Landlord and tenant –– Rent Acts –– Fair rent –– Rent Acts (Maximum Fair Rent) Order 1999 –– Capping order –– Failure to register fair rent for 10 years –– Whether capping order applies to original registered rent or to rent level that would have been registered two years previously –– Assessment of fair rent –– Comparables derived from assured tenancies –– Voids –– Whether correct to make deductions from rents to reflect voids
The appellant landlord owned a building containing a number of flats. The second respondent tenant occupied one of the flats under a regulated tenancy pursuant to the Rent Act 1977. In 1990 a rent was registered in respect of the flat at £412 per quarter. In fact, the tenant had paid a rent between 1990 and 2000 that was consistent with the rents of other flats in the building with regulated tenants, in respect of which the last registration had been in 1998 at the rate of £950 per quarter.
Following an application by the landlord to the respondent rent assessment committee for a fair rent of £998.07 for the second respondent’s flat, and for three other similar flats, the committee determined a fair rent for the respondent’s flat of £624.50, after it had applied the provisions of the Rent Acts (Maximum Fair Rent) Order 1999, and £950 per quarter for the other three flats. The committee stated that but for the application of the capping order that had been applied in respect of the 1990 registered rent, it would have determined the fair rent of the respondent’s flat at £950 per quarter. In determining the fair rents, the committee had regard to rents of assured tenancies in the same building, but made a deduction of one-twelfth in respect of voids. The appellant appealed that decision.
Held: The appeal was allowed in part and the decision remitted. There was nothing under the 1999 order, and no evidence that supported an exception in Article 2(7) of the order, that prevented the order applying a cap in relation to the 1990 registered rent. However, there was no evidence before the committee that the appellant had taken into account voids in fixing the rents for tenants holding flats in the building under assured tenancies. Although the committee members had expertise, which they were entitled to use, they should have been more careful to ensure that there was some basis in fact to enable any assumption to be applied. There was nothing to suggest that the appellant had added a sum to the rents of assured tenancies to allow for voids.
The following cases are referred to in this report.
Curtis v London Rent Assessment Committee; sub nom Curtis v Chairman of the London Rent Assessment Committee [1999] QB 92; [1998] 3 WLR 1427; [1997] 4 All ER 842; [1998] 1 EGLR 79; [1998] 15 EG 120, CA
Queensway Housing Association Ltd v Chiltern, Thames and Eastern Rent Assessment Committee (1999) 31 HLR 945, QB
Rakhit v Carty [1990] 2 QB 315; [1990] 2 WLR 1107: [1990] 2 All ER 202; [1990] 2 EGLR 95; [1990] 31 EG 40, CA
R (on the application of Spath Holme Ltd) v Secretary of State for the Environment, Transport and the Regions; sub nom R v Secretary of State for the Environment, Transport and the Regions, ex parte Spath Holme Ltd [2001 2 AC 349; [2001] 2 WLR 15; [2001] 1 All ER 195; [2001] 1 EGLR 129; (2001) 33 HLR 31, HL; [2000] 3 WLR 141; [2000] 1 All ER 884; [2000] 1 EGLR 167; (2000) 32 HLR 495, CA
Spath Holme Ltd v Chairman of the Greater Manchester and Lancashire Rent Assessment Committee (No 1) [1995] 2 EGLR 80; [1995] 49 EG 128; (1995) 28 HLR 107, CA
This was the hearing of an appeal by the appellant, Spath Holme Ltd, from a decision of the first respondent, the North Western Rent Assessment Committee, determining a rent under the Rent Act 1977 on an appeal by the appellant in respect of a flat occupied by the second respondent, Mrs Vera Bigio.
Jonathan Gavaghan (instructed by Willan Bootland White, of Manchester) appeared for the appellant; Martin Rodger (instructed by the Treasury Solicitor) represented the first respondent; the second respondent did not appear and was not represented.
Giving judgment, COLLINS J said:
1. This is an appeal by Spath Holme Ltd against the decision of the North Western Rent Assessment Committee dated 17 January 2001, whereby it determined a fair rent for flat 20, occupied by the second respondent, Mrs Bigio, in a block owned by the appellant in Manchester, of £624.50 per quarter. That figure was reached because of the application of the Rent Acts (Maximum Fair Rent) Order 1999 (the 1999 Order), which set a cap on the amount that could be determined. But for the cap, the committee would have determined a fair rent of £950 per quarter. The appeal lies only on a point of law.
