Fair rent registration: determination
The Rent Officer's determination of the rent to be registered for the tenancy.
Amount registered as rent - Section 71
The amount of rent to register under Section 71 of the Rent Act 1977.
Maximum legally recoverable rent
The maximum legally recoverable rent is defined in sections 44 and 45 of The Rent Act 1977 as that which is registered by the Rent Officer and so a landlord cannot, with some limited exceptions mentioned below, recover any amount that exceeds the registered rent at any time. Tenants can recover excess payments going back up to two years. Where there is no registered rent for a regulated tenancy and the landlord fails to use a correct formal agreement to increase the rent recovery is restricted to a maximum of one year.
In addition to the tenancy agreement or lease, there may be supplemental agreements between the landlord and the tenant, for example, an agreement in relation to a garage that is let separately from the dwelling. However, a supplemental agreement that seeks to impose an obligation on a tenant to make payments in excess of the registered rent will generally not be enforceable by virtue of s. 71(1) of the Rent Act 1977. Section 71 of The Rent Act is important because it directs the Rent Officer to include in the rent to be registered all sums payable by the tenant to the landlord in respect of his/her occupation of the dwelling.
s. 71(1) The amount to be registered as the rent of any dwelling-house shall include any sums payable by the tenant to the landlord in respect of council tax or for the use of furniture or for services, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house or are payable under separate agreements.
This provision prevents landlords from introducing separate agreements in order to charge additional amounts above the registered rent. In effect, everything that is payable by the tenant (or on the tenants behalf) as a condition of occupying the dwelling is treated as “rent” and included in the registered rent by the Rent Officer. A useful test for separate agreements is whether each property could be occupied independently, so in the case of a flat with a garage, could you still rent the garage if you moved out of the flat? If you could then it’s probably a valid separate agreement and not part of the registration. Agreements made at different times can further support this conclusion.
There are some limited exceptions – amounts that can be charged above the registered rent:
S71 (2) “Where any rates in respect of a dwelling-house are borne by the landlord or a superior landlord, the amount to be registered under this Part of this Act as the rent of the dwelling-house shall be the same as if the rates were not so borne; but the fact that they are so borne shall be noted on the register.”
Rates are a charge on occupation of the dwelling levied by either the local authority or a water authority based on “rateable value”, and as such are the responsibility of the occupier. They are never included within the registered rent, and where a landlord undertakes to pay “rates” on behalf of the tenant, this amount may be charged in addition to the registered rent. The Rent Officer will note this fact on the rent register.
Domestic rates ceased to exist from 1990 with the introduction of the Community Charge - later replaced by Council Tax. This is not based on “rateable value” and is therefore not “rates” for the purposes of section 71. As some dwellings are still subject to water authority bills based on the individual property “rateable value”, these are the only rates that Rent Officers are likely to come across now.
Water charges that have been levied directly on the dwelling by any means other than rateable value of the dwelling are not “rates”. So for example if a landlord apportions a bill from the water authority, however calculated, including a water rates bill for a whole house split between separately let rooms, the charge to the individual tenant is not a rate and will be included within the registered rent under section 71.
Water charges based on quantity of water consumed, private water supplies and septic tanks are not based on rateable value and therefore not rates. They must be included as charges within the registered rent, as stated in section 71 (1).
S71 (4) Where, under a regulated tenancy, the sums payable by the tenant to the landlord include any sums varying according to the cost from time to time of–
(a) any services provided by the landlord or a superior landlord, or (b) any works of maintenance or repair carried out by the landlord or a superior landlord,
the amount to be registered under this Part of this Act as rent may, if the Rent Officer is satisfied or, as the case may be, the rent assessment committee are satisfied, that the terms as to the variation are reasonable, be entered as an amount variable in accordance with those terms.
This means that where the tenancy agreement states, and the Rent Officer is satisfied that the tenancy agreement allows for varying amounts to be levied for services and maintenance, provided that the variation is noted on the rent register then the landlord may vary the rent registered in accordance with the variation clause in the agreement. For tenancies with variable service charges the tenants have statutory rights to see and question the landlord’s accounts.
Council Tax liability
Council Tax is a charge on occupation of the dwelling and is, by definition, the responsibility of the occupier. Each separately identifiable “hereditament”, or “rateable unit”, will be banded and listed in the Council Tax list and the local authority will bill the occupier based on the banding assigned to the dwelling.
Occasionally Rent Officers will come across tenancy agreements where the landlord has historically undertaken to pay “rates” or Council Tax for the dwelling and re-charge the amount to his tenant. This is permitted under section 71 for “rates” as described above, but where Council Tax is paid by the landlord, an amount for Council Tax must be included within the registered rent (s71 (1)) and the landlord cannot charge additional amounts above the registered rent in respect of Council Tax.
A problem arises where the liability for payment of Council Tax has changed, and this generally occurs when a dwelling such as an HMO has historically been treated as one hereditament with the Council Tax bill levied on the landlord, but the local authority has become aware that there are separately identifiable hereditaments within the building. This will trigger a re-banding of the building and each separately identifiable hereditament within the building will then receive their own individual Council Tax banding and each occupier will receive a separate bill.
Where Rent Officers come across this change, this would be sufficient to trigger a fresh application for registration of rent under section 67(3) and the section 70 rent determined by the Rent Officer would need to reflect the fact that Council Tax is no longer borne by the landlord. This should result in a reduced section 70 rent, but the actual registered rent may be unaffected due to the operation of MFR, particularly where the MFR is significantly lower than the section 70 figure.
- Valuation – Section 70 sisregards
- Valuation – Section 70
- Rent Register – notifying the parties
- Variable services
Checklist - old and new cases
A checklist of considerations of the Rent Officer when determining the rent to be registered.
This is a list of questions that Rent Officers should ask themselves when dealing with first time registrations, and cases where an application has not been received for over 5 years.
New cases - jurisdiction
- Why has the case not attracted an application to register before?
There may be something to indicate that the case may have been registered before, such as a comment on a letter accompanying the application, so ensure the application really is a first time application.
- Did the tenancy start after 15th January 1989?
If the tenancy began after 15/1/89 it may be an Assured Tenancy and not eligible for registration. However it may be the same tenant of the previous landlord in which case protection may be carried forward to a new tenancy. If in any doubt, contact the guidance helpdesk.
- For shared ownership, did the tenancy start after 10th December 1987?
In shared ownership cases the date after which protection was no longer afforded is different from other Rent Act cases – if the tenancy started after 10/12/87 then it may not be protected.
- For agricultural, did the occupation commence after 15th January 1989?
The important date for Agricultural cases is the date the occupation of the property started, which is often when the employment started too, and this must be prior to 15/1/89.
New cases - repair liability
- Does Section 11 of the Landlord and Tenant Act 1985 apply?
The tenancy may be a full repairing lease, or exempt from Section 11 by virtue of being a lease for a term of 7 years or more. Ensure the notation on the register is appropriate.
- Do we have a copy of the tenancy agreement?
For cases which are outside of Section 11, it is useful to see a copy of the agreement if at all possible. Then the contractual obligations may be fully reflected in the determination and in particular the Section 70 disregards.
New cases - Section 70 determination
- Suitable open market comparable rent?
Ensure the closest comparable possible is used, or an opinion of a suitable open market rent is extrapolated from available evidence. If outside the range of the LI search, add a case note to explain why this was felt to be appropriate.
- State of repair?
Ensure the state of repair of the property is fully accounted for in relation to the state of repair of the open market comparable figure.
- Tenant’s improvements or disrepair to disregard?
Of course, any improvements carried out by the tenant under the tenancy, outside their contractual obligations, and similarly any disrepair caused by the tenant neglecting their contractual obligations, are all disregarded for the purposes of the Rent Officer’s determination under section 70.
Rent Officers may wish to seek guidance where:
- The property had been subject to a long lease (21 years) which has come to an end
- Where the landlord had been, or is a Crown Property or Government Agency
- The landlord is a Housing Co-operative or similar mutual organisation
- The property had been subject to a Protected Shorthold Tenancy prior to 15/01/ 89
- The tenant had originally been part of a joint tenancy with the same landlord prior to 15/01/89
Old cases - jurisdiction
- Why has it been so long between registrations?
Has there been a change of landlord, or has the landlord simply not pursued a rent increase? Ensure that the tenancy started prior to the last registration, and that this not a new tenancy.
- Is it the same tenant name?
Has there been a succession?
- If you have the old tenancy start date but a new tenant name, the case may have been subject to a successor or an assignment, or the original tenant may have simply changed their name. The Rent Officer must satisfy themselves that the named tenant has the protection of the Rent Acts and is eligible for a registered rent.
Has there been an assignment?
- If the tenancy start date looks incorrect and/or there is a new tenant name, the tenancy may have been assigned. This is common amongst some Housing Associations, and all the necessary details should be checked to ensure the named tenant has Rent Act protection.
Old cases - is it the correct associated case?
- Check all contact addresses etc
Ensure the address on the RR1 matches exactly the address on the previous register entry. If there is any difference it may indicate a different property. Also check the contact addresses to ensure all notices are correctly served.
Old cases - is it exempt from MFR?
- Works carried out since last registration?
Where a number of years have elapsed since the last registration it becomes more likely that;
- Works have been carried out by the landlord, whether maintenance or repairs or improvements, and
- The value is more likely to reach the 15% threshold of the passing rent, as the passing rent is likely to be relatively low
If these 2 conditions are met the case will not be capped by the Maximum fair rent Order, as it will be exempt.
Old cases - is the correct registration notation on the system?
- Property description?
Make sure the property is still as described last time. If not then double check.
- Repair liability?
Ensure the repair liability is as described last time. If not then double check.
Ensure the services are correctly registered as fixed/variable and that this matched the last registration. If not then double check.
- Repair liability
- Rent (Agriculture) Act 1976 applications
- Variable services
- Valuation pages
Council Tax and fair rents
The effect of Council Tax being included in the rent.
Council Tax is a property based tax payable in respect of domestic dwellings. Liability to pay council tax will, in the main, fall on the occupier. Although where tenants and landlords live in the same chargeable dwelling the liability falls on the landlord. Each separately identifiable “hereditament” or “rateable unit” will be banded and listed in the Council Tax list and the occupier billed by the local authority based on the banding assigned to the dwelling. There are eight bands and Council Tax is based on what the property would have sold for on 1st April 1991.
The Rent Act 1977 states that any sums payable by the tenant to the landlord in respect of Council Tax should be included in the registered rent even where those sums are separate from the sums payable for the occupation of the dwelling house or are payable under separate agreements (Section 71).
This means that where the landlord pays the council tax for the tenant’s accommodation the cost cannot be recovered in addition to the registered rent. The Rent Officer should therefore take account of the landlord’s council tax liability by making allowance for it in the open market rental valuation - and should note “council tax borne by landlord” on the rent register.
Sometimes billing arrangements differ from the terms of tenancy - such as when the tenant of a HMO receives a council tax bill relating to their accommodation. In this case local authority powers override agreements between landlord and tenant. The Rent Officer should value the premises without allowing for council tax and should note “Council Tax borne by tenant” on the rent register.
