Tony Martin, Head of Clinics, ponders the role of the Tribunal in setting rents.
In the BPP Legal Advice Clinic we advise on quite a few cases where assured or assured shorthold tenants have applied to the First-tier Tribunal Property Chamber (Residential Property) for assessment where the landlord has served a notice they will increase the rent under section 13 of the Housing Act 1998. These applications raise a number of issues.
Firstly the tribunal must receive the application for assessment before the date the rent is due to increase. This time limit is strict. See R (on the application of Lester) v London Rent Assessment Committee [2003] EWCA Civ 319 and Robertson v Webb [2018] UKUT 235 (LC).
The notice of rent increase must be in a prescribed form.
The new rent must take effect at the beginning of a new period of the tenancy. This is often overlooked by landlords.
The Tribunal does not have the power to decide whether a s13 notice is valid or invalid: Mooney v Whitehead [2023] EWCA Civ 67. However, the Tribunal is entitled to decide whether it is satisfied, on balance, that the legal and factual matrix forming the background to the application demonstrates that it has jurisdiction.
Where the s13 notice is valid, s14 (1) of the Housing Act 1988 requires the Tribunal to determine the rent at which, they consider that the dwelling might reasonably be expected to be let in the open market by a willing landlord. In other words they declare a market rent. This poses particular issues for housing association (Registered Providers of Social Housing) tenants.
Tenants of homes let at social housing rents (as opposed to affordable or market rents) are almost certainly paying less than a market rent. Social housing rent increases are subject to a maximum formular. Since April 2020, Registered Providers have been permitted to increase rents by up to CPI+1% per annum (with the CPI rate taken at the previous September). But the prescribed form for rent increases makes no distinction between the type of landlord. On many occasions we are asked to advise where social housing tenants have made the referral to the Tribunal, but the only possible outcome is that the Tribunal will declare a higher rent that that sought by the landlord.
Many (perhaps most) housing association tenancies will contain a rent review clause. This outs the jurisdiction of s13 and the Tribunal, as the recent case of Moat Homes Ltd v Carlo (2024) UKUT 415 (LC) once again illustrates.
Where a tenant is a private sector tenancy other issues arise. Many tenants, understandably, focus on the amount (or percentage) of the rent increase rather than the question of whether the new rent is a market rent. Where a landlord has not increased the rent for a few years a large rent increase might simply bring the rent up to the market level. Of course the real issue here is affordability, but this is not a factor the Tribunal can consider (save that the Tribunal can decide that the new rent applies from a later date, up to the date of the determination, if this would otherwise cause the tenant undue hardship).
Finding comparators poses a further challenge. In the main the available information is properties to let. These are likely to be (on appearance in the photos at least) in good condition and well presented. The rent stated is the rent being sought, not necessarily the rent that will be obtained.
Then there is the element of risk. Referring the rent increase to the Tribunal is a gamble as the Tribunal will determine the market rent – which may be higher that the rent sought by the landlord.
All Change
The Renters’ Rights Bill, currently at the report stage in the House of Commons, will limit rent increases to once per year. It will require private landlords to serve a s13 rent increase notice. The s13 notice period will increase from 1 month to 2 months, so tenants will have longer to refer the matter to the Tribunal.
As happens now, tenants will be able to refer the rent to the Tribunal for determination of a market rent, but the new rent will be set at the lower of the rent proposed by the landlord and the determined open market rent. In other words, the rent cannot be increased by this process, so removing the risk for the tenant.
The Tribunal will also be able to determine when the new rent will come into effect upon determination, which could be up to two months after the determination.
For social housing tenants, there will be a new s13A Housing Act 1988 providing for a mechanism to increase rents and a right for the tenant to challenge that rent in the Tribunal. However, Registered Providers (unlike private landlords) may continue to use contractual clause mechanisms to increase the rent.
Finally, the Tribunal will have jurisdiction to assess the validity of s13 and s13A rent increase notices rather than this having to be subject to an application in the county court for determination.
Whilst these reforms will no doubt be welcome by tenants, nothing in the Bill addresses the crisis of affordability.
