Fair rent registration: tenancy information
Information about the tenancy which the Rent Officer considers under an application to register the rent.
Services – changes to services
Changes to the services provided by the landlord under the tenancy.
When making an application for registration of fair rent, Section 67 of the Rent Act 1977 sets out the requirements for a valid application. Where the landlord alone is making the application and services are provided the application must say so, and it must also give details of those services and landlord costs incurred in providing those services. If an application does not fulfil this requirement it should be rejected. Information obtained after the service of an RR3 request for further information is deemed to form part of the application. The RR3 and any response must be copied to both parties to the application to allow the opportunity to make representations.
Change since last registration
There may be valid changes to the services under the tenancy since the last registration of rent. If it appears that the terms of the tenancy may have changed to introduce or to remove services under the tenancy, clarification of the contractual arrangement between the tenant and the landlord may be sought by serving an RR3 request for further information. This is only necessary if the evidence required does not accompany the application.
Changes to services under a tenancy may have been agreed between the landlord and tenant, or may have been imposed by a landlord serving a notice of variation of the terms of the tenancy. It is this information which an RR3 request may ask for.
The basis of the registration should reflect the contractual arrangement between the parties. If there is a contractual obligation for the landlord to provide services under the tenancy, this must be reflected in the rent officer’s registration of rent. Only where there is no such contractual obligation may the rent be registered without services.
Any RR3 served should clearly state the consequence of receiving no response within the deadline stated. This may be a rejection of the application to register a rent on the basis of insufficient information being provided, or it may be to proceed to registration on the basis of certain clearly stated assumptions.
Where services are included under the contract but there is no written agreement, the rent officer is to proceed according to the best evidence available. This should reflect the contractual (albeit unwritten) arrangement which is agreed or uncontested between the parties. Where application information is copied to both parties and no representations are received by the rent officer, the information may be assumed to be agreed because it has not been contested.
If the application sets out changes to services compared to the existing registered rent, and the rent officer is uncertain as to how to proceed, they should contact the guidance helpdesk for advice and assistance.
- Services pages
- Further information required
Access unobtainable - fair rents
When the Rent Officer fails to access the dwelling when trying to inspect it.
The Rent Officer has no right of entry to a property and can only carry out an inspection with the tenant’s consent. If the Rent Officer who will determine the fair rent carries out the inspection, natural justice demands that landlords have the opportunity to be present, so they must be told about proposed inspections and consultations. But, it is for the landlord to arrange access directly with the tenant.
Rent Officers should make all reasonable efforts to re-arrange inspections or consultations for first time registrations as a matter of course, unless access is actually denied by the tenant.
Where a tenant denies access, for example by closing the door on the Rent Officer, they should make sufficient notes of the outside of the premises to allow them to make a valuation. The Rent Officer must then register the rent on the basis of the information available. They do not make a further appointment. If the tenant denies access to the Rent Officer, but a consultation has been requested, this should be re-arranged at a neutral venue, preferably at the local or most convenient VOA office, or at the local town hall for example.
The following procedures apply where, having given advance notice of an inspection or consultation in writing, the Rent Officer gets no answer at the door:
- The Rent Officer should leave an “access unobtainable note” addressed to the tenant in a sealed envelope. The note advises the tenant that they called, but that they will make a decision on the basis of the information available.
- The Rent Officer should make sufficient notes of the outside of the premises to allow them to make a valuation. The Rent Officer can then register the rent on the basis of the information available.
- If the tenant contacts the Rent Officer after registration the Rent Officer should not arrange a further inspection or attempt to re-open the case. The only option in these circumstances is for the tenant to object to the registered rent, and for a Rent Assessment Committee to reconsider the case.
If a tenant, landlord, or agent cancels an inspection or consultation appointment prior to the date of the visit the Rent Officer should try to arrange a further appointment. However, they should not allow one of the parties to continually cancel appointments and therefore delay the registration unreasonably. The number of re-arranged appointments is left to the discretion of the Rent Officer and will depend on the circumstances in an individual case, but guidance should be obtained initially from the Valuation Team Manager. It is suggested that a maximum of 3 appointments are made for any individual case. When re-arranging a visit for the final time the Rent Officer must make it clear that the registration will go ahead, even if one of the parties is unable to attend. It is worth explaining to landlords and tenants in these circumstances that they can be represented by someone else (perhaps a friend) and they do not have to be there themselves.
If the Rent Officer is unable to gain access a decision will be made on the basis of the information available.
If it appears to the inspecting Rent Officer that a tenant no longer lives at the property they should initially make reasonable efforts to check if the applicant still wishes to go ahead with the registration. But if they are unable to contact the applicant they should go ahead and make a decision on the basis of the information available. The only time the Rent Officer should not proceed to registration is if the applicant asks (in writing) for the application to be withdrawn and the Rent Officer agrees. Jurisdiction is decided as at the date the application for registration is received. So, if a tenant moves out, dies or terminates/relinquishes the tenancy in any other way during the registration process this doesn’t invalidate the original application, and the Rent Officer should continue to register the rent, unless the application is formally withdrawn.
- Inspections - policy
- Inspections - practice
- Time management – FR process
Meetings between the Rent Officer and the landlord and tenant where the rent to be registered is discussed.
During the process of an application to register a fair rent, either the landlord or the tenant may ask for a consultation but must do so within 14 days of receipt of their RR2 notification letter, and the request should be in writing either by letter, fax or email. If either the landlord or the tenant requests a consultation in writing, then the Rent Officer MUST arrange a consultation. This is a statutory requirement of Schedule 11 of The Rent Act 1977. If the Rent Officer fails to arrange a consultation where one is requested in writing, he / she will be in breach of Schedule 11, and their decision will be open to challenge.
In certain circumstances, a landlord or tenant may make a telephone request for a consultation, and whilst this is not a valid request under Schedule 11, it is agency policy that Rent Officers should hold the consultation as a Rent Officer request.
The Rent Officer may, in the absence of a request by landlord, tenant or their agents, decide that a consultation is required. The Rent Officer should for example arrange a consultation where the application has been made jointly by landlord and tenant and the Rent Officer is considering registering a rent other than that proposed on the application.
The purpose of the consultation is for the Rent Officer to consider, with the parties, what rent should be registered as a fair rent.
Notice of consultation
When arranging a consultation the Rent Officer must serve a notice on both parties telling them the proposed date, time and place of the consultation. At least seven days notice of the meeting must be given, but this is extended to fourteen days notice where the application includes services. If the required notice is not given, then this again, would be a breach of Schedule 11 of The Rent Act 1977 and a court could rule any subsequent registration made as “null and void”.
It is therefore essential that where a consultation is requested by the parties, a consultation is held, and that whenever a consultation is arranged, the correct notice is given.
All time limits start from the date the parties receive the notice so it is essential to make allowances for the time it takes for letters to be delivered, usually at least one extra working day or so.
It is agency policy that, in normal circumstances, Rent Officers should hold consultations at the premises on the same occasion as any inspection. If the Rent Officer arranges an inspection before receiving a consultation request they should try to arrange the consultation at the same time, and they must serve written notice of the consultation appointment, giving seven or fourteen days notice as appropriate and attaching a copy of any consultation request letter.
Rent Officers may arrange multiple or group consultations in respect of more than one dwelling-house. This might happen when they are dealing with more than one application, say for a number of properties owned by the same landlord, such as a block of housing association flats in a sheltered scheme.
In some instances Rent Officers may experience problems arranging a suitable time and location for the consultation, tenants and landlords occasionally are unwilling to meet, and tenants may not wish to admit landlords to their home. If this situation is encountered, then Rent Officers must adjourn the consultation and re-arrange the consultation on neutral ground either at the nearest VOA office, or possibly at a local authority building or other suitable neutral venue.
Occasionally Rent Officers may be contacted by the parties to cancel a consultation, sometimes at short notice and for unforeseen circumstances. Where the reason for cancellation is reasonable and at least 24 hours notice has been given, then Rent Officers should agree to cancel the meeting and endeavour to contact all parties by telephone advising that the meeting has had to be re-arranged. A letter confirming the cancellation to all parties should be issued immediately by first class post, or fax if a fax number is available.
When rearranging a consultation meeting, if doing so by letter, the same 7 or 14 days notice must be given as in the original consultation meeting, as per Schedule 11 of the Rent Act 1977. Only if doing so by phone or email, and by agreement with both parties to the application, should the Rent Officer agree to an earlier meeting. A case note should be added to the VICTER file in these circumstances.
If the Rent Officer has already had to cancel one consultation meeting at the request of the parties, and after having re-arranged the consultation a second cancellation request is received, or both parties do not attend the meeting as arranged, then the Rent Officer should only make one further attempt to arrange the consultation and they must advise the parties that the consultation will be held at the nearest VOA office at a fixed date and time which cannot be re-arranged again. The parties should be advised that they must attend unless they wish to appoint someone to attend on their behalf, or send written representations, or unless they do not wish to attend or make representations.
Natural justice is a phrase summarising the approach of fair and equal treatment of parties, and in this context it refers to ensuring that both landlord and tenant are given equal opportunities to make their case in respect of the application to register a fair rent.
The Rent Officer should not attend the consultation with any pre-conceived idea of what the fair rent should be or what comparables (market evidence and so on) they might use when making their decision.
To meet the demands of natural justice, the Rent Officer must allow both parties to present their case and make any submissions. If these are in writing they should be made available to the other party. Any rental evidence should be accepted and considered. All parties must have the opportunity to make statements and ask questions about any statements made.
At the consultation the parties may attend in person or be represented by anyone they choose. This may be a neighbour, friend or relative, but may include professional representation from a surveyor, estate agent or solicitor or anyone else the parties may care to choose. If the parties choose to engage professional representation, then this is a matter for them and VOA is in no way liable for professional fees or expenses incurred by the parties in any circumstances even where meetings are cancelled and re-arranged.
There is no specific statutory requirement, but there is an assumption throughout the rent registration process that “the Rent Officer” dealing with the case will remain the same throughout the process. This means that the Rent Officer who holds the consultation should ideally be the same Rent Officer who completes the valuation. This may not always be possible and in any event the Rent Officer must make sufficient consultation notes of what was discussed during the meeting, and of statements made by all.
The notes should ideally summarise meeting details including when and where it took place, who was present, confirmation that the Rent Officer has explained the process, and details of any relevant representations made by the parties.
These should be saved in “word” format and attached to the case in “case notes” on V4. The consultation notes must accurately record the parties’ relevant comments, but care should be taken to avoid any defamatory comments being recorded, as these notes may be requested by the parties as evidence, and will be supplied to the parties and the Rent Assessment Committee should an objection to the registered rent be raised.
There is a ‘consultation notes pro-forma’ which may be used as a template by Rent Officers, which contains essential elements for the Rent Officer to mention at the consultation meeting as an aide memoire, and may also be used to record representations made, both at the meeting itself, and on the V4 case.
If the consultation meeting is arranged but the parties have little to add to the application and written representations, a case note added to the VICTER case (in place of the above ‘word’ document) to explain that there were no additional representations made by the parties may be acceptable.
- Natural justice
- Consultation notes pro-forma (forms and letters)
Consultations - procedure and practice
Rent Officer procedures for consultation meetings.
It is essential that the Rent Officer checks the RR1 application and any correspondence received with it against the details recorded on VICTER as soon as the application is allocated. Correspondence submitted with the RR1 forms part of the application and must be copied to the other party when the RR2 is issued. It is the Rent Officer’s responsibility to ensure that copies have been properly sent to both parties. This checking process is mandatory and it prevents errors after the rent has been registered, such as the landlord address being incorrect or improvements being made to the property but not taken account of. It also allows early planning action to be taken if a consultation or inspection is required or requested by either party. There is a first scrutiny checklist available on the intranet forms and letters section to assist as an ‘aide memoire’ for Rent Officers.
Where any representations are received from the parties they must be copied to the other party under the principles of natural justice. So where the Network Support Office have notified the RO that correspondence has been received it is the Rent Officer’s responsibility to acknowledge the correspondence and send a copy to the other party. However, prior to doing so, NSO or the Rent Officer must check that the correspondence is not defamatory. Where any information is considered to be defamatory it should be redacted prior to being copied to the other party, or returned to the sender and a request made for information that is strictly relevant to the property and registration. Guidance should be sought where there is any doubt over the course of action to take in this regard.
Rent Officers should avoid telephone conversations with either party to the application once a consultation has been requested or arranged.
There are circumstances when telephone calls to or from the parties to an application may be appropriate, for example to deal with the administration of the application, such as chasing progress of the application, or re-arranging a consultation or inspection.
However if the Rent Officer is seeking clarification of information pertinent to their jurisdiction, or on a matter which affects rental value, then an RR3 is the preferred means of obtaining such information. There may be cases where a Rent Officer takes a call from a landlord or tenant where such information is provided. In this case the Rent Officer must ensure that any information which may affect jurisdiction or rental value is shared with the other party, by confirming it in writing to both parties.
When a consultation has been called, Rent Officers must avoid the appearance of unequal treatment of the parties. It is sensible therefore to try to avoid telephone conversations in advance of the consultation meeting. If the parties telephone the Rent Officer they should ask a colleague to take the call where possible, then confirm any information given in that call at the consultation meeting.
Rent Officers must not only treat the parties equally but must be seen to be treating the parties equally.
Requests to record the consultation
Rent Officers may receive a request from one of the parties to record the meeting with either audio or video equipment. Whilst there is no reason to reject such a request, it can only be carried out with the agreement of all present at the meeting. If any person present at the meeting disagrees then the request should be rejected. A compromise which may then be offered to the parties is for the Rent Officer to send them each a copy of their consultation notes. Whether the consultation meeting is being recorded or not, the Rent Officer’s approach must always be to conduct the meeting in a thoroughly professional manner. There is a template form available on the forms and letters section of the intranet to assist Rent Officers through the consultation process and to record any representations received during the meeting.
