shed further light on the procedure which this tribunal should follow in determining the rent; building on the High Court decision relating to his flat: John Preston v Area Estates Limited(1) and The London Rent Assessment Panel(2) [2014] EWHC 1206 (Admin).[9]Mr Preston advised that he was unable to comply with the Directions as he had not received the landlord’s statement of case. The original timetable was amended and Mr Preston reminded that he should provide his case even if he had not received anything from the landlord. It was confirmed that the inspection and determination would go ahead as planned.[10]Mr Preston submitted detailed written representations. The landlord did not submit any evidence. The Evidence[11]Mr. Preston stated in his written representations that he had followed the guidance outlined in the High Court judgement of H. H. Walden-Smith.[12]He produced written details of the verbal tenancy agreement with his original landlord which included the right to sublet, run his business from the address, carry out internal repairs and improve the property at his own expense while the landlord was to be responsible for the buildings insurance, maintenance and repair to the structure, exterior and services, and payment of the water bill. The tenant was to expect to pay an annual increase in line with the general rate of inflation.[13]He provided a detailed description on a room by room basis of the flat at the commencement of his tenancy together with details of his expenditure. The items are listed below with Mr Preston’s opinion of the effect on the rental value of the flat.[14]He had spoken to four local estate agents in May 2019 who had all confirmed that rents for two bedroomed flats had generally declined over the past few years. Their opinions ranged from £1,300 to £1,400 per month based on these conversations he was of the opinion that an average two bedroom conversion flat in this area would achieve a rent of approximately £1350 per month.[15]He referred to asking rents for seven flats with asking rents from £1,090 to £1,500 per month in the locality. In particular he noted that a purpose built flat in Green Man Gardens had returned to the market at £1,250 per month, the same rent as last year.[16]No, 38 Drayton Green, a recently refurbished first floor and attic flat with an additional bathroom was let for £1,475 per month last year and is being marketed at £1,500 per month. He thought it would probably be re-let at the same rent as last year.[17]The ground floor flat below Mr Preston’s has a fully modernised kitchen and bathroom, large master bedroom and smaller double, a large reception room with French windows leading on to its own garden. The landlord is responsible for internal repairs, the rent in 2019 was agreed at £1,090 per month.[18]Mr Preston referred to what he considered to be deficiencies in the building. The Energy Performance Certificate shows a low Band D due in the main to the single glazed windows and inadequate insulation to the main roof. The attic bedroom has no insulation to the walls and roof and limited ventilation from the window; the side window overlooks the neighbours only a metre away. The house has previously suffered from subsidence which was repaired; further cracks have appeared in the party wall which are being monitored by the neighbour. There is an inadequate sound and smell barrier between the ground and first floors following replacement of the original lath and plaster ceilings on the ground floor following dry rot works.[19]In order to value the tenant’s improvements, he looked at every case in the London area available online that had a reasons document attached. There were only two where the tenants had carried out work as extensive as his own. In each case the total deduction was 45%. In a third case a deduction of 65% had been given in respect of a ground floor mansion flat in Balham which was not only wholly unmodernised but in some state of disrepair owing in part to the structural condition of the property.[20]As regards deductions for tenant’s improvements, which he had described in some detail, he proposed and abatement of between 45% and 60% based on the following:(i) Carpets, curtains, blinds and white goods 10%(ii) Terms and conditions, decorations, contract management 5 – 10%(iii) Kitchen 10%(iv) Bathroom, wc and water supplies 5+%(v) Electrics and lighting 3+%(vi) Fireplaces and heating 2+%(vii) Windows, doors, floors, stairs, walls, ceilings, loft and insulation 10%(viii) Bookcases, display cases, shelving and cupboards 3%(ix) Exterior 2+% Inspection[21]The Tribunal inspected the property on 26 July 2019. The property is a converted Victorian semi-detached house on ground and first floors plus attic with front and rear gardens. The building is constructed of painted rendered brickwork under a tiled roof and is in good external condition.[22]The property is situated in a street of similar houses, some also converted into flats. The rear garden backs onto Drayton Green. Transport links and other local amenities are within walking distance of the property.[23]There is a shared entrance hall with doors leading to both the ground floor flat and the stairs to the first floor. The accommodation comprises on the first floor a living room overlooking the street, a kitchen with dining area with views to the rear, a double bedroom, bathroom with bath and wash hand basin and separate wc, there is a large double bedroom with curtained off eaves storage in the attic.[24]The flat has the benefit of gas fired central heating. The kitchen is fitted with good quality units, including the usual range of white goods. The bathroom has tiling to three walls and a heated towel rail connected to the heating system.[25]There are carpets throughout except in the kitchen and dining area where the floor is covered in Marmoleum, a type of linoleum. There are fitted shelves to the dining area, living room and first floor bedroom; the fireplaces in these rooms have been opened up and renovated.[26]There are UPVC double glazed windows in the bathroom and attic. The remaining windows are timber sash casements in good condition.[27]There is cracking on the party wall over the staircase and also on the ceiling of the first floor bedroom.