2. Mr Willan is a director of the appellant company, and a practising solicitor. He has considerable expertise in dealing with rent assessments and committees. He has also built up a detailed knowledge of this branch of the law. He signed the application for the registration of a fair rent for flat 20, dated 1 August 2000, which resulted in the appeal to the rent assessment committee following the rent officer’s decision, which the appellant considered unsatisfactory.
3. The background and history, so far as material, is as follows. Flat 20 is a one-bedroom flat that is virtually identical in layout to other flats, in particular nos 4, 28 and 36. Mrs Bigio is an elderly lady. Before 1990 she was the tenant of flat 33 on a regulated tenancy, but she was finding it difficult to manage stairs. Accordingly, she asked to be moved to a ground-floor flat if one should fall vacant. Flat 20 did fall vacant in 1990, and, following its redecoration, Mrs Bigio moved into it in late 1990. She remained protected by a regulated tenancy. There was some confusion as to whether the change of flats had occurred in 1990 or 1993, but it was, I think, common ground, by the time the hearing before me took place, that it was in late 1990. The precise date is immaterial.
4. The previous tenant of flat 20 was a Mr Smith, who held it under a regulated tenancy. In January 1990 a fair rent had been fixed at £412 per quarter. It seems, from Mr Willan’s statement, that, for some reason, although Mrs Bigio had always been charged the same rent as applied to identical units occupied under regulated tenancies, no figure for flat 20 was ever formally registered in her name. Nor was any subsequent application made to the rent officer to register a fair rent for flat 20 until that made on 1 August 2000.
5. Before going further, I should set out the legislative background. The Rent Act 1965 introduced regulated tenancies and registration of fair rents, initially only for unfurnished tenancies, but subsequently, by the Rent Act 1974, extended to furnished tenancies. This regime was considered to result in an unnecessary and undesirable hindrance to a market in private lettings. The Housing Act 1988 saw the introduction of assured and assured shorthold tenancies. Fair rent registration did not apply to either of these. Security of tenure is similar for assured tenancies as for regulated tenancies, but assured shortholds (now, perhaps, for obvious reasons, the most common form of tenancy) have very limited security. The result of the changes is that now there is, and, really, since 1989 there has been, no market in regulated tenancies, since no landlord would normally wish to create a new regulated tenancy that was subject to control over the amount of rent that could be charged.
6. Rents under regulated tenancies are now dealt with in Part III (sections 44 to 61) of the Rent Act 1977, and registration of rents under Part IV (sections 62 to 75). Section 44(1) reads:
Where a rent for a dwelling-house is registered under Part IV of this Act, the rent recoverable for any contractual period of a regulated tenancy of the dwelling-house shall be limited to the rent so registered.
Section 45 extends this to cover statutory tenancies arising on the conclusion of any contractual tenancy. Section 67 deals with applications for registration of rent, which can be made by the landlord, by the tenant or by both jointly: section 67(1). Section 67(2) (which was inserted by the Housing Act 1980) reads, so far as material:
Any such application must be in the prescribed form and must ––
(a) specify the rent which it is sought to register;
… and
(c) contain such other particulars as may be prescribed
Section 67(3) provides that, save where there have been specified material changes to the condition of the premises or the terms of the tenancy, no application by the landlord or the tenant alone can be made at intervals of less than two years from any registration. The relevant prescribed forms are those in Schedule 1 to the Rent Act 1977 (Forms etc) Regulations 1980 (SI 1980 No 1697). Section 75(1) of the Act provides that “references to a prescribed form include references to a form substantially to the same effect as the prescribed form”, and this is picked up in para 2(2) of the regulations, which states:
In these regulations any references to a numbered form shall be construed as a reference to the form bearing that number in Schedule 1 hereto or to a form substantially to the like effect.
7. Section 70 deals with determination of fair rent. It provides, so far as material:
Determination of fair rent
70.––(1) In determining, for the purposes of this Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling-house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to ––
(a) the age, character, locality and state of repair of the dwelling-house…
(b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and
(c) any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy.
(2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.
(3) There shall be disregarded ––
(a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with any terms thereof;
(b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any predecessor in title of his;
(c)…
(d)…
(e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any predecessor in title of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his.