Role at consultation
At the consultation the Rent Officer should start by explaining the valuation process to the parties. The applicant should then be invited to make representations and the other party should be allowed to respond. It is important to give the parties the opportunity to express themselves freely, but at the same time the Rent Officer should also maintain some control so that the parties do not end up talking over each other or launching personal attacks. The Rent Officer should also explain that the parties must keep to relevant issues only and no personal circumstances or defamatory remarks will be considered. After allowing the parties to make their representations the Rent Officer should sum up by advising that all the relevant points will be considered in accordance with the legislative framework, and inform them of their right to object to the registered rent once they have received notification of it. Notes should be made throughout the consultation of any relevant points and these should then be attached to the VICTER case. A consultation pro-forma is available for Rent Officers to use, it can be found under forms and letters on the Rent Officer guidance homepage.
When considering applications to register the rents for a block of flats or for a batch on a development, most likely to be (but not exclusively) a Housing Association, the Rent Officer may receive consultation requests from multiple tenants. In such circumstances the Rent Officer may decide to hold a meeting to deal with the representations made all together. This is known as a group or joint consultation. It is the Rent Officer’s decision whether or not to hold a group or joint consultation. The Rent Officer’s decision will be based on all of the circumstances, including an assessment of the most practical way of dealing with several tenants seeking to raise the same issues.
It should be noted that in relation to the protection of personal data, each tenant is a third party to all other tenants, and that the VICTER notice of consultation does not include a warning about this. The Rent Officer should open a group consultation by explaining that individual private consultations are available. If any tenant objects to their application being discussed in open forum, the Rent Officer should implement the option of a separate consultation to be held after the group consultation. The Rent Officer should also reassure attendees that we take data protection matters very seriously and that personal data will be retained only for the purposes for which it has been provided.
Prior to commencement of the consultation the Rent Officer should check that those present are in fact the persons that either requested the consultation or have been invited to the consultation, or are their legitimate representatives. The tenant and landlord are allowed representation on their behalf which should have been notified to the Rent Officer prior to the consultation. Anyone representing the landlord or tenant must be there only for that purpose. Anyone who is not entitled to be present should be excluded from the consultation. (An example may be a representative of the press.) If in any doubt the consultation should be adjourned and guidance sought.
During a group or joint consultation it is important to retain control and invite individuals to make comments when it is their turn, ensuring that everyone present gets their turn. Anyone attending a group consultation is entitled to make notes of the meeting but the meeting should not be recorded without prior notification. The Rent Officer will also take notes which must be attached to (or at least accessible from) each case.
Consultation v Jurisdictional hearing
A consultation is not a hearing to determine whether or not a fair rent can be accepted. The purpose of a consultation is for the Rent Officer to consider, with the parties, what rent should be registered as a fair rent. One of the parties may request a consultation or the Rent Officer may decide that a consultation is necessary. Where the landlord or tenant makes that request in writing the Rent Officer MUST arrange a consultation or he/she will be in breach of Schedule 11 and their decision could be invalidly made, or at least open to challenge.
Where there is doubt about a particular fact, Rent Officers must make enquiries to satisfy themselves as to their jurisdiction. They should do this by holding a jurisdictional hearing (not a consultation). This allows both parties to state their case, be questioned by the other party and/or make submissions about the applicable law. The Rent Officer must then decide after establishing all the facts at the hearing whether to proceed with the application.
The Rent Officer may quite legitimately decide to hold both a jurisdictional hearing and a consultation at the same time. The important thing is that the separate meetings are clearly delineated, and the Rent Officer makes it clear that the
- jurisdictional hearing (usually held first) is in order to hear representations concerning jurisdiction to register a rent, such as tenancy status and history, and then separately, the
- consultation meeting purpose is in order to hear representations in relation to the level of rent to be registered, such as tenant’s improvements and state of repair.
- Challenges to jurisdiction
- Deciding jurisdiction
- Re-arranging consultations
Rent Officer procedures for re-arranging consultation meetings.
Occasionally Rent Officers may be contacted by the parties to cancel a consultation. Where the reason for cancellation is reasonable and at least 24 hours notice has been given, then Rent Officers should agree to cancel the meeting and endeavour to contact all parties by telephone advising that the meeting has had to be re-arranged.
Rent Officers can re-arrange a consultation by writing to the parties with a new date and time, giving the required 7 days notice, or 14 days if services are included. The appointment should be re-booked on VICTER.
Rent Officers can also agree to an earlier meeting but only by agreement with both parties to the application. So a consultation could potentially be re-arranged for the following day, if both parties were in agreement. If the new consultation date is notified in writing this could constitute a notice and the 7 or 14 days notice requirement in Schedule 11 would still apply. Therefore appropriate wording that clarifies that both parties have agreed to the date must be used when you confirm the appointment by letter or via email.
A standard letter has been provided in the RO Guidance pages of the intranet for use when confirming a rearranged appointment in writing, which says:
As agreed by both parties on…(date) the consultation / consultation and inspection has now been re-arranged for …(time/date). The consultation will take place at the property / at your local office….. (name/address of office).
Please let us know if the above details differ from what you agreed.
Where an appointment is re-arranged verbally the Rent Officer should still physically re-book the appointment on VICTER selecting “phone booking” on the book appointment screen. This means it is still recorded on VICTER but no documents are produced, a case note with the date and time should also be added to explain that the appointment has been rebooked verbally, if there is no letter or email confirming the appointment. If there is such an email or letter this should be attached to the case and no case note is required.
If “phone booking” is not selected a letter will be produced and will go into the NSO print queue and it would be necessary to contact the NSO and have the letter removed.
For the avoidance of doubt, the paragraphs above should only be used if the consultation has been re-arranged within 7/14 days by phone or email with both parties, and you wish to confirm the new date in writing.
Full repairing leases
Tenancies where the tenant undertakes major repairs under the lease agreement.
Leases that the Rent Officer commonly encounters include:
- Assured Shorthold Tenancies, here in the majority of cases the landlord retains the repairing obligations
- Assured or Regulated Tenancies, here the tenant often only retains the internal repairing obligation because Section 11 of the Landlord & Tenant Act 1985 applies
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.
The Rent Officer will occasionally come across cases where there are express covenants within a lease relating to repairing obligations of the landlord and tenant. The majority but not all of these will be shared ownership cases because they are normally let on long leases of more than 7 years. These leases will be outside the provisions of the Landlord & Tenant Act 1985 Section 11.
In practice this means that a tenant with a full repairing and insuring lease (FRI) 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.
If either party has an obligation to repair that is different from standard Assured Shorthold Tenancy (AST) terms then there is more than likely to be a difference in value from the more common AST terms lease. Established practice in fair rent valuation is to use the open market value (OMV) and make adjustment for differences in the tenancies.
The starting point and primary unit of comparison is the OMV of an assured shorthold tenancy; here the landlord is normally responsible for all repairs and decoration. ROs are well versed with using the market rent and making allowances for the differences in the tenancy from a standard AST. The Rent Officer will know an appropriate level of allowance when they are experienced, but this will always be subjective because different purchasers/renters will make different allowances for things such as modernisation, and the cost of repair and amenity. The skill of the valuer will be required to make an allowance in money terms for such differences.
Basic principles are to value like with like. In an ideal situation we would be able to assess the rent of an unimproved dwelling with current market rents of other unimproved dwellings in the same vicinity. However rarely do we find such perfect comparables.
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 more general level of rents in the locality.
Adjustments may need to be made to the market rent. Invariably the subject property/tenancy details will be different from the comparable evidence. Additions/deductions should be made to take account of these differences (for example, many assured shorthold tenancies include carpets and white goods, and many regulated tenancies do not. There may be a lack of central heating in regulated properties whereas modern lettings are almost always let with the benefit of heating).
It is hoped that similar age properties can be identified but if not, an adjustment may be necessary; this is where knowledge of the market is important, and interrogation of the lettings information data base may not be sufficient.
When the tenant has a greater repairing obligation, for example when the property is let on a full repairing and insuring lease, the best comparable would be a property let in the open market on similar FRI terms; where such properties are found it is good practice to keep a local record of the letting and make colleagues aware of the transaction simply because they will be rare.
As a valuer we are simply trying to identify the prospective renter’s bid; to do this we need to be aware of market trends and the expected impact of the repairing obligation on the rent.
A property let in good condition with no structural or other defects would let for a higher rental than one that is in poor original condition with perhaps a watertight but dated roof that is reaching the end of its useful life. Whilst the obligations to repair will be the same the incidence of necessary repair will be very different. In the first instance the tenant will only have to budget for redecoration, perhaps on a cyclical basis to maintain the property to a similar standard, in the second example not only will the tenant have to budget for decoration but will also need to budget for roof repair/renewal and other associated repairs.
It is also important to consider the property’s location when considering the cost of complying with the lease terms; the cost of repair to, say, properties in Central London where access would be difficult will be much higher than in the provinces. In addition many of the developments in London will have specific requirements covering the nature of repair and maintenance e.g. frequency of decoration, when repairs can be executed, materials to be used, etc.
Case study 1
Property to value is a detached 3 bedroom house in a rural location, originally let on a 7 year lease with the tenant having a full repairing obligation. As originally let the property was in good repair and remains in good order with no obvious defects.
A property in the vicinity identical in age and character also in good order was recently let on the open market on a full repairing lease.
The starting point for this fair rent valuation is the comparable open market rent
Note: With a dearth of open market lettings on full repairing terms this evidence may be used to support valuations in other areas where no evidence is available; to do this the market differential method will need to be considered. (See handbook page on extrapolation and other techniques.)
Case study 2
The very same property as above, but over the past few years the roof has deteriorated and requires replacement. Under the terms of the lease the tenant is responsible.
There are no direct comparable lettings available as the estate that let the property mentioned above always put their properties in good order prior to letting.
The rental bid for this property would need to reflect the repairs necessary and would be likely to be lower than in case study 1. The level of adjustment would need to be judged by the Rent Officer, but in this example a reasonable approach may be to determine the cost of works and spread them over the expected life of the works. The full cost of works must not be deducted at each registration, it is an ongoing obligation with the tenant having the obligation from the start of the lease from which time the tenant should have considered setting up a sinking fund to cover the obligation.
Case study 3
Modern flat close centre of town, tenant retains full repairing liability although the building structure is maintained from common maintenance and service charge costs. As a modern flat built and let in the early eighties it is in sound structural order and has modern fittings; other than repairs and maintenance due to normal obsolescence the ongoing maintenance liability is relatively low. Open market AST rental value £100 per week. In the absence of direct comparable letting evidence an adjustment from the AST comparable type of property level of rent is likely to be relatively small. Adjusted market rent say £90 per week. This equates to 10% in this example.
Case study 4
Situated in a small west country village the detached listed building has a stone flag roof requiring constant maintenance as do the windows that have stone frames with hand crafted opening wrought iron casements. Access to the building is difficult and any repairs have to be carried out by skilled craftsmen.
It is very unlikely direct comparable evidence will be found with the Rent Officer having to use knowledge and experience of properties in the vicinity to arrive at realistic rental values. Having regard to the level of maintenance required to keep such a property in good order and the increased costs involved in carrying out specialist work of this nature the necessary adjustments are likely to be fairly high. In addition to the cost of work there is also the requirement to obtain listed building consent prior to works commencing, this is an added expense and should be included within any adjustments made. It is anticipated an adjustment from an AST open market rent could be fairly high where significant costs may be incurred in maintaining the property. Open market rental £100 per week, adjusted market rent to reflect obligations say £80 per week (equating to 20% in this example).
The adjustment in rental value is to reflect the obligation or liability to repair and each case must be looked at individually. It is an adjustment for ongoing maintenance and repair only. An obligation that is likely to incur great expense will attract a greater adjustment than a liability that is low cost and easy to achieve.
Clearly each case should be judged on its merits; please contact the guidance team to discuss individual cases as necessary.
- Extrapolation, interpolation and market differential
- Repair liability
- Repairing obligations
- Shared ownership
Further information required
Where the Rent Officer needs more information than that provided under the application to register the rent.
Having received an application to register a fair rent, Rent Officers may need more information. They can obtain this by serving on either landlord or tenant (or both) an RR3 notice requiring further information about anything included on or missing from the application.
The nature of the information received in response to the RR3 may be substantially material to the application, and as such should be treated as though it were part of the original application. This would apply where service schedules are concerned, for example, where the Rent Officer has asked for details of costs incurred in supplying the services. In these circumstances the information received by the Rent Officer in response to the request must be copied and issued to the other party to the application, and they must be given sufficient time to make their representations or to ask for a consultation.
Natural justice may be said to be jeopardised if the period given in such circumstances is insufficient, and 14 days may be required, as though the information were being supplied at RR2 stage. In any event, if one party is being given new information (not given at RR2 stage) which is material to the application, it is good practice to wait at least 7 days before registering the rent. When the information is copied to the other party a covering letter should clarify the earliest date on which the Rent Officer intends to register the rent, so the parties are given a clear and equal chance to have their say about the application as a whole, which is under consideration by the Rent Officer.
If the Rent Officer issues an RR3 asking for missing or additional information, and receives no response, it would be acceptable for the Rent Officer to reject the application. Prior to taking such action, reasonable efforts must be made to contact the applicant to explain the Rent Officer’s position, for example, some Housing Association applicants prefer to be contacted by email rather than post or phone. Such contact should ideally be made by a member of staff other than Rent Officer processing the case.
