Ahmed & Ors v Murphy

Introduction

This is a statutory appeal by landlords against a decision of a panel of the London Rent Assessment Committee (“LRAC”) that determined and registered a maximum fair rent for premises whose address is First Floor Flat, 132 Brick Lane, London, E1 7BU. The appellants, who are four brothers (“the landlords”), are long lessees of the entire building and superior landlords of the premises and the respondent, Mr Clive Murphy (“the tenant”), is the protected tenant of a furnished weekly tenancy of these premises.

The landlords had originally applied to the rent officer by an application dated 28 October 2008 to register a fair rent. The rent officer decided that the rent was exempt from the capping legislation that prescribes a capped maximum fair rent and, in consequence, registered a fair rent of £90 per week with effect from 22 December 2008. The landlords had applied for a fair rent to be fixed within the bracket of £140 to £180 per week and, in consequence, they referred that decision to the LRAC on 22 January 2009. The LRAC determined that the rent was subject to a capped maximum fair rent and determined a maximum fair rent of £6.50 per week in a decision dated 6 March 2009. This figure was corrected by the LRAC in its statement of reasons published on 28 May 2009 by directing that a figure of £8.50, being the current rent, should be registered as the maximum fair rent with effect from 6 March 2009. The effective date of that decision was 28 May 2009. This second decision is both the effective decision of the LRAC and the decision that is the subject of this appeal. The landlords initiated this appeal by serving a notice of appeal on 23 June 2009. The appeal is brought as of right from the LRAC’s decision to the Administrative Court on points of law by virtue of section 11 of the Tribunals and Inquiries Act 1992.

The tenant is a party to this appeal since his interest is directly affected by it. He has been served with the notice of appeal in accordance with the provisions of CPR 52.4(3) but he has neither been represented at, nor has taken any part in, the hearing of the appeal. Paragraph 17.5(1) of the Practice Direction to CPR 52 requires the panel of the LRAC to be served with a copy of the notice of appeal by service on the chairman of the panel. The panel chairman was, therefore, also named as a party to the appeal since section 151 of the Supreme Court Act 1981 requires those who must be served with a notice of appeal to be named as a party to the appeal (Footnote: ¹). It follows that the tribunal party to these appeals are the three panel members who sat on and determined the reference to the LRAC.

The chairman of the LRAC instructed the Treasury Solicitor to act for the LRAC and the Treasury Solicitor notified the Administrative Court that that tribunal did not intend to apply under CPR 52.12A(1)(b) to file a respondent’s notice or to attend the hearing of the appeal. Following that notification, the LRAC neither appeared nor was represented at the hearing but it did file a witness statement from the Vice-President of the Residential Property Tribunal Service relating to the fourth and principal issue arising in the appeal. Permission to file this witness statement was sought in a letter to the Administrative Court from the Treasury Solicitor dated 22 October 2009 as required by CPR 52.12A(1)(a) but, as no objection was raised by the landlords to this evidence being adduced at the hearing, no formal order was made by the Administrative Court. The witness statement was added to the appeal bundle and its contents were considered at the hearing.

The landlords are tenants of the entire property having acquired an assignment of a long lease from the previous long lessee, a Mr T. Ali. The date of this assignment was not in evidence but since the tenant described the landlords as his “new landlords” in a letter to their solicitors dated 19 July 2008, that date must have been sometime in the earlier part of 2008. The tenant has been a sitting furnished protected tenant for many years. No copy of his original tenancy agreement was any longer available.

However, this agreement was recorded in the Rent Register by the rent officer when registering the only previously registered fair rent on 20 June 1986 as having been entered into on 22 July 1974 with S. Haque and as allocating liability for repairs as follows: the tenant was responsible for internal decoration, the landlord was responsible for all repairs and external decorations and the tenancy was subject to the provisions of sections 32 and 33 of the Housing Act 1961. A copy of the list of furniture provided by the landlord was provided to the rent officer. A fair rent of £8.50 per week was registered on 20 June 1984 and this rent remained current rent at the time of the landlords’ application to the rent officer that initiated these proceedings.

When the rent officer registered a new fair rent on 22 December 2008, the premises was defined as the First Floor Flat comprising “Non-self contained Rooms, C 1800 – 1918; without central heating comprising 2 room(s), 1 WC, 1 area with sink. The allocation for liability for repairs was stated to be:

“Landlord responsible for repairs and external decorations. Tenant responsible for internal decorations. Subject to section 11 Landlord and Tenant Act 1985.”

The registration also stated that the details of the furniture provided by the landlord were as per the details held by the rent service. This would appear to be the same tenancy subject to the same terms as that created in 1974 that was evidenced by the 1984 registration save that the governing legislation was now set out in the Landlord and Tenant Act 1985.

The flat that is the subject of the tenant’s protected tenancy is located on the first floor of a four-storey terraced building that was built in about 1903. These premises are located in Brick Lane, a well-known street of predominantly Asian restaurants just to the east of the City of London. The LRAC’s decision stated that the adjacent area was one of considerable night time activity and was one which was not particularly conducive to quiet residential enjoyment of the flat. The building consists of a Balti restaurant on the ground floor, the tenant’s flat on the first floor and a second flat that was completely refurbished and renovated to a high standard in the summer of 2008 on the second and third floors. These two flats are approached from a separate staircase to the side of the restaurant. The first floor flat has an open landing which leads to the two floors above. The tenancy comprises two rooms, a scullery and a WC. It lacks basic amenities and no repairs or redecoration has been carried out in or to it for many years, possibly since the tenancy commenced in 1974.

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:

The tenancy is a weekly furnished tenancy which, having been granted in July 1974 soon after statutory protection was extended to furnished tenancies, has always been a protected tenancy. It therefore remains subject to the statutory regime for both protection and rent regulation that is applicable to such tenancies currently set out in the Rent Act 1977.