The purpose was that fair rents should reflect the market rent for a particular tenancy less any scarcity element: see section 70(2). But there never was a particularly active market in regulated tenancies. Thus, there was a tendency for rent officers and rent assessment committees to fix fair rents by reference to previous figures, and not by reference to
* Editor’s note: Also reported at [1995] 2 EGLR 80
† Editor’s note: Also reported at [1998] 1 EGLR 79
8. Following those decisions, rents were fixed at higher levels, with the result that some tenants faced sudden steep rises in the amounts payable. Accordingly, the Secretary of State decided to exercise his powers under section 31 of the Landlord and Tenant Act 1985, which enabled him, by order, to provide for “restricting or preventing increases of rent for dwellings which could otherwise take place”. He introduced the 1999 Order, which came into force on 1 February 1999, and which set a cap on fair rent determination by limiting them to increases of inflation plus 5% or 7.5%, depending upon whether previous capping applied. Article 2(6) and (7) provides:
(6) Subject to paragraph (7), this article applies where an application for the registration of a new rent in respect of a dwelling-house is made after this Order comes into force and, on the date of that application, there is an existing registered rent under Part IV in respect of that dwelling-house.
(7) This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV exceeds by at least 15% the previous rent registered or confirmed.
The lawfulness of the order was challenged by the present appellant in judicial review proceedings. Latham J refused permission, but the Court of Appeal granted it, and directed that the substantive application be heard before it. On 20 January 2000 it decided that the order was ultra vires, and so invalid. The Secretary of State appealed to the House of Lords, which reversed the Court of Appeal decision on 7 December 2000: see [2000] 3 WLR 41 (CA)* and [2001] 2 WLR 15 (HL)†.
* Editor’s note: Also reported at [2000] 1 EGLR 167
† Editor’s note: Also reported at [2001] 1 EGLR 129
9. When the application for registration was made on 1 August 2000, the 1999 Order was not in force, since it had been declared invalid by the Court of Appeal. Capping was therefore irrelevant and so any previous registration was of historic interest only. A total of eight applications were made at the same time, of which four were for one-bedroom flats of similar design. Mrs Bigio’s was one of those four. It was a joint application. It specified a desired rent of £998.07 per quarter, against an existing rent of £950. In all cases except flat 20, the last registration had taken place in June 1998 after Curtis v London Rent Assessment Committee (supra) and before any capping provision, so it can be assumed that a true open market figure was reached. In the case of flat 20, the need to register a new rent had been overlooked, and, as I have said, the last registration was in 1990, when it can be assumed that fair rents were probably below the true market level. On 29 September 2000 the rent officer determined a figure of £950 for all the one-bedroom flats, including flat 20. The appellant appealed to the rent assessment committee. The appeal was not resisted by Mrs Bigio: indeed, she has not opposed the appeal before me, and seems content to pay the figure that the appellant regards as fair. But she is obliged to pay only the registered rent, and can recover any overpayment made over a two-year period.
10. The appellant’s submissions to the committee are dated 25 October 2000. In them, it says that the rents registered by the rent officer do not properly reflect the fair rents, having regard to:
the age, character and locality of the premises, the extent to which the common parts have been upgraded, the increased supply of rented accommodation in Manchester in general and in Didsbury in particular which decreases the scarcity element and the evidence of rents received in respect of other similar accommodation, and having regard in particular to the evidence of rents from identical assured and assured shorthold tenancy units of accommodation in the same block.
It continues:
In addition, more than two years have passed since the last fair rents were determined, and the Rent Officer’s determinations show no increase over the rents previously registered at all, for Flats 4, 20, 28 and 36; a reduction in rent for Flat 5 and only a modest increase for Flats 8, 9 and 13.
This was erroneous for flat 20, since the previous registration was not in 1998 but in 1990, and was not £950, but £412. But it does show that a mistake was made by the appellant, and that up-to-date registration for flat 20 had been overlooked. Annexed to the submissions were the extracts from the rent register, showing that, for all but flat 20, the last and operative registration had been in June 1998. That for flat 20 shows that the operative registration was dated 4 January 1990 and had effect from that date. The application form submitted to the rent officer on 1 August 2000 recorded that there had been no major works or improvements carried out since the previous registration of a fair rent for the premises. The appellant wrote a letter to Mrs Bigio dated 25 July 2000, which she signed to indicate her acceptance of its suggestion that she would agree to the figures proposed by it for a fair rent, which commences:
As you will be aware your last rent review was on 11th June 1998 and upon which occasion the Rent Assessment Committee awarded £950 per quarter as your rent.