If the application for registration of fair rent contains insufficient information for the Rent Officer to make a decision on rental value or jurisdiction, they may choose to ‘withdraw’ that application, and send it back inviting the applicant to re-apply when the missing information may be included in the new application. This may be a reasonable approach if the missing information is, say, the costs incurred for the provision of services, but not necessarily if the missing information is less vital, such as clarification of a spurious tenancy commencement date, given on a current application as being after 1989, where the rent has been registered several times before for the same tenant and the tenancy commencement date previously was given as being prior to 1989.
If the Rent Officer is any doubt as to how to proceed, the guidance helpdesk should be emailed for advice.
- Natural justice
- Time management – FR process
Inspection - criteria
What the Rent Officer considers when deciding whether to inspect the dwelling.
Rent Officers do not inspect a property every time they receive an application for registration of fair rent. They may make determinations based on information gathered from previous inspections of the property or even from inspections of similar properties in the same block or road.
The following criteria should be used to decide which properties to inspect:
- First registrations – Rent Officers must inspect all premises where the application is for the first registration of a fair rent.
- Single Applications – Rent Officers must inspect if the application or representations indicate a change of circumstance to the premises, including improvements or deterioration to the property. This would include where the tenant alleges disrepair, or where there is a history of disrepair at the property.
- Rent Officers must inspect if either party requests an inspection of the property.
- Where original documentation has been destroyed
- where there is a previous registration, but
- where there are no records of an inspection on file (i.e. either on the VICTER record or on the hard copy file).
- On re-registration visit if the last inspection was over 7 years ago.
- The only exception to this frequency should be where the tenant has full repairing responsibilities under the tenancy, where re-inspection to record state of repair will have no effect on rental valuation. This is likely to include shared ownership cases.
- availability of Rent Officer resources and Performance Indicators are not proper factors in deciding whether to inspect and must not be used to justify a decision not to do so.
- Apply the same rules as for single applications, but only inspect one or two properties of each type.
- Inspection management
- Inspection practice
- Information retention policy
Inspections - practice
The Rent Act does not specify that Rent Officers must inspect any of the properties they deal with. But it is not good practice to value any property without having relevant information about what exactly is to be valued. Inspections are not necessary in every case but Rent Officers should visit a property where the application is a first time application. In addition, it is agency policy that properties are inspected:
• fair rent properties ideally every 7 years. Every effort should be made to inspect this frequently although it is recognised that this may not always be possible with the available resources, or,
• if part of a large estate, two beacon properties of each type at least every 7 years, as above.
The Rent Officer should always inspect if the applicant indicates that the property has been improved substantially, or that there has been major repair work to the property. This is especially true if the application is made within the normal two-year period due to a change of circumstances. Similarly the Rent Officer should inspect if there has been major deterioration or damage to the property.
The Rent Officer must inspect if either party to the application specifically requests an inspection.
For more information see the inspection criteria (FR) page.
If no inspection is to be made despite the above criteria the Rent Officer must add a case note to explain why.
Properties are inspected to gather and record information about the dwelling. This is to help Rent Officers assess and register a fair rent for the property. Keeping an accurate record of the property enables future applications to be processed more quickly as information is already on file.
Any inspection may meet all or some of the following criteria:
• provide additional information about the property and the area; • make it easier for the Rent Officer to value the property; • add to the database of property specific data (this is not market evidence); and • provide additional information about the housing market that the Rent Officer would not normally have access to.
The inspecting officer should inspect all of the accommodation let, together with any other accommodation used by the tenant.
The main reason for the inspection is to provide:
• further information about the property, especially condition, state of repair, etc, and • other information that may affect the valuation process, for example, the vicinity and locality of a property. Inspecting officers should record a brief but clear description of the property and collect all the information needed for them to complete the approved worksheet. The report needs to give: • a broad indication of the quality of the property (where furniture is provided by the landlord the report should also give a brief indication of the quality and quantity of this furniture); • condition and state of repair (level of modernisation,, details of any improvement/repairs made since the last registration ); • Details of any tenant’s improvements • Details of any disrepair or defect caused by the tenant’s failure to comply with any term of the tenancy • the services provided (for example, porterage, cleaning, fuel, etc); • the property specific amenities (mains for gas, water, drainage etc); • details of any local amenities (schools, shops, and public transport); • location details, particularly for properties in rural areas.
The person making the inspection should decide whether to produce a sketch plan but in most fair rent cases detailed measurements and scale drawings are not necessary but are useful where the size and/or design of the accommodation could impact greatly on the valuation.
Where sketch plans and detailed drawings are produced they should ideally conform to the RICS Code of measuring practice 6th Edition. There is no “accepted” standard for measurement of residential properties, but valuers should state their basis of measurement on any plan or drawing.
Agency policy is to measure to EFA (Effective Floor Area), for flats and maisonettes, as well as attics and basements, which includes all habitable rooms measured wall face to wall face excluding skirting boards. Bathrooms, toilets, halls, corridors and stairwells are excluded under the RICS code, though have historically been included by rent officers. (See handbook page Inspections – Measuring Standard.)
Agency policy remains that houses and bungalows should be measured using the RCA (Reduced Covered Area) method, which is similar to the RICS code GEA (Gross External Area) method. This involves taking external measurements for the ground floor footprint, and adding an appropriate equivalent external measured amount for each floor footprint.
Rent Officers do not normally inspect a property just to check the information provided on the application form. But, at an inspection, they should always check and verify information about the accommodation let and the tenancy details (viewing the tenancy agreement if possible). They should give the occupier the opportunity to ask questions but should not enter into discussions about issues affecting the valuation. These are more properly dealt with in a consultation.
The Rent Officer should always show their ID card without being asked, act in a professional and courteous manner and remember that they are a visitor in someone’s home. The Rent Officer has no right of entry to a property and can only carry out an inspection with the tenant’s consent. Natural justice demands that landlords have the opportunity to be present. It is good practice to send the landlord a copy of any letter sent to the tenant requesting access at a particular time. It is for the landlord to arrange access with the tenant.
Rent Officers may have to deal with situations where landlords attend inspections but the tenant refuses them access. They will need to deal with each case as it comes. The general rule is that they should not deal with one party without the other having the opportunity to be present. Rent officers should make it clear that, if either party wants to make detailed representations, they can hold a consultation on another day, at the property or on neutral ground which would usually be their office, or a room, for example, at the local town hall.
In most cases comments made by tenants during an inspection will be of a minor, incidental nature or will be in response to questions of a factual nature. This falls short of detailed representations requiring the arrangement of a separate consultation.
The Rent Officer should not seek to unnecessarily institute a consultation which will cause delay.
The Rent Officer should use their discretion as to whether to inspect the property if the tenant has refused access to the landlord. This may involve asking the landlord if he is willing for the inspection to go ahead, and explaining the benefits of basing the determination on up to date information, which could be made available to the landlord in due course.
An external inspection should be made if a Rent Officer considers that their personal safety may be compromised by entering a property.
- All other FR pages
Guidance on inspections
Guidance to Rent Officers about which dwellings to inspect.
When an application for registration of fair rent is received, the rent officer should make their own judgement as to which cases need to be inspected. However the guidance provided to rent officer teams is to arrange to inspect those cases that meet the inspection criteria.
Inspection visits should be arranged as soon as possible and within the first three days of receipt of the application, or any request. It is not necessary to wait the fourteen days allowed by the notice for requests for consultation. Inspection letters are produced and issued at the Network Support Office.
Wherever possible, consultations should be held at the same time as property inspections. Written appointment letters should be sent to both tenants and landlords or their agents. If the rent officer is calling a consultation at the same time there is a separate combined “inspection / consultation” letter.
If the rent officer has made an inspection appointment based on the inspection criteria, but one of the parties requests a consultation, then the rent officer should use a standard template letter to re-schedule the inspection as an inspection / consultation.
Rent officers should book inspection appointments between 09.00 and 16.30 in two hour time bands or at set times. They should arrange specific times for appointments for fair rent inspection/consultations. Appointments outside of these times may be arranged in exceptional circumstances and only if agreed with managers, as there are health and safety issues.
Landlords are parties to applications for registration of fair rent and must be told about proposed inspections by rent officers. Landlords have a right of entry to their tenants’ homes at reasonable times and with reasonable notice. If they want to attend inspections, they should arrange this directly with their tenants.
- Inspection criteria
- Inspections - practice
Reasons for inspection - use of the VICTER ‘drop downs’
Recording the reasons why the dwelling was inspected.
When inspecting cases the reason for the inspection is required to be recorded by Rent Officers using a limited number of reasons from a ‘drop down’ list on VICTER. The below is a guide to the circumstances in which each reason should be selected.
The inspection criteria followed by Rent Officers state that properties should be inspected regularly;
- for fair rent cases the property should be inspected if it was last seen more than 7 years ago
- for Housing Benefit cases, it should be inspected if it is an HMO, hostel, mooring or site rent, and it was last seen more than 12 months ago (6 months if it was deemed poor when last seen)
If the sole reason for inspection is the time elapsed, then this reason should be selected.
House in multiple occupation
Housing Benefit house in multiple occupation (HMO) cases should be inspected when first referred to the Rent Officer. Further inspections should be made at the frequency suggested above.
If the sole reason for inspection is that the property is an HMO then this reason should be selected.
fair rent cases may be accepted within the normal 2 year period for re-registration when there are changes or improvements to the property, but such material changes which are value significant may also occur on Housing Benefit referral cases and on fair rent cases which are applied for after the 2 year embargo period. If the main reason for inspecting is that changes have been notified to the Rent Officer as having occurred since the property was last seen, then this reason should be selected.
Local Authority request
Sometimes in Housing Benefit cases the Local Authority (LA) may ask the Rent Officer to inspect for some reason. It should be noted that the Rent Officer is in no way obliged to inspect whenever requested to do so by the LA. If the Rent Officer considers the LA’s reason valid and inspects mainly as a result of this request, this reason should be selected.
In fair rent cases it is agency policy to inspect when requested to do so by either party to the application. If a landlord or tenant request is received to inspect and this is the only reason for the Rent Officer to inspect then this reason may be chosen.
When dealing with Housing Benefit cases referrals may sometimes be received from areas where we have little lettings information, or for an unusual property type for which we are seeking lettings information, or from a landlord from whom we are seeking lettings information, etc.
If this is the main reason for the Rent Officer to inspect then this reason should be selected.
Rent Officers should always inspect a case if it is a first time application for registration of rent from a property unfamiliar to us.
When dealing with a first time rent registration application this reason should be selected.
Rent Officers may sometimes come across a fair rent case which we have dealt with before but for which no documents are to be found on record. This is effectively like a first time registration, with no information about the tenancy or property.
In such a rare instance when this is the main reason for inspection, this reason should be selected.
When dealing with an old case, the reason to inspect will generally be years elapsed above.
It is recommended that the Rent Officer does not use this option on VICTER.
If a Housing Benefit referral case is received in an area which is known to contain a large proportion of boarded up properties, or it has other particular problems which affect localised rental values, then this would be a valid reason for inspection.
In this circumstance, this reason should be selected.
There are some categories of letting which it is policy to inspect when they are first referred to the Rent Officer. These include lettings of a room with board, lettings of moorings, and lettings of site rents. If a referral case falls under these categories and has yet to be inspected, the Rent Officer may select the new let reason.
Rent Officer decision
Sometimes an Rent Officer (RO) may inspect a case in order to increase their local market knowledge and familiarity with an area, or because of known changes in that area, such as a new retail development for example, or unexpected movements in the lettings market. Equally the Rent Officer may decide to inspect to investigate particular terms of the tenancy which may be unusual and/or potentially ‘value significant’. Additionally, Redeterminations Officers may want to inspect to address tenant’s representations, or at 2nd or 3rd Redetermination stage as a matter of course. In the above circumstances, the RO Decision reason would be appropriate to select.
It is often good practice to inspect a Housing Benefit referral case where the property is a particularly unusual property type, and making a determination would be very difficult without seeing the property. If the sole reason to inspect is an unusual property type, this reason should be selected.
If a Rent Officer wishes to inspect a property for any reason other than those set out against the above reason categories, s/he should only do so with the agreement of their line manager, and a case note added to the case on VICTER to record the reason to inspect. In such cases the drop down reason to choose would also be agreed with line management, but is likely to be RO Decision.
- Inspection criteria – Housing Benefit
- Inspection criteria – fair rent
Equal and fair treatment of the parties under an application.
When dealing with any fair rent case, Rent Officers must comply with the two rules of natural justice. These rules are:
- No person may be a judge in their own cause - which is the rule preventing bias, and
- No person may be condemned unheard - which means that both parties have a right to be heard
Rent Officers must:
- Not deal with cases where they have a personal interest or where they could be thought to be biased
- Not deal with one party without informing the other party; this rule must be applied at every stage of the proceedings
- Make sure that they tell the landlord about any inspection appointment that they make
- Make sure that both parties are sent all relevant documents and correspondence
Relevant means relevant to the rent being considered. What is relevant is a matter of judgement but would certainly include any representations about:
- the level of rent
- comparable properties
- the condition of the property
- the amenities
- the quality and quantity of any furniture supplied by the landlord and so on
- at consultation allow the parties, in as informal a way as possible
- to call witnesses
- to ask questions
- to make submissions
Allow hearings to be postponed and adjourned so that both parties can be present or, for example, so that some new evidence can be studied. However, the Rent Officer must also make sure that postponements and adjournments do not cause undue delay which itself might create injustice. If Rent Officers feel that one party is deliberately attempting to delay proceedings unnecessarily then they must contact RO Guidance for advice on how to proceed.
In practice Rent Officers must not discuss the rent to be registered with any party without the other party having the opportunity to be part of the discussion.
Rent Officers should not decide on comparables or values prior to attending a consultation. This is to avoid being seen to have made a decision which does not reflect the parties’ right to be heard.