Where a fair rent already exists, an alteration in council tax liability constitutes a change of circumstances and allows for a landlord application for re-registration to be made within a year and nine months, or a tenant application within two years, under Section 67(3). However, as with all fair rent applications, no assumptions can be made as to what the new fair rent will be.
- Section 71
- Section 70
- Water rates
The effect of grants being given to the landlord or tenant.
The object of the statutory disregards in s70 of the Rent Act is to prevent tenants paying higher rents as a result of improvement works carried out at their own expense. The key test to apply is whether the tenants or someone else directly on their behalf paid for the work or commissioned it;, for example if the tenant’s son or daughter paid for the work it would generally be treated it as a tenant’s improvement.
There is no requirement under s70 to disregard any repair or improvement carried out by or on behalf of the landlord, irrespective of the source of funding though assistance to the landlord through the various schemes has to be weighed against exemption under the Maximum Fair Rents Order.
Where work is done through another agency such as social services
Local authority social service departments often ‘do’ work to help people with disabilities to adapt their homes to meet their special needs. Rent officers may come across a situation where they are told social services have provided a ground floor WC or shower-room and so on. Usually social services have not ‘done’ the work at all. A contractor approved by social services may have done the work but generally social services have made a grant to the tenant for the work to be done. So the tenant has ‘paid’ for the work, albeit with money provided by the local authority. In this case rent officers should treat the work as a tenant’s improvement and disregard it when assessing a fair rent.
Landlord improvements with grant assistance
Improvements carried out to dwellings by or on behalf of the landlord are not disregarded under s70 of the Rent Act. Rent officers may occasionally come across cases where the property has been the subject of fire precaution works, or subject to a local authority block repair grant. In these cases the landlord has been required to improve the property, or ensure the property meets a minimum standard of habitation. Full or partial grants may be available from the local authority to comply with the requirements of the scheme. Grant works such as these are treated as landlord improvements irrespective of the source of funding as the qualification for the grant is a personal circumstance of the landlord.
Warm Front Scheme (formerly known as the Home Energy Efficiency Scheme H.E.E.S.)
This scheme ended on 19th January 2013.
The Warm Front scheme was an initiative initially funded by the Department of the Environment, Farming and Rural Affairs (DEFRA) and later by The Department of Energy and Climate Change but managed by private industry. The object of the scheme is to provide insulation and heating to qualifying people. To qualify for assistance under the scheme, the applicant had to live in the property, be in receipt of certain benefits, or be over 60. The landlord had to agree for the work to be carried out, and would incur liability for an annual gas safety certificate to be issued (where appropriate).
The details of the scheme and qualification requirements have varied considerably over time, but essentially in these cases:
- Insulation becomes the landlord’s property from the date that it is installed; and
- The scheme supplies, fits and maintains the heating equipment, which is in effect, leased to the landlord
Work under this scheme is not disregarded under s70. It is not a tenant’s improvement as the tenant has not paid for the improvement, and it is not a grant. There is no requirement under s70 of the Rent Act to disregard anything other than a tenant improvement, so Rent Officers must reflect the condition and amenity of the dwelling including the installation of heating and insulation made under the warm front scheme in their s70 rent calculation.
However, work carried out under the scheme does not qualify as a landlord improvement for the purposes of exemption from the Rent Act (Maximum Fair Rent) Order because a requirement of that order is for the work to have been carried out and paid for by the landlord, and work under the scheme is neither commissioned nor paid for by the landlord.
There was a general requirement under the terms of the Warm Front scheme, that landlords would not charge an increased rent as a result of the warm front installation. The enforceability of such a condition is a matter between landlord, tenant and the Warm Front scheme. Rent officers should not become involved in any dispute regarding this clause, and should only advise the parties to seek independent legal advice in this regard.
Government backed insulation and boiler grants
Various schemes offering free loft and cavity wall insulation for home owners or tenants have been in place for a number of years now. In 2013 the Energy Companies Obligation (ECO) energy efficiency programme was introduced, placing an obligation on larger energy suppliers to deliver energy efficiency measures to domestic energy users. This is intended to work alongside the Green Deal (see below) with a particular focus on vulnerable consumer groups and hard-to-treat homes.
Where a tenant or landlord is eligible for free loft or cavity wall insulation or a replacement boiler, the improvements will become part of the landlord’s property. Any energy efficiency improvements completed under these schemes will not be disregarded under s70 as there is no requirement to disregard anything other than a tenant improvement. This means that any improvements to the energy efficiency of the property should be reflected in the s70 rent calculation, if it is to have an impact on the valuation. However, work carried out under these schemes will not qualify as a landlord improvement for the purposes of exemption from the MFR Oder because the work was not carried out by or on behalf of the landlord.
“Green Deal” Initiative
This scheme effectively replaced the Warm Front scheme from 28 January 2013, but unlike the Warm Front Scheme, the “Green Deal” is a scheme that funds various “green” improvements to a dwelling but the occupier then has to repay the cost of installation through their electricity bill. The “cost” is based on the savings expected as a result of the “green” energy saving measures installed.
“Green Deal” can be used to install insulation, heating, draught proofing, double glazing, and renewable energy technologies such as solar panels and wind turbines.
Normally measures installed under the “Green Deal” would be applied for and funded by the occupier of the dwelling, so are likely to be tenants’ improvements and therefore excluded from both S70 valuations and also MFR exemptions.
Unusually there may be options for a “Green Deal” loan to be paid off early depending on the particular scheme that the customer signed up to, so rent officers need to ask for full details of the scheme and whether or not the Green Deal loan has been paid off, and if so by whom, when considering whether or not the tenant improvement exemption applies in any particular case. (In the unlikely event that the landlord pays off the loan, the improvements could become the landlord’s and may then be included in the consideration of rent to be registered under Section 70.)
- Repairs / Improvements
Lettings information - monthly quality assurance
Background and timescale
Rent Officers are responsible for quality assuring all lettings information (LI) entered onto VICTER. Every month Rent Officers Quality Assure (QA) the information entered on or after the 28th of the previous month up to and including the 27th of the current month.
This QA process takes place over five working days up to and including the 28th of each month (or the next working day if the 28th is not a working day). This is the date IT extract the data from VICTER for colleagues in the Information & Analysis Team (I&A), who create the aggregate output values used by ONS (Office for National Statistics).
These outputs have to be delivered to ONS by I&A team three to five working days later, creating pressure to deliver quality assured data in a timely fashion.
|QA1 and QA2 Process|
|Day 1||Days 2 & 3||Day 4||Day 5|
|LI Monthly Download Spreadsheets created and made available by Midday. Manager to notify team. Spreadsheets created: - QA1-LI - Duplicates. QA1 checks can commence by RO’s||QA1 checks continue by RO’s. Manager to check progress throughout the day||QA1 checks continue by RO’s. Manager to check progress and resolve all outstanding checks by 1pm||QA2 LI Download fresh spreadsheets created and made available by 10:00am. Spreadsheets created: - QA2-LI and - Duplicates. QA2 checks can commence by RO’s but must be completed for all spreadsheets by 12:30pm - Manager to carry out final check by 1:00pm. Critical-CST must send all validated LI data to A&I team by close of business|
During the five day QA period Rent Officers should endeavour to be available to undertake the QA checks on LI entered under their own PI Number. If any Rent Officer is unavailable (e.g. they work part time) they must ensure another Rent Officer checks their entries and notifies the manager. Rent Officers are advised to limit data entry activity over the five day QA period as it may increase the volume of data to be checked in the second part of the process (referred to as QA2). Team meetings may be held during the first morning of the QA period but should otherwise be avoided.
The manager should ensure that they designate a deputy to oversee the QA process in their absence and inform CST.
Days one to four (QA1)
The Central Support Team (CST) produces two types of spreadsheets contained in the QA1 folder. They contain the data to be validated by Rent Officers:
- Lettings Information QA: This consists of lettings information entered in the last month which may contain errors. The 22 QA parameters are applied to the data to identify records containing common potential errors (see Annex A)
- Duplicates: This consists of lettings information entered in the last month which appears to be a duplicate (i.e., entered within 3 months) of an existing VIS record for the same address.
These spreadsheets may be national or broken down by team or region depending on the volume of data.
The deadline for this part of the process is 1pm on day four of the QA period.
Day five (QA2)
- CST produce a second set of spreadsheets contained in folder QA2 using the same parameters as QA1, covering all data entered nationally during the first four days of the QA period.
These spreadsheets may be national or broken down by team or region depending on the volume of data
The deadline for this part of the process is 1pm on day five (28th or next working day).
The manager (or nominated Rent Officer) should initially check all QA sheets for their team, and make sure that all Rent Officers that have entered information in their BRMAs are copied into the initial QA e-mail. The person that entered the record can be identified by their PI number (column AM, headed ‘User Entered’). Managers can use the search facility in the Flexi-Clock to find the name associated to the PI number. This ensures that everyone that has entered information is aware that records need checking on a specific sheet.
The manager (or nominated Rent Officer) should check that all QA sheets have been completed for their area before the deadline and chase up any that are incomplete or unclear and email firstname.lastname@example.org to confirm this has been carried out. This should also include a sample check that amendments have also been made on VIS.
Note: Amendments on VIS cannot be seen in a VIS search until the following day. Records that haven’t been marked Correct, Delete or Amend will be deleted by CST. They can be re-entered correctly the following month if necessary.
Rent Officer responsibilities
Rent Officers are required to validate the data in two different spreadsheets using the protocols listed below.
1. Lettings information QA
Rent Officers are required to thoroughly check the items in their allocated areas (by looking at all fields/cells on the QA sheet and in VIS, making sure there are no conflicting entries, and where necessary referring to the original paper copy record) and confirm one of the following actions from the dropdown list in column A: Correct, Delete or Amend. If the Rent Officer is unable to validate the entry the ‘Delete’ process must be followed.
Correct - When a record is checked and found to be correct simply:
- Select the appropriate drop-down option ‘Correct’ in column A
- Note the Rent Officer’s name and date in column C
- If the rent is unusually high or low an explanation for this must be provided
- Do not use any colour to highlight the line or individual cells
Delete - If a record is checked and needs deleting simply:
- Select the appropriate drop-down option ‘Delete’ in column A
- Note the Rent Officer’s name and date in column C, together with the reason the record needs deleting.
- No further action is required.
- Do not use any colour to highlight the line or individual cells.
- DO NOT attempt to delete the record in VICTER, as this is done centrally by CST.