This was inaccurate.
11. On 12 October 2000 the committee sent a standard letter to the appellant that enclosed copies of all the relevant documents sent to the committee by the rent officer “except those which you will already have (such as the application form and register sheet)”.
12. On 30 November 2000 the committee wrote to the appellant seeking some further information. It sought yet further (in the appellant’s view irrelevant) information on 29 December 2000. On 3 January 2001 the vice-president wrote a letter, which concluded:
I presume that you have no further comment on the subject of “capping” following the House of Lords decision of 7 December 2000.
The appellant confirmed that that was indeed so. On 5 January 2001 the committee returned to the capping point, and specifically asked whether the appellant wished to make any further representations upon it. By letter of 8 January, the appellant said that it did not.
13. The committee’s decision was given on 7 February 2001. It is fully reasoned. It identifies the error in respect of the previous registration of flat 20 and points out that it was £412 in 1990. It assesses the market rent by reference to the assured and assured shorthold tenancies in the block to which the appellant had drawn attention. It refers to the fact that three flats had been vacant for over a month, despite being advertised, and that many assured and assured shorthold tenants had been with the landlord for several years. The committee concluded that vacancies did arise from time to time, and concluded:
The Committee considers that in the circumstances a professional landlord can be expected to build into its agreed market rents an element in respect of the costs associated with such likely “void” periods and re-lettings. (By contrast the hypothetical market of fair rents is not one in which such costs are incurred and
14. Support for this conclusion is drawn from observations of Richards J in Queensway Housing Association Ltd v Chiltern, Thames and Eastern Rent Assessment Committee (1999) 31 HLR 945. To those I will return, since one of the grounds relied upon by Mr Jonathan Gavaghan is that the committee was not entitled to reduce the fair rent by reference to “voids”. The committee considered the question of rent capping, and has recorded the correspondence with the appellant to which I have already referred. It points out that the registered rent for flat 20 on 1 August 2000 was £412, and concludes:
This means that when the formula in the Order is applied to that rent the maximum fair rent for Flat 20 permitted by the Order is now £624.50 per quarter. No explanation has been given to the Committee as to why applications for re-registration have not been made since that date. Indeed the previously registered rent was not alluded to at all in evidence. However, the Committee noted that the Rent Officer’s inspection report suggested that the current tenant of this flat had transferred there in 1993. The combination of the outdated registration and the Order does produce what, as the Committee readily acknowledge, might be considered to be a capacious result. It is clearly undesirable that fair rents determined at the same time for identical properties should differ so markedly but this is the effect of the Order. The Committee was not presented with, nor could find, evidence to the effect that the repairs or improvement exception [viz Article 2(7)] was applicable.
15. The committee recorded its opinion that if it had not been capped by the order, the fair rent would have been £950 per quarter, and that sum was determined for the other three one-bedroom flats. That figure is important because the order may be repealed at any time, and, if it is, the uncapped figure will become material. That figure was reached because the committee had regard to the comparables, which were flats 2, 19 and 33. Flats 2 and 33 were let on assured shorthold tenancies at £4,113.52 and £4,281.48 pa respectively, although flat 33 included a sum for the use of a garage. Flat 19 was let on an assured tenancy at a rent of £4,098.60 pa. There was some suggestion, but no direct evidence, that flat 19 had been renovated. These figures led the committee to a starting figure for a projected market rent of £4,105 pa (or £1,276.28 per quarter). From this figure, the committee deducted one-twelfth (£342.00 pa) in respect of voids, presumably on the assumption that the rent was fixed on the basis that it was necessary to reckon, on average, that there might be one month without a tenant in a year. This resulted in a figure of £3,763 pa, or £943 per quarter, which was “sufficiently close to the fair rent determined by the Rent Officer for the one bedroom flats to persuade the Committee that the decision of the Rent Officer in those cases should be confirmed”.
16. The appellant takes two main points, the first being put in alternative ways. Mr Gavaghan submits, first, that the committee was not entitled, as a matter of law, alternatively as a matter of fairness, to apply the cap in the 1999 Order. Second, he submits that the deduction for voids was impermissible.