Rent Officers should be careful when leaving or arriving at a consultation with the landlord or his agent. This may lead a tenant to come to the wrong conclusion about the most innocent of conversations and sensitivity is needed here to avoid any accusation of bias.
- Jurisdiction - deciding jurisdiction
- Time management FR
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
Correspondence seeking further information under an application.
Where either a landlord acting alone or a tenant acting alone makes an application to have a rent registered, The Rent Officer must serve a notice on both parties. This notice is the RR2, or RR2S if the application includes services.
The leaflet, “fair rents – The role of the Rent Officer and the rent assessment committee”, should also be sent to both parties.
The following must also be sent to the non-applicant:
- a copy of the application; and
- a copy of any other papers received with the application
In addition, where the landlord makes the application and provides services, he must also:
- specify a sum required to meet the expenditure in providing those services, and
- provide details of that expenditure (see “RR1 - essential information” page)
Details of these services form part of the application and must be served on both parties.
The parties have fourteen days to ask for a consultation. Consultations are meetings between Rent Officer, landlord and tenant to consider what rent ought to be registered.
If the Rent Officer fails to send the notice to one or both of the parties it is in breach of the statutory requirements of Schedule 11 of The Rent Act 1977. The courts will, if asked, quash any registration made.
If, in response to the notice, one party sends in a letter containing information relevant to the assessment of a fair rent, the other party must be sent a copy, unless it contains libellous material.
- Services - schedules
- Essential information – RR1
Services - schedules
Lists of services provided by the landlord under the tenancy.
If a landlord applies for a registration of a fair rent, and that landlord provides services to the tenant, the Rent Act requires the landlord to give certain information about the services and the cost. In the application the landlord must: • specify the sum payable for services; and, • include details of the expenditure incurred by the landlord in providing those services.
The application is not valid unless this information is provided. Landlords often send in a separate service schedule. These details form part of the application; they are not just supporting evidence. This information must be provided before the Rent Officer can proceed.
Rent Officers need an actual figure even if it is only £1 a year. An application form which says that services are provided but specifies “negligible” only is not acceptable. If the required statutory information is not provided the application should be rejected, but the Rent Officer should tell the landlord what information is required. If Rent Officers need further information they can make a formal request for it using an RR3 (available in the forms cabinet). The request should be specific and give a date by which the information is required by the Rent Officer.
Service schedules setting out these details can come in any format. They are all acceptable providing they give the required information and they are relevant to the property being considered. Audited accounts are rarely acceptable as service schedules unless they clearly show details of expenditure relevant to the application being considered. ‘Details’ of the expenditure does not mean ‘proof’ of the expenditure; Rent Officers do not need to see receipts or contracts, and have no powers to demand to see them..
Sometimes a landlord will submit two service schedules – one for the tenant and a more detailed one for the Rent Officer. Often this happens where there are resident staff and the landlord does not want the tenants to know how much the staff earn. To comply with the rules of natural justice, the Rent Officer must always send the whole of the schedule to the tenant. The tenant must see all the information that the Rent Officer will take into account in assessing the fair rent.
Service schedules are scanned onto Victer by NSO when the case is entered. The Rent Officer must check that the correct schedule has been provided and If they need any additional information they should ask for it at an early stage of processing the case so as to meet our performance targets and to optimise customer service.
The application form for registration of fair rent includes the following questions:
|What rent do you want the Rent Officer to register as a fair rent? Include any amount for services and/or furniture provided by the landlord or superior landlord. Do not include anything for rates. Include council tax if this is payable under the tenancy by the tenant to the landlord.||£ per (eg per week, month, quarter etc)||The Rent Officer cannot deal with your application unless you answer this question|
|Are there any services provided under the tenancy? Such as cleaning, lighting, heating, hot water or gardening. If `Yes’, give details.||Yes||Tick one box|
|If you are the landlord (and this is not a joint application) how much of the proposed rent do you think is due to these services?||£ per (eg per week, month quarter etc)||If this is a landlord’s application, he must attach details of the expenditure incurred in providing any services, otherwise the Rent Officer cannot deal with the application|
It’s only when the Rent Officer is dealing with the registration that they will have a chance to establish the value of any services, or if indeed they are so small as to be negligible or unquantifiable. It has nothing to do with whether the landlord thinks the services are negligible or not – it is a decision that only the Rent Officer can make. Only when the amount is too small to reasonably be able to quantify (for instance, a light in the communal hall serving 10 flats) that ‘negligible’ applies.
When Rent Officers are registering fixed amounts for services they are entitled to update these costs using their knowledge and experience to ensure, as far as possible, that the landlord will be able to maintain the services during the ensuing two year period. This would particularly apply when the statement of costs was already outdated, or when the authorities providing public services (gas, electricity, water etc.) had already announced future price changes.
Since April 2003 the government introduced the “Supporting People” scheme, which was intended to remove funding for certain services from the Housing Benefit budget. Many Housing Associations have been advised that services provided under the heading “Supporting People” are not the concern of the Rent Officer, and need not be included in the service schedules for “fair rent” applications. This is not the case, and Rent Officers should be vigilant.
Section 71 of the Rent Act requires that the registered rent includes “all sums payable by the tenant to the landlord, even where these sums are payable under separate agreements” So Rent Officers need to check that service schedules provided include ALL services including “Supporting People” charges if they are provided. If the Housing Association has not provided the information, then it must be requested before proceeding further with the application.
For more information about the way Rent Officers should treat claims for a sum for services, see the Services page.
- RR1 Application
- Natural justice
- Further information required
- Housing association tenancy
Services - Apportioning
How the costs incurred providing services under several tenancies are shared between them.
Once the total value of services for a scheme has been agreed, or calculated by the Rent Officer, this needs to be apportioned between each unit.
There are many different methods of apportionment, but generally Rent Officers only need to confirm the existing arrangements or, if dissatisfied with the reasonableness of the apportionment, apply a method they consider to be fair and reasonable.
Methods of apportionment
###Rateable Value and Gross Value methods
These methods of apportionment are generally easy to understand, but the RV/GV list needs to be readily available, and they are only reliable for identical services. With the introduction of Community Charge and Council Tax, valuation lists have become obsolete as far as residential premises are concerned and these methods of apportionment have become inadequate. They cannot be used for new developments and the Valuation Office has now adopted global assessments for whole schemes most of the time. For these reasons these methods of apportionment are not recommended.
Floor area method
Accuracy is difficult with this method and there are some similar deficiencies to that above. For example, volume of rooms needs to be considered with ground floor rooms of many older houses having much higher ceilings than those of rooms on floors above.
Number of radiators method
This is a simple method, but it must be viewed with extreme caution and Rent Officers would require detailed inspection of all units to apply it. Tenants sometimes add or remove radiators without the landlord’s knowledge and this would have quite a dramatic effect where there is a communal boiler.
Number of rooms method
This is quite a useful method of apportionment, but again the volume of rooms should be similar as well as the floor area.
This method can be inaccurate because all units are apportioned equally regardless of size. For example, a single person in a studio flat can end up paying the same charge as a family in a four roomed flat. It is not a fair or reasonable method and is therefore not recommended.
The majority of schemes developed during and since the 1960s have tended to provide uniform units of accommodation (usually varying from the one person studio to the two or three roomed flat), and it has been common practice to divide the cost of more general services, such as ground maintenance, equally amongst the number of units in the scheme.
It is generally considered that where accommodation is reasonably uniform in a scheme, and a similar occupation rate is achieved this method is to be recommended. It has been commonly used where open market conditions exist and is certainly favoured by most Housing Associations whose accommodation generally falls into this category. But, it is only general services that can be dealt with in this manner. More personal services such as heating and hot water still need to be separately apportioned.
The Valuation Office Agency recommends assessing the value of services in each dwelling by a ratio of unit costs. Rent Officers should consider all factors and determine a reasonable ratio between the flats or houses in a scheme. Every scheme is unique and by applying this method Rent Officers can apportion the services reflecting size of accommodation, ceiling heights (which in modern blocks tend to be uniform), number of radiators and any other relevant factors.
For example - take a purpose built block of thirty flats comprising:
- 10 Studio flats at 25m.sq.
- 10 Two room flats at 30m.sq.
- 10 Two room flats at 35m.sq.
Assume that the cost of provision of general services equates to £3,000 per annum and the Rent Officer decides that an equal apportionment is fair and reasonable at £100 per annum per flat. There is a communal boiler that provides heating and hot water to all flats with an annual cost of £8,000. The Rent Officer has considered all factors and has decided that the flat types relate in a ration of 3 : 4 : 5 for calculation of the other services.
In other words the larger two roomed flat will, in his opinion, use five units for heat and hot water in comparison to the studio flat that will use three.
The computation will work like this.
Calculate total number of units in scheme.
Studio = 3 units x 10 flats = 30 units Smaller 2 room = 4 units x 10 flats = 40 units Larger 2 room = 5 units x 10 flats = 50 units
Total number of units =120 units
Annual costs = £8,000
Therefore cost per unit per annum = £8,000 / 120 units = £66.66
So, the apportioned annual costs of heating & hot water are:
Studio £66.66 x 3 = £199.98 Say £200 Smaller 2 room £66.66 x 4 = £266.67 Say £267 Larger 2 room £66.66 x 5 = £333.30 Say £333
To these figures the £100 per annum for general services is added to give a final total annual amount for services for each flat type as:
Studio flat £200 + £100 = £300 Smaller 2 roomed flat £267 + £100 = £367 Larger 2 roomed flat £333 + £100 = £433
It is considered that this method will give reasonable and probably the most equitable results and should be used whenever possible.
Pooling of service costs
Some housing associations have ‘pool’ costs of the various blocks of flats under their control to produce an average cost per unit. This is clearly attractive for the landlord and some of the tenants, it does mean that one group of tenants is subsidising another group. Unless the terms of the tenancy specifically allowing for pooling of services, it is difficult to see how the costs of services incurred in one scheme affects the costs in another, can be considered fair or reasonable . It is a fact of life that a larger block of flats will usually be far more economical, from the point of view of the cost of providing services, than a smaller block. The number of units in a larger block generally produces economies of scale – in other words, the total cost of services is divided by a greater number of units. So, the cost of services for flats in block comprising forty units will usually be lower than the cost for a flat in block comprising twenty units.
But, this is only one element in the global rent for a property. Although the cost of services may differ from block to block, the global rents for similar flats with similar services etc., should also be similar although not necessarily identical. In the true market situation a tenant may prefer to reside in a small block and pay a slightly higher rent for that privilege.
Accordingly Rent Officers should always require the landlord to supply details of the actual expenditure incurred for the particular block or development under consideration. If such details are not forthcoming then the Rent Officer should proceed to deal with the matter based on his/her knowledge and experience of other similar sized developments provided with very similar services.
If the tenancy agreement actually provides for the pooling of certain service costs within a variation clause, the Rent Officer has to consider whether those terms of variation are reasonable..
The final factors must be reasonableness of costs and value to tenants.
- Services – all pages
- Services - schedules
Services - Board and attendance
Where a landlord provides meals under the tenancy.
A tenancy is not a protected tenancy under The Rent Act 1977 if the rent includes board or attendance. If ‘board’ is bona fide it automatically takes the tenancy out of protection, but ‘attendance’ has to be substantial. (RA1977 S 7)
Board means the provision of meals, and must include an element of preparation and clearing away. It should also include the provision of crockery and cutlery to eat the food with. The provision of only the ingredients of a meal is insufficient to be board. Any amount of board, unless it is so little as to be ‘de minimis’, is sufficient to prevent the tenancy being protected.
Attendance essentially means a personal service to the tenant performed by an attendant and provided by the landlord.
Examples of attendance might include:
- cleaning of the actual house or flat itself (but not communal areas)
- a personal carer
- personal cook/chauffeur/valet
- the provision of a porter (but not caretaker)
- the disposal of rubbish from the property
- delivering letters and parcels
Services such as a warden/caretaker, emergency alarm system, central heating, constant hot water, cleaning of the common parts, or advice to tenants on property or personal matters (to enable a tenant to complete their own HB claim, or do their own cooking or cleaning, for example) do not constitute attendance.
A tenancy will be protected unless the amount the Rent Officer reasonably attributes to attendance form a substantial proportion of the total rent.
There is no specific definition of the word “substantial” in legislation, but various court cases have considered the substantiality question, and the principles represent the best authority and guide Rent Officers have. However, every case should be considered on the basis of the specific facts and circumstances. What is established to be substantial in one case may not be in another.
But, as a general guide, based on caselaw:
- A figure of less than 10% is generally considered not to be substantial
- In excess of 20% would usually constitute a substantial portion
- Rent Officers may need to make further enquiries when the proportion falls anywhere between 10 and 20% to establish whether it is considered substantial, or not
If a Rent Officer considers that attendance is substantial in any particular case it will take the case outside the protection of the Rent Act and they will not have jurisdiction to register the rent. The application should be returned to the applicant with a standard letter. Rent Officers should only reject jurisdiction if the level of attendance is clearly substantial – in many cases the level of attendance may be far higher than 20%, so it will be very clear. However, at lower marginal levels Rent Officers must take care not to reject cases routinely, and should seek further guidance where there is any doubt. It is not expected that the level of attendance will be substantial in all but the minority of cases where the Supporting People scheme is operating.
- Jurisdiction - deciding jurisdiction
Services - calculations of services
How the Rent Officer determines the noted amount for services provided by the landlord under the tenancy.
Sometimes different types of accommodation receive different types and amounts of services. This makes it difficult to analyse and compare. It is therefore generally simpler if the services are grouped together under the following headings, which makes comparability easier:-
- Heating and hot water
- Common parts and communal facilities
- Other facilities
These groups of services are dealt with separately and include a breakdown of what should and shouldn’t be included.