A furnished protected tenancy that was created 1974 and 1988 is and remains subject to rent regulation notwithstanding the creation of shorthold tenancies in 1988 by the Housing Act 1988. The position is similar for unfurnished protected tenancies that were created between 1965 and 1988. An application to determine a registered fair rent for a protected tenancy may be made to the rent officer by either the landlord or the tenant at intervals of no less than two years following a previous determination and any new fair rent must be registered following such a determination. The manner in which the fair rent is to be determined is provided for in the Rent Act 1977.

Since 1999, any increase in the registered fair rent, or previously payable rent where no fair rent has ever been registered, has been subject to a statutory cap that is calculated in accordance with the formula set out in Article 2(1) of the 1999 Order. This cap precludes a registered fair rent increase in excess of that resulting from the operation of the statutory capping formula so that, if the proposed increased fair rent exceeds the prescribed statutory cap, the lower capped figure, known as the maximum fair rent, must be registered and is the recoverable rent. 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.

The landlords contended in the grounds of appeal that the tenant was not a tenant of the flat, that he never had been a tenant or had ceased to be a tenant many years previously and that his occupation of the flat was not pursuant to a tenancy. In consequence, the LRAC and the rent officer had no jurisdiction to register a maximum or fair rent and the tenant’s occupation was not subject to either the Rent Act 1977 or the 1999 Order. This issue raises the point of law as to whether the LRAC had jurisdiction to determine the maximum fair rent of the premises.

The grounds of appeal suggested that the tenant had acquired that tenancy from S Haque as a result of an unidentified misrepresentation and that S Haque held no superior interest in the building and had had no authority to grant the tenancy. If the tenancy had been validly granted originally, it had come to an end when whatever interest in the building held by S Haque ceased. As a yet further variant of these contentions, it was asserted that the lease and any statutory control of the rent had ceased over time because it was no longer commercially viable for the landlords to be held to the low rent resulting from the statutory fair and maximum rent regime. Thus, it was suggested, the tenant had been permitted to hold over as what was described as a “short time leaseholder” or “limited tenant” under a “temporary lease” and that interest fell outside the jurisdiction of the statutory scheme for registering fair and maximum rents.

The grounds also sought to explain why the rent officer and the LRAC had no jurisdiction to register a fair or maximum rent despite the registration of a fair rent in 1984 and despite the fact that it was the landlords who had initially invoked the jurisdiction of both the rent officer and the LRAC when applying for the determination of a fair rent. It was asserted that these applications had only made because the tenant was being “tricky and avoiding his responsibility to be co-operative with the landlords”. It would appear that the landlords were under a misapprehension that the fair rent jurisdiction could be used not for fixing a fair rent for the quite different purpose of their being able to obtain access to the flat to enable them to undertake repairs and general refurbishment.

None of these contentions has any legal or factual basis of any kind. It should be recorded that Mr Kudagada expressly withdrew these contentions and this ground of appeal at the outset of his submissions and that he had had no hand in drafting or putting them forward having first been instructed the day before the hearing started.

The grounds are fallacious since the Rent Register, which remains uncorrected and unamended, records as a matter of record that the tenant was granted a weekly furnished tenancy in 1974. The tenant has always paid, and has always had accepted, the prescribed weekly rent ever since and his landlords throughout his period of occupation, including the present landlords, have always accepted this weekly rent payment. Thus, the tenant’s occupation has always been pursuant to a protected furnished tenancy. Once such a tenancy has been created, it can only be brought to an end by a prescribed Rent Act ground. Moreover, the statutory scheme for regulating the rent of a protected tenancy cannot be contracted out nor rendered inapplicable, particularly if the landlords decide that scheme no longer suits them. Finally, the landlords, by invoking the fair rent registration jurisdiction of the rent officer and the LRAC, were acknowledging that the tenant was a protected tenant and they are now estopped from contending otherwise.

It follows that Mr Kudagada was correct to withdraw this ground of appeal but, since the ground goes to the essential jurisdiction of the LRAC, and since that jurisdiction is concerned with Rent Act protection, I considered it necessary to enquire into and, having done so, to reject it notwithstanding its withdrawal at the outset of the appeal. It was, in any event, helpful to consider this ground because it revealed that the standpoint of the landlords and their legal advisers was that the tenant had no security of tenure, that his rent was not susceptible to the fair rent provisions of the Rent Act 1977 and that they were entitled to refurbish the flat to a very high standard and then charge an open market rent. This provided the essential background against which to consider the landlords’ further contention, considered as part of Issue 3, that the tenant had unreasonably refused them access to the flat to carry out repairs and additional works.

At the hearing, the landlords’ counsel developed a general complaint that the reasons of the LRAC were inadequate in that they did not provide any, or any sufficient, detail of the panel’s reasons, reasoning and supporting evidence for four findings, namely that:

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 hearing was conducted as a paper exercise with brief written submissions and copies of relevant contemporary documentation since both parties had waived their rights to an oral hearing. 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.

Since an appeal may only be brought on a question of law, the factual findings made by the committee are not capable of being appealed save in extreme cases of procedural or evidential error. The reasons should, therefore, be sufficient to enable it to be seen what the crucial findings of fact were and how those findings were applied to the relevant law. The Administrative Court has a discretion as to whether or not to direct that further findings or a fresh hearing should be ordered in cases where the reasons or the reasoning is deficient. It is much more difficult to persuade the Administrative Court to intervene if no useful purpose would be served by the provision of further reasons or by an order for a fresh hearing,. However, since the purpose of an appeal on a point of law is to provide a control over the decisions and decision-making process and to ensure that these are arrived at and followed in accordance with the law, the Administrative Court will, as a last resort intervene, particularly if the lack of reasons is extreme.

