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12/05/2010

Of fair rents, disrepair and unreasonable temptations

Ahmed & Ors v Murphy [2010] EWHC 453 (Admin)

This was an appeal to the High Court of a decision by the London Rent Assessment Committee (LRAC) that the maximum fair rent payable by Mr Murphy for the flat in Brick Lane, Spitalfields was £8.50 per week. The appeal was brought by the landlords, the Ahmeds. Neither the tenant, Mr Murphy, nor the LRAC attended or were represented.

As a case, it is primarily about assessment of maximum fair rent for protected tenants, but there is something for everyone in there, from security of tenure to ‘reasonable notice’ in disrepair. It also features one of the most bewildering set of appeal submissions by solicitors that I’ve yet seen, and that even includes my own. This is a lengthy post, because the case covers a lot of ground and because the details of Rent Act protection are no longer common parlance.

Mr Murphy had a tenancy of the first floor flat 132 Brick Lane since, it appeared, July 1974. On that basis, he was a Rent Act 1977 protected tenant. A fair rent of £8.50 per week was registered in 1984. There was no copy of any original written tenancy agreement and the 1984 registration had it as “Landlord responsible for repairs and external decorations. Tenant responsible for internal decorations. Subject to section 11 Landlord and Tenant Act 1985”.

The flat was always poor accommodation, “comprising 2 room(s), 1 WC, 1 area with sink”, off the first floor landing. (No bathroom etc.). The flat was furnished, initially, by the landlord. In 2008 it was described as follows:

The two rooms of the tenancy were heavily stacked with boxes, books and other personal belongings. The flat was barely habitable and no decoration, repairs or essential improvements have been carried out for many years. The only cooking and washing facilities were located in the scullery which only contained the original stone sink with only cold water. The flat lacked heating. The rear room, although described as the kitchen, contained no units or sink. There was no plasterboard to the ceilings and the underside of the floor joists of the floor above were visible within the flat which is subject to disturbance from both the restaurant below and the flat above

In about early 2008 – the date was unclear – the four Ahmed brothers acquired the long head lease of the building. The had plans for the building. The upper floors were converted into a three bedroom flat, finished to a high spec, and let for £2,600 per month. The Ahmeds approached Mr Murphy in July 2008, stating that they wished to undertake extensive works of repair and refurbishment. Mr Murphy agreed in principle that the landlords could carry out ‘legal adjustments’ and asking that his books and papers be stored in the then empty upstairs flat during works.

Through their solicitor, the landlords then served a notice on the tenant on 18 July 2008 notifying him that they wished to have access to his flat to carry out their planned improvements, refurbishment and repair work. The tenant responded to the landlords’ notice on 19 July 2008 by informing them that he wished to remain in the flat whilst landlords carried out such of their proposed work as they were entitled to carry out and, in the meantime, to move many of his possessions temporarily upstairs so that he had access to them.

The Ahmeds’ response, through their solicitor, was to inform Mr Murphy’s solicitors that extensive works of refurbishment were planned and that the flat would then be let at a commercial rate. The Ahmeds told Mr Murphy he would have to move out during renovations, but that they would not provide alternative accommodation. Mr Murphy’s solicitors responded that Mr Murphy had never agreed to leave the flat and then return at a full commercial rate. He had nowhere else to live and this was his main residence.

To this, the Ahmeds’ solicitors responded that:

the tenant was not a tenant at all. It was suggested that his tenancy had been granted by [a] Mr S Haque at a time that he had no interest in the property or right to grant a tenancy to the tenant. As a result, it was contended that the tenant’s rent protection should have been ended when whatever interest held by Mr Haque in the property terminated many years previously.

Some 6 weeks after this last letter, the Ahmeds, in an act of quite stunning shortage of eptitude, applied to the Rent Officer to register a fair rent for the property, contending that the rent should be between £140 and £160 per week. (Their later explanation in the grounds of appeal, drafted by their solicitors, of how this application was somehow congruent with their insistence that Mr Murphy wasn’t a tenant was that “As the [tenant] was tricky and avoiding his duty and responsibility to be co-operative with the appellants being the landlords, they applied to rent service to fix a fair rent.” Which only makes things worse).

The Rent Officer, however, accepted the Ahmeds’ contention that the flat had not been refurbished or repaired because the tenant had refused to allow the work to be carried out. For reasons not given, the Rent Officer also evidently decided that The Rent Acts (Maximum Fair Rent) Order 1999 did not apply, and assessed the fair rent as £90 per week from December 2008.

The 1999 Order sets a cap on the increase in any registered fair rent, or previously payable rent, for protected tenancies.