Amend - If a record is checked and needs correcting:
- Select the appropriate drop-down option ‘Amend’ in column A
- Make the appropriate correction(s) to the cell or cells on the QA sheet. Drop down lists are provided to make changes to ‘Property Type’ or ‘Dwelling Type’ easier *Also make the corresponding appropriate correction(s) in VIS immediately, using VIS search (as this will overwrite the flawed entry). Remember to save the record
- Note: Do not use record MED as this will record a renewal and leave the old, flawed entry in the system
- Rents should be recorded as per the rental period on the QA sheet in column H. (To convert a non-weekly rent, replicate the VICTER-VIS method of multiplying a monthly rent by 12 and dividing by 52)
- If correcting the number of living rooms (column R) or bedrooms (column S), you must also correct the total number of rooms (column T). The same principle applies to any shared rooms (columns U, V & W)
- Where amounts for ‘inel_services’ (ineligible services) are altered the Rent Officer must also update the ‘Net_Rent’ figure in column G to reflect this. This is critical as the RPI/CPI process uses net rental values. ‘Inel_services’ (column I) added to the ‘Net_Rent’ (column G) must equal the ‘Market_Rent’ (column F). This must also match the corrected value in VIS
- Note the Rent Officer’s name and date in column C, together with a brief explanation of the alterations that have been made. For example, rent amended from £100pcm to £100pw; or amended from 1LR to 2LR
- Highlight ONLY the cell or cells that have been amended in yellow. DO NOT highlight the complete line
- No further action is required
Do not attempt to overwrite CST reasons provided in column B of the spreadsheet or overwrite the MSOA name in column AQ. the L/A field in column AR should always match column AQ (without MSOA code number)
Rent Officers are required to thoroughly check the items in their allocated BRMAs (it is often necessary to look at the entries in VIS and/or refer to the original paper copy records to establish whether records are duplicates) and confirm one of the following actions from the dropdown list in column A:
Correct - When two matching records are checked and found to be correct (i.e., not duplicates) both entries should be dealt with in the same way as those under the Lettings Information QA above. Note: Most Assured Shorthold Tenancies are for 6 or 12 months and are therefore entered once for each tenancy. Rent Officers must only update records in VIS within 12 months if they are able to confirm that the tenancy has been renewed or a new tenancy has been created and a new tenancy start date must be entered in VIS.
Delete – If one or both matching records are checked and found to be duplicates (ie, require deletion) they should be dealt with in the same way as those under the Lettings Information QA above.
There are only two options in the Duplicates sheet, Correct or Delete. It is not possible to Amend an entry on this sheet.
- To ensure no QA records are missed Rent Officers should also check items against their PI number in column AM (headed ‘User Entered’). This will pick up their entries in other BRMAs within the team
- Managers and Rent Officers should check deleted items after the QA process has been completed to see if any items can be recaptured
- Remove all filters before saving and exiting each QA sheet. Otherwise items may not be visible and could be overlooked by others. The simplest way of doing this is by selecting ‘Data>Filter>Show All’ from the main Excel menu
- Do not save any QA sheets with ‘Freeze Panes’ or ‘Hidden Rows‘ active, as items may not be visible and could be overlooked by others
- Do not drag or copy down entries as this may corrupt the integrity of the information in the sheet. This is more likely when rows are hidden or filters have been applied
Award datashare, future tenancy start date entries and pre 15-1-1989 dates are deleted centrally by CST and are provided as QA feedback to Team Managers at the end of the QA period along with errors on dealing with the QA process.
The automated quality assurance checks are:
- 0 Sole BR (except bedspaces and caravan site rents
- 0 Sole LRs & not Room or Studio
- Non Self Contained & not a Room
- Sole LR > BR
- Fuel flagged but no Ineligible Services figure entered
- Incomplete Postcode
- Exceeds Rental parameters (above or below extreme observations determined by local Rent Officers)
- services ineligible for housing benefit deducted from gross rent is > 25% of Gross Rent
- Property Condition is missing
- 0 Sole Rooms (except bedspaces and caravan site rents)
- House with 1 Sole Room
- House or Flat with shared Bedroom, Living Room, kitchen or bathroom
- Studio with Sole Rooms <> 1
- Rooms with 1 Sole Room
- Room with more than 1 Sole Room
- Tenancy Start Date is before 15/01/1989 i.e. regulated tenancy – deleted centrally by CST
- Dwelling Type = Unique
- Property Type = Hostel
- Bedspace with Sole Rooms > 0
25% variance between achieved & advertised rent (rents negotiated down or forced up by >25% based on supply & demand in the market)
- Future Tenancy Start Date – deleted centrally by CST
- Incorrect Local Authority picked from drop down list
- Duplicate checks against other lettings information entered based on an exact match of full address, postcode and sole rooms.
- Duplicates matched against award datashare received from local authorities (people entitled to housing benefit) this is based on sole rooms, postcode and first 15 characters of address field – deleted centrally by CST
The area to consider when determining the effect of scarcity.
Section 70 of the Rent Act 1977 sets out the criteria that Rent Officers must use to determine fair rents and the word locality is used in two separate sub-sections.
Rent Officers must have regard:
“to all the circumstances (other than personal circumstances) and in particular to – the age, character, locality and state of repair of the dwelling-house, …” (See the page “market rent”)
In addition, Rent Officers must assume:
“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.” In simple terms, this means that the Rent Officer must discount scarcity.
The Courts have determined that each of these two separate uses of the word ‘locality’ mean different things and so need separate definitions.
When having regard to all the circumstances in assessing a fair rent, the Rent Officer must “have regard to the sort of factors which tend to push rents up and down on the market”. They must have regard to the age of the premises, their character and their locality . “Their locality is important because a house situate in pleasant surroundings, and with the advantage of local amenities, may very well command a higher rent than an identical house in a less attractive setting.”
For the initial market rent starting point, Rent Officers should concentrate on market evidence in a relatively small locality. This is the immediate vicinity of the dwelling - probably a street or adjoining streets, where there is recent market evidence for similar, if not identical, property.
Rent Officers should be aware of the surrounding locality or neighbourhood to ensure that they know about all local factors, amenities and any specific factors, which influence local rent levels.
In some areas, or for some property types, it may be found that there is a shortage of comparable evidence. In these circumstances, Rent Officers should extend their search for evidence more widely and where necessary use the interpolation or extrapolation process.
But when Rent Officers have to eliminate the ‘scarcity value’ they are not concerned with the scarcity caused by property-specific or local factors . Scarcity in this context is “a broad, overall, general scarcity affecting a really substantial area”.
Rent Officers have to assume for the purposes of the fair rent valuation that market rents are not inflated because of scarcity of similar accommodation in a broad locality. The assumption for the fair rent valuation should be that the market for a certain type of dwelling is more or less balanced between supply and demand.
Rent Officers must distinguish between scarcity which flows from the special amenity value of a dwelling and scarcity which arises as a result of an excess of demand over supply in a large locality.
Rent Officers should only make deductions for scarcity which results from excessive demand. They should not make deductions for difficulty in finding properties to meet specific needs (such as wanting a thatched cottage with roses round the door, or trying to live within walking distance of a particular amenity like a school).
This was confirmed in 1998 when the court said that when disregarding scarcity, locality “will generally be a much wider area than the “locality” relevant to the assessment of market rent”. But the judge thought it wrong for the court to seek to define (or redefine) the expression by prescribing particular geographical or similar tests, such as “an area within reasonable commuting distance”, which had been suggested. The choice of area is a matter for the Rent Officer or rent assessment committee and they should not be tied to any particular formula. They should have in mind the purpose of the scarcity provision and choose an area sufficiently large to give effect to that purpose.
The judge added that an approach which did meet the legislative policy “is to consider what reasonable alternatives are available to potential tenants of the subject property.” If, as a result of the level of amenities in the area of the subject property, there was a scarcity, but over a wider area where potential tenants could be expected to live there was no shortage, then no deduction for scarcity should be made. But if there is a shortage of property throughout the wider area, where potential tenants of the property could reasonably be expected to live, then the Rent Officer should make a deduction for scarcity, even if the shortage is attributable to the relatively high amenity of that wider area. The judge considered, however, that whilst such a test may be a useful pointer in marginal cases it should not be regarded as an essential analytical tool in formulating the choice of locality generally.
- Valuation - market rent start point
- Valuation - scarcity
Maximum fair rent
Limits on increases in registered rents due to the operation of the Rent Acts (Maximum fair rent) Order 1999.
The Rent Acts (Maximum fair rent) Order 1999 limits fair rent increases by linking the increase to a Retail Price Index (RPI) formula. The Order came into force on 1 February 1999 and applies to applications for registration made on or after that date.
Under the Order, Rent Officers still determine fair rents in accordance with s70 of The Rent Act 1977. However, they must also calculate what is known as the “maximum fair rent” according to a formula linked to RPI.
The Maximum fair rent Order sets out the formula used for calculating the Maximum Fair Rent.
The formula is:
MFR = LR [1 + (x − y) + P] y
Where MFR is the Maximum fair rent
LR is the amount of the existing registered rent
x is the Retail Price index published in the month preceding the month in which the rent is being registered
(Note: RPI is published 1 month in arrears, so the RPI published in the preceding month is the RPI FOR the month prior to the preceding month, so the RPI to use is the RPI for 2 months ago)
y is the published index for the month in which the rent was last registered
P is 0.075 for the first application for registration of rent after 1 February 1999 and 0.05 for every subsequent application
Where rent not a multiple of 50 pence it should be rounded up to nearest multiple of 50 pence.
It is important to emphasise that the 7.5% enhancement can only used for the first application on or after 1 February 1999. All subsequent applications are subject to 5% enhancement. If the first application after 1 February 1999 is exempt from MFR for whatever reason (no previous registration, improvements, etc) then the second application is still subject to the 5% enhancement.
All variable charges are removed before the application of the MFR formula and added back in afterwards.
The Rent Officer must register the fair rent determined under Section 70 of the Rent Act if it is at or below the maximum fair rent calculated under the Maximum fair rent Order.
The Rent Officer must register the “maximum fair rent” calculated under the Order if the fair rent determined under the Rent Act is more than that figure. A statement giving the uncapped rent will appear in ‘Remarks’ on the rent register.
The exception to this is where the maximum fair rent calculated under the order is LESS than the existing registered rent. This should be a rare occurrence, but it is possible if RPI suffered a significant reduction. (It would be good practice to double check the figures used).
In these instances, the existing registered rent should be registered again. If the case also has variable charges this test should be done on the base rent excluding the existing variable charges. You would then add back the NEW variable charges to the existing base rent and register that figure as the registered rent.
The capping provisions do not apply if there is no existing registered fair rent. Neither do they apply where the Rent Officer considers that:
because of a change in the condition of the property or common parts, and
as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord,
the rent at the time of the last registration would have been at least 15% more.
It is important to emphasise that the 15% increase test is for increases that are directly attributable to the change in condition of the property NOT due to a change in general rental levels in the market.
You have a case last registered in January 2007 at £60.50 and to be re-registered in January 2009
You have determined a S70 Rent of £75
The formula is:
MFR = LR [1 + (x − y) + P] y
Where MFR is the Maximum fair rent
LR is the amount of the existing registered rent
x is the RPI published in the month preceding the month in which the rent is registered.
(Note: RPI is published 1 month in arrears, so the RPI published in the preceding month is the RPI FOR the month prior to the preceding month, so the RPI to use is the RPI for 2 months ago)
yis the published index for the month in which the rent was last registered
P is 0.075 for the first application of rent after the Order came into force and 0.05 for every subsequent application
Where rent not a multiple of 50 pence it should be rounded up to nearest multiple of 50 Pence
LR = £60.50
x is the RPI for November 2008 which is 216.0 (The RPI PUBLISHED IN the month preceding the date the rent is to be re-registered. In this case the re-registration is in January 2009, so the RPI to use is PUBLISHED IN December 2008, which is the RPI FOR November 2008)
y is the RPI for January 2007 which is 201.6 (The RPI FOR the month the rent was last registered)
The calculation is therefore:
60.50 x (1+ (216.0 - 201.6) / 201.6 + 0.05 which is 60.50 x (1 + 14.4 / 201.6 + 0.05)
Or 60.50 x (1 + 0.0714 + 0.05)
Or 60.50 x 1.1214 = 67.85
The Maximum fair rent is rounded up to £68.00
Your S70 Rent was £75
The Rent to be registered is the lower of the S70 Rent or MFR, so in this example, the MFR £68 is the registered rent.