In determining what the reasons for a decision are, the Administrative Court will usually restrict its examination of the decision to the decision itself and to any documents incorporated into that decision. In ascertaining whether the reasons containing findings of fact and the reasoning leading to those findings are sufficient, the Administrative Court will not ordinarily decide whether it would have made the same findings and it will be acutely conscious that it had not heard or seen the witnesses that the fact-finding body had seen and heard and that in law the decisions of fact are exclusively for that body unless its decision can be seen to be perverse. That said, a party is entitled to brief reasons and these are also necessary to enable the appeal court to satisfy itself that the decision and the decision-making process complied with the law and fell within the jurisdiction and competence of the body in question.

These reasons need not be written in any particular style and need not read as if they were a judgment of a court of record. They may be brief and informal. Deficiencies of grammar, style or vocabulary would only lead to a direction for a further hearing or further reasons if the decision as a whole is so garbled or unintelligible that a reasonable bystander of reasonable but not exceptional ability would be unable to understand the decision or to divine what its critical findings were and why they were arrived at.

The decision under appeal in this case is not, on its face, so deficient in the reasons and reasoning it contains that the landlords have established any basis for the court to order further reasons or a rehearing and fresh decision. Therefore, a general complaint that the reasons are insufficient cannot succeed and it fails. It will, however, be necessary for me to consider whether any of the four complaints are made out when considering each complaint individually when I am examining the issue to which that complaint relates. In doing so, I will need to give effect to the various competing interests and considerations summarised in paragraphs 21 – 25 above.

This issue is dependent on paragraph (7) of the 1999 Order which reads:

“(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.”

It is clear that no relevant change in the condition of the flat had occurred and no repairs or improvements had been carried out since the last fair rent review in 1986. Moreover, the increase in the new fair rent that would have been registered but for the terms of the 1999 Order was not in any way attributable to repairs or improvements. Therefore, the 1999 Order would, given the terms of paragraph (7), be applicable to this fair rent registration exercise. However, the landlords contended that they had both the intention and the means of carrying out and completing substantial repairs and improvements and that these could and should have been completed prior to the application to fix a new fair rent which was made to the rent officer and renewed in the application made to the LRAC. However, these improvements had not been carried out solely because the tenant had wilfully and deliberately refused them permission to carry them out by refusing them access to the flat for that purpose and had compounded this refusal by suggesting wholly unreasonable terms as the basis for allowing that access. In consequence, the LRAC should have found that paragraph (7) applied to exclude the capping provisions of the 1999 Order.

The way in which this core issue arose and was dealt with by the LRAC is both unfortunate and unsatisfactory. During the summer and early autumn of 2008, the landlords had attempted to obtain access in order to carry out extensive work within the flat. The tenant was willing to provide them with access to carry out such work as they were entitled to carry out but had not agreed to the terms of such access by the time that the landlords’ application to the rent officer to fix a fair rent was determined by the rent officer. The rent officer’s determination, dated 22 December 2008, determined that the tenancy was exempt from the maximum fair rent provisions but, as is the way with such determinations, no reasons were given for that determination.

The landlords’ solicitors did not clearly or obviously address the question as to whether the 1999 Order was applicable to the new fair rent in their written submissions accompanying their reference or appeal to the LRAC. The reference to the LRAC challenged the fair rent figure fixed by the rent officer of £90 per week on the basis that it should have been a higher figure within the bracket of £140 to £180 per week. The absence of any direct reference to the question of the applicability of the 1999 Order is explained by the fact that the rent officer had determined the issue relating to the exemption of this fair rent from the 1999 Order in favour of the landlords so that the issue did not need to be addressed by them. Since no oral hearing took place, there was no oral evidence and no submissions that directly related to this issue.

The landlords did raise the issue as to whether the fair rent should take account of the lack of amenities and the poor state of repair of the premises. This can be seen from this somewhat garbled passage in the landlords’ solicitors’ submissions set out in the reference or 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.”

Notwithstanding the absence of clearly articulated grounds that took the point that the 1999 Order was not applicable, the LRAC, as it was bound to, raised and addressed the issue of the applicability of the 1999 Order to the fair rent it had determined would otherwise be payable.

The decision noted that the accommodation was very poor and lacked heating, hot water and proper cooking facilities. It had not been decorated for many years, there was evidence of damp and there was no plasterboard on the ceiling. The decision referred to the written submissions of each party. In these submissions, the landlords’ solicitors had admitted that the premises were barely habitable but had noted that the tenant had denied the landlords access to carry out improvements. The tenant had denied these allegations of the landlords. The decision then determined what the new fair rent would be. In doing so, it discounted the fair rent otherwise chargeable by a very significant amount on account of the very poor state of repair and the absence of essential facilities. This exercised led to a reduction of £93.75 per week from the provisional fair rent of £125.00 per week. No reasons were given for rejecting the landlords’ submissions that such a reduction, which was one required by the fair rent provisions of the Rent Act 1977, should not be made on account of the tenant’s “perverse and irrational” refusal to provide access for the proposed refurbishment and improvements unless he was provided with bed and breakfast accommodation elsewhere

Having determined what the uncapped and heavily discounted fair or market rent would be, the decision continued:

“We have to consider the effect of the [1999 Order]. In the first instance we need to consider whether there were any major works to the subject property, either as repairs or improvements that would have resulted in an increase in the rent of over 15% of the previously registered rent. The landlord’s representative stated that the tenant had denied access for the landlord to carry out improvements to the property. Therefore, the committee is obliged to apply the capping order.”