The maximum fair rent is calculated by uplifting the previously registered fair rent by an amount ascertained from the application of the formula. This formula is based on the relative movement in the Resale Price Index (“RPI”) in the intervening period between the date on which the previously fixed or agreed rent took effect and the effective date of the new fair rent. The 1999 Order exempts from the cap any fair rent increase of at least 15% that is attributable to repairs and improvements carried out by the landlords.

£90 wasn’t enough for the Ahmeds, so in a continued display of eptlessness, they referred/appealed to the LRAC, again seeking a rent in the £140-£180 per week bracket. I can’t resist a quote from the Ahmeds’ solicitor’s reference/appeal document:

the landlords have offered the tenant and always are willing to develop the living condition which have been resisted him by be (sic) demanding and looking for an unreasonable temptation to be provided him with accommodation in a bed and breakfast whilst the refurbishment works to be carried out. He was paying few pounds whereas his demand was to provide him accommodation in an alternative accommodation, did not make any sense, which was needless to be considered as perverse and irrational on his part. Due to long awaiting need of refurbishment in the accommodation … if the refurbishment and improvement were allowed the potential rent will be far more than £200 for the two rooms. … In the light of that the rent of £90 would be much lower than it should have been. The maximum rent provision should thus not applicable in the disputed premises.

The LRAC decided that:
(1) The exception contained in the 1999 Order was not applicable. This exception, mentioned above, provides that a fair rent increase is not covered by the capping provisions of the 1999 Order if at least 15% of the fair rent increase in question is attributable to improvements or repairs that had been carried out by the landlords.
(2) The likely market rent would be £125.00 per week.
(3) A deduction of £93.75 should be made for the difference in the condition considered usual for a letting of the kind in question and the much poorer condition of the tenant’s flat.
(4) A further deduction of 20% should be made for the substantial scarcity of properties to rent that existed in the Greater London locality.

The LRAC set a capped rent of £6.00 per week from March 2009, later amended to £8.50 per week when the LRAC realised that the current rent was £8.50 and that Article 2 (4) of the 1999 Order means that there can be no decrease in rent as a result of the relevant calculations.

The Ahmeds, clearly learning from experience, appealed to the High Court.

The grounds of appeal are drafted in a diffuse and ungrammatical manner and they do not clearly identify the points of law that are raised in relation to the LRAC’s decision. However, five issues can be seen to be raised by the notice of appeal and a further issue of law arose during the course of the hearing. These six issues of law are as follows:
(1) Whether, as contended by the landlords, the tenant is not a protected tenant at all but is instead, a short-term tenant who has no statutory protection or a licensee so that the LRAC, in consequence, had no jurisdiction to register either a maximum or a fair rent. If so, the Rent Register should be corrected by the removal of the registration of a maximum rent.
(2) Whether the LRAC failed to give any or any adequate reasons for its conclusions relating to the inapplicability of the 1999 Order, the choice of comparables and the calculation of the discount that it applied.
(3) If the LRAC had jurisdiction, whether it was in error in determining that the tenancy was subject to The Rent Acts (Maximum Fair Rent) Order 1999 (“the 1999 Order”) that capped the increased rent so that the significantly lower maximum fair rent and not the fair rent otherwise decided on should be registered and recovered. The landlords contend that, instead, the LRAC should have reached the same conclusion as the Rent Officer, namely that the tenancy was not subject to the 1999 Order and that the fair rent should be registered.
(4) Whether the LRAC was in error, if it had been correct in determining that the 1999 Order was applicable, in the way that it applied the capping formula in the 1999 Order, specifically in not taking account of the rebasing of the applicable index that had occurred in January 1987.
(5) Whether, in determining a fair rent, the LRAC erred in not properly taking account of appropriate comparable rents and in discounting the fair rent on account of both disrepair and scarcity.
(6) What should be the effective date for the registration and effect of the maximum or fair rent finally arising from this appeal from the LRAC’s determination. The three contending dates are the effective date of the Rent Officer’s determination, the LRAC’s decision or the date of the Administrative Court’s order determining this appeal.

Held:

On (1) this ground of appeal was withdrawn by Counsel, who had had no part in drafting it, but fell to be addressed as it went to the jurisdiction of the LRAC. The contention that Mr Murphy was not a tenant was rejected as having no legal or factual basis. On the Ahmeds’ application to the Rent Officer “It would appear that the landlords were under a misapprehension that the fair rent jurisdiction could be used not for fixing a fair rent [but] for the quite different purpose of their being able to obtain access to the flat to enable them to undertake repairs and general refurbishment.” This was the only explanation of their application to the Rent Officer when they were denying there was a tenancy.