- Services – heating and hot water
- Services – Wardens, Porters and Caretakers
- Services – common parts and communal facilities
Services - Common Parts and Communal Facilities
Heating and Lighting
Generally all amounts reasonably expended on communal heating and lighting should be recovered by the landlord by way of services. The rent officer should compare costs with similar blocks of flats providing a similar service. Comparison with other schemes can also bring to light accounting errors.
Some landlords provide a communal laundry room in a block or scheme. Running costs, and depreciation of plant and equipment, should be apportioned in accordance with the terms of the agreement. In the absence of such terms it is quite common to divide the cost of this service equally amongst the tenants, irrespective of use. If the landlords provide this service on a commercial basis, with coin-slot equipment, then any application for making good an imbalance between income and out-goings should be looked at carefully in the light of the agreement between the parties.
Upkeep of Grounds
Whether the costs for the maintenance of lawns, paths, play areas, car parks, borders and unadopted roads are considered reasonable depends largely on the size of the area, and the quality / frequency of care and maintenance. The quality of this service can be conveniently divided into three categories:
- Comprehensive, including supplying shrubs, plants, etc
- Grass cutting with minimal border/path care
- Grass cutting only
Factors such as distance that a contractor has to travel, the ease or difficulty with which he can dispose of garden refuse and the availability of casual labour are all factors likely to affect the overall cost. The charges for these services vary hugely - In some instances there are very low costs (for example, when a tenant or tenants do the gardening on a purely voluntary basis). But, in some larger schemes it is actually financially better to employ a full-time or part-time gardener.
Maintenance and depreciation of gardening equipment should be dealt with in a similar way to other plant and machinery. Likewise the costs of any tree surgery should be spread over a number of years. In new schemes, the initial cost of stocking gardens with trees, shrubs, plants, etc. should not be charged in full in the first year, but should be spread over a suitable number of years.
Fire Fighting Equipment, Fire Alarms and Smoke Detectors
The provision of fire alarms could be argued as of equal benefit to landlords and tenants. However, it has been customary to allow this as a service. The annual costs of maintenance and repair are included as depreciation items. Be aware that there should be no allowance for a landlord’s supervision, administration and profit on any depreciation items.
The quality of firefighting equipment varies greatly from scheme to scheme. Some landlords may simply provide buckets of sand and water or, at the other extreme, a sophisticated sprinkler system. The general rules should be that money has been spent wisely and that the tenants are receiving value for money. Annual costs would include maintenance contracts, testing of equipment, and repair/replacement. All equipment with a reasonably long life would qualify for depreciation, and the amount included would be governed by the standard of the maintenance contract, if any.
Warden Call System
These systems are common in sheltered housing association accommodation, but private schemes have also incorporated them as a security measure. Rent officers should compare costs with previous registrations, and other schemes providing a similar service. Again, the amount given for depreciation should have regard to the standard of any maintenance contract.
Many larger blocks have a communal coin-box or modern equivalent telephone available. Rent officers should be satisfied that any `shortfall’ claimed as part of the services by the landlord is genuine, and that in such cases a service is being provided which is of general value to tenants. Usually the landlord should receive sufficient income from the coin-box to cover both calls and rental of the line and equipment, or only have to request a modest sum to balance the account. Rent officers will frequently be pressured by tenants to remove the cost of the telephone from their service charge, because they don’t use it / have their own telephone in the flat. Rent Officers must remind tenants that the telephone is a contractual part of their tenancy, and therefore must be charged for. If the tenant’s collectively decide with the landlord that the telephone is not required, then they can agree to have it removed.
Door Entry Phone
For security reasons entry telephones, or even video entry systems (which allow automatic door opening to the block from within individual flats) are very common, particularly when wardens/caretakers are not employed. The running costs often include a maintenance contract and, together with depreciation, should be allowed as a service.
The provision of a system of low-powered bulbs placed at strategic intervals in passages, corridors, staircases etc is of obvious advantage to the tenants. The power source has to be divorced from the normal supply, and is sometimes provided by an independent generator or some other method. The landlord should be able to produce some evidence to support the actual running costs, and subject to this being acceptable a reasonable sum should be allowed to cover running costs, repairs and depreciation.
Communal Television Aerial/Satellite Dish
Where a landlord supplies a central communal television aerial or satellite dish as part of the agreed services to a block, the costs are allowable as a service. The change from analogue to digital television has seen an increase in demands for replacement of existing aerials on communal schemes. Rent officers need to be vigilant as to the amounts requested by landlords for these replacements, and their expected lifespan for depreciation purposes, which we would expect to be little different from that of a standard analogue system.
Sheltered accommodation qualifies for concessionary TV licences only if it forms part of a group of at least four dwellings with a common and exclusive boundary; is erected or converted only for the use of pensioners or disabled people; is run by a Local Authority or Housing Association; is served by a full time or resident warden and has communal facilities within the boundary.
Sheltered housing interspersed with mainstream housing cannot qualify for the concession. The cost under the current concession is £5.00 per annum, per qualifying development. Rent Officers should consider the concessionary value to be the `value to tenant’ whenever it is applicable.
In all other circumstances the current cost of any communal licence should also be regarded as `value to tenant’ and applied as appropriate.
The reasonable costs of pest control are an allowable service item. Where residential accommodation is situated over commercial premises such as supermarkets and restaurants the landlord should only pass part of any charge relating to pest control to the residential tenants.
Many schemes include a guest room for the casual use of tenants’ relatives and friends. They are usually well furnished, and a reasonable charge is made for their use. The value of such accommodation to tenants, who by the very nature of their own accommodation, are unable to provide personal hospitality, will be readily appreciated. Whilst occasionally such guest rooms are occupied sufficiently for the costs to be covered by the contributions made for overnight stays, it is usual for a shortfall to occur. The total annual costs should include heating, lighting and cleaning, laundering of bed-linen, plus a return on furniture, fittings and depreciation. The income would be set off against this `notional total’ and the balance, if any, allowed as a service item.
Communal Kitchens etc.
In addition to guest rooms, some sheltered accommodation, and some
luxury flats' include communal kitchens, laundries, hairdressing salons, etc. in their schemes. It is thought that whilst the initial provision of such facilities should be reflected in the basic rent, the running costs’ are legitimate for landlords to include in their claims for services, and should be allowed accordingly. Comparison with different landlords and schemes should provide the basis for rent officer’s assessment of `value to tenants’.
Rates of Common Parts
If a landlord is obliged to pay rates or water rates specifically for common parts or facilities like communal car parks, which are provided purely for the benefit or convenience of tenants, then such costs are quite properly a charge to the service costs for the block.
Communal Car Parking
Where specific car parking spaces are provided for tenants or guests then these should be reflected within the rent. Only the cost of maintenance of the spaces should be passed on as a service (for example - sweeping, marking out etc).
Interior Decoration of Common Parts
If the landlord maintains the decoration of shared access points over and above usual up keep then this could be treated as a service, although value to tenant should be considered. But generally the landlord’s internal redecoration of the common access ways should not be considered a service to tenants, but rather a fulfilment of their repairing obligations.
The costs of heating, lighting and redecoration of common rooms is an acceptable charge to be passed onto the tenant as part of the services, because they are provided for the benefit of the tenants, over and above the basic requirements of the accommodation.
Repairs to communal heating systems and the structure
S11 of the Landlord and Tenant Act 1985 provides that the landlord is responsible for the maintenance and repair of the installations within the dwelling and structure of the dwelling provided the lease was granted on or after 24 October 1961 for a period of less than 7 years. ‘Common parts’ generally fell outside the definition of dwelling for the purposes of s11, which meant that anything which is not specific to the dwelling, which for flats used to include communal heating systems and the fabric and exterior of the building, were not considered a landlord’s repair liability under s11 and could therefore be charged to the tenant as a service.
This was changed by S116 of the Housing Act 1988 so that for tenancies beginning from 15th January 1989 communal heating systems, and the fabric and exterior of the building was brought into the definition of the dwelling, and became a landlord repairing obligation, and therefore not chargeable to the tenant as a service.
It is then the case that for flats, repairs to the fabric and exterior of the building may be seen as a legitimate service, and noted as such in the noted amount for services on the rent register, if;
- The tenancy began before 15th January 1989, or
- The letting is one to which Section 11 of the 1985 Act does not apply.
- Services – apportioning services
- Depreciation table
- Services – value to tenants
Services - deficits and surpluses
Where the landlord has collected too much or too little service charge to cover the costs of providing services.
When making a determination of fair rent the Rent Officer is establishing a fair rent for the property at a particular time, which compares with rents of other similar properties in the locality. The object is not to enforce the contractual obligations of the parties, for that is a matter between those parties and ultimately for the court, if they cannot agree. So, where a landlord has allowed a surplus or deficit in the service charge to accrue, the Rent Officer should ignore it and assess a global rent in the usual way. The adjustment of service charges for any such arrears or excess repayment is a matter of contract between the parties. To do otherwise would destroy the true comparability of one property with another. There are statutory time limitations for the recovery of arrears of service costs, which is another very good reason why a Rent Officer should ignore such items.
There is one obvious exception to the rule, where the deficit or surplus has occurred in the immediate previous year’s costs and the inclusion of either would produce an updated true annual cost, then it would be prudent to include such items.
- Service schedules
- Services – all other pages
Services - definitions and rent register notation
What services under the tenancy are, and how they are recorded.
Definition of a service
The term “service” has no general statutory definition. However various court cases over the years have concluded that if a landlord supplies, for the benefit of his tenant, something beyond the requirements for the basic provision of accommodation (whether or not furnished) then this would be a service.
So, a ‘service’ is something beyond the basic provision of the accommodation, and if it were not carried out by the landlord the tenants would have to do it (or at least pay for someone to do it) themselves.
Although in practical terms once a tenant has accepted a tenancy, they have little control over the type and volume of the services provided, there are arrangements in place that enable unreasonable service charges to be challenged through the courts
Service or service charge?
It is important to recognise the difference between a ‘service’ and a ‘service charge’. A ‘service charge’ is an amount payable by a tenant as part of, or in addition to, the rent and may include not only services, but also things like maintenance and repair of the structure of a building, insurance, and general management costs. Most of these latter items are already reflected in a registered rent, as they are part of a landlord’s normal repairing obligations and management responsibilities.
S11 requirements and service charges
Where a tenancy commenced on or after 24th October 1961 for a contractual term of less than 7 years, the landlord is usually required to maintain the structure of the dwelling and the water supply, drainage and facilities for space and water heating in the dwelling. The tenancy agreement may already provide for this liability, but where it does not then s11 of The Landlord and Tenant Act 1985 implies these terms into the contract. This does NOT mean the landlord cannot charge the tenant for this provision, but what it does mean is that the Rent Officer cannot include it as a service as (referring back to the definition of a service) it wouldn’t normally be something a tenant would have to provide for themselves. The landlord would receive an amount for this provision in the basic rent or the service charge.
Amount noted on register
When registering the rent, the Rent Officer is required to note on the rent register an amount for “services” and “Fuel” included in the registered rent. Whilst there is no statutory obligation for a Rent Officer to note on the register an amount of ‘service charge’ included in the registered rent (as distinct from the requirement to note an amount for ‘services’) nevertheless unless such an amount is noted the parties will have no clear understanding what amount the Rent Officer has included as being fair and reasonable, and from which future increases or decreases may be calculated.
In addition, since the introduction of the Rent Act (Maximum fair rent Order) 1999, if the amount of variable service charge is not noted in full, then the Rent Officer will be unable to correctly calculate the maximum fair rent under the Order. It is therefore essential that Rent Officers show the full variable sum on the register. It may well be necessary for a separate amount for ‘services’ to be noted on the register to conform to the statutory requirement of section 72.
*Services – all other pages
Services - depreciation table
Where capital costs involved in providing services are written off over a period under the tenancy.
Guide to the useful life for items of plant and machinery
- Lift 25 – 30
- Lift with comprehensive maintenance 50
- Central heating boiler Non-Condensing) 10 – 20
- Central Heating Boiler (Condensing) 10 – 15
- Carpets 10 – 12
- Furniture 10 – 12
- Laundry equipment 5 – 8
- Lawn mower 5 – 8
- Refuse containers 10
- Fire alarms 15 – 25
- Fire fighting equipment 10 – 12
- Door entry phone 15 – 20
- Warden call system 10 – 15
- Emergency lighting 20
- TV aerial (Analogue & Digital) 20
- Satellite Dish 10
- Cooker 5 – 8
- Refrigerator 5 – 8
- Wind Turbine 20 –30
- Inverter 10 – 15
- Solar Photovoltaic Panels 20 – 25
- Solar Water Heating Panels 20 – 25
- Biomass Plant 25 – 30
- Ground Source Heat Pump 45 –50
- Rainwater Harvesting Tank (Below Ground) 60
- Rainwater Harvesting Tank (Above Ground) 20 – 30
- Rainwater Harvester pumps 5 – 10
- Rainwater Harvester Controls 10 – 15
This is not intended to be a comprehensive or exhaustive list - it is merely a guide. Rent Officers make their own decisions about the useful life for each item of plant or machinery taking into account all the circumstances, and using their own knowledge and experience.
- Services – common / communal areas
- Services – apportioning services
- Services – calculation of services
Services - excluded items
What are not considered to be services under the tenancy.
Repair, maintenance and insurance of the dwelling structure, fixtures and fitting and of the installations within the dwelling as specified in section 11 of the Landlord and Tenant Act 1985
Provision, repair and maintenance of communal halls, stairways and passages.
Provision of fixtures and fittings, including radiators, pipes, etc. within the dwelling.