[28]Immediately after the inspection we viewed externally the two comparables to which Mr Preston had particularly referred: the ground floor flat within the same house which has been fully modernised and has direct access into the rear garden and the first floor and attic at No.38 Drayton Green a detached converted house in similar style to the subject.[29]The ground floor flat at No.24 has exclusive use of the rear garden, it had previously been shared with Mr Preston. There is side access to the rear garden.[30]No.38 appeared to be in very good condition, the attic has two large dormer windows: one to the front and the other to the side which would provide better accommodation than at the subject property. The law[31]In accordance with the terms of section 14 Housing Act 1988 the Tribunal proceeded to determine the rent at which it considered that the subject property might reasonably be expected to be let on the open market by a willing landlord under an assured tenancy.[32]In so doing the Tribunal, as required by section 14(1), ignored the effect on the rental value of the property of any relevant tenant's improvements as defined in section 14(2) of that Act. Valuation[33]The tenancy is one to which Section 11of the Landlord and Tenant Act 1985 applies. The Tribunal accepts that the flat was in very poor condition at the commencement of the tenancy but the landlord carried out extensive repairs in 2012 consequently there is no evidence of landlord’s disrepair at the present time. Moreover, some of the original works carried out by Mr Preston were redone by the landlord in 2012. The adjustments for tenant’s improvements, under the Act, should not include items which were more properly landlord’s repairs.[34]Nevertheless, the Tribunal accepts that Mr Preston does have more onerous internal decorating and repair covenants than an assured shorthold tenant.[35]In coming to its decision, the Tribunal had regard to the evidence supplied by Mr Preston.[36]The previous decisions relating to other flats which had undergone significant works of improvement were based on the facts presented in those cases, full details of which are not included in the reasons documents consequently it is not possible to directly compare those with the subject property, in one of which elements of condition were reflected in the determination.[37]The items treated as tenant’s improvements are:(1) Fitted kitchen: units, tiling, electrics and appliances;(2) Bathroom and wc: bath and wash hand basin, new toilet seat, tiling, wall cladding, mirrored cabinet(3) Electrics: rewired, various light fittings/ recessed spot lights, additional power points etc.(4) Fireplaces and gas fires(5) Insulation between the rafters and joists(6) Bookcases, display shelves and cupboards(7) Side gate, finishing coat to render, new doorbell, TV aerial.[38]In determining the rental value of the subject property, the Tribunal finds that the best evidence is the actual rent paid in respect of the ground floor at No.24 and the asking rent at no.38 where the asking rental is almost the same as the rent achieved last year. The Tribunal also used as background information the opinions of the local estate agents.[39]The ground floor flat at No. 24 is smaller, but has the benefit of the back garden which backs onto Drayton Green. The 2019 rent is £1,090 per month.[40]The first floor and attic flat at No.38 is recently refurbished. The two dormer windows have much larger windows than the subject property, the side dormer which faces onto Drayton Bridge Road has the advantage of not being in close proximity to a neighbouring window. The accommodation provides contemporary living accommodation, two double bedrooms and two bathrooms. The asking rent is £1,500 per month and it was let last year for £1,474 per month.[41]Doing the best it can with the limited rental evidence available and taking into account the background information from the local estate agents the Tribunal determines the open market rental value at £1,350 per month.[42]However, the tenancy is an assured periodic tenancy and Mr Preston is required to carry out minor internal repairs and decorate the interior. His flat was let without the floor and window coverings, modernised kitchen with white goods and bathroom with modern fittings usually found in an assured shorthold letting. In addition, the landlord of an assured shorthold usually redecorates unless the existing decorations are in very good condition.[43]The Tribunal must adjust the open market rent to reflect these matters together with the improvements carried out by the tenant. We were mindful that Mr Preston had suggested a deduction of 45%+. However, his list of improvements included items which were not appropriate and not all improvements necessarily affect the rental value, for instance while the shelving and display units suit Mr Preston’s requirements not all tenants would necessarily pay extra for them. Using our expert knowledge of the level of deductions appropriate the Tribunal has valued the flat as follows: Market rent £1,350 Less No carpets, curtains, blinds or white goods 10% Tenant’s improvements 10% Terms and conditions of tenancy 5% Adjusted market rent £1012.50 say £1,000 per month The decision[44]The Tribunal determined that the rent at £1.000 per month inclusive of water rates.[45]The rent takes effect from 1 June 2019 in accordance with the landlord’s notice. Chairman: Evelyn Flint Dated: 6 August 2019 __________________________________ ANNEX - RIGHTS OF APPEAL i. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case. ii. The application for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application. iii. If the application is not made within the 28 day time limit, such application must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit. iv. The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party making the application is seeking. Appendix Landlord and Tenant Act 1985 11 Repairing obligations in short leases(1) In a lease to which this section applies (as to which, see sections 13 and 14) there is implied a covenant by the lessor— (a) to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes), (b) to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and (c) to keep in repair and proper working order the installations in the dwelling-house for space heating and heating water. [(1A) If a lease to which this section applies is a lease of a dwelling-house which forms part only of a building, then, subject