On (2) – lack of reasons – the LRAC had given sufficient reasons for the Administrative Court not to interfere with the decisions:

A Rent Assessment Committee, like any judicial decision, must give adequate reasons for its decisions. What amounts to adequate reasons can only be determined in the context of a particular decision. In this case, the decision was made by a specialist tribunal with a legally qualified chairman and two non-lawyer colleagues. Their remit was, essentially, to exercise their professional expertise and experience to fix a fair rent taking account of the factors identified as relevant by the governing statutory provisions. That exercise involved a considerable element of local knowledge and a value judgment involving such matters as amenity, relevant comparable rents, levels of scarcity and the habitability of the property in question. […] The committee, with the agreement of the parties, conducted an unaccompanied view.
In those circumstances, the reasons and reasoning could be brief and it would have been sufficient for the decision merely to identify the relevant factual findings that were made with brief reasoning that identified why those findings were made and any essential supporting evidence relied on to support and shape those findings.

There was one exception where the reasons were inadequate, addressed in (3) next.

On (3) – the lack of applicability of the 1999 Order – the main contention by the Ahmeds was that paragraph 7 of the Order applied.

(7) This article does not apply in respect of a dwelling-house if because of a change in the condition of the dwelling-house or the common parts as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord or a superior landlord, the rent that is determined in response to an application for registration of a new rent under Part IV [of the Rent Act 1977] exceeds by at least 15% the previous rent registered or confirmed

The Ahmeds’ argument was, it appears, that the tenant had wilfully prevented works being carried out that would have raised the rental value by over 15%, where the landlord had both the intention and the means of carrying out the works which could and should have been completed before the application to the Rent Officer. In short, the para 7 exemption could not be avoided by the tenant wilfully refusing access. They further argued that the LRAC had failed to give adequate reasons for the decision that the 1999 Order applied.

The Court found that the LRAC had failed to give adequate reasons in this instance. Although it was within their jurisdiction to decide whether the Order applied, regardless of whether the Ahmeds had raised it as an issue in their reference/appeal, the LRAC had not adequately explained why the Rent Officer’s decision was overturned. It was within the Administrative court’s powers on appeal to review the issue on the information provided to the LRAC and the court went on to do that.

It was true that if a tenant had unreasonably refused access for works that the landlord was entitled to carry out, in breach of the express or implied terms of the tenancy agreement, the unremedied disrepair should be disregarded for the purposes of the rent assessment, s.70 Rent Act 1977.

Had Mr Murphy unreasonably refused access and what works were the Ahmeds entitled to carry out?

The tenancy was governed by the terms implied into it by Landlord and Tenant Act 1985. The court found that s.8 (fitness for habitation), s.10 and s.11 applied and governed the repairing obligations of the landlord and the tenant’s duty to provide access.

(In this I would suggest that HH Judge Thornton QC had actually fallen into error, perhaps as only one party was represented and attended. The rent on the flat was £8.50 per week, which puts it well above the upper rent limit for London of £80 per year required for s.8 and s.10 to apply. This does not appear to have been contested at the hearing. However, as s.11 does apply, with what are lesser repairing duties on the landlord than s.8, this in no way invalidates the findings the Court went on to make).

The paragraphs on the repairing obligations and on what constitutes reasonable notice are worth quoting in full:

40 These obligations [s.8, 10 and 11] are not onerous. They require the landlords to maintain the premises in the state of repair that it was in at the time of the grant of the tenancy in 1974 but they do not require the landlords to undertake any improvements save as are necessary to keep the premises in a state fit for human habitation. Thus, in these premises, there was an obvious and essential need to provide facilities for cooking, to repair the ceilings, to eradicate the damp, to provide a hot water supply and to decorate the common parts and the exterior of the premises. These obligations would not extend to providing central heating, partitioning or any other improvements, refurbishment or development works. If the landlords wished to carry out any such additional work, this could only be undertake with the agreement of the tenant, which he would not be obliged to provide. That agreement would need to cover what effect, if any, the non-essential work would have on any rental increase could be made to reflect any improvement resulting from this non-essential work and on any other term of the agreement. If agreement could not be reached, the landlords could only carry out, and insist on being provided with access to carry out, repairs and other essential work that they were required to complete.

