Cavendish Square Investments Ltd, R (on the application of) v Moule

Under section 71(4) of the Rent Act 1977, sums payable under a regulated tenancy may be registered as variable rent where they vary with the cost of maintenance, repair or services provided by the landlord or a superior landlord, provided the terms of variation are reasonable.

A contractual obligation requiring the tenant to contribute a proportion of the cost of maintenance or repair works can fall within section 71(4)(b). The decision-maker must then assess both the reasonableness of the variation terms and the reasonableness and contractual basis of the sums claimed.

The claimant landlord appealed against a decision of the Rent Assessment Committee dated 13 December 2010. The Committee had determined the fair rent for the defendant tenant’s regulated tenancy and concluded that the rent was not to be registered as variable.

The underlease required the tenant to contribute ten twenty-fourths of the costs incurred by the landlord in complying with maintenance and repair covenants in the head lease. The central issue was whether that provision created a variable rent within section 71(4) of the Rent Act 1977.

1. Appeal allowed. The Rent Assessment Committee had misdirected itself in law by concluding that the underlease contained no proper provision for a variable rent.
2. Section 71(4) of the Rent Act 1977 applies where sums payable by the tenant vary according to the cost from time to time of maintenance or repair works carried out by the landlord or a superior landlord. Such sums may be registered as variable rent if the terms of variation are reasonable.
3. Clause 3(8) of the underlease required the tenant to pay ten twenty-fourths of the costs of maintenance or repair works undertaken pursuant to the landlord’s covenants. Properly construed, that provision fell within section 71(4)(b).
4. The Committee had not considered whether the variable amount sought was reasonable because it had misconstrued section 71(4) and clause 3(8).
5. On reconsideration, the Committee was required to consider whether the expenditure was incurred in accordance with the landlord’s obligations under the head lease, whether the amounts claimed were reasonable, and whether the terms governing variation under clause 3(8) were reasonable.

The matter was remitted to the Rent Assessment Committee for reconsideration and a declaration was to be made as to the meaning and effect of section 71(4) and clause 3(8). There was no order as to the costs of the appeal.

• Rent Assessment Committee of the London Rent Assessment Panel: on 13 December 2010, determined the fair rent and concluded that it should not be registered as variable.
• High Court (Administrative Court): allowed the appeal, declared the proper construction of section 71(4) of the Rent Act 1977 and clause 3(8), and directed reconsideration by the Committee.