- Repairs / improvements
- Rent register – notifying the parties
Exemptions from maximum fair rent
Registered rents which are not limited by the operation of the Rent Acts (Maximum fair rent) Order 1999.
The Rent Acts (Maximum fair rent) Order was introduced in 1999 to limit the effect of rising registered rents. The Order caps the rise to an amount based on the movement of the Retail Prices Index since the rent was last registered.
However the Order does not affect all applications for registration of rent.
The MFR does not apply if:
- The application for registration of rent is a first application, and there is no existing registered rent
- The previous registered rent has been cancelled, so there is no existing registered rent
- There has been a change in the condition of the dwelling (including any common parts) because of repairs or improvements carried out by the landlord, and that change alone would have increased the existing registered rent by at least 15%
The 15% test is a matter of the Rent Officer applying their professional judgement to give an opinion of the value to the tenant of the works to the property.
The mechanism of the test is:
- The Rent Officer determines the current Section 70 rental value with the property as it stands
- Then the current Section 70 rental value of the property without the repairs or improvements carried out by the landlord since the last registration
- Does the difference between the two above rental values exceed 15% of the existing registered rent?
- If the answer is ‘yes’ the case is exempted from MFR. If ‘no’, the MFR is applied
If the MFR does not apply, then the registered rent would be the rent determined by the Rent Officer (or First-tier Tribunal (Property Chamber)) under Section 70 of the Rent Act 1977.
The 15% test is not to be confused with the entirely separate test of whether or not to accept an application for registration of rent within 1 year and 9 months of the last registered rent under Section 67(3) because of a change of circumstances which makes the registered rent no longer a fair rent. Changes of circumstances under Section 67(3) are not confined to repairs or improvements carried out by the landlord since the last registration.
- Maximum fair rent
- MFR operation and services
- Change of circumstances – fair rent
The effect of the landlord sharing the costs of providing services between different lettings.
Some Housing Associations have adopted a “pooling” arrangement when calculating costs of provision of services to their tenants. It is a fact of life that when a service charge is divided between a smaller number of tenants (on a small block or scheme) they will pay a higher charge per dwelling than a larger scheme simply because the charge is divided between more tenants.
The object of “pooling” is to calculate an average cost per unit for the provision of services, which may “even out” the cost between similar blocks or schemes so that tenants of smaller schemes do not pay disproportionately large sums for their services.
Whilst the cost of providing services for a block with say 40 flats would generally be cheaper per flat than a similar block with 20 units, that is only 1 part of the global rent being considered. Similar dwellings with similar services would normally command similar (but not necessarily the same) rent. It may be perfectly normal for a tenant wishing to live in a smaller block to pay a higher rent for the priviledge.
One of the main issues with “pooling” is that whilst the tenants of smaller schemes may benefit from a lower service charge, this is inevitably due to being subsidised by tenants of the larger schemes.
These situations very often also include a variable service charge , and the validity of a variable charge where the charges being considered are not being incurred at the particular block must be viewed very carefully. If the tenancy agreement itself permits pooling of costs, then as a contractual provision, it would be difficult for the Rent Officer to refuse to accept it.
The overriding consideration when valuing any service amount is “Value for money” and Rent Officers should always ask for specific costs incurred at the scheme being considered, and determine whether or not the pooling arrangement is giving value for money to the tenants of that scheme alone.
If the landlord is unable or unwilling to provide such a breakdown of costs, then the Rent Officer will need to rely on his / her knowledge and experience of similar dwellings with the same services and come to his / her own conclusions.
The pooling of some costs may permit a “better deal” for the landlord based on economies of scale. In this instance if the landlord and the tenants as a group are getting the best deal possible, then this would be an argument to allow pooling from a value for money perspective.
- Services – all pages
Rent Officer role
The Rent Officer’s role under the Rent Act 1977.
Rent Officers were created by the Rent Act 1965 to determine and register fair rents. The Act has been modified several times since 1965 resulting in The Rent Act 1977 which consolidated all earlier Rent Acts.
The Act includes paragraphs that describe those tenancies that are covered by the Act, and the Rent Officers powers to register rents for those tenancies that are covered, how often an application may be made and by whom, how the Rent Officer must make his / her decision and what must be included within the registered rent.
The Act also includes the right of the parties to object to the Rent Officer’s decision.
Schedule 11 of the Act describes the process that the Rent Officer MUST follow when dealing with an application for registration of rent.
The Rent Act 1977 gives the Rent Officer power to register rents. The Act says that the Rent Officer shall “determine a fair rent and register it as the rent for the dwelling-house or confirm the rent for the time being registered and note the confirmation in the register”.
This handbook explains what Rent Officers must do to fully comply with their duties under The Rent Act 1977 and Rent (Agriculture) Act 1976.
Rent Officers can only register a rent when they receive a valid application. So:
certain conditions have to exist before they can register a fair rent; and
they must make sure that these conditions exist before they register a fair rent. (See “Jurisdiction – Deciding Jurisdiction” page)
If Rent Officers act beyond their powers or use their powers in a way that the law does not allow, then no matter how good their valuation, it is worthless and is invalid.
A registration may be challenged in the courts by way of an application for judicial review on the grounds that:
- the Rent Officer failed to follow Schedule 11 of The Rent Act
- the Rent Officer had no power to act because of the lack of the necessary ‘conditions precedent’ (for example, the dwelling might not be let under a regulated tenancy)
- the Rent Officer made a determination he or she had no power to make (for example, determining a rent subject to repairs being carried out in the future)
- the Rent Officer broke the rules of natural justice
- the Rent Officer asked the wrong questions; or failed to ask the right questions
- the Rent Officer took account of matters he or she had no right to take into account for example, personal circumstances
- Jurisdiction – determining jurisdiction
- Regulated tenancy
- Natural justice
The effect of the duties of the landlord and tenant in respect of repairs to the dwelling.
Occasionally Rent Officers are confronted by a situation where landlord and tenant are in dispute about repair obligations. Sometimes there is a tenancy agreement which details the responsibilities, but in other instances there may be nothing in writing. Only the courts can decide in the absence of agreement between the parties on specific repairing obligations. Rent Officers should not get directly involved in any dispute on these issues between the parties, although they could point either of them in the direction of an appropriate advice agency, such as Citizens’ Advice Bureaux, or Housing Advice Centres.
However when processing fair rent applications, Rent Officers need to be aware of Section 11 of the Landlord and Tenant Act 1985 as the landlord’s repairing obligation can affect the rental value.
Section 11 applies to leases granted on or after 24 October 1961, for an initial term of less than 7 years. So unless a tenancy agreement was for 7 years or more, or started before 24 October 1961, Section 11 will generally apply. This is probably the case for the majority of the regulated tenancies (although not all) that we deal with.
Section 11 says that landlords of tenancies to which the section applies must:
- Keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes)
- Keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and
- Keep in repair and proper working order the installations in the dwelling-house for space heating and heating water
This would normally be the minimum standard expected in terms of a landlord’s obligations and a landlord cannot opt out of a statutory duty to maintain. In addition s11 and s12 say that a tenant cannot be made to take on any of these express landlords repairing obligations but:
- must use the property in a tenant-like manner, and
- maintain anything which they are entitled to remove from the property
Rent Officers are often faced with various situations of disrepair or improvements where it is unclear who has responsibility. The table below provides examples of these situations but only where the tenancy is subject to s11, as detailed above. The list is not exhaustive and will not apply in every situation but is a general guideline.
|Boiler and Gas Fire||Yes|
|Gas safety checks||Yes|
|Bath, sink and toilet||Yes, but not usually other perishables e.g. tap washers|
|Guttering||Yes, but not the cleaning of the gutters|
|Boundary wall||Yes, provided it is brick or stone and unsafe***|
|Minor repairs e.g. unblocking sinks, replacing external light bulbs||Yes|
|Windows||Yes - window frames||Yes - glass pane|
- Provided the items are owned by the landlord, if they are owned by the tenant it would be the tenant’s responsibility to maintain but the landlords responsibility to make safe. ** Unless it is being replaced as part of remedial work e.g. a damp proof course. *** Defective Premises Act 1972.
It is important that Rent Officers consider repairing obligations when making their determination as it can have a significant effect on the valuation. For example a full repairing lease will have a reducing effect on the level of rent, as will be the case in all shared ownership leases.
The landlords repairing obligations can also have an effect on the amount charged for services. If a landlord has a statutory obligation to maintain something they cannot then charge the tenant for that item. So it is important to keep s11 in mind when looking at any service schedule.
Section 11 does not apply
Problems may arise if s11 does not apply to the tenancy. Where s11 does not apply the repairing obligations of both landlord and tenant should be detailed in the tenancy agreement and the Rent Officer should look at the agreement. However there is often no original tenancy agreement available in these situations especially if the tenancy began before 24 Oct 1961. In this case a valuation would need to be made on the facts available and assumptions may need to be made. Any disputes that may arise in this situation could only be resolved by the courts.
- Long tenancies
- Regulated tenancy
- Housing Association tenancy
- Repairing obligations
- Services – excluded items
Repair liability - register annotation - VICTER
The Rent Officer recording the duties of the landlord and tenant in respect of repairs to the dwelling.
When completing a fair rent case on VICTER, Rent Officers must enter a repair liability on the tenancy details tab. The current options are:
- Tenant responsible for all repairs and decorations
- Landlord responsible for all repairs and decorations
- In accordance with the agreement dated …….. (copy held by the Rent Officer)
- In accordance with the standard form of agreement. (copy held by the Rent Officer)
- As agreed between the parties
- In accordance with the standard form of shared ownership lease (copy held by the Rent Officer)
- Landlord responsible for repairs and external decorations. Tenant responsible for internal decorations
Section 11 (s11) of The landlord & Tenant Act 1985 (S11 L&TA 1985)
The check box “subject to the repairing obligations of s11 of The Landlord & Tenant Act 1985” only applies to tenancies created on or after 24 October 1961 and for an initial term of less than 7 years. If s11 does apply to a case then the tenant cannot, for example, have a full repairing liability. Similarly as a shared ownership lease is generally for 99 years, s11 cannot apply to those tenancies either and therefore the s11 check box is unavailable.
Repairing Obligation Notation including the phrase (copy held by the Rent Officer)
Rent Officers should only use this option if they are sure that a copy of the tenancy agreement has been retained and it is available if it is requested by either party at a future date. Where reference is to a standard form of agreement, the Rent Officer must be satisfied that a copy of the agreement is retained centrally, and that the subject tenancy is subject to the specified terms..
- Repair liability
- Repair standard
- Repairing obligations
The duties of the landlord and tenant in respect of repairs under the tenancy.
