Spath Holme Ltd v Chairman of the Greater Manchester and Lancashire Rent Assessment Committee and others

Rent Acts — Assessment of fair rents — Whether rent assessment committee entitled to prefer evidence of other registered fair rents in preference to evidence of rents of assured tenancies The respondent is the owner of a block of 20 flats which were originally all let on regulated tenancies under the Rent Act 1977; section 70 of that Act provides for a fair rent for such tenancies. Since 1988 vacant flats have been let as assured tenancies under the Housing Act 1988; section 14 of that Act provides for an open-market rent. In connection with two references to the rent assessment committee for the determination of fair rents for several of the flats let on regulated tenancies, the landlord submitted that the rents paid on comparable flats let on assured tenancies within the same property must be taken into account by the committee; they declined to submit comparables outside the property. In determining the fair rents for the flats, the committee relied on evidence of other registered rents in preference to evidence of the rents of the assured tenancies in the property. The landlord’s appeal under section 13 of the Tribunals and Inquiries Act 1971 was allowed by Harrison J who decided that a committee should have considered the market rents and made adjustments to these for scarcity before considering evidence of fair rents. The chairman of the rent assessment committee appealed contending that the committee was entitled to reject the assured rent comparables without giving any reasons. Held: The appeal was dismissed. A fair rent is the market rent less the statutory disregards and discounted to remove any element for scarcity. The committee made an error of law in using the word ‘fair’ in the sense of reasonable. If the committee were entitled to conclude, and correct in their view, that tenancies enjoying security of tenure command higher rents than those which do not, they were wrong in law in holding that the rents for assured tenancies would have to be discounted on that ground since the like security was enjoyed by regulated tenancies as well and was a circumstance to be taken into account. Contrary to the committee’s view, market rents of assured tenancies adjusted for scarcity are precisely what the fair rent is required to be; they were wrong to reject the evidence of the assured tenancies. The following cases are referred to in this report. BTE Ltd v Merseyside and Cheshire Rent Assessment Committee (1991) 24 HLR 514; [1992] 1 EGLR 116; [1992] 16 EG 111 Guppys (Bridport) Ltd v Sandoe (1975) 30 P&CR 69; [1975] 2 EGLR 66; (1975) 235 EG 689 Guppys Properties Ltd v Knott (1977) 245 EG 1023, [1978] 1 EGLR 67; [1978] EGD 255 Guppys Properties Ltd v Knott (1979) 253 EG 907; [1980] 1 EGLR 67 London Rent Assessment Committee v St George’s Court Ltd (1984) 48 P&CR 230; [1984] 1 EGLR 99; 270 EG 1186, CA Mason v Skilling [1974] 1 WLR 1437; [1974] 3 All ER 977; (1973) 29 P&CR 88; [1974] EGD 230; 230 EG 1271, HL Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577; [1968] 3 WLR 694; [1968] 3 All ER 304, CA Metropolitan Property Holdings Ltd v Finegold [1975] 1 WLR 349; [1975] 1 All ER 389; (1974) 29 P&CR 161; [1975] 1 EGLR 75; 233 EG 843, DC Metropolitan Property Holdings v Laufer (1974) 29 P&CR 172; [1975] 1 EGLR 77; 233 EG 1011 Mountview Court Properties v Devlin (1970) 21 P&CR 689; [1970] EGD 513; 215 EG 303; [1971] JPL 113, DC Palmer v Peabody Trust [1975] QB 604; [1974] 3 WLR 575; [1974] 3 All ER 355; (1974) 28 P&CR 391; 232 EG 83, DC Tormes Property Co Ltd v Landau [1971] 1 QB 261; [1970] 3 WLR 762; [1970] 3 All ER 653; (1970) 21 P&CR 923; [1971] JPL 112 Western Heritable Investment Co Ltd v Husband [1983] 2 AC 849; [1983] 3 WLR 429; [1983] 3 All ER 65; [1983] 2 EGLR 100; (1983) 268 EG 266, HL This was an appeal by the chairman of the Greater Manchester and Lancashire Rent Assessment Committe from a decision of Harrison J who had allowed an appeal by Spath Holme Ltd under section 13 of the Tribunals and Inquiries Act 1971 and quashed determinations of fair rents by the committee. James Bonney QC (instructed by Drewitt Willan, of Manchester) appeared for the landlord; John Furber QC (instructed by the Treasury Solicitor) represented the chairman. Giving judgment at the invitation of Glidewell LJ, MORRITT LJ said: These are appeals by the chairman of the Greater Manchester and Lancashire Rent Assessment Committee from the orders of Harrison J made on August 17 1994, quashing determinations of the Greater Manchester and Lancashire Rent Assessment Committee, made on March 29 and August 17 1993, as to the fair rents payable in respect of 20 flats in Spath Holme, Holme Road, West Didsbury, in the City of Manchester, let to tenants on regulated tenancies and remitting the matters for redetermination by a differently constituted committee. As described by the rent assessment committee Spath Holme is a purpose built block of flats in the good residential area of Didsbury in South Manchester. Vehicular access can be obtained from Spath Road and the unmade Holme Road. It is a three-storey block of brick and concrete construction with a pitched roof and is set in well maintained landscaped grounds. There is parking and separate garage accommodation to the rear. The building is in six sections, four fronting in to Holme Road with two ‘outrigger’ blocks in the grounds to the rear. Each section has an entrance operated by a door entry system, and each flat has its own letter box and milk box. The flats are of three types. There are two-bedroom flats comprising: a hall, living room, dining room/kitchen, bathroom/WC and two bedrooms with built-in wardrobes; one bedroom flats comprising: a hall, living room with partitioned off dining area, kitchen, bathroom/WC and bedroom; and what the rent assessment committee referred to as ‘bedsits’ comprising: a hall, bedsitting room, kitchen and bathroom/WC. On completion of the building in about 1968 the flats were let on regulated tenancies