Refrigerators, cookers and washing machines within the dwelling, if only provided by the landlord with no covenant to keep in repair or to maintain, would usually be treated as furniture. Cookers in communal facilities should be treated as a service.
Decoration of common parts, other than communal rooms.
Interior decoration of dwellings, including provision of decorating materials.
Management costs for other than service items.
Staff training levies.
Deficits and surpluses arising from previous years’ costs
• Services – included Items • Services – heating and hot water
Services - global rent
Consideration of the rent including any services charge.
The ‘global’ rent
When assessing the amount to be included in the ‘global’ fair rent to reflect the value of the services supplied by the landlord, the objective is that the landlord should receive sufficient income from the amounts paid in respect of the services to enable him to discharge his obligations properly and adequately.
The Rent Officer must be satisfied that the total ‘global’ rent registered for the dwelling, including the services, represents a fair rent under the provisions of sections 70 and 71 of the Rent Act 1977. If the actual cost of a particular service incurred by the landlord can be shown to be unreasonable, then an appropriate allowance should be made. Although Rent Officers must look carefully at the cost of the provision of services, they must also ensure that the amount included in the rent fairly reflects the value to the tenant.
It is extremely important to note that it is the Rent Officer’s final global valuation, the ‘registered fair rent’ as entered on the register, that is the basis for comparability with similar properties, not merely the basic rent.
The assessment of the ‘global’ rent is a legal requirement. In other words, the rent should be similar to that for similar accommodation with identical or almost identical services, irrespective of any difference in the cost of those services, and should represent value to the tenant.
The amount attributable to services entered in box (e) of the register sheet should reflect the reasonable cost of providing the services as efficiently as possible with the existing equipment, assessed at the date of registration. An amount for services should always be shown in box (e) unless the amount is so small as to be unquantifiable.
The practicalities of the ‘Global Rent’ principle can be shown by a simple example:
A landlord owns two purpose built blocks of flats built in the mid 1960s. Block A consists of twenty one bedroom flats and block B of thirty similar one bedroom flats.
The same comprehensive services are provided to each block and the costs are very similar, approximately £10,000 p.a. in each block.
It is fairly obvious from the outset that a straight division of the total service cost would create an anomaly between blocks A and B
Block A Block B Service Cost £10,000 Service Cost £10,000 / No. of units / 20 / No. of units / 30 = £500 per unit, per annum = £334 per unit, per annum
The flats are identical other than the difference in numbers within each block, and it is assumed that this difference does not affect the general rental values.
Given these circumstances the Rent Officer would value the flats at the same ‘global’ rent; BUT the amount for services would be different.
Block A Block B Registered Rent £3,000 p.a. Registered Rent £3,000 p.a. including services of £500 p.a. including services of £334 p.a.
The end product is a registered rent which compares with other similar properties and the landlord is reimbursed for the reasonable costs of providing the contractual services.
- Services – all pages
Services - heating and hot water
Where the landlord provides heating and hot water under the tenancy.
Fuel costs (oil, gas, electricity, solid fuel, etc)
Ideally this should be calculated on the average consumption over the previous three years to avoid the effects of an especially severe or mild winter, and multiplied by the current price per unit. Solid fuel consumption can be similarly calculated and an addition made for labour charges for stoking, clearing ash, etc. Rent Officers should be aware of the volatility of fuel prices, and make adjustments to ensure that the landlord receives sufficient income to discharge his commitments under the tenancy.
For tenancy agreements of less than seven years entered into after 24th October 1961 the provisions of section 11 of the Landlord and Tenant Act 1985 apply to the dwelling, but centrally provided plant (such as boilers) was excluded, and could be charged as a service.
From 15th January 1989 section 116 of the Housing Act 1988 amended S11 of the Landlord & Tenant Act 1985, and now mean that the provision, repair and maintenance of a centrally provided heating system or hot water boiler is an implied landlord’s statutory repairing obligation and therefore would not be eligible as a service item to such tenants.
Section 116 of the Housing Act 1988 extended landlords’ existing repairing obligations (under s.11) to cover communal boilers etc serving a dwelling, not just those within it.
So, for any tenancies commencing on or after 15th January 1989 this is now a standard repairing obligation on the landlord. But, for older agreements (before this date) there exists no such implied landlord’s liability on centrally provided plant, and it would generally quite correctly be treated as ‘a service’.
This means that a landlord may generally recover the cost of communal boiler repairs etc. (by way of the services) from tenants who are still under a pre- 15th January 1989 tenancy agreement, but not from those tenants who have had new agreements since that date. In this respect it may be necessary for a landlord to break down his schedule of service costs into two sections to cover the different obligations.
In the highly unlikely event of a boiler man being employed the Rent Officer should make sure that no separate charge is made to cover this role.
It is usual to employ independent maintenance engineers who might also carry out repairs. In this event the two items, repairs and maintenance, might well be combined. When separate maintenance contracts exists, they are an admissible item of cost against the services, subject to the usual provision of the Rent Officer being satisfied as to their fairness and also to the landlord’s implied statutory obligation.
Contracts vary and before deciding what is a reasonable cost the Rent Officer should find out what is included.
Servicing of individual boilers
Landlords are normally responsible (under s11 of the Landlord & Tenant Act 1985), amongst other matters, for keeping in repair and proper working order the installations within the dwelling for space heating and heating water. However this does not include anything that the tenant is entitled to remove (such as a tenant provided fire). The landlord is required to obtain an annual gas safety certificate under The Gas Safety (Installation & Use) Regulations 1998, but this does not extend to repairing a tenant provided appliance, merely to “make it safe” – essentially disconnecting a faulty appliance makes it “safe”.
The tenant is under a duty to use the dwelling in a tenant-like manner.This has been established as including:-
- Taking proper care of the place
- Treating the property as it was their own
- Repairing damage caused by them or their guests
There are a variety of service packages available ranging from basic inspection to a full parts and labour warranty. The standard of service package must be considered and must take into account both the landlords and tenants obligations
Good insurance cover is to the advantage of the tenants and is an admissible charge. Regular inspection of plant and machinery is a matter of common sense - not only does it help ensure reliability but, more importantly, inspection ensures safety of operation.
There are a wide range of insurance packages and cover options available. It would be wise to find out what is covered and although not necessary to examiner the policy be aware of what is and isn’t included.
The other main factors to examine are covered elsewhere in this manual and the principles are the same. These are:
- Management and supervision
The recommended method of calculation of the cost is to take the actual original cost of the plant, dividing it by the number of years in its actual past and estimated future life. In determining what the future life of such plant is likely to be, the knowledge and experience of the Rent Officer will be brought into play, but as a general guide boiler sections are often taken over 10 years, firing equipment over 15 years and pumps over 5 years.
A factor that must not be overlooked when considering depreciation is that where an item is replaced it is the new replacement cost and revised estimated life that must be taken into account.
Rent Officers should be vigilant, and carefully look at depreciated items. It is not uncommon for landlords to provide “current replacement values” rather than original costs. They should also be aware that If an item has been fully depreciated and has not been replaced, no further allowance for depreciation should be made.
- Services – all other pages
Services - included items
What are considered to be services under the tenancy.
Heating and hot water
- Fuel (gas, oil, electricity, coal, coke etc)
- Repairs/Maintenance contracts – boilers, heat exchangers, hot water tanks, communal radiators and pipes
- Insurance of boilers, oil storage tanks etc
- Electricity for pumps etc (not usually metered separately)
- Administration/Supervision allowance and profit
- Depreciation of plant
- Fees of Energy Saving Consultants, if appropriate
- Common parts and communal services
- Cleaner’s wages including holiday relief
- Cleaning materials
- Electricity for lighting, power for vacuum cleaners and polishers, etc
- Replacement lamps
- Window cleaning in common parts
- Refuse sacks provision, hire of refuse containers
- Emergency lighting maintenance
- Communal radio, TV aerial maintenance and communal television licence fee
- TV relay rental and satellite relay
- Fire/smoke detection alarms maintenance
- Smoke dispersal equipment maintenance
- Fire fighting equipment maintenance
- Door entry telephone rental/maintenance
- Pesticides and pest control contracts
- Communal telephone rental
- Maintenance of common parts, grounds and car parks
- Gardener’s wages/Contractor’s charge
- Repair/maintenance of gardening tools and equipment
- Plants, shrubs and tree lopping – annual provision (if appropriate)
- Employer’s liability and third party insurances
- Administration/Supervision allowance and profit
- Maintenance and depreciation of door entry telephone/fire fighting/detection equipment, warden and other call systems, radio and TV aerials, vacuum cleaners, lawn mowers etc
- Ventilation and air conditioning equipment maintenance
- Maintenance of water softening and purification systems
- Plant and equipment testing required by statute
- Porters, wardens, caretakers
- Salaries/wages/honoraria, excluding a percentage for the landlord’s management function
- Employer’s pension contribution
- Employer’s National Insurance contribution
- Council Tax, water and sewerage rates on porter’s/warden’s accommodation
- Uniforms/Overalls allowance
- Gas and electricity allowances on porter’s/warden’s accommodation
- Decoration allowance on porter’s/warden’s accommodation
- Administration/supervision allowance and profit
- Notional reasonable rental value of rent free accommodation
- Depreciation of office furniture
- Passenger and goods lifts
- Electric power
- Repairs/Maintenance contract
- Administration/supervision allowance and profit
- Depreciation of plant
- Special facilities
- Electricity for lighting and cooking etc, in communal rooms, laundries and kitchens
- Decoration of communal rooms, laundry rooms etc
- Cleaning and repair of communal furniture, carpets etc
- Insurance of furniture
- Administration/supervision allowance and profit
- Depreciation and maintenance of refrigerators, water heaters, cookers in communal kitchens, laundry equipment, communal room furniture and carpets
- Maintenance and depreciation of burglar alarms and security lighting
- Maintenance and depreciation of cookers, refrigerators and washing machines within the dwelling if repaired and maintained by the landlord
- Special facilities for the disabled
- Charges for services provided under the “Supporting People” scheme
Administration/supervision and profit on services
Management charges and profit is usually calculated at between 10-15% of actual costs. This however is not applicable where a landlord’s subsidiary company carries out the work and includes such costs in its charge to the landlord company, as it would be a duplication of charges to the tenant. Likewise such additions are not applicable on notional items such as the rent of the caretaker’s accommodation.
But, no allowance for profit on depreciation is allowable.
The above list comprises items recognised to be services. It is not, nor can it be, exhaustive, but it forms a useful basis and a guide as to whether other more unusual items should be included.
- Services – all other pages
Services - management chargers
Costs incurred by the landlord in managing the provision of services under the tenancy.
Management charges are an allowable service so any amount attributable to the management of the provision of services should be clearly indicated in the service schedule. The value of any management element within the registered rent is generally accepted as being around 10% of the gross value of the services (excluding any depreciated items) plus up to 5% profit on the gross value of the services. This is an indicative maximum value generally adopted by Rent Officers and the First-tier Tribunal (formerly know as the Rent Assessment Panel).
Landlords may include set charges for the management of services in their applications for registration of rent, which is acceptable. However they may also include a management charge for depreciated items – it is not acceptable to pass this particular management charge on to a tenant. Depreciated items represent the replacement value of items of capital expenditure in relation to the provision of services, such as lift plant, so management charges on such items would not be appropriate. Rent Officers should work through the service schedule provided and apply their own calculations to determine value for money to the tenant based on the amount of management of the contractual services that is provided on their behalf by the landlord.
For example if the only service provided to the tenant is communal lighting, this would attract a minimal charge because the management in this instance would simply involve paying the bill for the communal lighting and maintaining the system. You would not expect to see a high management charge for services that require very little management.
Rent Officers can vary the figure given in the schedule if they find that it does not comply with approved practice or value to the tenant by comparison with the rental value of services provided on similar tenancies.
Shared ownership schemes
Management charges are also allowable for management of the lease for a shared ownership property. So Rent Officers should consider whether the amount requested by the landlord represents value to the tenant, bearing in mind the terms of the lease and comparable evidence. The cost of managing a shared ownership lease would usually be minimal, for clarification this is not in respect of collecting rent which would be no different from an ordinary tenancy. Some housing associations include the costs of staircasing (changing the tenant share) within the management charge, others charge a one off fee. Rent Officers should be aware of particular contractual arrangements.
Rent Officers should work through the schedule to ensure than the requested amounts, whether for services, management or insurance, represent value to the tenant. Consideration should be given to fact that the costs of a block insurance policy and its management are likely to be significantly lower than for individual contracts. Any figures that do not meet the value for money criteria should be amended.
Where services are included, separate figures should be given on the schedule for the management of the services and the management of the lease, and they should not be combined. Landlords sometimes include a combined figure, which is an incorrect approach; in these cases Rent Officers should seek clarification from the landlord to ensure the correct figures are obtained, separated for management of services and management of the lease.
- All other services pages
- Shared ownership
Services - miscellaneous
Various matter concerning services under the tenancy.
Depreciation should be allowed for floor coverings and the provision and washing of mats or rugs to protect entrance carpets to the common parts in bad weather. Other service charges which are claimed from time to time include floral displays, flood-lighting of entrances, hire of paintings and other works of art. Christmas decorations, national flags, and the hire of bunting for special occasions have also formed part of such claims.
In each case the two basic rules should be applied:
- is such expenditure approved by the tenants (in the terms of the lease, or by a tenants’ committee, etc.) or at least supported by them as a body?
- are they receiving value for money?
Projection of service costs
Rent Officers should be aware that when assessing an amount for (fixed) services, they are setting an amount which will form a limit until the next registration in 2 years time. Only known inflationary (or deflationary) items can be considered e.g. Rent registration in June with known increase (or decrease) in electricity charges in the following September.