When processing fair rent applications, Rent Officers should record the repairing obligations either under the contract or the Landlord and Tenant Act 1985; there is a field on the rent register entry for this purpose.
Section 11 of the Landlord and Tenant Act 1985
S11 applies to most tenancies which we deal with, apart from tenancies which began prior to 24 October 1961, (the section was first introduced in the Housing Act 1961), or tenancies with an initial contractual term of 7 years or more.
Section 11 says that landlords of tenancies to which the section applies must:
- keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes)
- keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and
- keep in repair and proper working order the installations in the dwelling-house for space heating and heating water
This would normally be the minimum standard expected in terms of a landlord’s obligations, but the individual contract may provide for more obligations on the landlord, for example internal decorations.
It should be noted that only if a copy of the tenancy agreement is actually in the possession of the Rent Officer should the standard phrase saying so be used.
Shared ownership leases
Most shared ownership cases are long leases of more than 7 years and put the onus of repairs onto the tenant. These tend to be called full repairing leases, and as such are not subject to section 11. The same applies to statutory tenancies arising at the end of a long tenancy at a low rent. Full repairing leases place most, if not all, of the repair and maintenance liabilities on the tenant, and as such attract a lower rent.
In practice this means that a tenant in a property to which section 11 applies may be required to spend money on internal decorations and minor repairs, whereas the landlord may have to spend money on replacement windows or roof. The rental value will reflect this, with a relatively high rent.
On the other hand, a tenant with a full repairing lease may be required to spend money on internal decorations, minor repairs, as well as replacement windows or roof, which is a much greater financial liability. The rental value will reflect this liability, with a relatively low rent.
Rent Officers should make their valuations having regard to the landlord’s repairing obligations; this is the difference between valuing a property and valuing a tenancy.
- Repairs / improvements
- Change of circumstances
Whether works conducted to the dwelling constitute repairs or improvements.
Change in condition
Normally, unless the application is made jointly (joint applications can be made at any time), once a fair rent has been registered another application for registration of fair rent cannot be made until 2 years have elapsed (tenant’s application), or 1 year and 9 months (landlord’s application). However, s67(3) of the Rent Act 1977 allows an application within this time period where there has been a “change” in:
- the condition of the dwelling house (including the making of any improvement)
- the terms of the tenancy
- the quantity, quality or condition of furniture
- any other circumstances taken into consideration when the rent was registered or confirmed
- that makes the current registered rent “no longer a fair rent”
- “Change” can result from repairs or improvements on their own, or both together; they are treated with the same status in this respect
Rent Officers should not make deductions for minor disrepair where it is likely that the landlord will meet his obligations either under the contract or the Landlord and Tenant Act 1985; they should work on the basis that landlords will perform those obligations. Rent Officers should make their valuations having regard to the landlord’s repairing obligations; this is the difference between valuing a property and valuing a tenancy.
Where there are more substantial items of disrepair that affect the tenant’s ongoing use or occupation or enjoyment of a dwelling (for example: defects that interfere with the use of a room, or the lack of basic amenities) and the Rent Officer judges (on the balance of evidence) that suitable repair will not be undertaken immediately, the Rent Officer must determine a rent which reflects the actual market at that time for a property in that condition. In these circumstances the nature and degree of disrepair must be taken into account and suitable adjustments to the rent for a property in reasonable repair should be made and recorded. It is particularly important that the Rent Officer notes the disrepair taken into account in their rental determination and the adjustments made to the rental value to reflect this disrepair, because a future application under s67(3) can be accepted later if the landlord addresses the items of disrepair.
If there is any subsequent change to the property that improves the dwelling because some or all of the disrepair or other recorded matters have been put right, the Rent Officer is able to accept an application and register a different rent within the 2-year period. However the disrepair noted at the last registration must have actually resulted in a lower valuation.
Rent Officers should be aware that some items of disrepair and their remedies may have little or no effect on the rental value of the property, though they may have a significant cost or effect on capital value. One such example could be subsidence and underpinning that does not actually materially affect the interior of the property. When determining any possible change to the value of the tenancy following rectification of disrepair the Rent Officer should compare the existing registered rent with the potential level of rent based on comparable tenancies in reasonable repair. Depreciation of the capital cost of repairs over a period of time is not an appropriate valuation method for this process. The proper method is comparison with the rent level of other comparable tenancies.
Maximum fair rent
Under the Maximum fair rent Order, consideration must be given to repairs or improvements carried out by the landlord for potential exemption from rent capping provisions. However this is a separate consideration from that of an application to register a rent under s67(3) following a change to the condition of the property (which could also have been repairs or improvements).
At the application stage the Rent Officer must make a judgement as to whether any identified change renders the previously registered rent no longer fair, and if so, accept the application under s67(3). However this does not automatically mean that the repairs or improvements would exempt the new registration from rent capping under the Maximum fair rent Order. This must be considered as a separate Rent Officer decision, looking more specifically at whether the resultant change alone, disregarding the passage of time, would have resulted in a rent rise of 15% or more. Only then would the decision be made to exempt the new registration from rent capping provisions. The s67(3) test governs whether we can accept an application; the MFR one determines how we treat it at registration stage – two different ends of the process.
- Change of circumstances
- Jurisdiction - determining jurisdiction
The imbalance of supply and demand for rented dwellings and the effect on the rent.
Having determined the market rent for the premises, the rent officer must, under Section 70 of the Rent Act 1977, make adjustments to take account of the statutory disregards and to remove any element within the rent attributable to an imbalance in supply and demand that has generally inflated rents for similar properties in the locality. This is commonly referred to as scarcity.
The rent officer must determine firstly whether there is such an imbalance for the subject tenancy and secondly whether that imbalance has inflated the market rent, and if so by how much. Only then will s/he be in a position to make the necessary adjustment to that market rent in order to satisfy the requirement to assume that there is a balanced market.
The test is therefore; 1. that there is a low supply 2. that there is a corresponding high demand 3. that the effect of 1 and 2 above is that the rent has been inflated 4. using evidence a determination of the level of that inflation is made 5. the rent officer makes an adjustment to their determination to so that it is as though the market for such tenancies is a balanced market and that supply and demand are approximately equalised, and the rent officer must be able to justify all elements using researched evidence.
By scarcity we do not mean simply that the property or tenancy is scarce or even unique. That would only indicate a low supply which is only the first step of the above process.
Each case should be dealt with on its own merits. Rent officers may conclude that scarcity has a minimal or even negligible effect on the market rents within many localities. No scarcity adjustment is justifiable where this occurs.
Since deregulation rental markets have matured and independent studies and reports suggest that they are more stable than property sales markets. However, supply and demand can change over time and may directly affect achievable rent levels, usually increasing rents where scarcity exists at a faster rate or to a higher degree than would be expected in a typical stable, balanced market. These types of increasing or higher than expected rents over a broad area, even if just for a few property types, can often be attributed to the type of imbalance referred to in the Rent Act 1977.
Clearly, a proper assessment of whether there is scarcity and what effect it has on rental levels can only be achieved with careful research and regular monitoring informing our market intelligence.
Any element allowed for scarcity in the rent officer’s determination must be capable of being fully justified. This may include reference to documents where the conclusions of the team’s scarcity research are recorded (a shared file holding the data).
Approach to assessing scarcity
Rent officers should collectively examine the evidence which will mainly be in the form of information from lettings agents and landlords, and tracking trends in their own market evidence. The aim is to reach a consensus both within and across teams on where, what property types and to what degree scarcity is influencing rental levels. This approach is essential to provide consistency as it will involve the valuation and judgement skills of all local rent officers. Outcomes should be recorded for reference. Such collective decision making should not be confused with taking committee decisions on individual cases – it is for individual rent officers to make determinations on their own caseload.
It does not preclude a rent officer applying a different degree of scarcity to an individual registration, given sound reasoning and explanation, and following consultation with their manager; however it does provide a consistent starting point. In particular, where a substantial adjustment is being made for the scarcity element, this should only be determined after consultation between the rent officer and their line manager, and, as with any unusual valuation decision, a file note added to the case to explain why such an adjustment was considered appropriate. What is to constitute a ‘substantial’ adjustment should be agreed locally amongst teams of rent officers and their manager, in order to ensure that a consistent approach is adopted across geographical areas.
It should be noted that it is not acceptable for a rent officer to simply follow the scarcity adjustments used by others without further consideration of the research, evidence and conclusions of the team. Any adjustment applied must be suitable for the specific circumstances of the subject case. For example, simply following a First-tier Tribunal decision on the scarcity element without sound reasoning could amount to a fettering of the rent officer’s discretion, which is a ground for judicial review. First-tier Tribunal decisions should be considered and given due weight depending on the extent to which their determination of the scarcity element is justified in their reasons. This is best done as part of the team’s regular review of scarcity as it can be considered with the benefit of all the other research and evidence.
For the purposes of the fair rent valuation, in the absence of evidence to the contrary, rent officers have to assume that market rents are not inflated because of scarcity of similar accommodation in a locality. The assumption for the fair rent valuation should be that the market for a certain type of dwelling is more-or-less balanced between supply and demand, unless evidence leads the rent officer to a different conclusion.
The difference between scarcity and special amenity value
Rent officers must distinguish between the type of scarcity which flows from the special amenity value of a dwelling and the type which arises as a result of an imbalance where demand exceeds supply in a broad locality. The Rent Act 1977 refers to the latter only. Special amenity value is best understood as the added value factors that influence an individual property’s desirability; and hence its rental value. For example, special amenity value may be a swimming pool, a thatched roof, or close proximity to a desirable school or train station. These factors can demand a higher rental value for the few properties that offer them, compared to alternative but similar type and sized accommodation without them, (which may be widely available within the locality). No adjustment can be made for special amenity value; it is simply one element affecting the property’s open market rental value. The only adjustment for scarcity that can be made is where there is an overall imbalance of supply and demand affecting the rental value for similar accommodation (e.g. all three bed houses) across the broad locality. A local scarcity caused by a particular amenity has been judged too limited a consideration – the rent officer must consider scarcity across a really substantial area.
The area under consideration when the Rent Officer considers an imbalance of supply and demand affecting rents should be a wide area. The judgement in the Finegold [Metropolitan Property Holdings Ltd. v. Finegold & Ors  1 WLR 349, DC, at 353-4] case sets the case law precedent for this. The size of area should be a large or broad area, but centred on the subject property, rather than a small neighbourhood, such as a few streets in an urban area, or a village in a rural area.
Scarcity may vary between property types in the same locality
Different property types may experience different degrees of scarcity in the same locality. For example, there may be a far higher demand for three bedroom houses than are available, resulting in scarcity and higher than expected rental values across a locality. The rent officer would make an adjustment from the market rent to reflect this. However, sustained new development and ‘right to buy’ may have substantially increased the supply of one bedroom flats in the same locality, creating a balance or even over supply. Clearly there is no justification to apply a scarcity adjustment from the one bedroom flat market rents in this instance.
It should also be noted that an over supply and low demand leading to market rent reductions should not be adjusted upwards – i.e. “reverse scarcity” must attract no adjustment by the rent officer.
The extent of the search to determine ‘scarcity’
Rent officers must include all categories of tenants looking for accommodation when they consider the level of scarcity over a large area. Rent officers should retain a record of any figures and workings used in their decision making. It should be noted that:
- This does not mean that scarcity should be determined by a mathematical formula.
