Landlord and tenant – Rent determination – Fair rent – Rent Act 1977 – Rent Act (Maximum Fair Rent) Order 1999 – Appellant landlord objecting to fair rent registered by rent officer – First-tier tribunal determining different rent – Tribunal applying statutory cap on rent increases under Rent Act (Maximum Fair Rent) Order 1999 – Whether having jurisdiction to consider that issue where objection relating to different matters – Whether erring in consideration of 1999 Order – Appeal allowed
The appellant owned a three-bedroom semi-detached house which was let to a tenant occupying under a statutory tenancy arising under the Rent (Agriculture) Act 1976, to which the fair rent provisions of the Rent Act 1977 applied. In 2015, the rent officer registered a new fair rent of £381 per week for the property. In doing so, he found that works of repair and improvement carried out since the previous rent was registered had increased the value of the property by more than the 15% necessary to disapply the statutory cap on rent increases under the Rent Act (Maximum Fair Rent) Order 1999. He did, however, make a deduction from the market rent for scarcity, on the grounds that the market rent was affected by a demand for properties in the area created by the catchment area of a popular school.
The appellant raised an objection to the registered rent, arguing that the deduction for scarcity was wrong in principle. The matter accordingly went to the first-tier tribunal (FTT) for determination pursuant to para 6(1) of Schedule 11 to the 1977 Act. At the oral hearing of the matter, the tenant submitted documents in which she argued that the extent of the repairs and improvements, and their effect on value, was less than the appellant had contended and the rent officer had found; although not submitted in accordance with its earlier directions, the FTT decided to admit that material.
The FTT found that the rent officer had erred in his deduction for scarcity. However, it also made deductions from the market rent for various matters and, after listing the repairs and improvements which it considered to have increased the value of the property and by how much, it concluded that the increase in value was insufficient to disapply the statutory cap under the 1999 Order. Overall, it determined that the registered fair rent should be £240.50 per week.
The appellant appealed. It contended that: (i) the FTT did not have jurisdiction to consider the effect of the repairs and improvements in circumstances where the only issue referred to it was the deduction for scarcity; (ii) alternatively, if it did have jurisdiction to reconsider those aspects of the rent officer’s decision, it was procedurally unfair for it to do so without first making directions clearly identifying the issues which needed to be addressed; and (iii) it had given inadequate reasons for its decision on the rent cap issue.
Held: The appeal was allowed.
(1) Where a disputed fair rent was referred to the FTT by the rent officer, the FTT was not limited to determining only those matters specifically put in contention by the parties before the hearing. The jurisdiction of both the rent officer and the FTT on applications for the registration of a fair rent under the 1977 Act was derived from section 67 of, and Schedule 11 to, that Act. Under those provisions, the rent officer was not required to give any reasons for his decision but was simply required to refer any objection to the rent he had registered to the appropriate tribunal. The referral of an objection was not an appeal. Nor was there any requirement in Schedule 11 for a landlord or tenant who objected to the registered rent to provide their reasons for doing so. Accordingly, the scheme and language of the 1977 Act indicated that the matter which was referred to the tribunal was simply the figure which had been registered as a fair rent, not the basis on which that figure had been reached. The grounds on which a landlord or tenant objected to the rent registered by the rent officer were therefore irrelevant to the FTT’s jurisdiction. Both the rent officer’s duty to refer the matter to the FTT, and the FTT’s duty to consider that matter, were wholly engaged by the raising of the objection alone.
Accordingly, once a registered fair rent had been referred to the FTT, the FTT’s task was not to consider the reasons which persuaded the rent officer to register a particular rent but was simply to arrive at its own conclusion as to the fair rent. Although any reasoned objections raised by a party would be likely to frame the dispute at a practical level, because the FTT would be obliged to address those objections in reaching its decision, such reasons were not to be regarded as grounds of appeal, or as a statement of case, or as imposing any technical restriction on the scope of the inquiry.
Moreover, para 9B of Schedule 11 to the 1977 Act placed the FTT under an explicit duty to consider the effect of the 1999 Order. Any submission that it could do so only where the issue was specifically raised by one of the parties was therefore unsustainable: Birmingham City Council v Keddie [2012] UKUT 323 (LC); [2012] 3 EGLR 53; [2012] 49 EG 71 distinguished.
(2) The FTT was not at fault in failing to issue case management directions in relation to the rent cap issue. Rent determination cases were usually managed by the FTT without formality, as befitted the limited level of engagement often encountered and the relatively modest sums involved, despite their importance to the parties. There was no general obligation on tribunals in rent cases to direct the exchange of statements of case. Nor, once it became clear to the FTT in the present case that issues not previously foreshadowed were in dispute, had it been under a duty to give directions designed to enable the parties to prepare properly to address those issues. While the appellant might have been surprised by the breadth of the FTT’s interest in the case, it should not have been. Both parties were on notice that the matter in issue at the hearing would be the fair rent to be registered for the property and each was aware of the position taken by the other in relation to improvements because both had received copies of the correspondence exchanged with the rent officer. Each party was therefore in a position to adduce evidence to the FTT in support of its position and to contradict that of the other party. That being so, the FTT’s usual approach to case management was not inappropriate to the case, let alone a procedural irregularity sufficient to require its decision to be set aside.
(3) The FTT’s decision should nonetheless be set aside on the ground that it had given inadequate reasons for its decision. In order to apply the 1999 Order correctly, it was first necessary to consider whether a change had taken place in the condition of the dwelling-house as a result of repairs or improvements carried out by the landlord since the previous registration. That required a finding of what repairs and improvements had been carried out, and whether by the landlord or someone else. Where such works had been carried out, it was then necessary to consider whether they had resulted in the rent exceeding the previous registered rent by at least 15%, which required a consideration of the rent that would have been determined by the FTT had the works not been carried out and a comparison of the two current rents with the previous registered rent. The FTT in the instant case had failed to make sufficiently clear findings of fact, or give an explanation of its thinking on the rental value of repairs and improvements, with the result that it was not possible to tell whether it had correctly applied the 1999 Order.
Nicola Muir (instructed by Fletcher Day) appeared for the appellant; the tenant did not respond to the appeal.
Sally Dobson, barrister