17. Mr Gavaghan has submitted that the 1999 Order applies only to existing rent. In the case of flat 20, the registered rent was out of date, and Mrs Bigio had been paying the same sum as applied to the other one-bedroom flats. This submission is hopeless. It ignores a fundamental purpose behind registration, which is to fix a rent for the premises so that any tenant is protected from paying excessive sums. This follows from the wording of section 44(1) of the Act and has been confirmed by the Court of Appeal in Rakhit v Carty [1990] 2 QB 315*. Mr Gavaghan sought to pray in aid the Human Rights Act, in particular Article 1 of Protocol No 1. This is because, it is said, to decrease a rent would be grossly disproportionate. The simple answer to this is that the appellant has only itself to blame for not re-registering the rent of flat 20, as it did with the others, and there is no reason to ignore the law and the clear provisions of the 1999 Order to cater for such errors. This is particularly so in the case of this appellant, which, through Mr Willan, asserts a considerable expertise in this branch of the law. In desperation, Mr Gavaghan tried to argue that the application should be treated as an application to cancel the existing registration, on the ground that the form used was substantially to the like effect to that for cancellation. The argument that a prescribed form for registration can be used for cancellation is indeed a bold one, although, naturally, the basic information in each is similar. The argument is clearly unsustainable. In any event, the conditions for cancellation set out in section 73 of the Act do not apply: see section 73(1) and (1A), and particularly section 73(1A)(b).
* Editor’s note: Also reported at [1990] 2 EGLR 95
18. In submitting that it was unfair to rely upon the order, Mr Gavaghan argues that there was a failure by the committee to give proper disclosure. Its obligations in that respect are contained in the Rent Assessment Committees (England and Wales) Regulations 1971 (SI 1971 No 1065). Regulation 6 provides:
Where a reference is not to be subject to a hearing, the committee shall supply to each of the parties a copy of, or sufficient extracts from or particulars of, any such document as is mentioned in [Regulation 5(1)(a)]… (other than a document excepted from that paragraph) and a copy of any such document as is mentioned in [Regulation 5(1)(b)] and they shall not reach their decision until they are satisfied that each party has been given a sufficient opportunity of commenting upon any document of which a copy, or from which extracts or of which particulars, has or have been so supplied…
Regulation 5(1)(a) covers documents received from the rent officer, except for a “document which is in the possession of such party, or of which he has previously been supplied with a copy by the rent officer”. Section 5(1)(b) covers “a copy of any document which embodies the results of any enquiries made by or for the committee for the purposes of that reference…”. The submission is that the committee should have supplied copies of the rent register showing the figure of £412 and of the figures of the adjustment for inflation going back to 1990, from which the capping calculation was made. The short answer is that the committee was clearly entitled to infer that the appellant was aware of, and had, the figures for the previous registration. It had been the landlord at the time, and had been responsible for the application that led to that registration. The figures used for the capping calculation were all in the public domain, and, in any event, could not fairly be said to be within regulation 5(1)(b). The committee was dealing with an apparently competent and experienced landlord, and there was, in my view, no requirement to supply the calculations. The committee had properly drawn the appellant’s attention to the House of Lords decision (of which, as respondent to that appeal, it was well aware), and invited comments. None were forthcoming. There was no need for the committee to go further. There was no unfairness, and so I reject those submissions. I should add that the committee was, in my judgment, correct to say that there was no evidence to support any finding that the exception in Article 2(7) of the order could prevent capping.
19. There was no evidence before the committee that the appellant had taken account of voids in fixing the rent for its tenants who were holding their flats under an assured or an assured shorthold tenancy. The committee relied upon the experience of its members to assume that the appellant had done so, because a professional landlord could be expected to do so. The committee members have an expertise that they are entitled to use, but they should be careful to ensure that there is some basis in fact to enable any assumption to be applied. More particularly, they should be satisfied that there is no evidence pointing in another direction. Here, the evidence was that there was no material difference between the amounts for assured tenancies and for assured shorthold tenancies because “most tenants were unaware of the differences between the two types of tenancy”. While that may generally be so, the fact is that security of tenure is a major consideration that some tenants will appreciate, and that could justify a higher rent. But the appellant does not charge higher rents for assured tenancies. Once scarcity is removed, it can be assumed that there may be voids, particularly perhaps with shorthold tenancies. Against that, there is the evidence that many tenants remain for a substantial time. It does not seem to me that
20. Even if it did, the committee would be able to deduct any amount only if a similar increase for voids was not necessarily applied to regulated tenancies. There is, of course, no market in regulated tenancies, and so a hypothetical market has to be postulated. In such a hypothetical market, it must be assumed that there is no scarcity and there will be applicants for tenancies. There is security of tenure and the creation of statutory tenants by succession, so that tenancies are more likely to last for relatively long periods. This means less turnover and probably fewer voids. But the same applies to assured tenancies. In addition, a higher amount ought to be appropriate to reflect the security of tenure.
