JOHN NIGEL PRESTON v AREA ESTATES LTD [2019] UKUT 387 (LC)

UPPER TRIBUNAL
LANDS CHAMBER
[2019] UKUT 387 (LC)Case No RAP/43/2019
Between
JOHN NIGEL PRESTONApplicantAREA ESTATES LTDRespondent
Before
Judge Elizabeth CookeProperty: First Floor Flat,, 24 Drayton Green,, London,, W13 OJF, Judge Elizabeth CookeCatchwords: LANDLORD AND TENANT – RENT DETERMINATION - reasons for the discount for tenant’s improvements – consistency with earlier decisions – the status of findings of fact in earlier decisions
[1]The appellant, Mr Preston, has had since 1995 an assured tenancy of the first-floor flat at 24 Drayton Green, London W13 0JF. This is his appeal from the decision of the First-tier Tribunal (“the FTT”) dated 26 July 2019 determining the market rent for the property from 1 June 2019, pursuant to section 14 of the Housing Act 1988.[2]The appeal has been determined on the basis of written representations; the respondent landlord has written to the Tribunal with some information about comparable properties, but has expressed the wish not to participate in the appeal.[3]The appellant accepts the FTT’s determination of the rent itself, at £1,350 per month, and for that reason I do not need to consider the comparables supplied by the respondent. The sole point at issue in the appeal is that the appellant disagrees with the deduction made by the FTT in respect of his own improvements to the property.[4]It is relevant to explain, first, the legal basis of the determination of rent in these circumstances and then the background to this appeal. The legal basis for the determination of rent[5]Section 14 of the Housing Act 1988 enables a tenant to refer to the FTT a notice of increase in the rent, and requires the FTT to determine the rent at which the dwelling-house might reasonably be expected to be let on the open market. Central to this appeal is the principle set out in section 14(2) that the tenant is not to be charged rent for that element of the value of the dwelling house which is attributable to improvements he has made without being under an obligation to do so: (2) In making a determination under this section, there shall be disregarded— … (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, …” The factual background[6]When the appellant first took his tenancy in 1995 the flat was in a state of considerable disrepair. The appellant did a great deal of work and rendered it habitable. 3[7]However, in 2011 the appellant complained to the local authority about the condition of the property and the London Borough of Ealing provided a report in September 2011. The respondent purchased the freehold with knowledge of that report and in 2012 carried out “significant repairs and improvements” to the house including the appellant’s flat. The words just quoted are from paragraph 4 of the FTT’s 2014 re-determination, to which I refer below.[8]The respondent then sought an increased rent, and the appellant sought a determination of the rent from what was then the London Rent Assessment Panel. The decision given by the Panel was the subject of an appeal to the High Court, whose decision can be found at Preston v Area Estates Ltd and the London Rent Assessment Panel [2014] EWHC 1206 (Admin). The appeal was allowed, and the case remitted to the FTT for a determination of the 2012 rent.[9]The appeal was allowed because the FTT gave inadequate reasons for the deductions it made. It failed to take a staged approach, determining the open market rent and then setting out the deductions it was making; and it professed to rely on “the evidence supplied by the parties and the members' own general knowledge of market rent levels in the area”. The difficulty with that reasoning was that the FTT did not explain what the members had in mind and had not given the parties the opportunity to comment on it. So the case had to be remitted for a further determination (“the 2014 re-determination”), which was given later in 2014.[10]The 2014 re-determination (LON/00AJ/MNR/2012/0281), of which the appellant has provided a copy at the Tribunal’s request, is a detailed and very careful consideration of the rent, taking a properly staged approach and giving proper consideration both to the extent of the landlord’s works in 2012 and to the improvements carried out by the tenant. In particular the FTT found as a fact that although the appellant had put in wall mounted electric storage heaters in 2009, the landlord installed a gas central heating system; it determined therefore that the central heating was not a tenant’s improvement and accordingly did not give rise to a reduction in the rent.