- The law does not expect rent officers to know exactly how many dwellings are available to let, or exactly how many people are seeking them.
- The effect of case law is that rent officers must by some means be able to explain in a practical way how they relate rents in a hypothetical balanced market to rents in the real market.
- Rent officers must evaluate, quantify and assess what a rent would be in a more or less balanced market.
Any percentage factor or figure for scarcity should reflect the amount by which the rent officer thinks the actual market rent exceeds the hypothetically balanced market rent. The Rent Act 1977 tells the rent officer to assume that the number of persons wishing to become tenants of similar homes in the locality on similar terms is not substantially greater than the number of homes in the locality which are available for letting. This is a balanced market.
The requirement cannot be directly related to the actual difference between the specific numbers of people seeking homes and the exact numbers of homes available to let in the locality but the rent officer should be able to justify in general terms any adjustment s/he makes, so as not to run the risk of being judged to have acted unreasonably.
Rent officers have to eliminate the ‘scarcity value’ but they are not concerned with the scarcity caused by property-specific or local factors. Scarcity in this context is “a broad, overall, general scarcity affecting a really substantial area”.
This means that if localised scarcity is evident due to the level or quality of amenities in the immediate area of the subject property BUT there is no overall shortage over a wider area, then no deduction for scarcity should be made.
Markets with scarcity
The factors which may indicate that a market has an imbalance with low supply and high demand include;
- Letting agents throughout the broad locality are actively seeking accommodation for their books
- Letting agents over the broad locality report that they have tenants waiting to rent properties
- A decreasing trend in landlords looking to rent out properties
- Waiting lists for homes are getting longer
- Changes to the sales market result in an increase in the number of people looking to rent but there is no reciprocal increase in supply
- Letting agents have few or no properties available to rent
- Letting agents over the broad locality reporting tenants are having to expand their area of choice
The factors which may indicate that scarcity is inflating market rent levels include;
- Negotiations between landlords and tenants are being reported as resulting in escalation of rent levels
- Quickly rising rents for given property types across a substantial area
- Competition between tenants for a small number of lettings results in bidding on rent levels
- Potential tenants previously unknown to each other club together in order to afford joint tenancies of properties at rising rents
- Void times are lower than average or decreasing
- Looking at average rental values, the differentials between particular property types are closer than expected for a balanced market (e.g. average 2 bed rents very close to average three bed rents may be partially as a result of scarcity)
Markets without scarcity
The factors which indicate that a market has little or no scarcity, and that there is little or no discernable effect on rent levels, may include;
- Rents appear to have levelled, with little movement over a period
- Agents have plenty of properties available for let as evinced by lists of available lettings for example
- Tenants have a choice of properties to rent
- Rent levels are negotiable, downwards, for landlords to secure “good” tenants
- Tenancies are being renewed without rents being increased
- There are property “to let” signs in evidence in the area
- The press has advertisements for properties to let in the area
- There is lettings evidence of both advertised rents and achieved rents, and there is a degree of similarity in rent levels
Consistency and Quality Assurance
A team approach backed up by evidence and structured research is essential and this must be managed by team managers. A shared understanding of scarcity and the local markets is the starting point. When a consistent approach is determined for a given locality, rent officer team members need to make assessments which are consistent with this collective approach.
If a rent officer has a case which they feel falls outside of this approach due to individual circumstances, then they must consult their team manager to obtain approval for their determination of scarcity prior to registering the rent and issuing the determination notices to the parties.
- Ensure there is a clear understanding of scarcity within the team, consistent with the current market and with the guidance
- Have a structured approach to researching supply and demand and resulting market trends
- Ensure general scarcity levels are regularly assessed and agreed locally – rent officers from all work streams should be included in the consultation, including those from adjoining offices where practical
- Agreed conclusions on scarcity should be recorded
- Local protocols for dealing with cases that require individual attention should be established
- Managers should monitor quality
- Valuation – S70
- Valuation – S70 Disregards,
- Valuation - Market rent start point
A schedule under Section 67 of the Rent Act 1977 which sets out Rent Officer procedures to be followed.
Schedule 11 of the Rent Act 1977 sets out the basic procedure to be followed by Rent Officers upon receipt of an application for registration of fair rent. A failure to follow the processes contained in Schedule 11 can render a registration invalid.
Landlord or tenant applications
Paragraph 1 states that the Rent Officer may serve notice on the landlord and tenant requesting whatever further information which may be needed to process the application. This notice is known as an RR3.
“On receiving any application for the registration of a rent, the Rent Officer may, by notice in writing served on the landlord or on the tenant (whether or not the applicant or one of the applicants) require him to give to the Rent Officer, within such period of not less than 7 days from the service of the notice as may be specified in the notice, such information as he may reasonably require regarding such of the particulars contained in the application as may be specified in the notice.”
In practice, to ensure the principles of natural justice are followed, when an RR3 is issued to one of the parties to an application it is copied to the other, and when a response is received, this is also copied to the other party.
Paragraph 2 states that where a joint application is made and the Rent Officer thinks the rent proposed is a fair rent, that rent may be registered straight away.
“Where the application is made jointly by the landlord and the tenant and it appears to the rent officer, after making such inquiry, if any, as he thinks fit and considering any information supplied to him in pursuance of paragraph 1 above, that the rent specified in the application is a fair rent, he may register that rent without further proceedings.”
In practice this would mean that the proposed rent on any joint application would have to propose the same rent amount as the Rent Officer’s rent determined under Section 70 of the Rent Act 1977 for a first time application, or to the capped rent under the MFR Order for any subsequent registration. Guidance on joint applications is contained in the handbook page on this subject.
Where an application for registration is made solely by a landlord or by a tenant, or where a jointly proposed rent is not, in the opinion of the Rent Officer, a fair rent, notice should be served on the parties inviting them to make representations as to the rent to be registered. Where services are included the notice should be accompanied by details of services expenditure and in any case the application must be copied to the non-applicant party.
For non-joint applications, this notice is known as the RR2, or RR2S where services are included.
“In the case of an application which does not fall within paragraph 2 above, the Rent Officer shall serve on the landlord and on the tenant a notice inviting the person on whom the notice is served to state in writing, within a period of not less than seven days after the service of the notice, whether he wishes the Rent Officer to consider, in consultation with the landlord and the tenant, what rent ought to be registered for the dwelling-house.”
“A notice served under (the) paragraph above on the person who did not make the application shall be accompanied–
(a) by a copy of the application; and (b) where, in pursuance of section 67(2)(b), the application was accompanied by details of the landlord’s expenditure in connection with the provisions of services, by a copy of those details.”
Paragraph 3 also states that where no representations or consultation request is received within the period specified in the notice, the RO may proceed to register the rent.
“If, after service of a notice by the Rent Officer under paragraph 3 above, no request in writing is made within the period specified in the notice for the rent to be considered as mentioned in that paragraph, the Rent Officer after considering what rent ought to be registered or, as the case may be, whether a different rent ought to be registered, may—
(a) determine a fair rent and register it as the rent for the dwelling-house; or (b) confirm the rent for the time being registered and note the confirmation in the register; or (c) serve a notice under paragraph 4 below.”
However, where a consultation request is received, the Rent Officer must invite the parties to a consultation to discuss the rent to be registered, before proceeding to register the rent. The Rent Officer may choose to invite the parties to a consultation even if the parties do not request one.
Paragraph 4 states that where a notice is served by the Rent Officer to invite the parties to a consultation, a minimum of 7 days notice must be given for applications with no services and a minimum of 14 days notice must be given where services are included in the rent. It also provides for the parties to be represented at the consultation if they wish.
“A notice under this paragraph shall be served on the landlord and on the tenant informing them that the Rent Officer proposes, at a time (which shall not be earlier than 7 days after the service of the notice, or 14 days in a case falling within paragraph 3 (with services) and place specified in the notice, to consider in consultation with the landlord and the tenant, or such of them as may appear at that time and place, what rent ought to be registered for the dwelling-house or, as the case may be, whether a different rent ought to be so registered.
At any such consultation the landlord and the tenant may each be represented by a person authorised by him in that behalf, whether or not that person is of counsel or a solicitor.
The Rent Officer may, where he considers it appropriate, arrange for consultations in respect of one dwelling-house to be held together with consultations in respect of one or more other dwelling-houses.”
Paragraph 5A states that the registration is sent out with a notice giving the parties 28 days to object in writing and paragraph 6 states that the Rent Officer must accept such an objection on behalf of the Property Chamber (formerly, the Rent Assessment Panel) if it is received within 28 days and if later, to seek the Chamber’s direction as to whether to accept it or not. Standard letters for both scenarios are in the forms and letters section on the intranet.
“Where a rent has been registered or confirmed by the Rent Officer … he shall notify the landlord and the tenant accordingly by a notice stating that if, within 28 days of the service of the notice or such longer period as he or a rent assessment committee may allow, an objection in writing is received by the Rent Officer from the landlord or the tenant the matter will be referred to a rent assessment committee.”
In practice we allow for postal delays as a Rent Officer can accept a later objection, or we refer it to the Property Chamber (formerly, the Rent Assessment Panel) for them to decide whether to accept it. A Rent Officer does not have the power to reject an objection.
Paragraph 9(3) states that the Rent Officer must update the register with the First Tier Tribunal Property Chamber’s (formerly, the rent assessment committee’s) decision (on the public register, which is the Electronic Rent Register).
“Where the committee confirm or determine a rent under this paragraph they shall notify the landlord, the tenant and the Rent Officer [of their decision and of the date on which it was made]. On receiving the notification, the Rent Officer shall, as the case may require, either indicate in the register that the rent has been confirmed or register the rent determined by the committee as the rent for the dwelling-house.”
This is not an exhaustive list of procedures to be followed by the Rent Officer; further requirements derive from the other sections in Part IV of the Rent Act 1977.
- Consultations – procedure and practice
- Further information required
- Valuation – Section 70
- Maximum fair rent
- Joint applications
FR services and MFR operation
The way that services provided under the tenancy affect the operation of the Rent Acts (Maximum fair rents) Order 1999.
Article 2(5) of the Rent Acts (Maximum fair rent) Order 1999 says:
In applying this article no account shall be taken of any variable sum to be included in the registered rent in accordance with section 71(4) of the 1977 Act.
Section 71(4) of the Rent Act 1977 says:
S71 (4) Where, under a regulated tenancy, the sums payable by the tenant to the landlord include any sums varying according to the cost from time to time of–
(a) any services provided by the landlord or a superior landlord, or (b) any works of maintenance or repair carried out by the landlord or a superior landlord
the amount to be registered under this Part of this Act as rent may, if the Rent Officer is satisfied or, as the case may be, the rent assessment committee are satisfied, that the terms as to the variation are reasonable, be entered as an amount variable in accordance with those terms.