This core finding would appear to have a passage missing from the text since the last sentence does not follow from the previous sentences and no explanation is give as to why the landlords’ contention that the tenant had denied access to the landlords was rejected and as to why its decision was that the 1999 Order was applicable notwithstanding that contention. However, since there is no evidence that such a passage was omitted in error from the published decision, I must decide this appeal on the basis that the decision as drafted is the final and complete decision of the Committee.

In the grounds of appeal, the landlords’ solicitors addressed the issue of the applicability of the 1999 Order in this way:

“The [LRAC] again wrongly failed to consider that the formula would not be applicable had the respondent acted in good faith as he, with an ulterior motive, has not afforded and/or has denied access to the disputed premises by the landlords and/or their agent to carry out the required repairs and refurbishment and/or development works, which have more than overdue as there have not been any repairs over there since 1984. Had he allowed that to follow, then the maximum fair rent order would not be applicable. Having considered this, the rent officer confirmed during his visit on the disputed property that the maximum fair rent order would not be applicable in this case, which was not objected to by any party including the [tenant].”

The landlords also contended that internal and normal repair and decoration was the responsibility and duty of the tenant and that, overall, disrepairs and defects could only affect rental reviews if there were any faults on the part of the landlords. Overall, the decision of the LRAC was flawed because there were no landlords’ defaults and because the committee did not consider the decision of the rent officer and did not give any reasons given as to why they had rejected his decision that the 1999 Order was inapplicable.

The issue raised by the tenant’s alleged refusal of access raises no fewer than seven separate procedural and substantive points of law. These are, set out in a logical order, the following:

There has not been, on behalf of the landlords, a detailed explanation of the nature of the obligation that they allege that the tenant was in breach of, namely an obligation to provide them with access to the flat for the purpose of carrying out repairs. The obligation and its alleged breach and consequences in relation to the exemption from the capping provisions of the 1999 Order are most fully explained in the passage from the document setting out the landlords’ grounds of appeal dated 23 June 2009 set out in paragraph 32. This allegation, in summary, is that:

The LRAC did not consider or analyse these allegations, primarily because they had not been raised by the landlords since they were not challenging the rent officer’s determination that the tenancy was exempt from the maximum fair rent regime. It was, however, incumbent on the LRAC to explain why it was departing from the rent officer’s determination and why the landlords’ case that, despite there having been no repairs or other work undertaken since the previous fair rent registration, the rent officer was correct in deciding that the premises were exempt as a result of the tenant’s denial of access that had been referred to in the landlords’ submissions, albeit in connection with the different but related question of the fair rent that should be registered.

I must therefore first consider the tenant’s contractual or statutory obligation to provide access which, in turn, also requires a consideration of the landlords’ contractual or statutory obligation to ask for access. The tenant’s furnished tenancy in this case is the simplest imaginable. There are no extant contractual terms save those implied or provided for by statute. The relevant terms relate to the landlords’ obligations to carry out work within or to the tenanted premises. These obligations are to carry out repairs and external decorations and these contractual obligations are supplemented by the relevant provisions of the Landlord and Tenant Act 1985. These statutory provisions impose on the landlords these further or more clearly defined obligations:

These obligations 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.

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.

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.

The next issue that arises is a consideration of the consequences, if any, of the tenant unreasonably and unlawfully refusing access to the landlords. In the context of this appeal, this issue relates to the specific question of whether an unreasonable and/or unlawful refusal would have the effect that the new fair rent to be determined in 2009 by the LRAC should be considered to have been exempt from the capping provisions of the 1999 Order.

The landlords contend that the capping provisions of the 1999 Order should not apply to the new fair rent. In other words the application should be treated as if the fair rent that is determined in response to their application for the registration of a new rent under Part IV [of the Rent Act 1977] exceeds by at least 15% the previous fair rent as a result of repairs or improvements carried out by the landlord. The method by which a fair rent is to be determined is set out in sections 70 and 71 of the Rent Act 1977. Those provisions include the following:

In the light of these provisions, the landlords’ contention that the new fair rent should be treated as being exempt from the operation of the 1999 Order even though no relevant work had been carried out, it would be necessary for the following to be established:

This approach is one that is required by section 70 of the Rent Act 1977 since, as explained in paragraph 44(2) above, the fair rent that is to be fixed should disregard any disrepair attributable to a failure by the tenant to comply with the terms of the lease. In other words, there should be no discount for disrepair arising from the inability of the landlords to obtain access to carry out necessary repairs where that access had been wrongly denied in breach of the terms of the lease.

Thus, if the landlords can establish each of these six steps, they would succeed in establishing that the new fair rent was exempt even though the relevant work had not been carried out. That failure would have occurred as a direct result of the tenant’s breach of his tenancy obligation to provide access. It is well established that a party may not take the benefit of a statutory or contractual advantage if the only reason why that advantage would be available is as a result of that party’s breach of the contract under which the advantage would accrue. If the landlords can establish all these steps, they will have demonstrated that the tenant has obtained the advantage of a capped maximum fair rent as a direct result of his breach of the terms of the tenancy in refusing access for work to be carried out.

The point of law arising from the structure and content of the LRAC’s decision is whether the reasons were deficient and were they produced unfairly and lacking appropriate transparency. There are, in reality, six interlinked complaints arising from the decision as it affects the paragraph (7) exemption issue. These are:

These deficiencies are, to some extent, the result of the landlords’ reference which did not raise the paragraph (7) issue. However, the committee had to investigate this issue since it went to jurisdiction and, indeed the committee recognised this be stating in paragraph 23 of the decision that they “had to consider the effect of the 1999 Order” and “whether there were any major works to the subject property”. The committee then concluded without further explanation, findings or reasoning, that “the committee is obliged to apply the capping order”. This crucial finding is not, therefore, supported by any, or any sufficient, factual findings, reasons and reasoning. The appeal on this ground succeeds.