Estimates from contractors for new contract/period can also be considered, for example rent registration in June. Gardening contract expires the following January, and a new contract has been agreed.
Value Added Tax
Landlords who are registered for VAT purposes should be allowed to recover in their services whatever they have paid for, or have become liable to pay, as a direct result of the provision of services. Where a variable rent has been registered, it will be possible for the landlord who provides services which are liable to VAT to charge the tax to the tenants, if it is within the terms of the variation already entered in the register. Some landlords make an addition to their total costs and call it ‘management’. They then add VAT because management charges quite properly attract VAT. However what is being added is a notional amount which is better described as ‘administrative and supervision’ and VAT is not chargeable on such a notional amount.
- Services – depreciation table
- Services – included items
- Services – value to tenant
Services - non-contractual
Where services provided under the tenancy may not be written in a tenancy agreement.
Contractual services are those services that are provided by the landlord and are detailed in the tenancy agreement. Non-contractual services are those that the landlord has provided in addition to those detailed in the agreement, and therefore he is not contractually bound to continue to supply the service.
The Rent Officer should not normally allow for variation in the cost of non-contractual service items, but exceptionally they may do so if both parties agree. The cost of non-contractual services should only be included in the global rent if the Rent Officer is satisfied that the landlord will continue to supply them. However, the Rent Officer may decide to discount the amounts payable for them if they consider there is a degree of uncertainty as to whether the services will continue to be supplied because the landlord is not under a duty to provide them
- Services – variable services
Services - private water and drainage
Where the landlord provides water or drainage under the tenancy.
In some rural areas landlords undertake responsibility for supplying water to tenants, and agreements generally stipulate that the cost of this service should be recovered from the tenant.
It is recommended that the maintenance and repair of a septic tank or cesspit should not be treated as normal property maintenance. The rent would not allow for such a landlord’s obligation in the usual way. However, a prospective tenant faced with renting a house would look at his total outgoings of rent (including any service charge) plus local taxes and water rates, before making a choice between properties on offer.
It should be assumed that a tenant would be willing to pay the same total cost for either of two identical houses whether or not connected to a main drainage system, as long as the disposal method was satisfactory. Drainage or sewerage rates are a tax on occupation and the cost of emptying or cleaning a suitable size tank once or even twice a year is usually less than the average charge by a water company. It would therefore be reasonable to allow the landlord an additional amount for the maintenance of the system, up to the balance of the rate charge, so that the tenant’s total outgoings are the same, whether or not the house is connected to main drainage.
The emptying of such tanks or pits would also normally fall upon the tenant as a charge to be paid under ‘water rates’, and as normally water companies would reduce their charges for properties not connected to mains drainage, such a
service' by the landlord should be allowed on the basis of value to tenant’.
- Services – included items
- Services – value to tenant
Services - supporting people
Where the landlord provides personal care under the tenancy under the Supporting People scheme.
‘Supporting People’ is a Department for Communities & Local Government (DCLG) grant funded programme delivered and administered at local authority level. It has been in place since April 2003. The scheme provides separate funding for housing related support services to a wide range of vulnerable people to enable them live independently in the community. The aim of the scheme was to ensure that ‘support’ services are no longer payable through the Housing Benefit budget.
Funds under the scheme are paid to local authorities in the form of a support grant who either pay an amount to the tenant themselves (so that the tenant may pay their own support costs), or the funds are paid directly to the support provider on the tenants behalf. Although the system of funding has changed there are often no changes to the actual services provided to tenants.
Registrations and supporting people
The Rent Act 1977 has not been amended since the introduction of the Supporting People scheme. In general terms a service is something provided by the landlord beyond the normal basic provision of the accommodation. They are things the tenant (perhaps, jointly with other tenants) would normally have to provide for themselves, if not provided by the landlord. Support would fall into this category. So basically, if the tenant pays the landlord for a service (or arranges the landlord to be paid on his/her behalf - for example, via Housing Benefit), then full details must be provided in the landlords application, and the Rent Officer must take them into account in the registration. Rent Officers are obliged to include all charges payable within the registered rent, and note the amount for services (including any supporting people charges) on the rent register. If there are any supporting people charges included in the registered rent they must also note in “Remarks” - “The registered rent includes property related support charges under the supporting people scheme”. This is to alert a local authority who may be paying Housing Benefit for the tenancy to check their records to see if they are already paying the support provider separately for the support element to avoid the possibility of “double funding”.
However, when Rent Officers register a rent there is no distinction between normal property related services or personal services (even if they are property related), unless they can be classed as attendance. So, regardless of what ‘label’ a landlord attaches to groups of services, such as ‘support’ charges, Rent Officers must deal with them like any other service. In other words, on an individual basis, measuring the cost against the test of reasonableness and value to tenant. Therefore, Rent Officers need to look at any breakdown of ‘support costs’ submitted by a landlord, before deciding which individual items can be considered as a service, and whether any constitute attendance.
Rent Officers must check all RR1 applications carefully and be aware that some landlords do not include the costs of ‘support’ in their applications for registration and service schedules - as a consequence there is a risk that an amount for the support element could be missed off the registration. If support services are omitted in error the Rent Officer does not have the power to re-open the case and reconsider their decision. If either the landlord or tenant are unhappy about the rent that has been registered and/or the omission of these services they have the right to object to a Rent Assessment Committee.
If previous registrations have included services which are now missing from a current application, such as warden costs, Rent Officers should check to see why (or if) they are no longer provided. If the service is still being provided then a revised schedule will be required including those costs. Registered rents must include any sums payable by the tenant to the landlord for services even where the support element is payable under a separate ‘support agreement’.
DCLG do not expect that the level of attendance will be substantial in all but the minority of cases if the ‘Supporting People’ scheme is being operated as intended. The programme is designed to give advice and support to tenants on property or personal matters (to enable the tenant to complete their own HB claim, or do their own cooking or cleaning, for example). It isn’t intended to include the provision of someone to physically do the work for the tenant, like a cleaner or cook for example, which would constitute attendance. Attendance essentially means a service personal to the tenant performed by an attendant and provided by the landlord.
Examples of attendance might include:
- cleaning of the actual house or flat itself
- a personal carer
- personal cook/chauffeur/valet
- the provision of a porter (but not caretaker)
- the disposing of rubbish from the property
- delivering letters and parcels
Services such as a warden/caretaker, emergency alarm system, central heating, constant hot water, or cleaning of the common parts do not constitute attendance.
If the level of attendance is substantial the Rent Officer will not have jurisdiction to register the rent, even if they have done so in the past. It should be noted here that ‘support’ is not necessarily ‘attendance’, and vice-versa.
- Rents cannot be registered omitting certain services, even if they are provided under a separate agreement to the tenancy, so long as they relate to the tenants’ occupation of the property
- Rent Officers need to look at the costs of individual items included under the heading of ‘support’ or ‘Supporting People’
- If the amount of attendance (which may include some of theses support charges) is substantial, then the tenancy may not be a protected tenancy
- If the registered rent includes any supporting people charges Rent Officers must note in “Remarks” on the rent register - “The registered rent includes property related support charges under the supporting people scheme”
- Services – Board and attendance
- Services - schedules
- Jurisdiction - deciding jurisdiction
Services - updating costs
How the landlord’s costs of providing services under the tenancy are updated.
If the service costs presented with the application for registration are more than six months out of date (audited figures can often be as much as a year or more out of date and these can be the only figures available) it is recommended that these should be amended in line with current costs.
The major items of cost are fuel and wages. For fuel an average of the previous three years’ consumption multiplied by the current cost of fuel should produce a satisfactory figure.
Heating oil consumption: Year 1 Year 2 Year 3 30,000 litres 35,000 litres 32,500 litres Average annual consumption = 32,500 litres Current fuel costs = 35p per litre 32,500 litres at 35p per litre = £11,375 per annum
For wages, the current weekly bill including National Insurance contributions should be multiplied by 52 weeks, plus the number of weeks holiday entitlement to produce an updated amount.
Other items should be adjusted for current costs where known and any remaining items can be brought up to date as far as possible using the retail price index.
It is recommended that a copy of the schedule prepared by the Rent Officer for the purpose of calculating their best estimate of the current base figures taken into account in the rent determination should be sent to the parties to enable any excess charge to be calculated in subsequent years.
- Services – calculation of services
- Services – value to tenant
Services - value to tenants
The Rent Officer’s consideration of the value to the tenant of the provision of services under the tenancy.
The Rent Officer must include in the registered rent a sum for services which are provided at a reasonable cost. Reasonableness of charges is defined in section 19 of the Landlord and Tenant Act 1985. If the actual cost of the provision of a service is reasonable by comparison with the cost of the provision of other similar services in the locality, this would probably be the most compelling evidence of the reasonableness of the service charge. ‘Cost to the landlord’ and ‘value to the tenants’ would usually equate and the Rent Officer would register accordingly.
Case law has identified areas where cost to the landlord did not equate to value to the tenant. For example a landlord who chose to heat his property by uneconomic means, would not offer his tenant value for money, and in those cases the Rent Officer would be entitled to make an appropriate deduction from the service amount.
Many landlords choose to obtain fuel and electricity from a variety of independent sources, and Rent Officers should be aware that deregulation in the gas and electricity markets have enabled third party suppliers to reduce their overall costs over a period of time. It may be that landlords actual costs have reduced, giving the tenant better value for money year on year, and this should be reflected in the service amount.
Value of available facilities
If the ‘reasonable cost’ of a service is correctly assessed, it should represent the true value to tenants. The fact that some tenants never use a communal telephone does not prevent them being fairly and correctly charged for the landlord providing the facility. The same principle applies to television aerials, communal rooms, drying rooms, laundry rooms etc. It also applies to tenants on the ground floor of a block of flats who should pay their fair share towards the cost of the provision of lifts within the block. After all what is being assessed is the rental value of the benefits of the services which are offered at the outset of the tenancy, whether or not the tenant chooses to use the facility is immaterial
The Rent Officer must be satisfied that the sum for each particular service represents the reasonable ‘going rate’ for that service in the locality at that specific time. This is following a basic valuation principle of comparing ‘like with like’.
Management and profit
Rent Officers should be aware that management and profit on services are an allowable service, This is generally accepted as being 10% Management on the gross services (excluding any depreciated items) and 5% profit on services.
Rent Officers should be aware that some landlords attempt to apply “set” charges for management, often include depreciated items, and do not always represent value to the tenant.
It is therefore imperative that Rent Officers work through the service schedule provided and apply their own calculations to determine value for money to the tenant, changing any figure they find in the schedule that either does not comply with approved practice or value to the tenant.
- Services – apportioning services
- Services – common and communal areas
- Services – calculation of services
Services - variable services
Where the landlord can vary the service charges under the tenancy.
Although it is common to refer to registered rents with variable services, the statutory provision is actually for the registration of a variable rent. The Rent Officer has to be satisfied that the terms allowing variation are reasonable.
Section 71 (4) of the Rent Act 1977 states; “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; any services provided by the landlord or a superior landlord, or 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 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.”
Rent Officers must make the decision to register a variable or a fixed rent separately from the decision about the amount of the total or individual charge for the services, or whether the terms are reasonably administered. The Rent Officer is solely charged with satisfying themselves that the terms as to the variation are reasonable. In this respect the following points should be borne in mind;
The clause is paramount
While the Rent Officer has a certain amount of discretion in the contractual requirements in order to be satisfied as to the terms of variation being reasonable, the agreement should contain a clause which includes certain essential elements, which are described in detail in the separate handbook page “Services – Variation Clause”. In the absence of such a clause, or if the Rent Officer considers the clause insufficient, the rent should be registered with fixed service charges.
The Rent Officer must be satisfied that there is a contractual obligation to provide services and that the variation clause allows for fair and reasonable variation of the service charge element. Ideally the Rent Officer should see a copy of the agreement in order to scrutinise the variation clause, and should retain it on the VICTER case file.
There may be circumstances in certain cases where the Rent Officer can satisfy themselves that there are reasonable contractual terms to allow variation without the need for a copy to be attached to the file. There may, for example, be a copy of the standard agreement used by the landlord in question, which is retained in a shared drive folder. If the agreement is not attached to the VICTER file, a case note should be added to the case to explain the basis on which the Rent Officer has satisfied him or herself regarding the terms of variation. An example of such a note may be “standard agreement viewed”, “sample agreement on file”, or perhaps “variation clause adequate”. If lengthier or more complex deliberations were carried out, and case notes provide insufficient space to record the decision making process, than a file note in Word should be attached to the VICTER file.
‘Should’ means ‘Must’
If the Rent Officer considers the terms as to variation are reasonable, they must register the rent as variable. If not, they must not.
Identification of appropriate services
Rent Officers have no power to vary the terms of the agreement, but must reflect the terms of the agreement in the registration. The agreement and consequently the registration may exceptionally allow for the rent being variable for some items but not for others. However the Rent Officer considers the whole global rent including all services, so if some of the services are variable under the terms of the agreement, the global rent is registered as variable. The variable elements need not be separately identified on the register – the parties may refer to the agreement to identify them.
Non-variable cost and increases
In cases involving variable rents the Rent Officer must not accept an application on the grounds of a change in the cost of services. In non-variable cases they may accept an application provided they are satisfied that the cost of providing the services has increased or decreased to a substantial extent which was unforeseeable by the Rent Officer when the rent was originally registered, so as potentially to make the current registered rent no longer a fair rent.
Contract versus statute
Even where a variable clause is considered to be reasonable, it may still be invalid if it purports to contract out of statutory provision. If, for example, a clause makes the tenant liable to contribute towards the cost of keeping the structure of the dwelling-house in repair under a lease which clearly attracts section 11 of the Landlord and Tenant Act 1985, that provision of the clause must be invalid. Even if certain clauses are invalid in this way, the Rent Officer may register the rent as variable anyway, if the variable clause itself is considered to be reasonable.