This means that the MFR formula applies to the gross registered rent when the service charge is fixed, but to the net registered rent when the service charge is variable. There are further considerations where the type of service charge has changed since the previous registration. The table below sets out the possible scenarios. The crucial factor is whether the last registered rent was with fixed or variable service charges.
|Operation of MFR where services have changed from fixed to variable or variable to fixed||New registered rent is with fixed services||New registered rent is with variable services|
|Last registered rent was with fixed services||MFR cap is applied to last registered rent including services (gross) and capped figure product is the maximum new registered rent, including new services||MFR cap is applied to last registered rent including services (gross) and the new variable services amount is added to the capped figure product to arrive at maximum new registered rent|
|Last registered rent was with variable services||MFR cap is applied to last registered rent net of the variable services element and capped figure product is the maximum new registered rent, including new services||MFR cap is applied to last registered rent net of the variable services element and the new variable services amount is added to the capped figure product to arrive at the maximum new registered rent|
- Services pages
- Maximum fair rent
Date of tenancy commencement
The effect of the date of the start of the tenancy.
Rent Officers are required to determine their jurisdiction before proceeding to register a “fair rent” under the Rent Act. One of the common issues is establishing the tenancy commencement date, and what appears to be a straightforward task often causes problems.
The RR1 application form should ideally show the tenancy commencement date, but invariably these tenancies are old, and landlords have changed over the years. Rent Officers should not automatically assume jurisdiction without good cause, and it may be necessary to request further information by means of the RR3 form to establish jurisdiction.
The tenancy commencement date given should be a full date where a written agreement exists, but where no agreement is available, the parties should be asked to verify a year. Where the year is 1989, Rent Officers will need to be wary of the changes effected by the Housing Act 1988 from 15.1.89, and for “Shared Ownership” cases, they will need to be aware of the changes to the Rent Act 1977 on 10.12.87
In certain circumstances the tenancy may have started many years ago, and the parties may simply not know the date. In those circumstances it may be appropriate to simply state an approximate date such as “circa 1966” or “prior to 15.1.89”
In all cases, an entry should be made in the tenancy commencement date field on VICTER.
Usually, Rent Officers can only accept jurisdiction for tenancies that commenced prior to 15.1.89 which was the start date of the Housing Act 1988, however there are several exceptions.
Tenancies for which an agreement was signed before 15.1.89 but occupation commenced after that date can still be protected tenancies under the Rent Act. In those circumstances the tenancy start date is the date the agreement was signed.
An assignment is where a new party “takes over” as one party to an agreement, leaving the agreement itself intact. This can happen in a variety of forms, most commonly occurring for “shared ownership” cases but it can occur for other types of contractual tenancy.
“Assignments” do NOT involve the creation of a NEW tenancy, it is the ORIGINAL tenancy that is ASSIGNED and it is still effective.
If the Rent Officer accepts jurisdiction and proceeds to register the rent he / she should insert in the ‘Commenced on’ box of the register the date the original tenancy of the property commenced (not the date of assignment), and in the ‘Remarks’ box (g) the following phrase: ‘Tenancy assigned on [DATE]’
A transfer is simply where a tenant vacates one property and then starts a new tenancy at a different property, but the landlord (or one of the joint landlords) remains the same. This is typically where a tenant moves to a different flat or house belonging to the same housing association, or a landlord relocates a tenant to another flat or house they own.
If the Rent Officer accepts jurisdiction and proceeds to register the rent he / she should insert in the ‘Commenced on’ box of the register the date the new tenancy of the property commenced, and in the ‘Remarks’ box (g) the following phrase: “Former protected tenant of same landlord”
A mutual exchange is simply an assignment but where two parties (usually 2 tenants) effectively swap places with each other. Mutual exchange often occurs where the tenancies exchanged are with different landlords, such as between local authority and housing association tenants.
It is important to remember that the tenancies (including their start dates and protections) stay with their respective properties, though the actual tenants change.
If the Rent Officer accepts jurisdiction and proceeds to register the rent he / she should insert in the ‘Commenced on’ box of the register the date the original tenancy of the property commenced (not the date of assignment), and in the ‘Remarks’ box (g) the following phrase: ‘Tenancy assigned by mutual exchange on [DATE]”
A succession occurs where an original protected tenant dies, and the qualifying spouse or partner is entitled to succeed to the protected tenancy.
If the Rent Officer accepts jurisdiction and proceeds to register the rent he / she should insert in the ‘Commenced on’ box of the register the date the original tenancy of the property commenced (not the date of succession), and in the ‘Remarks’ box (g) the following phrase: ‘Succession on [DATE]”
Rent Officers should be aware that statutory tenancies under the Rent (Agriculture) Act 1976 only commence once the protected occupancy ends. This is usually on redundancy or retirement of the qualifying farm worker, but may be earlier by agreement or other means.
If the Rent Officer accepts jurisdiction and proceeds to register the rent he / she should insert in the ‘Commenced on’ box of the register the date the protected occupancy ended which is also the date that the statutory tenancy of the property commenced (not the original date of occupation).
- Jurisdiction – deciding jurisdiction
- Assignments, mutual exchanges and transfers
Time management - FR process
Timescales followed by the Rent Officer.
There are no time limits in the Rent Act 1977 for completing a rent registration, but our internal target is that fair rents will be registered within 40 working days of receipt.
To achieve this, Rent Officers should aim to complete cases within 25 working days, or 30 working days where they hold a consultation.
If cases exceed or are likely to exceed these target times exception reports must be produced detailing the reasons for any delays in processing the case or cases.
The fair rent casework management flow chart gives further detail on the revised fair rent streamlining process and target times.
Valuation - market rent start point
The starting point for the determination of a fair rent by the Rent Officer.
Section 70 of the Rent Act, and supporting case-law, guides Rent Officers to assess a fair rent in a number of stages.
As a result Rent Officers must:
- Assess a market rent, using established best practice
- Make any additions/deductions if the subject property/tenancy details are different from the comparable evidence (for example, many assured/shorthold tenancies include carpets and white goods, and many regulated tenancies do not)
- Make adjustments for improvements the tenant has carried out, or for a premium the tenant has paid
- Disregard any damage the tenant has caused
- Assess whether in the Rent Officer’s opinion, there is any “scarcity” and adjust the valuation to reflect any general shortage of similar accommodation
- Where appropriate and where the landlord or tenant provides supporting evidence take account of specific case related issues for example the impact of voids on the rental value of a property
Any adjustments must accurately reflect the way the market is known to function locally.
The starting point for all valuations should be a “Market Rent”. This is effectively the same as a Housing Benefit “Significantly High” determination. Transactional lettings information from assured or assured shorthold tenancies should form the basis of the valuation, backed up and supported by other supporting lettings information. The only difference between a market rent assessed for HB purposes, and that for fair rent purposes, is that whereas for HB purposes the Rent Officer must give due weight to lettings information arising from tenancies which are subject themselves to an HB claim (which is a specific requirement of the Rent Officers Housing Benefit Functions Order), for fair rent purposes there is no such requirement contained in the Rent Act. So Rent Officers should not exclude evidence where Housing Benefit is known to be or is likely to be payable.
Rent Officers should use their judgement and experience to identify and exclude “special bids” which may be high or low comparables, for example unusually high amounts paid by individuals prepared to exceed the going rate for personal reasons or very low rents agreed between friends or family. Valuations should be determined in line with the general level of rents in the locality.
- Valuation - S70 disregards
- Lettings information – all pages
Valuation - Section 70
Matters for the consideration of the Rent Officer set out in Section 70 of the Rent Act 1977.
The Rent Act sets out the criteria that Rent Officers use to determine fair rents. Rent Officers must have regard:
“to all the circumstances (other than personal circumstances) and in particular to – the age, character, locality and state of repair of the dwelling-house, …”
The Rent Officer must further assume:
“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.”
In simple terms this means that the Rent Officer must discount scarcity (see “Scarcity” page).
The courts have said:
“the fair rent which is to be determined is the market rent for the property in question disregarding the personal circumstances, the specified disregards and discounted for any scarcity”.
When Rent Officers determine a fair rent they should apply the following six principles:
A “fair rent” is the market rent adjusted for the scarcity element and disregarding personal circumstances and the disregards.
There are various methods of assessing the fair rent, including the use of assured tenancy comparables and the use of registered fair rent comparables though assured tenancy comparable evidence is the preferred option and a Rent Officer would need to show good reason for using registered fair rent comparables.
The method or methods adopted by a Rent Officer or rent assessment committee may vary according to the particular circumstances of the case.
The Rent Officer or rent assessment committee must consider (though not necessarily adopt) any method or methods suggested to them by the parties.
In deciding which method to adopt the Rent Officer or rent assessment committee must take into account relevant considerations and give adequate reasons for their choice of method.
Subject to compliance with those requirements, the Rent Officer or rent assessment committee is free to adopt the method which appears to them, on the evidence, to be the most appropriate method provided it is lawful and reasonable.
“Close market rent comparables are the best evidence to use as the starting point for determining a fair rent.”
The courts recognise that valuation is as much an art as a science, but they also stress that however much experienced ‘feel’ or judgement the exercise requires, the end product is a figure for rent of particular premises. From that it follows, and the courts have said, that in arriving at that figure, there is necessarily some arithmetic involved:
“Where the comparables are not exact and/or there is a need to make disputed adjustments for hypothetical lack of scarcity or for disregards, it necessarily involves some working through – some sums, however few and approximate – some arithmetical markers whether in percentage form or otherwise on the way to the final figure. There is no other rational way of giving effect to the scheme of assessment…”.
So, it is reasonable, and the courts will expect, that there is some record to show how the Rent Officer made the determinations and arrived at the final figure.
Rent Officers and rent assessment committees should use their general knowledge and experience of:
- local market rentals
- the proper adjustments to make for differences between comparables and the subject properties; and where necessary, the extent of scarcity in the local market and how that market is affected by it
Rent Officers must look at the legal criteria that require them to “have regard to the sort of factors which tend to push rents up and down on the market”.
Rent Officers may have to make other adjustments, either because they have to take into account one of the other statutory disregards, or to reflect other differences between the subject property and those properties, let in the open market, that they are using as comparables.
The Rent Officer then has to eliminate any premium value caused by scarcity by looking at “a broad, overall, general scarcity affecting a really substantial area”.
The fair rent must be indicated on the rent register and the rental period should be the same as provided in the tenancy agreement.
- Valuation – Section 70 disregards
- Rent Register – notifying the parties
Valuation - Section 70 disregards
The Rent Act 1977 sets out a number of things Rent Officers must not do when they determine a fair rent.
Rent Officers must not reduce the rent because of:
Any disrepair or defect caused by the tenant’s failure to comply with any term of the tenancy; Any deterioration to any furniture due to ill-treatment by the tenant, any sub-tenant or anyone residing or lodging with the tenant.
This ‘disregard’ makes sure that the landlord is not penalised, by receiving a lower rent, if the condition of the property deteriorates because the tenants fail to do the things that they are obliged under their contract to do.
So, if for example, under the terms of the tenancy the tenants are under an obligation to keep the internal decorations in good order, and they fail to do so, the Rent Officer must ignore that defect and register the same rent as if the decorations were well maintained.
Rent Officers must not increase the rent because of:
Any tenant’s improvements over and above any work required under the terms of the tenancy. Any tenant’s improvement to any of the landlord’s furniture over and above any work required under the terms of the tenancy.
