Perseus Property Co Ltd v Burberry and others

Rent Act 1977 — Landlords’ appeal against decision of rent assessment committee — Main complaints against the decision were the failure of the committee to include in the amount fairly attributable to the provision of services an allowance for the depreciation of plant and machinery necessary for the provision of the services and the failure to allow any sum in respect of profit on the services provided — Equipment in respect of which the landlords made a claim for a depreciation allowance included boilers, lifts, carpets, oil-storage tanks and cold-water tanks — Held that, as the committee had had regard to the costs of services, it was an error of law to have failed to consider the inclusion of an allowance for depreciation of service equipment and of an element of profit — It was true that it was not essential for the committee to have had regard to costs at all; they could have looked at the matter in some other way so as to arrive at a fair rent — But, having taken figures for specific items of costs, they were wrong not to have allowed for depreciation — In these circumstances the appeal must be allowed and the matter remitted to the committee for reconsideration — Regis Property Co Ltd v Dudley and Bell Property Trust Ltd v Hampstead Assessment Committee cited This was an appeal by the landlords, Perseus Property Co Ltd, against a decision of a committee of the South Eastern Rent Assessment Panel in respect of 30 flats at Furze Croft, Furze Hill, Hove, Sussex. David Neuberger (instructed by Piper Smith & Basham) appeared on behalf of the appellant landlords; the respondent tenants did not appear and were not represented. Giving judgment, NOLAN J said: This is an appeal by landlords, Perseus Property Co Ltd, against a determination of the South Eastern Rent Assessment Panel, dated November 11 1983, in respect of 30 flats at Furze Croft, Furze Hill, Hove. The respondents to the appeal, who are the tenants of those flats, have not appeared in these proceedings, although the court has received affidavits from individual tenants which have been considered. Those affidavits do not, unfortunately, deal in terms or at all with the precise points of law on which the appellants rely. Mr Neuberger of counsel, appearing for the appellants, has, however, fairly and in accordance with his duty, assisted by putting to me such points as might be raised on behalf of the respondents in opposition to this appeal. The substance of the appeal arises out of the part of the determination which deals with service charges. Service charges are one of the items or elements commonly, and in a case such as the present, to be taken into account by the rent assessment committee in fixing the fair rent. The statutory provisions governing the matter are those now contained in sections 70 and 71 of the Rent Act 1977 as amended. Section 71(1) in particular makes it clear that the amount to be registered as the rent of any dwelling-house shall include any sums payable by the tenant to the landlord for the use of furniture or for services. The determination made by the rent assessment committee does indeed make allowances in respect of sums paid by the landlords, the appellants, for furniture and services, but it is criticised by Mr Neuberger on a number of grounds, of which the two most important are these: first, when assessing the fair rent for the various flats, the committee made no allowance for an annual sum in respect of depreciation or replacement of the boilers, lifts, carpets, oil-storage tanks, cold-water tanks and so on in the building of which the flats form part and, second, the committee failed to allow any sum in respect of profit to the appellants in relation to the services provided to the building. The decision of the rent assessment committee shows, as one would expect and almost invariably finds, a careful and obviously conscientious study of the premises and of the complaints of the tenants. It also specifically adverts to the detailed figures of claim put in by the appellants to the rent assessment committee in respect of the cost of providing services. It makes specific provision in respect of most of the various items. What it does not do is to include anything in respect of the claim for depreciation of the items to which I have referred and, says Mr Neuberger, that discloses an error in point of law. It is true that it was not essential for the rent assessment committee to have regard to costs at all. Their discretion is very properly wide and large and they could have looked at the matter in some other way so as to arrive at a fair rent. But, having, as they have done, taken figures for specific items, such as maintenance, yet not allowed for depreciation, it seems to me that they have, on the face of it, erred in law. The Court of Appeal in Regis Property Co Ltd v Dudley [1958] 1 QB 346, which was a case which was decided upon earlier legislation and which referred to the fixing of a reasonable charge for the accommodation, made it clear that the statute necessarily implied a provision for depreciation. Pearce LJ (as he then was), giving the judgment of the court at p 360, said: It seems to us that, once it is conceded (as it must be and is in this case) that the plant in question is necessary in order to provide the services, some provision for its depreciation or replacement must be included in any computation of the reasonable charge for those services. It seems to me, that, although the phrase ‘reasonable charge’ has disappeared from the legislation, this is a statement of principle that cannot be excluded from the law because the cost of replacement and depreciation is as much a cost as the direct cost of providing the services and the cost of maintenance. Therefore, on this ground alone, it seems to me that it is necessary for the matter to be remitted to the rent assessment committee, so that they may consider the question of depreciation. The second main ground on which this appeal has been brought goes to the disallowance by the rent assessment committee of any element in respect of profit to the landlords on the provision of services. Here the position is perhaps slightly less straightforward because there may be circumstances in which the rent assessment committee may properly decide that no element of profit should be allowed to the landlords. For example, if, as appears from the decision of the Court of Appeal in the Regis Property case at [1958] 1 QB 346 at p 363, it is shown that the landlords had entrusted the management to a services company which was a subsidiary of the landlords, there may be a very good reason for disallowing any profit to the management company itself. 115 However, barring such circumstances as this — there are no such circumstances in the present case — it seems hard to deny to the landlords any profit at all on the services which they provide. That, too, was evidently the view of the Court of Appeal in Bell Property Trust Ltd v Hampstead Assessment Committee [1940] 2 KB 543. On this ground also, therefore, as it seems to me, the matter should be remitted to the rent assessment committee to reconsider the claim made by the landlords in respect of some profit at any rate upon the services which they provide. Other matters to which the appellants, in their amended notice of motion, referred are less easy to determine as matters of principle. They relate to the degree to which allowance is made in respect of particular items and, in the case of some items, to the non-allowance of any reduction at all. I would be very reluctant to trespass upon the function of the rent assessment committee in offering any view, as a matter of law, upon the attitude which they have taken. I have no doubt that they have aimed throughout to arrive at the fair overall result. Since, however, I am remitting the matter to them, I would respectfully invite them to have regard to the arguments raised by the appellants in their notice of motion and to attach to them such weight as they think fit. The upshot of the matter is that, in particular, upon the non-allowance for depreciation and upon the unexplained absence of any allowance for profit to the landlords, the appeal should be allowed and the matter sent back to the rent assessment committee for reconsideration in the manner I have described. No order was made for costs.