It is not possible to determine whether this crucial decision contains or is based on an error of law. Thus, either this appeal, or the committee following a remission to it by this court, must address this issue afresh, adopting the approach and the law that I have already set out. I must therefore determine what should be the consequence of my inability to determine whether the decision is based on any error of law.

The reference to the LRAC was, with the consent of the parties, determined on the documents and with a view. Thus, the facts were to be found from the documents submitted by the parties with their submissions. These documents have been provided to me with the bundle provided for this appeal. The powers of the Administrative Court in hearing an appeal from the LRAC are the same as the Court of Appeal. Therefore, I have the power to affirm, set aside or vary any order or judgment of the committee or to refer any issue for determination back to it (CPR 52.10(2)). If I decide to consider the issue myself and then affirm or vary the order of the committee, I am limited to a review of the decision. In undertaking that review, I should not receive evidence not received by the committee and should give appropriate respect to findings of primary fact. However, since the primary facts are contained in documents which were before both the committee and myself and since any findings arise from an interpretation of those documents without either the committee or myself having recourse to oral evidence, I am in the same position in undertaking a review as the committee was. Since I am able to decide this issue without undue difficulty and with the same materials as the committee had, and since it would be disproportionate in costs and time and the issues at stake to refer this issue back to the committee, I propose to identify the primary facts from the documents and decide the issue of law that they raise myself. Having done so, I will affirm or vary the decision of the LRAC as appropriate.

On behalf of the landlords, copies of correspondence between the landlords’ solicitors and both the tenant’s solicitor and the tenant that had been provided to the LRAC were provided to the Administrative Court with the notice of appeal. Some additional correspondence that post-dated the committee’s decision was also provided but I did not take that into account since the evidence that correspondence contained had not been before the committee.

The relevant parts of the correspondence sets out the primary facts relating to this issue and these may be summarised as follows:

I can summarise the relevant primary facts as follows:

In the light of this factual background, it can readily be seen that the tenant did not refuse access at all. Instead, he responded in a reasonable way to a request to agree to extensive works that would have involved the transformation of the flat into one of similar standard to the two-storey flat that the landlords had just created above him, a request couched as a demand to rely on the landlords’ alleged entitlement to carry out such works as they wished and to treat the tenant as having no rights of security who could be evicted at will and who could be asked to pay a full commercial rent.

The tenant’s response was in three parts put forward with the clear assertion that he was and would remain a protected, furnished weekly tenant with rights as to security and as to the continued entitlement of the protection of the fair rent regime:

Once it became clear to the landlords that the tenant would hold his ground on that basis, they abandoned their request for access, completed the works on the upper two floors and entered into a shorthold tenancy with three tenants at a rent of £2,600 per month and lodged their application to the Rent Service for the rent officer to fix a fair rent of the ground floor premises.

If the landlords could have been said to have made a request for access, the request in the form it took was unreasonable and the tenant’s response was both reasonable one and one that did not amount to a refusal but to a set of counter-proposals which it was reasonable for him to put forward. The landlords’ request was unreasonable because:

Conclusion – Issue 3

There was no request for access or no reasonable request for access by the landlords. In any event, the tenant reasonably put forward counter-proposals which were not responded to or reasonably refused whatever request for access was actually made. As a result, there is no basis for the landlords’ contention that the tenant’s rent should be exempt from the maximum fair rent provisions of the 1999 Order or that no account should be taken of his alleged refusal to provide access in determining figure for a new fair rent. The appeal on this issue is dismissed.

The principal issue in this appeal is whether the LRAC was in error in the way it applied the capping formula, specifically in not taking account of the rebasing of the applicable index that occurred in January 1987. This issue raises a short but difficult and important issue of statutory construction. that arises in the light of the rebasing of the relevant index that occurred in January 1987. The 1999 Order was made under section 31 of The Landlord and Tenant Act 1985. This issue is the same as that that was raised in two conjoined appeals that were heard by me at the same time as the hearing of this appeal, Compatriot Holdings Ltd v The Chairwoman of the London Rent Assessment Committee and others (Footnote: ²). I have incorporated my reasoning concerned with the proper construction of the 1999 Order from that judgment into this judgment. Both references to the LRAC in the Compatriot Holdings Ltd appeals were decided by the same panel on the same day in an identical manner and the landlords’ appeals from both those decisions were heard and argued together with this appeal. The reference in this case to the LRAC was to a different panel who decided the reference on a different and later date, without reference to the earlier decisions but the decision relating to that issue in issue in this appeal incorporated the same reasoning and used identical language as was used in the comparable issue in the two earlier decisions.

The permitted increase in rent or tenancies subject to the 1999 Order is determined in two stages. At the first stage, a new registered fair rent is determined by reference to comparable market rents, scarcity values and any improvements in the tenanted property. This rent is registered unless the process of determining a new fair rent shows that the 1999 Order is inapplicable. At the second stage, if it has been determined that the 1999 Order is applicable, the formula contained in 1999 Order is applied to the existing fair rent and a new capped fair rent, called the maximum fair rent, is derived from the existing fair rent and then registered.

