Howard De Walden Estates, R (on the application of) v London Rent Assessment Committee

In assessing a fair rent under the Rent Act 1977, the tribunal should identify the market rent for the property in its current state, make the statutory adjustments for scarcity and disregards, and show some working through of material adjustments. The exercise involves judgment as well as analysis.

Under article 2(7) of the Rent Act (Maximum Fair Rent) Order, the tribunal must assess directly how far landlord’s repairs or improvements increased the rental value. A rise in the registered fair rent compared with a market index does not establish that the 15 per cent threshold is met.

Scarcity must be assessed over an adequately broad and justified area. Where the reduction is substantial, the tribunal must identify factors connecting the reduction to scarcity in that area.

The landlord challenged consolidated determinations by the London Rent Assessment Committee fixing capped fair rents for three regulated tenancies under the Rent Act 1977. The Committee had assessed uncapped rents, applied a 30 per cent adjustment for differences from market comparables, deducted 25 per cent for scarcity, and applied the maximum-rent cap.

The landlord argued that the repairs and improvements displaced the cap under article 2(7) of the Rent Act (Maximum Fair Rent) Order, and that the Committee had erred in calculating the fair rents and explaining its conclusions. The central issues were the proper valuation method, the assessment and quantification of scarcity, the adequacy of reasons, and whether the matter should be remitted.

1. Order. The Committee lawfully applied article 2(7). The relevant question was the amount by which the landlord’s works increased the rental value of the particular properties. It was not necessary to explain every reason for the difference between the previous and current fair rents. The previous rent was relevant only when testing the 15 per cent threshold. Comparing registered fair rents with a prime-market index was flawed because the figures were not comparable and fair rents involved different evidence and evaluative judgments.

2. Market rent and security. The Committee’s approach under section 70 was generally governed by the market rent in the property’s current state, adjusted for scarcity and statutory disregards. Security of tenure could technically be relevant, but under the statutory assumption of a neutral market its effect would ordinarily be minimal.

3. Reasons and adjustments. A Committee must give proper, intelligible and adequate reasons on the principal controversial issues, with sufficient working to permit a reasonable understanding of the main steps. It need not provide elaborate calculations. The Committee should, however, have separately addressed the reduction attributable to repairing and decorating obligations because that was a distinct and material issue supported by separate expert evidence.

4. Scarcity. The Committee was required to select an area sufficiently broad to assess general supply and demand for comparable accommodation, or explain why a narrower area represented reasonable alternatives. It failed to explain adequately why the selected area was appropriate. It also failed to connect the 25 per cent deduction to evidence of scarcity in that area. Those were errors in the fair-rent analysis.

5. Those errors did not justify remittal. Since the cap was lawfully applicable, the Committee’s determination stood and the appeal was dismissed. The appellant was ordered to pay 50 per cent of the first respondent’s costs.

• High Court (Administrative Court): an earlier determination concerning the properties had been quashed by consent order dated 20 June 2002 for inadequate reasons concerning article 2(7). The matter was remitted to a differently constituted Committee, whose redetermination was challenged in the present proceedings.
• High Court (Administrative Court): the appeal against the redetermination was dismissed. The Committee’s capped rents stood.