41 The tenancy does not contain any express terms as to the provision of access. However, the implied obligations, supplemented by the statutory provisions that I have outlined, include an obligation on the tenant to provide reasonable access for the carrying out of reasonably required repairs. As a corollary to that obligation, the landlords are subject to a requirement to give reasonable notice of the required access and to make reasonable provision for the work in terms of the timing, manner of work and the disturbance and disruption it might cause the tenant. Reasonable notice would need to include full details of the proposed work and the manner in which it was intended to carry it out and reasonable period of time within which to prepare for the proposed works and their execution. If access can only reasonably be obtained by the temporary removal and storage of the tenant’s belongings or by the vacation of the flat or by carrying out the works in a particular sequence or method of working, temporary alternative storage, temporary accommodation or appropriate working methods would have to be provided by the landlords at their expense. The nature and extent of such arrangements would be governed by what was reasonably necessary. The tenant would be entitled to withhold consent for access unless and until the landlords had made all necessary alternative arrangements or had agreed to pay for them and had the means of paying for them.

42 In summary, therefore, the tenant could only be considered to have refused access if the landlords had previously given reasonable notice of wishing to carry out repairs and other work as they were required by law to undertake and if the tenant’s refusal was unreasonable taking account of any proposed alternative arrangements and any funding for such arrangements that had been suggested by the landlords to cover the disruption and disturbance to the tenant that would be caused. In short, the landlords would need to show that their request was reasonable and that its refusal was unreasonable. Moreover, they would have to show that the request only covered work that they were obliged in law or by the terms of the lease to carry out. Insofar as the request extended beyond such work, access for such additional work could only be required if the tenant had agreed to it being carried out. The tenant would have had no obligation to agree and he could not be required to agree to any such extra work.

Thus, given the facts set out above, including the landlords denying that he had a tenancy at all, Mr Murphy’s refusal to allow access was wholly reasonable and could not trigger the exemption via para 7 of the 1999 Order and s.70 Rent Act 1977. The LRAC’s decision was entirely right in this regard even if it was not clear how the LRAC had reached it. There simply was no reasonable request for access.

(4) – the application of the 1999 Order capping mechanism

I will leave detailed discussion of this point to a forthcoming post on a interlinked case, Compatriot Holdings Ltd v The Chairwoman of the London Rent Assessment Committee and others. However, what was held was that the LRAC had erred in its use of the Index of Retail Prices by not taking into accout the ‘rebasing’ of the Index that took place in January 1987 (resetting the index to a base of 100 at that date). Although the relevant passage of the capping formula simply stated that the figure for the Y element of the formula was to be:

the published index for the month in which the rent was last registered under Part IV before the date of the application for registration of a new rent and the X figure is the index published in the month immediately preceding the month in which the determination of a fair rent is made under Part IV

This did not mean the exact figure printed for that date in the Retail price index, but rather the figure adjusted to take account of any intermediate rebasings (since the index began in 1947, rebasings happened in January 1952, January 1956, January 1962, January 1974 and January 1987). The LRAC should have appreciated that its approach was nonsensical because if the X and Y figures came from either side of a rebased date, the figure for the rent increase would inevitably be negative, as they found here.

The correctly calculated figure for the capped rent was £12.

(5) had the LRC erred in not taking account of comparable rents and in reducing the figure provisonally for scarcity and poor condition?

On the comparable rents, the Ahmeds had presented no evidence to the LRAC save for the rent of the 3 bedroom flat upstairs, which was in no way suitable as comparator. On both the comparable rents and scarcity, the LRAC was expressly constituted to have specialist local knowledge and was able to make such assessments. The Ahmeds’ belated sheaf of internet print outs from letting agents was not admitted, but was not sufficient to give comparators in any event. The fair rent found by the Rent Officer – £90 – and by the LRAC before deductions – £100 – were sufficiently similar to suggest accuracy. The discount for poor repair was based on the evidence presented and a site visit and was not assailable as ‘provisional’.

On (6) the proper date for the start of the revised rent of £12 per week was the date that the LRAC’s rent assessment would have been in effect, June 2009.

Appeal allowed to the extent of the revision of the capped fair rent. No order as to costs.

Aside from the details of fair rent assessment, which of interesting, if now of limited use, the more general observations on eligible repairs, what constitutes reasonable notice and circumstances in which a refusal of access may itself be reasonable are potentially of use in the broader run of disrepair cases, where allegations of tenants refusing access by landlords are common. While it is explicitly notice pursuant to repairs under s.11 (and s.8 & 10) Landlord and Tenant Act 1985 that is addressed, the same principles of reasonable notice can be argued for the expresss terms of a tenancy agreement. The kind of information that should be be provided for notice to be reasonable could well be of use to tenants’ advisors.

Now, does anyone know who solicitors for the Ahmeds were? The judgment is, perhaps mercifully, silent on this. Emails please, rather than comments. Let us be merciful too.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

2 Comments

  1. Gill Hughes

    Could you let me know who Mr Murphy’s solicitor was in this case? Thanks

    Reply
  2. NL

    Dunno. He wasn’t represented at the appeal and didn’t attend.

    Reply

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