[11]At paragraph 44 the FTT set out the tenant’s improvements that were to be disregarded. At paragraph 63 it determined that the appropriate deduction from the rent in respect of those improvements was 10%.[12]The appellant sought permission to appeal that decision, from the FTT and then from the Tribunal. The applicant has provided a copy of his application to the Tribunal for permission to appeal; I see from the Tribunal’s records that the Deputy President’s refused permission on 22 October 2014.[13]An increased rent was again demanded in 2018 and the appellant sought a determination for the FTT. The FTT made a determination (“the 2018 decision”) which the appellant appealed, and I allowed the appeal: Preston v Area Estates Limited c/o Hamways Managing Agent [2019] UKUT 0334 (LC). The 2018 decision was extremely brief. The FTT had determined a market rent, before deductions, that was higher than either the appellant or the respondent had proposed, and had not explained why it rejected the appellant’s comparables. It had imposed the same 4 deductions as it did in the 2014 re-determination; but no reference was made to that re- determination and no explanation was given for the level of deductions made. Accordingly the matter was remitted to the FTT for the 2018 rent to be re-determined. The tribunal had not been provided with a copy of the 2014 re-determination; but even had a copy been provided the outcome of the appeal would have been the same because of the absence of any discussion of the comparables and of explanation of the deductions made.[14]Mr Preston’s application for the determination of the 2019 rent was heard by the FTT after permission to appeal had been given in respect of the 2018 decision and before the appeal had been determined. Mr Preston was assured by the chair of the FTT panel that the 2019 rent would be determined independently of the 2018 rent and that he would not be disadvantaged by the existence of the 2018 decision which at that stage was under appeal. Rental values in 2019 may well be different from those in 2018 and the FTT was right to proceed with the 2019 application at that stage. The FTT’s 2019 decision and the apeal[15]Mr Preston’s quarrel with the FTT’s 2019 decision is much more limited than was his challenge to the 2012 or 2018 decisions. He takes no issue with the basic rental figure of £1,350 per month (and indeed that was the figure he had suggested). Nor does he challenge the deductions of 10% made for the absence of carpets, curtains, blinds and white goods, and of 5% for the terms and conditions of the tenancy (which were the same as those made in the 2014 re- determination and the 2018 decision). He appeals the 10% deducted by the Tribunal for the Tenant’s improvements. His case before the FTT was that this should have been a 45% - 60% deduction. He appeals on the basis, first, that the FTT attributed to the landlord certain repairs which he says he carried out himself in 2012, and without there having been evidence given to that effect, and second that it gave insufficient reasons for the deduction of 10% which he regards as rounded and random.[16]So I have to look at what the FTT said about the 2012 repairs, and then at its explanation for the 10% deduction. The 2012 repairs[17]What the FTT said at its paragraph 33 was this: “… 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.” 5[18]The appellant says in his grounds of appeal is that there was no evidence to support what the FTT said in that paragraph, that he had modernised the flat long before the respondent bought the freehold, that the respondent had not re-done any of his work, and that any claim by the respondent to have modernised the flat was demolished by him and his fellow tenants at the hearing prior to the 2014 FTT re-determination.[19]The appellant says that paragraph 33, quoted above, is very close to the wording of paragraph 40 of the 2014 FTT re-determination:
“However, since the work has been carried out in 2012 it was agreed that there is no current landlord’s disrepair. Our valuation reflects this and not the historic landlord’s disrepair… Also some of the repair work [the tenant] had carried out in earlier years had been redone by the landlord as part of the major works in 2012.”