The intention and purposes of the 1999 Order are clearly and succinctly explained in the speech of Lord Bingham in R v Environment Secretary, ex parte Spath Holme Ltd (Footnote: ³). Very briefly, the background to the 1999 Order was the provision for the first time, by the Housing Act 1988, of assured and assured shorthold tenancies with their regime of negotiated rent levels (subject to a limited safeguard for some tenants) and the abolition, for the future, of newly created Rent Act tenancies. This new statutory regime was followed by the subsequent decisions of the Court of Appeal in Spath Holme Ltd v Chairman of the Greater Manchester and Lancashire Rent Assessment Committee (Footnote: ⁴) and Curtis v London Rent Assessment Committee (Footnote: ⁵). These decisions significantly affected the previous fair rent regime by directing that, when fixing registered fair rents for existing Rent Act tenancies, rent officers had to take account of rents being charged for comparable assured tenancies which, inevitably, were significantly higher than comparable registered fair rents that were then current. This had the consequence that new registered fair rents for many Rent Act tenancies, particularly in London and the North East, were very significantly increased from the previously registered rent. This unintended consequence of the Housing Act 1988 led to the introduction of the 1999 Order that provided a statutory capping mechanism that restricted the level of any permitted increase for registered fair rents. The permitted maximum increase must be calculated using the formula introduced by the 1999 Order. The permitted increase is linked to movement in the retail price index in the period between the date that the fair rent was previously fixed and the current date from which the new rent is to take effect. This relative movement in the retail price index is built into the capping formula provided for by the 1999 Order.

The effect of the formula is clearly summarised by Lord Bingham in these words:

“On the first application for registration after the Order had come into effect, the permitted increase in a registered fair rent would be five per cent, if the retail price index had increased by five per cent over the two year period since the last registration, plus 7.5 per cent. Thereafter any subsequent increase over a two-year period would be five per cent plus the difference in the retail price index. The Order would only apply where there was an existing registered rent when the Order came into effect, and it would not apply where, because of repairs or improvements carried out by the landlord, the fair rent exceeded by at least fifteen per cent the previous registered rent. Article 3 of the Order and the Schedule provided that The Rent Act 1977 should be modified by inserting a new paragraph into Schedule 11 of the 1977 Act. That is the Schedule which governs applications for the assessment and registration of fair rents by rent officers and rent assessment committees. The new paragraph provides:

"(a) the rent officer, in considering what rent ought to be registered, shall consider whether that article [article 2] applies; and

(b) where a matter is referred to them, the committee shall consider whether that article applies and, where it does apply, they shall not, subject to paragraph (5) of that article, confirm or determine a rent for the dwelling-house that exceeds the maximum fair rent calculated in accordance with that article."

In these two appeals, the rent levels were last registered in 1985, some twenty four years previously, so that there has been a very significant increase in the RPI since these previous registrations. The capping formula is set out in Article 2(2) as follows:

“(2)

The formula is-

MFR = LR(1 + ((X-Y)/Y + P)

Where:

MFR is the maximum fair rent;

LR is the amount of the existing registered rent for the dwelling-house;

X is the published index in the month immediately preceding the month in which the determination of a fair rent is made under part IV;

Y is the published index for the month in which the rent was last registered under part IV before the date of the application of registration of a new rent; and

P is 0.0075 for the first application for rent registration of the dwelling-house after this Order comes into force and 0.005 for every subsequent application.

…

(8)

For the purposes of this article:

…

(c)

“index” means the monthly United Kingdom Index of Retail Prices (for all items) published by the Office for National Statistics.”

(2)

The Formula Explained

Each month, the Office for National Statistics issues the monthly United Kingdom Index of Retail Prices (all items) which is usually known as the RPI. The index is published as a table containing all previously published monthly indices with the current month’s index added to it. The RPI is used as a general purpose method of measuring the movement of retail prices over any period of time between June 1947 and the present time. This movement can be measured over any period of whole months since the index is published monthly. Each index is built up using the prices of a fixed basket of retail goods representing average monthly expenditure patterns of a standard household and inflationary (or occasionally deflationary) movement is obtained by ascertaining the movement of the index over the relevant period. Each monthly index is expressed as a percentage representing the percentage increase in the relevant basket of prices making up the index since the relative movements in the index are ascertained by comparing the indices of the month at the start and at the end of the period in question. The relative percentage movement between any two months can be ascertained by subtracting the index figure of the earlier month from that for the later month.

The starting base date for the RPI was the level of prices in June 1947 and all increases in retail prices have been measured month by month from that month. Thus, the June 1947 base date index figure was fixed as 100. However, the monthly percentage increases in the index rose rapidly and, no doubt for presentational reasons, the RPI index figure was rebased back to 100 from time to time. Since 1947, this rebasing has occurred on five separate occasions: in January 1952, January 1956, January 1962, January 1974 and January 1987. Each time the RPI was rebased, two index figures were provided in the published table for the first month following that rebasing. The last rebasing occurred in January 1987. For that month, the RPI table included the un-rebased index figure of 394.5 and the rebased index figure of 100. All that is involved in a rebasing is that the index figure for the relevant month is changed from the figure that would have followed from the previous month had there been no rebasing to the rebased figure of 100.00. The effect of this was that the RPI indices since January 1987 have identified the RPI percentage movement from the January 1987 rebased figure of 100.00 instead of the percentage movement from the month of the previous rebasing that occurred in January 1974. However, if earlier indices are further rebased appropriately, the percentage movement may be ascertained from June 1947.

It can be seen, therefore, that the RPI, following a rebasing exercise, remained the same index in the sense that it provided the same relative percentage movement month on month as would have been provided but for the rebasing. However, if the percentage movement that occurred between a month in the period between January 1974 and December 1986 and a month after December 1986 is to be ascertained, the earlier index figure must take account of the rebasing that occurred in January 1987 which changed the index figure for that month from 394.5 to 100. This rebasing is achieved by using the multiplier 100/394.5 or 0.2534854 on the earlier index so that both indices are similarly based. This is necessary to enable a like for like comparison of the two index figures. If the relevant pre-1987 figure is for a month which is prior to the fourth rebasing that occurred in January 1974, two numerical rebasings are needed before the earlier figure can be compared with a post-January 1987 figure and so on, if necessary, for each of the three further rebasing exercises that have taken place since 1947.