There is an implied term of contract that costs and standards in respect of services are to be fair and reasonable.
Rent register notation
Where a rent is registered as being variable, Rent Officers must state the amount within the rent at the registration date which has been attributed to services, and this must be entered on the rent register. In this instance there can be no ‘service element’ and the amount should not be described as the ‘noted amount’ on the rent register. Although these phrases are automatically generated by VICTER, the Rent Officer should check that the correct and intended notation appears properly on register entries. This may be done at register preview stage on VICTER.
Where services are recoverable under the terms of variation in the particular lease under consideration, the following recommended standard variation clause should appear in the remarks section of the rent register:-
‘The registered rent (including £ … per … for services as determined at the date of registration) is variable in accordance with the terms of the agreement.’
Even though the fair rent is registered with variable services which may be subject to future fluctuations, the Rent Officer must apply the same detailed considerations as they would to fixed service charges.
Whether Rent Officers register rents as variable or fixed, they should register a rent which allows, during the ensuing two year period, for landlords to receive a service charge which will defray their reasonable expenditure on services during that period.
It is completely unacceptable for Rent Officers to ignore their statutory responsibility to value the services where the tenancy has a variable agreement on the basis that it matters less because the landlords have the scope to vary the charge.
- Services – variation clause
Services - variation clause
The clause in the tenancy agreement which allows the landlord to vary the service charges.
Whether the registration of a fair rent is made variable or not depends on the Rent Officer or Rent Assessment Committee being satisfied as to the terms of variation under the tenancy agreement. If the terms conform to the following principles, and the proposed apportionment appears reasonable the Rent Officer or Committee should be satisfied.
It is very difficult to envisage the appropriate registration of a variable rent unless the tenancy agreement contains:
- A contractual obligation to provide the services specified. 2. A provision that any increase or decrease in the rent payable is based on actual or estimated reasonable costs. The procedure for the recovery by the tenant of any amounts that may have been overpaid should be clearly set out. 3. An endorsement containing reference to the basic service charge included in the rent at the time of the commencement of the tenancy 4. An unambiguous statement indicating the methods of apportionment which will be adopted if and when any variation occurs. The method of apportionment should be clearly stated and not left to the discretion of any third party. 5. The tenant’s right to receive full information on service costs and to inspect relevant documents. Reference should also be made to the procedure which the tenant is entitled to follow where they are in dispute with the landlord as to the reasonableness of costs and standard of services. 6. A provision stating that the rent payable shall not be varied more than twice in any one year.
Items (1) to (3) are considered to be essential requirements for the establishment of a legally enforceable variation clause.
Item (4) is highly desirable, although there have been cases where the variation clause has contained all but this apportionment element, the Rent Officer has registered a fixed rent, and that decision has been successfully challenged. Therefore if this is the only missing element it may not preclude the Rent Officer from registering a variable rent, particularly if the apportionment method is transparent in practice and is not disputed by the parties to the application.
Item (5) restates a tenant’s statutory rights under the provisions of the Landlord and Tenant Act 1985. Failure to include Item (5) does not affect the tenant’s statutory rights. Therefore if this element were missing, it would not alone prevent the rent from being registered as variable.
Item (6) is recommended best practice and while it would be unusual to waive this requirement, if this element were missing it would not prevent the rent from being registered as variable.
The Rent Officer has a degree of discretion over whether a variation clause is acceptable or not, but guidance and advice is available via the guidance team in any individual case, which may help the Rent Officer make that judgement.
The actual wording of the variable service charge clause is clearly a matter for the parties, and Rent Officers are not in a position to offer guidance in the drafting of such a clause. Nevertheless, protracted discussion on the matter has taken place by and between interested parties over a period of some years, and the following clause finally emerged as likely to be acceptable:
Example of acceptable service charge variation clause
(1) The rent payable includes £……….. as the amount ascribed to the provision of the following services by the landlord (as attached Schedule).
(2) The service charge (subject to clause (3) below) represents …. (a fixed proportion) of the total service charge for:……….(insert address of scheme or development) (3) Any increase or decrease in the rent payable caused by a change in the amount of the service charge will be notified by the landlord to the tenant in writing giving at least four weeks notice. The landlord undertakes not to alter the amount of rent payable more than once in any period of 26 weeks.
(4) If requested by the tenant (or tenants’ association) the landlord must provide a summary of the costs included in the service charge. Such a request must be made within six months of the period concerned or one month of the request for payment whichever is later and the summary must be certified by a qualified accountant who is not an employee of the landlord.
If the tenant (or tenants’ association) has received a summary he can ask to see the landlord’s accounts, receipts, or other papers affecting the summary. This request must be made within six months of receiving the summary. If they are dissatisfied with the information given, the tenant may apply to the County Court to determine whether the costs or the standard of services supplied are reasonable.
- Services – variable services
Services - Wardens, Porters and Caretakers
Where the landlord provides wardens porters and caretakers under the tenancy.
Various terms are used for these occupations, some of which overlap. Some porters, caretakers, housekeepers and wardens also carry out cleaning duties, gardening and sometimes boiler maintenance. For the purpose of comparison exercises with other blocks, allowance for such ‘additional duties’ should be made and separated from the normal warden/porter function.
Whilst wardens/porters are provided for the benefit of tenants, it is usual for part of their duties to be of direct assistance to the landlord in the management of the premises. They will often advise on the need for repairs to the structure, give access to builders, show prospective tenants over vacant accommodation, even give landlords prior information about tenants’ financial difficulties, and generally keep an eye on the property on behalf of the landlord. Some allowance should be made to the tenant for such services to the landlord, and it is customary to allow approximately 85% of the total warden/porterage costs as a service, with the remaining 15% being considered as relating to work done for the benefit of the landlords, and therefore included in the rent itself. However, this percentage division should not be slavishly followed, and there may be many cases where a more appropriate adjustment should be made.
The term ‘porter’ usually means a person, often in uniform, employed to spend time in the entrance to the premises, who is available to assist tenants and visitors with luggage, calling taxis, etc. The more general term of caretaker, warden, manager or housekeeper should be used, as appropriate, in other cases.
Allowance should be made for staff replacement during holiday periods.
Some landlords have their own pension schemes, whilst others pay into Government schemes; in either case suitable payments should be approved as forming part of staff remuneration.
In some cases staff may pay a proportion of their accommodation costs in exchange for a higher salary, and the full circumstances of remuneration and payment need to be examined closely in every case.
If free accommodation is provided by the landlord the notional rent forms part of staff emoluments, and they are likely to be taxed on the hidden benefits. The Rent Officer should satisfy himself that the ‘total salary/wage’ (i.e. including the value of free accommodation, heating, etc.) is giving the tenants value for money, and any lavish or excessively large accommodation would be scaled down in the notional rent. The same 85/15% split should also be followed for supervision, administration and profit, which were not an acceptable addition to the notional rent. Some allowance may also have to be made for council tax, but the principles shown above should be followed.
The valuation of the notional rent is commonly based on an equivalent fair rent level particularly on sheltered schemes, but the valuation could quite properly be calculated on a market rental basis.
Council Tax for resident porter’s/warden’s accommodation
If the employing landlord compensates their employee by making an allowance for the porter’s/warden’s liability for Council Tax as part of the latter’s emoluments then that may be considered as a proper charge towards services. Whether the total costs are then reasonable is a matter for the consideration of the Rent Officer or Rent Assessment Committee. Payment of the full Council Tax brought about by the occupation of others within the accommodation however could well be considered as unreasonable if charged to the services account.
Much of the cost of the use of the telephone by porters/wardens is for management purposes and will therefore be included in the notional ‘administrative and supervision’ allowance. However some use of the telephone is undoubtedly for the benefit of tenants. It is usual to include the rental for the telephone line, any equipment (external bells etc.) and extensions and VAT on the rental. In addition a reasonable number of units calculated at the current cost per unit should be included for the calls made on behalf of tenants (e.g. to doctors or relatives).
There is generally an optimum size for a block of flats below which it is uneconomical to provide a porter/warden service. In smaller blocks the unit cost will be high, whilst in larger blocks it will be low. However the smaller blocks may not be receiving a noticeably better service. Some housing associations have sought to remedy this problem by providing an ‘overall or pooled warden service’, each tenant being charged the same figure whether living in a small or large block. This seems to be a sensible system which Rent Officers could accept provided, as in other service charge items, they are satisfied that tenants are receiving value for money.
The generally recommended apportionment is 85% of the charge to the tenants and 15% to the landlords for management tasks performed by the warden/porter. Although for sheltered schemes the proportion charged to the tenants could be less. But in every case the Rent Officer must be satisfied that the apportionment is reasonable considering all the circumstances, and taking into account geographic area, duties, and hours worked.
- Services – apportionment of services
- Services – included items
- Services – value to tenant
- Services – common and communal areas
Where the lease provides that the tenant is ‘part renting and part buying’ the dwelling.
Shared ownership is a form of tenure under which the occupier pays a premium which entitles them to a discount on the rent they pay. This is often understood as part-buying and part-renting a home. The occupier is actually granted a long lease on payment of a premium calculated as a proportion of the market value of the property with vacant possession. These schemes tend to be administered by nominated housing associations, with the housing association owning the freehold in the property. Tenants would normally obtain a mortgage to pay the premium and be liable for the mortgage repayments. In addition, the tenant would then pay rent on a proportion of the property, set at the corresponding proportion of the fair rent for the property. It was hoped that in time most shared ownership tenants would buy further proportions of the equity share until eventually they owned the whole of the premises. This process is called ‘staircasing’.
Shared ownership leases granted on or after 10th December 1987 cannot be protected tenancies and are outside of the rent officer’s jurisdiction.
Rent officers may still register fair rents for shared ownership properties where the original lease was granted prior to 10th December 1987, even if the lease has been assigned since that date.
Shared ownership leases are not subject to the rules of succession. On the death of the tenant the lease is vested in the deceased’s estate until assigned to a new shared ownership tenant by the executors of the estate and the landlord.
Valuing shared ownership cases is similar to other fair rent valuations. Rent officers still need to start from the market rent for the property and make appropriate adjustments to produce a base rent (or equivalent fair rent, which would be the registered rent in an ordinary case). However the registration must take account of the different repairing liabilities which may apply in shared ownership cases and the equity share (sometimes referred to as the premium). The shared ownership lease will show the repairing liability and this must be reflected in the adjustment at part 3 of the worksheet referred to below.
Tenants of shared ownership houses will typically have full repairing liability. The amount of the deduction from a typical open market rent, to reflect the repairing liability will vary according to the type, construction and age of the property, (see the handbook page on the valuation approach to full repairing leases).
The liability in shared ownership flats may vary between individual cases. It is likely that the landlord will retain the liability to repair the structure of the building but the tenant may take on the liability for things actually inside the flat that would normally be a landlord’s responsibility, such as the electrical, hot water and heating systems. Such items might include the bathroom fittings, kitchen units, any plumbing that is contained solely within the flat, electric wiring and plasterwork. In cases where the liability is split like this the adjustment may typically be between 5% to 12% but will vary according to the exact terms of the lease.
Management and insurance
Management charges are allowable, but rent officers should consider whether the amount requested by the landlord represents value to the tenant, bearing in mind the terms of the lease.
Management and insurance costs borne by landlords in shared ownership cases are not strictly speaking ‘services’, but in one respect they are treated similarly. This is because the landlord incurs costs in providing them, and the rent officer should seek the information about these costs in order to determine the registered rent.
If an application for registration of rent has insufficient information for the rent officer to know the costs incurred by the landlord in managing the shared ownership tenancy (which may include provision of true services, but may simply be administration and audit costs) then the rent officer may be able to take a view of the likely reasonable costs involved, and the value to the tenant. The ‘management’ costs the rent officer needs here relate to the management of the lease, which may be simply the cost of arranging insurance. Management of services may be included in the general services costs, as they would be in a non-shared ownership case.
Insurance costs are more difficult to predict, because they depend on many variables including construction methods and specific location. The landlord’s liability here is the insurance of the building (against fire and other potential damage). The actual costs incurred must be sought from the applicant if they are not provided with the application. This should be requested using an RR3 where information is missing from the application. However in the absence of such information, for example where there is no response to the RR3, the application should not be rejected because the insurance costs are not a true service and so the lack of information about the costs incurred do not invalidate the application.
Where the costs incurred are not provided and there is no response to the RR3, the rent officer must proceed to register the rent on the basis of comparable costs for management and insurance of similar tenancies in similar areas. This approach should be made clear on the RR3 using wording such as,
“If you do not provide information in the next 7 days about the costs you have incurred in insuring the dwelling and managing the lease, I will have to proceed with the application on the basis of comparable information which may be less accurate and appropriate for the subject tenancy.”
Rent Officers must not simply accept the service schedule without investigation. They must ensure that the requested amounts, be that for services or management / insurance, represent value to the tenant, and should amend any amount that does not meet this criteria.
A shared ownership worksheet showing the considerations and calculations necessary is available from the forms and letters page of the intranet. It is essential that the valuation is carried out in this strict order, and that the terms on the worksheet are used and carried forward onto the rent register so that the shared ownership lease can operate fully and correctly. The gross rent should be shown in the remarks box.
Maximum fair rent
Shared ownership registrations are subject to rent capping (Maximum Fair Rent) in exactly the same way as any other registration. The cap is applied to the existing registered rent irrespective of whether there has been any change to the percentage equity held by the parties.
- Housing association tenancy
- Transfer / Assignment / Mutual Exchange
- MFR Maximum Fair Rent
- Full Repairing Leases; valuation approach