Here it is the tenants who are protected. The aim is to prevent a landlord getting, by way of a higher rent, the benefit of works carried out at the tenant’s expense.
So, if for example, the tenants add a conservatory to the property, the Rent Officer must ignore the improvement and register the same rent as if the conservatory was not there. (Unless the tenant was required to provide the conservatory as a condition of being granted the tenancy, in which case the Rent Officer would include any additional value in the rent)
‘Tenant’ includes any predecessor in title under the tenancy (see below).
Rent Officers deal with few applications for registration of rent for furnished lettings. The number of applications fell away rapidly after 1989 as new tenants ceased to qualify for Rent Act protection. However, the two ‘disregards’ about furniture are still in the Rent Act and so Rent Officers need to know that they exist. The purpose and effect of these two ‘disregards’ is the same in relation to the landlord’s furniture as the other two are in relation to the property.
Predecessor in title under the tenancy
In simple terms this means someone who had the same tenancy before. There are two likely scenarios but there may be others:
A tenancy is in the sole name of one or other spouse or civil partner. The tenant dies and the surviving spouse or civil partner succeeds to the regulated tenancy. The deceased spouse or civil partner is the predecessor in title and the Rent Officer must discount any improvement work (or damage) done to the property by that person. A previous tenant has assigned the tenancy to the current tenant. The previous tenant is the predecessor in title and the Rent Officer must discount any improvement work (or damage) done to the property by that person.
The key point is that what is being passed on is the same tenancy. In the second scenario, had the previous tenant’s tenancy come to an end and the current tenant had been granted a new tenancy, then the landlord would reap the benefit of any improvement work that the previous tenant had done. The previous tenant would not be the predecessor in title under the tenancy, he or she would just be the previous tenant.
But what happens if at the end of one contractual tenancy the same tenant is granted a new lease? For the Rent Officer to disregard work or damage it has to have been carried out by the tenant under the present regulated tenancy. If the tenant takes a new lease, the Rent Officer must not disregard any work done under the old tenancy. Here the landlord would get the benefit of works carried out at the tenant’s expense.
What are tenant’s improvements?
The object of the legislation is to prevent tenants paying higher rents as a result of improvement works carried out at their own expense. The key test is whether the tenants paid for the work. Use common sense. If the tenant’s son or daughter paid for the work treat it as a tenant’s improvement.
The grey area is where work is done through another agency such as social services.
Local authority social service departments often ‘do’ work to help people with disabilities adapt their homes to meet their special needs. You may come across a situation where you are told social services have provided a ground floor WC or shower-room and so on. Usually social services have not done the work at all. A contractor approved by social services may have done the work but what has happened is that social services have made a grant to the tenant for the work to be done. So the tenant has ‘paid’ for the work, albeit with money provided by the local authority. In this case Rent Officers should treat the work as a tenant’s improvement and disregard it when assessing a fair rent.
A similar scheme is the Warm Front Scheme, an initiative funded by the Department of the Environment, Farming and Rural Affairs (DEFRA) but managed by private industry. The object of the scheme is to provide insulation and heating to qualifying people. In these cases:
Insulation becomes the landlord’s property from the time that it is put in; and The scheme supplies, fits and maintains the equipment, which is in effect, leased to the landlord.
Work under this scheme is not disregarded. It is not a tenant’s improvement.
Rent (Agriculture) Act 1976
Rent Officers, usually those working in rural areas, may come across applications for registration of a fair rent made for a statutory tenancy under the Rent (Agriculture) Act. It is often the case that the occupier will have improved the property whilst occupying it as a farm worker and before the statutory tenancy came into being. Rent Officers should not disregard these improvements when assessing a fair rent; the work was not done under the tenancy - it was done under the protected occupancy that preceded the current statutory tenancy, and in this case the landlord would get the benefit of works carried out at the tenant’s expense during the protected occupancy, but as soon as the statutory tenancy commenced, any further works would be disregarded.
Tenant’s improvements v landlord’s obligations
Some tenant’s improvements increase the landlord’s statutory obligations. If this happens the Rent Officer must ignore the improvement when determining the rent and must also make proper allowance for the landlord’s increased liability.
If the tenancy began after 24 October 1961 and is for a term of less than seven years, by law the landlord is responsible for repairs to:
The structure and exterior of the dwelling; The installations in the dwelling for the supply of gas, water, electricity and for sanitation; The installations in the dwelling for space heating and water heating.
The landlord does not have to repair any appliance that the tenant is entitled to remove (see below, “What is the tenant entitled to remove?”).
So, if the tenant installed a bathroom /wc without being contractually obliged to do so, the Rent Officer should disregard the improvement but should reflect the landlord’s obligation to maintain the sanitary fittings and to keep them in proper repair. In practice this might mean that rent the Rent Officer determination of rent is more than it would have been for the unimproved property, but less than it would have been had the landlord done the improvements.
Landlords must ensure that gas fittings and flues are maintained in a safe condition and have each gas appliance or flue checked each year by a CORGI-registered gas installer. Enquiries regarding the operation of the Gas Safety Regulations should be directed to the Heath and Safety Executive.
What is the tenant entitled to remove?
There is no clear-cut answer. The rule used to be that if the tenant fixed something to the property then it became part of that property and the tenant could not take it away. Today it is often a question of degree. The more permanent the fixture, the less likely that the tenant would be entitled to remove it. So, if the tenants installed gas-fired central heating, they might not be entitled to remove it. In this case the landlord would be responsible for maintaining the boiler and so on. A gas fire on the other hand is a much more portable appliance, and even though it is fixed to the property it can be removed without too much difficulty and so it is not capable of becoming a landlord’s fitting. The tenant can remove it, and so the landlord has no obligation to maintain it or have it serviced. But, there may be considerations. When the landlord gave the tenant permission to install the gas fire, it may have been made a condition that the tenant leaves the appliance in situ at the end of the tenancy. So, in spite of being portable, the tenant is not entitled to remove it because of a contractual restriction. In this case the landlord would have a responsibility for servicing and repair.
Less likely, but also possible, it might be a condition of a permission to install, say, a gas central heating system that, at the end of the tenancy, the tenants remove the system and make good. Here the tenants are not just entitled to remove the system, they are contractually obliged to do so.
- Repairs / improvements
Victer worksheet - FR
The Rent Officer’s worksheet for rent determination.
The courts have stressed the need for rent assessment committees to explain their assessments of fair rent in their reasons. It is good practice, and in line with the VOA policy of openness, transparency and accountability, for Rent Officers to record the processes by which they reached their decisions. A worksheet is produced by the VICTER system to record the Rent Officer’s decision and thought process.
It is important to remember that rent assessment is primarily an exercise of the valuer’s professional skill. It is not purely an arithmetical exercise. The worksheet is designed to show how the decision was made. It is not a tool to make the assessment, even less a route to follow by way of specific deductions and additions.
This worksheet records the Rent Officer’s calculation of the fair rent under section 70 of the Rent Act 1977. Having made this determination, the Rent Officer must still apply the Maximum fair rent Order “rent capping” procedures.
There is a further worksheet available for use in shared ownership cases, which also acts as an “aide memoire” to assist Rent Officers in ensuring processes are carried out in the correct order for the determination of such cases.
- Further reasons for decision
- Making determinations
- Maximum fair rent
- Shared ownership
The effect of periods when a landlord’s properties lie empty and unlet.
When calculating an adjusted market rent, Rent Officers should take into account the market evidence provided and, if necessary, make relevant adjustments to the rent to reflect different tenancy terms and liabilities of both landlord and tenant. These deductions can be for things like repairing liability, scarcity, and voids.
Voids are the periods of time when the property is empty between lettings to separate tenants. In the “Assured Shorthold” tenancy market properties are typically let on 6 month tenancies, and after this period the tenant may move out, and the landlord will incur costs to find another tenant, meanwhile the property remains empty and the landlord is losing rental income.
Some landlords inflate their asking rent to help cover these “Void” periods.
It is an established principle that any valuation Rent Officers make should be based on as close comparable evidence as is possible. The majority of evidence collected is probably of assured shortholds which is suitable for Housing Benefit determinations as its quite likely that the majority of referrals The VOA receive are also for assured shorthold tenancies.
In a fair rent determination, the courts (Bigio case) have held that deductions for voids are not necessarily appropriate. However, if Rent Officers do make deductions/adjustments to take account of voids from assured shorthold rent levels they must have evidence to demonstrate that there is a similar difference in local market rent level between assured and assured shorthold tenancies. If there is such evidence, making an adjustment is quite permissible. If there isn’t, it is not appropriate to use a figure of “say 8%” in the calculation in order to reduce the assured shorthold figure to something lower. The principle that runs through all valuations, and through every facet of each valuation, is that solid evidence is necessary to support the valuation.
- Valuation – scarcity
- Valuation – Section 70 disregards
Water rates or water chargers
The effect of water rates on the registered rent.
Section 71 (1) of the Rent Act lays down what must be included in a registered rent. It establishes that anything payable by the tenant to the landlord must be included in the registered rent even if it is under a separate agreement from the main tenancy agreement.
However, Section 71 (2) excludes “rates” from this principle and states that if the landlord is responsible for rates the rent registered must be “as if the landlord wasn’t responsible for them but the registration must note that he is”.
This means that the rent is calculated exclusive of rates but the register must state that the landlord actually pays the rates.
Section 71 (3) then allows the landlord to add the cost of the rates to the registered rent.
In summary, if the landlord pays the rates, he can add the cost to the registered rent. If the tenant pays the rates then they do so to the billing authority directly.
Most rates ceased many years ago and local government taxation is now via council tax (which can be included in the registered rent under s71(1) as explained above).
‘Rates’ are defined in s152 as including “water rates”. This means that if a property is individually rated and the landlord pays the water rates, the Rent Officer registers the rent exclusive of the water rates but the landlord recovers them on top of the registered rent.
Where the dwelling is not individually rated, it is more likely that the amount payable for water is by means of a water “charge” which is usually a charge from a metered water supply, but some rated dwellings may also be subject to water charges.
For example: If a landlord has rooms or flats within an HMO it is quite likely that he will be paying the water rates for the whole building and will want to recover this within the rent for each of the lettings. This situation may even apply to some larger schemes owned by housing associations.
Strictly speaking what is being recovered here isn’t the water rates, it is a service charge to cover the proportion of the water rates which is applicable to each dwelling.
Service charges can be included within the registered rent so in these circumstances Rent Officers should include an amount within the registered rent for this.
Private water supplies
There is a separate handbook page “private water and drainage” which deals with this issue, but the same principles apply as regards “rates” and “charges” as above.
Rent Officers need to be clear about whether they are dealing with ‘water rates’ which are not included within the registered rent or ‘water charges within the service charge’ which are included in the registered rent.
When entering a decision on VICTER, Rent Officers will need to complete the “Tenancy / remarks” tab of the final decision screen correctly.
Where the landlord pays the “water rates” then the radio button should be checked “other rates borne by landlord”. This produces some text on the rent register that states the rent excludes water rates, but the landlord is responsible for payment, and can charge the tenant over and above the registered rent to recoup that amount.
Where the tenant pays the water rates directly to the water company, or the water charges are included in a service charge the “other rates borne by tenant” option should be selected.
- Services – private water and drainage