Landlord and tenant – Rent Act 1977 — Rent Act (Maximum Fair Rent) Order 1999 – Fair rent payable by appellant tenant including fuel charge for heating and hot water – respondent landlord later making changes to heating system so appellant separately liable for those items – Capping of increases to fair registered rent under article 2 of 1999 Order – Whether uplift by reference to retail prices index to be applied to whole of existing registered rent – Whether deduction first to be made for amount of fuel charges as “variable sum” under article 2(5) – Appeal dismissed
The appellant had since 1982 been the tenant of a first-floor flat in London W1G let by the respondent landlord. In May 2011, pursuant to section 70 of the Rent Act 1977 as amended, the rent officer determined the fair rent of the flat at £5,212.50 pa; that figure was entered in the Rent Register along with fuel charges of £852.50 attributable to the provision of heating and hot water by the landlord.
In February 2013, the respondent applied to the rent officer for registration of a fair rent of £19,500 pa, partly in light of major works of improvements to the property which had included the provision of a self-contained central heating and hot water system within the flat. As a result of those works, heating and hot water services were no longer provided by the landlord and the appellant had to pay for them separately. The rent officer registered the fair rent as £5,748 pa with effect from May 2013, with no sum recorded for services. That decision was subsequently upheld by the first-tier tribunal (FTT), which varied it only to the extent of registering the new fair rent at £5,801.50 with effect from July 2013.
The appellant appealed. An issue arose as to the application of the rent-capping provisions in the Rent Act (Maximum Fair Rent) Order 1999, so far as these imposed a ceiling, under article 2, on increases to the existing registered rent by reference to the United Kingdom Index of Retail Prices. The appellant contended that the fuel costs fell to be discounted under article 2(5) as a “variable sum to be included in the registered rent in accordance with section 71(4) of the 1977 Act”; he submitted that they should therefore be deducted from the existing registered rent of £5,212.50 pa to produce a figure of £4,350 pa, to which the retail price index uplift should be applied so as to cap the fair rent at £4,801.50 pa. In that regard, he argued that the relevant services were “variable” in the sense that the landlord had discontinued the previous means of provision and replaced it with a self-contained system of heating and hot water.
Held: The appeal was dismissed.
In order for the cost of services to be “variable” under section 71(4) of the 1977 Act, it was the sums payable by the tenant to the landlord that had to vary according to the cost from time to time of the services, rather than the provision of the actual services themselves. The fact that the services had been discontinued was not material for those purposes. The Act was referring to the this provision refers to is the not uncommon situation of where a lease requires the tenant to pay sums in addition to rent by way of service charge which vary each year according to the actual cost or provision of those services. Section 71(4) referred to the not uncommon situation where a lease required the tenant to pay sums in addition to rent by way of a service charge that varied each year according to the actual cost or provision of those services. Where those terms were regarded as reasonable by the rent office, that sum could be registered as a separate element of the registered rent and was to be disregarded when applying the inflation-linked capping provisions of the 1999 Order under article 2(5). There was good reason for distinguishing between the rent in its normal sense and in the sense of a service charge or variable charge. By definition, the variable service charge would change according to cost and usage and therefore did not need to be uplifted to take into account the vagaries of inflation, whereas rent that was fixed, whether or not it included the provision of services, would not be varied in that way but could only be increased by an application for registration of a new fair rent, which was when the capping provisions were engaged.
The rental charge to the appellant had merely included the provision of heating and hot water, without those costs being separately identified or recoverable and variable within any service charge provision or the terms of the lease or tenancy. Accordingly, no variable sums were comprised within the registered rent, as distinct from it merely being recorded that the landlord provided services. Those charges were fixed because they were encompassed within the rent with no separate liability or ability of the landlord to recover or vary them under the provisions of the tenancy itself. It followed that no variable sums were payable within the meaning of article 2(5) of the 1999 Order and the “existing registered rent” did not fall to be reduced, notwithstanding that the previously registered fair rent encompassed the cost of providing heating and hot water and these were no longer provided by the respondent landlord but paid for by the appellant tenant.
It was not inherently unfair or unjust for the capped rent to be set by reference to hot water and heating services that were no longer provided. The purpose of the capping provision was not to set the rent but merely to limit the amount by which the rent could be increased. Where market rents would be higher than the existing registered rent, parliament had intervened to restrict the amount by which the rent should increase. That intervention in the market protected the tenants, by limiting the amount by which the rent could otherwise be increased, but disbenefited the landlord, who could not charge the market rent. It was not unjust to the tenant to imposing a cap on the amount by which rent could increase even if that cap, on one analysis, did not reflect the fact that the situation has altered since the rent was last assessed. The capped rent, whether or not it operated anomalously on the facts of the instant case, was still grossly under the market value and would remain so for the duration of the appellant’s tenancy.
Per curiam: Where a landlord had been providing services that were included in the rent paid, it was not usually permissible for it to withdraw those services without some sort of arrangement or agreement being made with the tenant. Although it was not material to the correct interpretation of the statutory provisions, there was no evidence in the instant case of whether the parties had reached any financial arrangement to reflect the fact that heating and hot water were no longer included in the rent.
The appellant tenant appeared in person; the landlord did not respond to the appeal.
Sally Dobson, barrister