to subsection (1B), the covenant implied by subsection (1) shall have effect as if— (a) the reference in paragraph (a) of that subsection to the dwelling-house included a reference to any part of the building in which the lessor has an estate or interest; and (b) any reference in paragraphs (b) and (c) of that subsection to an installation in the dwelling-house included a reference to an installation which, directly or indirectly, serves the dwelling-house and which either— (i) forms part of any part of a building in which the lessor has an estate or interest; or (ii) is owned by the lessor or under his control. (1B) Nothing in subsection (1A) shall be construed as requiring the lessor to carry out any works or repairs unless the disrepair (or failure to maintain in working order) is such as to affect the lessee's enjoyment of the dwelling-house or of any common parts, as defined in section 60(1) of the Landlord and Tenant Act 1987, which the lessee, as such, is entitled to use.](2) The covenant implied by subsection (1) (“the lessor's repairing covenant”) shall not be construed as requiring the lessor— (a) to carry out works or repairs for which the lessee is liable by virtue of his duty to use the premises in a tenant-like manner, or would be so liable but for an express covenant on his part, (b) to rebuild or reinstate the premises in the case of destruction or damage by fire, or by tempest, flood or other inevitable accident, or (c) to keep in repair or maintain anything which the lessee is entitled to remove from the dwelling-house.(3) In determining the standard of repair required by the lessor's repairing covenant, regard shall be had to the age, character and prospective life of the dwelling-house and the locality in which it is situated. [(3A) In any case where— (a) the lessor's repairing covenant has effect as mentioned in subsection (1A), and (b) in order to comply with the covenant the lessor needs to carry out works or repairs otherwise than in, or to an installation in, the dwelling-house, and (c) the lessor does not have a sufficient right in the part of the building or the installation concerned to enable him to carry out the required works or repairs, then, in any proceedings relating to a failure to comply with the lessor's repairing covenant, so far as it requires the lessor to carry out the works or repairs in question, it shall be a defence for the lessor to prove that he used all reasonable endeavours to obtain, but was unable to obtain, such rights as would be adequate to enable him to carry out the works or repairs.](4) A covenant by the lessee for the repair of the premises is of no effect so far as it relates to the matters mentioned in subsection (1)(a) to (c), except so far as it imposes on the lessee any of the requirements mentioned in subsection (2)(a) or (c).(5) The reference in subsection (4) to a covenant by the lessee for the repair of the premises includes a covenant— (a) to put in repair or deliver up in repair, (b) to paint, point or render, (c) to pay money in lieu of repairs by the lessee, or (d) to pay money on account of repairs by the lessor.(6) In a case in which the lessor's repairing covenant is implied there is also implied a covenant by the lessee that the lessor, or any person authorised by him in writing, may at reasonable times of the day and on giving 24 hours' notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair. Housing Act 1988 14 Determination of rent by rent assessment committee. (1)Where, under subsection (4) (a) of section 13, a tenant refers to a rent assessment committee a notice under subsection (2) of that section, the committee shall determine the rent at which, subject to subsections (2) and (4) below, the committee consider that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy— (a) which is a periodic tenancy having the same periods as those of the tenancy to which the notice relates; (b) which begins at the beginning of the new period specified in the notice; (c) the terms of which (other than relating to the amount of the rent) are the same as those of the tenancy to which the notice relates; and (d )in respect of which the same notices, if any, have been given under any of Grounds 1 to 5 of Schedule 2 to this Act, as have been given (or have effect as if given) in relation to the tenancy to which the notice relates. (2) In making a determination under this section, there shall be disregarded— (a) any effect on the rent attributable to the granting of a tenancy to a sitting tenant; (b) any increase in the value of the dwelling-house attributable to a relevant improvement carried out by a person who at the time it was carried out was the tenant, if the improvement— (i) was carried out otherwise than in pursuance of an obligation to his immediate landlord, or (ii) was carried out pursuant to an obligation to his immediate landlord being an obligation which did not relate to the specific improvement concerned but arose by reference to consent given to the carrying out of that improvement; and (c) any reduction in the value of the dwelling-house attributable to a failure by the tenant to comply with any terms of the tenancy. (3)For the purposes of subsection (2)(b) above, in relation to a notice which is referred by a tenant as mentioned in subsection (1) above, an improvement is a relevant improvement if either it was carried out during the tenancy to which the notice relates or the following conditions are satisfied, namely— (a) that it was carried out not more than twenty-one years before the date of service of the notice; and (b) that, at all times during the period beginning when the improvement was carried out and ending on the date of service of the notice, the dwelling-house has been let under an assured tenancy; and (c) that, on the coming to an end of an assured tenancy at any time during that period, the tenant (or, in the case of joint tenants, at least one of them) did not quit. (4)In this section “rent” does not include any service charge, within the meaning of section 18 of the Landlord and Tenant Act 1985, but, subject to that, includes any sums payable by the tenant to the landlord on account of the use of furniture or for any of the matters referred to in subsection (1) (a) of that section, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house concerned or are payable under separate agreements….