Fair Rent

Comparables

When rent is increased, a tenant may apply to the First-tier Tribunal (Property Chamber) to request the Tribunal to determine a fair rent for the property.

The First-tier Tribunal (Property Chamber) now use “comparables” in which the Tribunal look at rent for similar properties and the rent that they are marketed for as a means of determining a fair rent. This means that rent should not be increased above what could considered as market rent, otherwise a tenant may oppose the rent increase by applying to the Tribunal. Evidence of market rents can be found by looking at advertisements for similar rented property in local newspapers, advertisements in shop windows etc.

The approach of using market rents as comparables has become progressively more established by case law.[1] Although the courts have acknowledged that there can be more than one approach to determining a fair rent, every approach must start from a comparison with a market rent.

Scarcity value

Arguments about scarcity are an important factor for a tenant in restricting the level of a fair rent increase. Scarcity value was included in the determination of a fair rent to protect tenants from the high rents, which resulted from the fact that the demand for rented housing far outstrips supply. Fair rents must be assessed on the level they would have been if there was no scarcity, thereby keeping the rent low.[2]

To contest this presumption, a landlord would have to show there was no scarcity in the broader locality.[3] Landlords have to provide substantial evidence that scarcity no longer exists and advisers should argue that simply copying lists of local private rented accommodation is not sufficient evidence of a lack of scarcity, as there is no guarantee that an advertised property is still available. Landlords can refer to a fairly large locality when presenting evidence of scarcity.[4]

Advisers should gather information about the pressure on housing in the locality, as case law has established that scarcity in an area could be shown by demand as well as supply. The First-tier Tribunal (Property Chamber) can use council housing registers and housing association waiting lists when assessing scarcity because a high demand for public sector housing may reflect pronounced scarcity in the private sector.[5]

Relevant evidence should be available from local registered social landlords and local authority housing registers; from housing advice centres regarding the level of housing need and from local homeless persons units about the number of people applying for housing considered not in priority need. Case law has also held that rather than introducing inflexible rules as to the burden of proof of scarcity, the Tribunal’s own knowledge and experience of the locality is considered to be of particular value.[6]

However, where the committee’s determination of a fair rent differs significantly from the market rent indicated by comparables, the committee must show good reason for its decision, providing arithmetical workings if necessary.

Other factors influencing the level of fair rents

Apart from considering comparables and scarcity, advisers should take account of other factors when preparing a submission to a rent officer or to the Tribunal concerning a fair rent, including the following:

  • Furniture– furniture provided by the landlord should be included in the rent on the basis of the value to the tenant and not the cost to the landlord. A rent officer or the Tribunal may either look at the property as a whole including furniture and set a rent for a furnished dwelling, or may consider a rent for an unfurnished dwelling then add an amount for the furniture.
  • Service charges – an amount attributable to service charges will be included in the fair rent set and landlords who provide services normally give details of their service charge expenditure to rent officers and the Tribunal. Advisers should check with their clients whether the stated services conform with the terms of the tenancy agreement, whether the standard of the services is satisfactory and the reasonableness of the landlord’s charges. It has been established that landlords can charge management costs and are entitled to some profit on the provision of services; it is generally accepted that this charge is between 10 per cent and 15 per cent of the total service charge bill. Where there is a block of flats there are recognisable methods of apportioning the service charge between them by dividing by the number of flats, rateable values or according to the floor space of each dwelling, which advisers should use. The Rent Act provides that where the sums payable to the landlord include sums that vary according to the cost of services provided by the landlord, the fair rent may be registered as a variable amount.[7]However, the rent officer or the Tribunal must consider the variation terms to be reasonable.
  • Disrepair– full details of all disrepair should be presented to the rent officer (such as ill-fitting windows, broken heaters and dangerous wiring). Where a landlord is not fulfilling her/his repairing obligations (for example under section 11 of the Landlord and Tenant Act 1985), the rent set should reflect this and evidence can be presented to the rent officer or the Tribunal such as environmental health officer reports or repair notices which have been served.
  • Inadequate lighting and heating, poor natural light, nearby disruptive businesses, access to local amenities, heavy traffic and the size of rooms – these are all factors which may influence the level at which the fair rent is set.

[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).

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