This arithmetical adjustment is necessary since the index is a numerical scale showing relative changes in the cost of living with reference to a predetermined base level. If that base level is rebased, any relative change from a date earlier than the rebasing can only be ascertained if the earlier index is rebased so that both indices are identically based. This adjustment is inherent in the use of a price index as can be seen by the definition of an index such the RPI that is found in Webster’s Dictionary (Footnote: ⁶):

“A numerical scale showing the relative changes in the cost of living, wages, etc, with reference to some predetermined base level.”

(3)

Evidence

The Office of National Statistics publishes each month the new RPI monthly index figure in a table containing every published RPI monthly index figure since June 1947. These figures are set out in five bands reflecting the five rebasing exercises that have occurred since June 1947. However, the figures within each band are based to the first month in the relevant band and, save for the first monthly index in each band, no additional figure is given rebasing that index to any index in any preceding band. However, when it is necessary to rebase the index figures in, say, band four (the months between January 1974 and December 1986), the rebasing can be undertaken by using the two figures that are provided for January 1987, the month following the fifth rebasing. These are the January 1987 figure as it would have been had there been no rebasing (394.5) and the rebased figure (100). Similar figures are provided for the first month following each of the preceding four rebasing exercises.

The Department of the Environment, which sponsored the 1999 Order, advised all Rent Assessment Committees to use a table of monthly percentage figures between January 1965 (when rent registration first started) and November 1998, the month of the advice. These figures were the published monthly RPI index figures rebased to take account of the rebasings that had occurred in January 1974 and January 1987. Unfortunately, this table was never updated with the passage of time. However, the effect of that advice was that Rent Assessment Committees should rebase an RPI index figure if such a figure from before January 1987 has to be inserted into the formula contained in the 1999 Order.

According to the evidence of Mr Angus Andrew, some Rent Assessment Committees have taken the rebasings into account in their determination of fair rents to be registered under the 1999 Order by referring to an adjusted index published privately by Wolfbane Cybernetic Limited. However, according to Mr Andrew, notwithstanding the advice of the Department of the Environment published in November 1998 which was sent to all Rent Assessment Committees that they should take the two relevant rebasings of the index that have occurred into account as necessary, some Rent Assessment Committees do not take these rebasings into account and use the un-rebased index figure when a pre-January 1987 index figure is required.

The LRAC, unlike the rent officer, did not take the January 1987 rebasing into account and did not rebase the June 1984 index figure by making the appropriate arithmetical adjustment to it. Instead, the LRAC compared the “raw” or un-rebased figure for June 1984 of 351.9 with the January 2009 figure of 210.1. Had the June 1984 figure been multiplied by 0.2534854, a like for like comparison would have been achieved. The LRAC felt unable to undertake this exercise because, as its decision records:

“ … When considering how we should approach the application of the order, we were of the opinion that we had two options. The first option was to use the data published and therefore adopt the figure for June 1984. The second alternative was to interpolate the data to calculate a figure that could be adopted into the formula.

Having carefully considered the wording of the Order, it clearly states that the figure to be used in the Y part of the formula should 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’.

We consider that the Order makes no provision for us to interpolate a figure and sets out clearly that figure to be inserted into the formula is the published index, in this case X 210.1, Y 351.9.”

In applying the formula in this way, the LRAC initially determined that the capped rent figure should be £6.00 per week in its notification dated 6 March 2009. This was the figure that was derived from the operation of the capping formula. This figure was less than the previously registered fair rent of £8.50 per week that had been registered twenty five years previously. At that stage, therefore, the LRAC must have overlooked Article 2 (4) of the 1999 Order which provides that:

Mr Kudagada, counsel for the landlord appellants, in a clear and succinct submission, forcefully contended that the LRAC had erred in its use of the formula. The LRAC had, he submitted, used an unduly formalistic and literal approach in concluding that the requirement of the 1999 Order was that the “Y” figure in the statutory formula should be the figure provided as the published index figure for the month in question, being May 1985 in both cases. The LRAC erroneously concluded that that figure should be taken even though it was based differently from the “X” figure that also had to be used. That led the LRAC into the error of using the figure that appeared in the published index rather than subjecting that figure to an adjustment to take account of the subsequent rebasing of the index. This error is identified by the passage of the LRAC’s decisions which stated that the wording of the 1999 Order did not permit them to “interpolate” this un-rebased figure.

In my judgment, Mr Kudagada is undoubtedly correct for these reasons:

The error of the LSAC can be seen from its use of the words “interpolate”, “data”, “calculate” and “adopted into” in this critical passage in its decision when describing the approach to the statutory formula that it adopted:

“The second alternative was to interpolate the data to calculate a figure that could be adopted into the formula” (emphasis added).

The word “interpolate” is defined in Chambers Dictionary (Footnote: ⁷) as follows:

“… to fill in as an intermediate term of a series (maths)”.

The LRAC therefore considered that, if it was to take account of the January 1987 rebasing, it would not be using the prescribed RPI indices but would, instead, be filling up a gap in those indices by itself calculating, adopting and filling in a new intermediate term for June 1984 which it would have to derive itself from the relevant raw data, presumably the household prices for May 1984. This language shows that the LRAC misunderstood what had happened when the RPI was rebased in January 1987. All that was required to give effect to that rebasing was a simple arithmetical adjustment to the June 1984 figure of the kind suggested both by the published indices and by the Department of the Environment when advising all Rent Assessment Committees in November 1998 how to give effect to the 1999 Order and its prescribed rent capping formula. This arithmetical adjustment was not to interpolate the data but, instead, was to use the RPI indices and the data contained in the RPI tables in the manner provided by those tables and in a manner provided for by the capping formula contained in the 1999 Order

The LRAC should have appreciated that its proposed method of applying the rent capping formula was nonsensical and incorrect since the formula would never be capable of yielding a capped revised figure where the two indices that are to be used are placed in different bands in the table of indices. This is because the (x-y) figure will invariably be a negative figure, if an un-rebased y figure is taken, and that figure is too large a negative figure to be capable of being turned into a figure greater than zero by the formula prescribed in Article 2(4) (see paragraph 3[] above). Unfortunately, the LRAC in applying Article 2(4) appears to have ignored the consequence of doing so where the earlier index was not rebased, namely that a capped revised figure could not be achieved for this rent.