[20]The appellant objects to the re-use in the 2019 decision of the reasoning in the 2014 FTT re- determination. He says that this goes counter to the assurance that he was given that the 2019 rent would be determined independently of earlier years, and is inconsistent with the fact that many of the comparables he had produced were disregarded as being dependent on their own facts.[21]It was not clear to me, when I granted permission to appeal, that this was what the appellant was saying. I had understood him to be pointing to an inconsistency between the 2019 decision and the 2014 High Court decision. But having now been provided with a copy of the 2014 redetermination I understand that what is objected to is in fact the consistency between the facts found in the 2014 FTT re-determination and the 2019 decision.[22]There is no basis for appeal here. The facts found in 2014 have not been appealed and it is not open to the appellant to challenge them now. The FTT in 2014 found that the landlord had installed central heating in 2012, replacing the heaters installed by the appellant. It is not now open to the appellant to challenge that finding of fact, however much he continues to disagree with it. In legal jargon this is an issue estoppel; in common sense terms, the appellant does not get to have another go at the events of 2012 every time he challenges an increase in the rent. And the respondent does not have to produce evidence of what happened in 2012 every time there are fresh proceedings before the FTT, because the FTT has made a finding of fact already about what then happened.[23]This is consistent with the determination of the 2019 rent being independent of the decision in 2018. Rental values vary from year to year and there was no difficulty in the FTT assessing the open market rent in 2019 while the 2018 rent was under appeal. But where the FTT or any other court has made a finding of fact about this property, and that finding has not been appealed, the appellant cannot challenge that finding in later proceedings.[24]It is also consistent with the FTT’s finding that decisions relating to deductions from the rent made in decisions about other properties. Between different parties, did not assist it, because they turned on the specific facts of those cases. The appellant cannot rely on decisions made about 6 other properties on different evidence, but he is bound by the facts already judicially determined in respect of the subject property. The explanation for the 10% deduction in respect of the tenant’s improvements[25]The appellant before the FTT contended for the following deductions: Kitchen 10% Bathroom, wc and plumbing works 5% Electrics and lighting 3% Fireplaces and heating 2% Windows, doors, loft insulation etc 10% Bookcases, display cases, shelving, cupboards, mirrors, fanlights 3% Front door, path, gate etc 2%[26]The FTT allowed a total deduction of 10% for these items taken together, and its explanation was as follows:
“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 £1012,59 Say £1,000 per month”
[27]By itself this is arguably an inadequate explanation of the deductions, since it does not spell out what was inappropriate about the improvements and focuses solely on the shelving and display units. Permission to appeal was given on that basis.[28]However, what was not known to the Tribunal when giving permission was that the 10% deduction was the same as that made at the 2014 re-determination. It is not, as the appellant says, a figure chosen at random. The list of tenant’s improvements under consideration is set out at paragraph 44 of the 2014 re-determination. It is not worded in identical terms to the list in the 2019 decision, being rather more detailed, but it seems clear that it included at least all the items now contended for, and probably some additional ones. 7[29]In my judgment that changes the position. The FTT explained its 10% deduction at paragraphs 60 and 61 of the 2014 re-determination; it pointed out that the appellant had argued for a 50% deduction for his improvements including the central heating, which was of course a major item that the FTT ruled was not a tenant’s improvement, and a number of other items that the FTT was not prepared to allow. The appellant’s contention that that explanation was inadequate was rejected as unarguable by the Deputy President in his refusal of permission to appeal.[30]The 10% deduction in made in 2014 does not prevent the FTT from reaching a different valuation on future occasions, because values change and, in particular, improvements become dated; what added value in 2014 might well add less value now, and is unlikely to add more value now. In the light of that earlier determination the appellant’s argument for a 45% deduction, or even for the 35% that his figures add up to, was wholly unrealistic. Nevertheless, despite its misgivings about the value of the improvements in 2019 the FTT still awarded a 10% deduction.[31]Once the explanation for the deduction in the 2019 decision is read together with the 2014 re-determination, the appellant has a proper explanation for the deduction made. It would have been helpful for the FTT to have spelled out its explanation in more detail in the 2019 decision, but in the circumstances its decision is upheld, and the appeal fails. The appellant may wish to reflect on the fact that a redetermination would be most unlikely to lead to any more favourable decision for him and might well result in a lower deduction. Upper Tribunal Judge Elizabeth Cooke 13 December 2019