Landlord Advice UK Tenant Eviction Service For Landlords

When a landlord seeks to increase rent, tenants have the right to challenge the proposed increase by applying to the First-tier Tribunal (Property Chamber). The tribunal is empowered to assess and determine a fair rent for the property, considering various factors to ensure the rent aligns with legal requirements and market conditions.

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How the Tribunal Determines Fair Rent

The tribunal relies on “comparables” to determine a fair rent. This involves analysing the rent levels of similar properties in the local area, including advertised rents in newspapers, shop windows, and online listings. The tribunal ensures that the rent increase does not exceed what could reasonably be considered market rent. If a landlord proposes an excessive increase, tenants can challenge it by presenting evidence of lower market rents for comparable properties.

Case law has firmly established that all fair rent determinations must begin with a comparison to market rent [1]. While there may be other approaches, they must align with this foundation.

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Scarcity and Its Impact on Fair Rent

Scarcity value plays a critical role in limiting rent increases under the fair rent regime. The Rent Act 1977 requires that fair rents exclude the effects of scarcity, which arises when the demand for rental housing significantly exceeds supply [2]. By removing scarcity value, rents are kept lower to protect tenants.

• Landlord’s Burden of Proof: To argue against scarcity, landlords must provide substantial evidence demonstrating that scarcity no longer exists in the broader locality [3].
• Insufficient Evidence: Simply presenting lists of available private rented properties is not enough; landlords must prove these properties are genuinely available.
• Tribunal’s Role: The tribunal uses its knowledge of the local area, council housing registers, and housing association waiting lists to assess scarcity. High demand for public sector housing may indicate scarcity in the private sector [5].

Case law confirms that the tribunal’s own expertise and understanding of local housing markets are invaluable in assessing scarcity, and decisions must reflect a comprehensive evaluation of demand and supply [6].

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Other Factors Influencing Fair Rent Determinations

Beyond comparables and scarcity, several additional factors may affect the level of fair rent set by the tribunal:

1. Furniture

   • The rent should reflect the value of the furniture provided by the landlord, not its cost.
   • The tribunal can either assess the property as a furnished dwelling or calculate rent for an unfurnished property and add a separate amount for the furniture.

2. Service Charges

   • Fair rent may include service charges where applicable. Landlords must provide detailed accounts of their expenditure on services.
   • Tenants should verify that services align with the tenancy agreement, the standard of services provided, and the reasonableness of charges.
   • Landlords can charge a profit margin, generally between 10% and 15% of the total service charge.

3. Disrepair

   • Evidence of disrepair, such as ill-fitting windows, broken heaters, or unsafe wiring, should be presented to the tribunal.
   • If the landlord fails to meet repair obligations under Section 11 of the Landlord and Tenant Act 1985, the rent may be reduced accordingly. Reports from environmental health officers or repair notices can support tenant claims.

4. Property Conditions and Location

   • Factors such as inadequate lighting or heating, poor natural light, disruptive nearby businesses, heavy traffic, access to amenities, and room sizes are all considered when determining fair rent.

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Tribunal Requirements for Fair Rent Decisions

The tribunal must provide clear reasoning for its decisions, particularly when the fair rent it sets significantly deviates from market rent comparables. Detailed calculations and justifications are essential to ensure transparency.

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Key Takeaways for Tenants and Landlords

1. Tenants:

   • If faced with an unjustified rent increase, tenants can apply to the First-tier Tribunal to challenge it.
   • Collect evidence of market rents, scarcity, and property conditions to strengthen your case.
   • Ensure all payments made during a dispute are marked “without prejudice” to avoid implying agreement with the increase.

2. Landlords:

   • Rent increases must reflect fair market conditions and exclude scarcity value.
   • Be prepared to provide detailed evidence of services, furniture value, and the absence of scarcity in the locality.
   • Maintain properties in good repair to avoid reductions in fair rent determinations due to disrepair.

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Conclusion

The determination of fair rent aims to balance tenant protection with landlord rights by excluding scarcity value and ensuring rents align with market conditions. Both tenants and landlords should understand the factors influencing fair rent decisions and prepare evidence to support their position during disputes. By adhering to legal requirements and presenting compelling cases, both parties can navigate rent increase challenges effectively.

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Footnotes

[1] Spath Holme Ltd v Greater Manchester and Lancashire Rent Assessment Committee (1996) 28 HLR 107; Curtis v London Rent Assessment Committee (1998) 30 HLR 733.
[2] s.70(2) Rent Act 1977.
[3] Metropolitan Property Holdings v Finegold [1975] 1 WLR 349, 1 All ER 389.
[4] R Wolters (London) Ltd v London Rent Assessment Committee and others [2003] EWHC 1465; Yeoman’s Row Management Ltd v Chairman of London Rent Assessment Committee and others [2002] EWHC 835, Admin.
[5] Forebury Estates Ltd v Chiltern Thames and Eastern Rent Assessment Panel and others [2000] 20 June 2000, QBD.
[6] Curtis v London Rent Assessment Committee (1998) 30 HLR 733.
[7] s.71(4) Rent Act 1977; Cavendish Square Investments Ltd v Moule [2012] EWHC 1839 (Admin).