The LSAC should have applied the formula in this way:

The LRAC should have applied the capping formula by using as the Y figure a rebased figure which was obtained by multiplying the applicable unrebased figure for June 1984 by a co-efficient of 0.2534854. In other words, the maximum fair rent that should have been registered was £12.00 per week instead of £8.50 per week.

This issue arises because the landlords contend that, in determining a fair rent, the LRAC erred in not taking account of appropriate comparable rents and in reducing the figure provisionally arrived at on account of the poor standard of the premises and of scarcity. This raises the point of law as to whether the LRAC correctly applied sections 70 and 71 to the facts of this tenancy.

In considering this issue, it is necessary to take account of the following:

It is also necessary to compare the fair rent registered by the rent officer with the fair rent that the committee would have registered had it not decided that the 1999 Order applied to impose a maximum fair rent. The rent officer determined that the fair rent should be £90 per week. In reaching this figure, the rent officer made no deduction or discount for the dilapidated state of the premises since, in determining that the premises were exempt from the 1999 Order, he must have concluded that the current state of disrepair was attributable to the tenant’s default and should therefore not be taken into account. The rent officer would, however, have been required to discount his starting figure based on comparable rents for scarcity. The LRAC had decided that the fair rent, prior to any discount for disrepair and scarcity, should be £125.00 per week. This figure was then discounted by 20% for scarcity after a substantial deduction had been made for the state of disrepair. If that second deduction had not been made for disrepair, the fair rent figure that the LRAC would have decided upon would therefore have been £100 per week. It can be seen, therefore, that the rent officer’s and the LRAC’s fair rent figures were similar.

The landlords make three complaints about the LRAC’s decision as to the fair rent. These are that the figure should not have been discounted for either disrepair or for scarcity value, that the LRAC failed to give any effect to the comparable rent being obtained from the shorthold tenancy on the upper floors and that no, or insufficient reasons were given for fixing the levels of deduction for both disrepair and scarcity. Save for the complaint about inadequate reasons, these complaints are not ones raising a point of law and are not in any event made out.

Firstly, the committee was required to discount the fair rent to take account of the state of disrepair since it had, or should have, concluded that this state of disrepair was not attributable to any breach of the tenancy agreement by the tenant who had not refused access for repairs to be carried out. Secondly, the level of comparables, the nature, extent and value for rent purposes of the disrepair and the extent of any scarcity element in comparable rents were all matters within the particular expertise and experience of the committee who had considerable knowledge of the locality and had viewed the premises. Moreover, no relevant evidence had been provided to them by the landlords and the decision had therefore to be based on that experience coupled with the evidence obtained from their view. Thirdly, the fair rent, once the disrepair discount was ignored, was sufficiently similar to that arrived at independently by the rent officer to allow each decision to provide support for the other.

The only criticism of the decision that was arguably made good related to the paucity of reasons since no details were provided of comparable rents used to derive the fair rent for these premises, of the valuation of the disrepairs or of how the size of the discount of 20% for scarcity was arrived at. The decision does give sufficient details of the actual state of disrepair upon used to value the size of the discount for disrepair.

The lack of reasons is, given the circumstances of this decision, only marginal. I do not propose to decide whether the reasons are sufficient albeit sparse or insufficient since no useful purpose would be served in directing the panel now to provide further details of their calculations. I reach this conclusion for these reasons:

It follows that the appeal relating to this issue should be dismissed.

I must finally determine the date from which the court should direct that the maximum fair rent should be registered from.

The landlord has succeeded in this appeal to the relatively limited extent of being able to revise the capped or maximum fair rent upwards from £8.50 per week to £12.00 per week because the LRAC had erroneously failed to take account of the rebasing of the RPI when correctly applying the capping formula provided for by the 1999 Order. This success has occurred because the LRAC’s erroneous use of the rent capping formula has been set aside and has been replaced by the correct use of that formula. In those circumstances, the maximum fair rent which will now be registered should have taken effect from 28 May 2009, being the date that the corrected decision of the LRAC was published. I have exercised my power to amend the decision as opposed to setting the decision aside and deciding what the maximum fair rent should be. It is therefore appropriate that, having succeeded in this appeal to that limited extent and having failed to upset the decision in any other respect, the landlord should have the benefit of the maximum fair rent from the date that that new registered fair rent would and should have taken effect had the LRAC not fallen into error and had the landlords otherwise accepted the decision of the LRAC. The further amended decision of the LRAC will therefore take effect from 3 June 2009.

For these reasons, the appeal will be allowed in part. I direct that the maximum fair rent for the first floor premises at 132 Brick Lane, London, E1 7BU, ascertained by using the 1999 Order formula in the manner set out in this judgment, should be registered in the sum of £12.00 per week with effect from 3 June 2009, the effective date of the corrected order of the LRAC. In all other respects, the appeal will be dismissed.

There will be no order as to costs. The landlords have only succeeded to a limited extent in this appeal, the tenant took no part in the appeal and the LRAC have not been responsible to any significant extent for any of the costs that the landlords have incurred in pursuing this appeal.