Landlord and tenant – Fair rent – Determination – Rent officer determining fair rent for flat let by appellants on regulated tenancy – Respondent tenant applying for reconsideration of rent – First-tier tribunal determining lower rent after making larger deductions from market rent than made by rent officer or contended for by respondent – Whether giving inadequate reasons for deductions – Appeal allowed
The respondent occupied a ground-floor flat in London, W5, under a regulated tenancy at a fair rent. The appellants owned the freehold of the building. The flat was un-modernised, lacked central heating and suffered from problems with structural cracking and collapsed ceiling plaster. The respondent had provided heating appliances, white goods, flooring and curtains.
In 2014, the appellants applied for an increase in the registered rent from £657.50 per month to £825 per month. The rent officer registered a new fair rent of £722.50 with effect from late April 2014. The respondent considered that the new rent was too high and referred it to the first-tier tribunal (FTT) for reconsideration under section 70 of the Rent Act 1977. He submitted a detailed statement, with evidence, to support his case that the market rental value of the premises, in good condition and let on an assured tenancy, would have been £1,048 per calendar month, but that adjustments should be made to reflect the poor condition of the premises and the absence of furniture and white goods, carpets and curtains and central heating, which would usually be available in a similar property let at a market rent. Overall, he contended that the uncapped fair rent should be £463. The appellants criticised the respondent’s approach but submitted no substantial evidence of their own.
In its decision, the FTT determined that the open market rent of the premises, if modernised and centrally heated, would be £1,200 per month but that a deduction of £600 per month should be made to allow for the difference between the usual terms and conditions of such a letting and the actual condition of the property, ignoring tenant’s improvements. It made a further deduction of 20% to reflect the statutory disregard of the effect of scarcity in the letting market. It concluded that an uncapped fair rent of £480 per month should be registered with effect from the date of its decision in September 2014.
The appellants appealed. They contended that the FTT had failed to give adequate reasons for making a 50% deduction from the market rent to reflect the condition of the property and the terms of the letting, in circumstances where both the rent officer and the respondent himself had made a smaller deduction for those same factors.
Held: The appeal was allowed.
When determining a fair rent, the FTT was only required to give reasons for its decision when reasons were requested. Where a request for reasons was made, the reasons did not have to be elaborate or lengthy but they had to be intelligible and deal with the substantial points which had been raised. Having read the reasons, the parties should be able to understand why the decision had been reached. Where the FTT’s assessment of a fair rent differed significantly from the market rent indicated by market rent comparables, it had to have good reasons for that difference and explain them. Its explanation would require a degree of “working through”, although what that would amount to in any individual case would depend on the nature of the issue and the evidence. Often the FTT would have been provided with little or no relevant evidence, but it was still required to explain how and why it reached its own determination. It had to avoid the appearance of simply picking figures out of the air although it should be able to achieve that without going into any greater detail than the subject matter required: Curtis v Chairman of the London Rent Assessment Committee [1999] QB 92; [1998] 1 EGLR 79 applied.
In the instant case, the FTT had simply stated that a deduction of £600 per month, equivalent to 50% of the market rent, was required to reflect differences between the terms and conditions usual for a market letting and the condition of the property. In doing so, it had expressed a conclusion without providing an explanation of how that conclusion had been reached, and in particular how the figure had been quantified. It was striking that the FTT’s deduction exceeded the carefully quantified deduction for the same factors requested by the respondent in his detailed submissions. The FTT’s reasons were insufficient because they failed to explain how its deduction of £600 per month had been arrived at. It was unclear whether it was based on the method adopted by the respondent or on some other method or approach. The decision also fell short by failing to explain why the FTT considered the respondent’s deduction of £362 to be inadequate. The fact that the rent officer had made a much lower deduction was also a matter which ought to have been addressed. An informed reader of the decision, familiar with the evidence and background, would be unable to understand why a deduction as great as £600 was considered to be justified. Those deficiencies had not been remedied by additional reasons given by the FTT at a later stage. It followed that the decision of the FTT was flawed in failing adequately to explain the quantum of the deduction and the matter should be remitted to it for reconsideration.
The appeal was determined on the written representations of the parties.
Sally Dobson, barrister
Click here to read transcript: Trustees of the Israel Moss Children’s Trust v Bandy
