18 Lake Road London SW19 7ER LON/00BA/F77/2019/0101
REASONS
[1]By an application dated 31 January 2019 the landlord applied to the Rent Officer for registration of a fair rent of £1450 per calendar month (pcm) for the Property. There landlord stated that the existing rent payable was £606.50 per calendar month.[2]On 18 April 2019, the Rent Officer registered a fair rent of £1,000 pcm effect from 18 April 2019. It was a first registration for the Property. There were no amounts for services or fuel recorded.[3]By an email 10 May 2019 to the Rent Officer but redirected to the Tribunal the tenant appealed the new registered rent. The matter was referred to the Tribunal for a fresh determination of the rent.[4]Directions dated 29 May 2019 for the progression of the case were issued. The tenant requested a hearing, the landlord declined.[5]The tenant made brief written representations with their email of appeal. The new registration was “…contrary to what my lawyer told me to expect in view of the future rent increase for this property. He advised me in relinquishing my safe and secure lease of my previous flat – 9 Wood Lodge, 8 Lake Road Wimbledon SW19 7EL that any rent increase would be subject to a 2.1/2% increase only. He did not explain that I was upon leaving Wood Lodge to be subjected to a completely new assessment of this accommodation and that this would entail a massive increase in rent from 2021. His play on words was devious.”[6]The landlord made written representations to the effect that the new registered rent on 18 April 2019 was too low. The landlord considered that the market rent should be £1,400 pcm ‘at the very lowest end of the range of rents for two bedroom flats in the locality and already reflects the standard of the property’. The landlord did not agree with the Rent Officers deduction of 25% from this starting figure. The landlord bought this Property in 2016 specifically to re-house this tenant and that it had on purchase and was now, in a ‘good condition’.[7]The landlord provided information on a two bedroom part furnished flat at 22 Lake Road and that this was let at the asking rent of £1,800 pcm within 3 weeks of 1 June 2019. The landlord provided brief details on another similarly aged two bedroom flat in Lake Close, letting at £1,595 pcm earlier in 2019.[8]The landlord explained the background to the tenants move as a protected tenant from his former home at 9 Wood Lodge Lake Road to the current Property as part of a re-provision of ‘suitable alternative accommodation’. In addition to this the tenant was also paid £55,000 in compensation by order of the Central London County Court.[9]The Court order also provided that “The parties shall not apply for an application for a new registered rent in respect of the (alternative property) on or after 6th April 2019. If after such application it shall be determined that the rent exceeds £621.65 per calendar month then the Claimant (landlord) agrees not to enforce the determined rent, but to charge the £621.65 per calendar month until the net rent assessment on or after 6th April 2021. The landlord has confirmed to the tenant that the rent will be capped at £621.65 until 6th April 2021 in accordance with the terms of the Court Order.” Inspection[10]The Tribunal inspected the Property on 19 July 2019. The building is a traditional low rise 3 level small block of purpose built flats from the 1950’s. There was no lift and the flats appeared to be of a standard layout and accommodation. The grounds and common parts were in fair condition and order. The Property was on the ground floor. Access to the block within which the Property is located is through communal gardens and a common enclosed entrance hallway and stairwell. There is no off street parking. The block is opposite a local school.[11]The Property has a living room, two small double bedrooms, kitchen, bathroom and WC. Windows were UPVC framed double glazed, full gas central heating. There are internal fitted cupboards. There were no landlord’s white goods, carpets and curtains. The tenant was also required under his lease dated 5 December 2016 to, among other matters at paragraph 8.2, “… keep the interior of the Property in as good and clean state of repair condition and decoration as the Property is in at the commencement of the Term and to make good all damage…”. It was generally in a good state of repair and decoration. Law[12]When determining a fair rent the Committee, in accordance with the Rent Act 1977, section 70, had regard to all the circumstances including the age, location and state of repair of the property. It also 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.[13]In Spath Holme Ltd v Chairman of the Greater Manchester etc. Committee (1995) 28 HLR 107 and Curtis v London Rent Assessment Committee [1999] QB 92 the Court of Appeal emphasized 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 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).[14]Where the condition of a property is so much poorer than that of comparable properties, so that the rents of those comparables are towards twice that proposed rent for the subject property, it calls into question whether or not those transactions are truly comparable. Would prospective tenants of modernized properties in good order consider taking a tenancy of an unmodernised house in poor repair and with only basic facilities or are they in entirely separate lettings markets? The problem for the Tribunal is that the only evidence of value levels available to us is of modernised properties. We therefore have to use this but make appropriate discounts for the differences, rather than ignore it and determine a rent entirely based on our own knowledge and experience, whenever we can.[15]On the evidence of the comparable market lettings from the parties and our own general knowledge of market rent levels in Merton, we accept that the subject property if modernized and in good order would let on normal Assured Shorthold Tenancy (AST) terms, for £1,400 per calendar month. This then, is the appropriate starting point from which to determine the rent of the property as it falls to be valued.[16]A normal open market letting would include curtains and “white goods”, but they are absent here. The tenancy also contains slightly onerous repairing obligations on the tenant. To reflect these we deduct £140 pcm. This leaves the adjusted market rent at £1,260 pcm.[17]The Tribunal also has to consider the element of scarcity and whether demand exceeded supply. The Tribunal found that there was a substantial scarcity in the locality of Greater London and therefore makes a further deduction of 20% from the adjusted market rent to reflect this element. This leaves £1,008 pcm. The uncapped fair rent to be registered would therefore be £1,008 per calendar month. The new rent would take effect from the date of decision below.[18]As this is a first registration for this Property, the Maximum Fair Rent Order Cap which would ordinarily apply to all increases in Fair Rents does not apply. However barring any change in the law in the intervening period until the next rent registration at this Property it should be expected to apply to all future increases in the Fair Rent.[19]Lastly the Tribunal notes in passing that the rent payable by the tenant in this instance is still subject to a lower rent cap by historic order of the Court imposed on the parties and referred to above, but otherwise unrelated this time, to the Maximum Fair Rent Order Cap. Name: Neil Martindale Date: 19 July 2019 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the Tribunal is required to notify the parties about any right of appeal they may have. 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. 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. 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. 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. If the Tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).