21. In Queensway Housing Association Ltd at p975, Richards J sets out the material reasoning of the committee in one of the appeals before him. The relevant paragraph reads:
A further deduction from open market rents is appropriate on account of letting costs, even though (unlike some properties let on the open market) the open market comparables… do not benefit from features such as carpets and white goods. Void periods must be allowed for (number 11 had apparently been empty between December and March) and agents will charge a letting fee… [T]he properties… quoted were let on assured shorthold tenancies of six or twelve months… The appropriate deduction for this is regarded as being an additional 15 per cent.
The evidence in that case may well have justified a deduction. Richards J goes on to record the submissions of counsel on this issue and to reach his conclusions on them. He says:
As to the adjustments, on behalf of the appellant landlord Mr Bonney submits first that the committee were wrong to make a deduction in respect of letting costs. The committee did not approach the matter on the basis that the assured shorthold tenancy rents relied on as comparables were inflated by higher letting costs associated with such tenancies and therefore had to be adjusted downwards in order to produce a market rent for regulated tenancies where such costs would not be incurred. Instead, by making the deduction for letting costs, the committee were simply declining to allow the landlords that particular profit element in the regulated rents. But the concern of the committee should be with rents, not landlord’s profits.
Mr Hobson’s riposte on behalf of the committee is that the committee’s concern was plainly with rents, not profits. A characteristic of assured shortholds is that they involve short tenancies with gaps between successive lettings and additional costs associated with the void periods and re-lettings. Such costs are likely to be recovered as part of the rent. By contrast, in the case of fair rents one is concerned with a hypothetical market in which landlords do not incur those letting costs, and it is open to the committee to decide that the lower costs would be reflected in lower rents. It is for the committee to form a judgment on these matters, on the basis of their knowledge and experience.
I accept Mr Hobson’s submissions on that point. Although the reasoning is not set out as clearly in the relevant part of the decision as in his submissions, it seems to me to be tolerably clear that that is what the committee had in mind. They are considering whether a deduction from the market rent comparables is appropriate in order to reflect the extent to which those comparables are increased by letting costs that are not incurred in relation to the regulated tenancies. They are not considering the matter in terms of disallowing a profit element, nor is that the effect of their reasoning.
22. The crucial submission by Mr Hobson, which was accepted as correct by Richards J, is that landlords do not incur letting costs in the hypothetical market for regulated tenancies. When I asked Mr Martin Rodger why that was so, he was unable to provide a satisfactory answer. The hypothetical market is an open market in regulated tenancies, and, as it seems to me, a landlord in such a market would face voids and letting costs to a similar extent as for assured tenancies. Why should he not? If Richards J was asserting a general rule, rather than considering the facts of the case before him, I must respectfully decline to follow him. I do not think that it is correct to assume an absence of voids and letting costs in the hypothetical market, and, in so doing, the committee erred in law. It follows that it was wrong to make the deductions as it did. Whether any deduction is appropriate is perhaps doubtful, since I cannot help wondering whether a fair rent of £950, fixed two years before for the flats other than flat 20, can reasonably lead to exactly the same sum two years later. However, that is not for me to decide, but for the committee, if this case is returned to it to reconsider.
23. I say: “if this case is returned”, since I did wonder, in the course of argument, whether, because of the cap, the error in reducing the amount as it did was material. However, Mr Rodger supported Mr Gavaghan in submitting that if I decided that the committee had erred in its approach to voids, I should quash the decision and send the case back for reconsideration. The reason for this is the importance of the figure for fair rent in case the cap is removed, having regard to the impossibility of any further application by the landlord for two years without the tenant’s agreement. Accordingly, I shall order that the decision is quashed, and that a differently constituted committee reconsider the whole matter. This means that the appellant will be able to put before the committee such evidence as it wishes to try to establish that it is entitled to avoid capping through Article 2(7) of the 1999 Order.
Appeal allowed in part.
