Flat — Fair rent — Landlords objecting to rent fixed by rent officer — High Court remitting case for reconsideration — Whether committee properly applying percentage deductions to market rent before stripping out service costs — Whether effective date tat of committee’s original decision — Objection upheld in part
In June 2004, the respondent tenant of a flat applied for the registration of a fair rent. She occupied the flat as a regulated tenant under the terms of a three-year fixed-term agreement that had been entered into in May 2004. On 2 August 2004, the rent officer fixed the rent at £470 per month inclusive of £73 for services. The appellant landlords objected to the sum fixed and the matter was referred to the Rent Assessment Committee (RAC) which determined the rent at £510 per month, including £80 per month for services. The appellants appealed to the High Court, which remitted the matter to the RAC to re-examine the committee’s treatment of service charges.
The appellants contended that the service charge of £80 should be stripped out of the gross market rent of £910 before any percentage deduction for condition or scarcity was applied to avoid a double deduction in favour of the respondent. The respondent argued that although the deduction for scarcity ought not to be applied to the service charge costs, it should apply to the rent inclusive of services when applying a percentage deduction for condition. The disrepair at the premises should be reflected by a deduction in the level of payment for services that should equate with the deduction made to the basic rent. The committee also had to determine the effective date of its decision for the purposes of section 72 of the Rent Act 1977.
Held: The objection was upheld in part.
The cost of services should be stripped out of the global rent before percentage deductions for either condition or scarcity were applied. The relevant service charges assessed by an RAC were adjusted on the basis of the value to the tenant and it would be inequitable to make a further percentage deduction from the figure assessed.
Section 70(2) of the 1977 Act required the elimination of “scarcity” on the assumption of a neutral market for regulated tenancies. Where an RAC considered that substantial scarcity was the factor, it had to adjust the rent to reflect that fact. However, such a consideration could not affect the level of payment for services, which was assessed separately from the rent, with specific regard to the value of the services provided to the particular tenancy: Metropolitan Properties Co Ltd v Noble [1968] 1 WLR 838 referred to.
The market rent for the property was £910 per week inclusive of £80 for services. The net rent of £830 was to be adjusted by deducting 25% to reflect differences in condition between the appeal property and its comparables. The adjusted rent of £622.50 was subject to a further deduction of 25% to reflect scarcity, giving a net rent of £466.88, and the service charge of £80 was added back to the net rent giving a final figure of £546.88 per month.
Section 72 of the 1977 Act had originally provided that a registration of rent took effect from the date of application for registration, whether the rent was determined by the rent officer or on appeal by the RAC. However, the Housing Act 1980 had removed any retrospective effect of registration so that RAC decisions were not backdated.
Accordingly, the effective date of registration following renewed consideration of the landlord’s objection was the date of its decision and not the date of the original decision. The RAC had no discretion, even in the unusual circumstances of this case.
Nicholas Grundy (instructed by Devonshires) appeared for the appellants; Mr Cheblak, of the College of Law Pro Bono Unit, appeared for the respondent.
Eileen O’Grady, barrister