as now defined in Rent Act 1977, section 18. A distinguishing feature of such a tenancy is that in practice the rent 81 payable in respect of the property comprised in it is limited to the fair rent as determined in accordance with section 70 Rent Act 1977. So far as relevant that section provides (1) In determining, for the purposes of this Part of this Act, what rent is or would be a fair rent under a regulated tenancy of a dwelling-house, regard shall be had to all the circumstances (other than personal circumstances) and in particular to — (a)    the age, character, locality and state of repair of the dwelling-house … (b)    if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture, and (c)    any premium, or sum in the nature of a premium, which has been or may be lawfully required or received on the grant, renewal, continuance or assignment of the tenancy. (2) For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms. Subsection (3) prescribes matters such as disrepair, tenants improvements otherwise than as required by the tenancy agreement and any improvement or damage to furniture effected by the tenant which are to be disregarded. The Housing Act 1988 introduced, among others, the concept of the assured tenancy. The tenant under such a tenancy enjoys the security of tenure provided for by that Act and, where it is a periodic tenancy, the right to have the amount of any rent increase notified by the landlord determined by a rent assessment committee. By section 14 that rent is to be what the committee considers that the dwelling-house concerned might reasonably be expected to be let for in the open market by a willing landlord under an assured tenancy on the various assumptions set out in that section. Flats in Spath Holme which have become vacant after Housing Act 1988 came into force have been relet on assured tenancies. The landlord evidently considered that the level of rent agreed in respect of those lettings justified a higher fair rent in respect of the regulated tenancies. Thus a series of applications were made to the rent officer to determine the fair rent payable for those flats still let on regulated tenancies. The first batch, comprising flats 4, 9, 14, 17 and 32, led to registrations with which the landlord was dissatisfied; at his request they were referred to the rent assessment committee for their determination. The rent assessment committee reduced the fair rents as determined by the rent officer. The statement of reasons dated December 19 1991 contained the following passage: The Committee did not consider that the lettings of the [five] subject properties were comparable with the lettings in the same blocks on assured tenancies, either to companies or individuals, having regard to the difference in the terms of the two types of tenancy. The landlord appealed to the High Court as permitted by section 13 of the Tribunal and Inquiries Act 1971 on the grounds that: (i) The Committee erred in law in concluding that lettings of various similar dwellings in the same block of flats as the subject properties were not comparable with the lettings of the subject properties for the purposes of the assessment of rent solely because the former lettings were on assured tenancies; (ii) The Committee erred in law in failing wholly, in assessing the rents payable in respect of the subject properties, to take account of the lettings of the said very similar dwelling solely on the basis that the former lettings were on assured tenancies. On November 5 1992, by consent, Hutchison J allowed the appeal, quashed the determination ‘on the grounds (1) and (2) in the Notice of Motion herein’ and remitted the matter for redetermination to the rent assessment committee. By the time that that redetermination came before the rent assessment committee the landlord had also referred for the like determination the fair rents in respect of other flats and withdrawn the reference of some as the flat in question had become vacant and had been relet on an assured tenancy. Thus the determination dated March 29 1993 related to flats 1, 3, 4, 5, 8, 9, 11, 14, 19, 21, 25, 29, 30, 31, 35 and 36. These comprised three two-bedroom flats (nos 1, 3 and 5), eight one-bedroom flats (nos 4, 11, 14, 19, 21, 25, 29 and 36) and five bedsits (nos 8, 9, 30, 31 and 35). In written submissions to the rent assessment committee, the landlord recorded that the terms of the tenancies of flats of each type were the same whether the tenancy was a regulated or an assured tenancy. It asserted that ‘rents paid on comparable property let on assured tenancies must be taken into account’ and gave details of one-bedroom and bedsit flats let on an assured tenancy as comparables for each of those types let on a regulated tenancy; in the case of the two-bedroom flats it was suggested that the figures for the one-bedroom flats might be suitably adjusted. In para 5.7 it was stated: We feel that the assured rents and assured shorthold rents quoted are extremely pertinent for they indicate what tenants are prepared to pay in recognition of the quality of the property and of this particular environment. We fully accept that the ‘scarcity element’ has to be ignored but we do not feel, at the present time, that this figures as prominently as it did, if at all. The market of houses for sale is, as is widely known, very depressed to such an extent that it is a source of concern to the Treasury as it is helping to depress the economy. One side effect is that people wishing to sell their houses and finding they are unable to do so are making them available to rent and whilst not depressing the rental levels obtained this has had an effect on the ‘scarcity element’. There is no evidence of scarcity in the market. The landlord reiterated that it did not propose to put forward as comparables lettings outside Spath House as it did not know the terms of the tenancies or regulated tenancies within Spath House as they were affected by the appeal. In their determination the rent assessment committee set out the underlying facts, the result of their inspections of individual flats, the test, as they understood it, to be applied in accordance with section 70 of the Rent Act 1977 and the submissions for the parties, including those of the landlord to which I have referred. In the light of the arguments advanced on behalf of the landlord, it is necessary to quote in full para 17 of the reasons for the decision of the rent assessment committee in which the committee explained their approach to the determination of the question of fair rent. It reads as follows: 17. There remains the important and general issue of how the Committee should approach the matter of determining what is fair rent for each of the subject properties. On this the Rent Act is largely silent although, importantly, Section 70(2) provides that the Committee must assume ‘…  that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.’ Thus, when assessing a fair rent, it must be assumed that there is a market of properties of a similar nature in the locality to let on the terms of the regulated tenancy in question in which the demand does not ‘substantially’ outstrip the supply; ie that the market is broadly balanced (Western Heritable Investment Co Ltd v Husband [1983] 2 AC 849). However, it must be remembered that the statutory assumption referred to above is but part of the wider process of determining a rent that is ‘fair’. Since the system of fair rent regulation was first introduced in 1965, a variety of judicially approved methods have emerged which have been adopted either singly or in combination by both Rent Officers and Rent Assessment Committees when carrying out their rent determining function. (See Megarry, The Rent Acts 11th ed Ch 23.) The basic rule is that any method of ascertaining a fair rent may be adopted provided it is not unlawful or unreasonable. (Mason v Skilling [1974] 1 WLR 1437 HL.) In Mason v Skilling (supra) Lord Reid stated that ‘the most obvious and direct method is to have regard to registered rents of comparable houses in the area. In the initial stages this method may not be available but as the number of comparable registered rents increases the more likely is that it will lead to a correct result …’ This approach was endorsed in Western Heritable Investment Co Ltd v Husband (supra) where Lord Brightman declared that, ‘if comparables are available which do not reflect, or are discounted to reflect, scarcity values, such comparables are the best guide to a fair rent’. The committee’s conclusions and their reasoning are set out in paras 26 to 31 of the reasons for the decision of the rent assessment committee which, like the judge, I think it is necessary to quote in full. 82 26. The evidence as to rents obtained for similar unrenovated, unfurnished, flats in the block is incontrovertible. However, it is less clear that these rents provide direct evidence of what would be an appropriate rent for the subject properties. The ‘comparables’ relied on by the landlord as providing the best evidence are all of properties described as unrenovated and unfurnished. Although some of them surely have the benefit of a number of minor improvements effected by former protected tenants, they are, to all intents and purposes, unmodernised. However, they are being let on assured tenancies which have the benefit of security of tenure afforded by the Housing Act 1988. In such circumstances it might be expected that tenants will be willing to spend money on improvements, which will endure for the period of their occupancy, albeit to the eventual benefit of the landlord. Consequently it would not be surprising to find that such tenants are willing to pay a substantial rent. But can it then be deduced that such a rent could be obtained for the subject properties let as they are on regulated tenancies and disregarding the tenants’ security of tenure, which is a ‘personal circumstances’ (See Mason v Skilling supra). The answer would seem to be, no. A hypothetical tenant would, in the Committee’s experience and view, pay much less for such a property. Furthermore, if the Committee were to adopt the method of ‘market rent less scarcity’ approach contended for by the landlord, it would need to be satisfied that there was virtually no scarcity in the market. As already pointed out, the landlord had offered no evidence on the point and simply relied on unsupported assertions (in paragraphs 1.5 and 5.7 of the Appeal Document) that there is no evidence of scarcity in the market. This is coupled with a reference to the recent ‘effect on scarcity’ produced by the phenomenon of homeowners who are unable to sell, letting on an interim basis, although it is accepted that this has not depressed the rental levels obtained (paragraph 5.7 Appeal Document). 27. The Committee are of the view that these assertions are opinion only and not supported by hard evidence. On the contrary, as far as Spath Holme is concerned, the evidence suggests that when flats formerly let on regulated tenancies become available, they are soon relet on assured tenancies at markedly increased and increasing rental levels. This does not indicate an absence of ‘scarcity’; quite the contrary. To establish an absence of scarcity the landlord would need to show that ‘the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy, is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms’. No evidence was offered on this issue by the landlord. However, the Committee is aware that there is a real problem of lack of housing for persons in the Manchester area as evidenced by the long waiting list of applications for local authority dwellings and housing association dwellings. Admittedly not all will seek accommodation of the same type and on the same terms (other than as to rent) as the subject properties, but obviously a significant number would be willing to take a tenancy on the terms (other than as to rent) in question. The Committee was not made aware by the landlord of any selection procedure for obtaining tenants, such as a request for financial guarantees, deposits etc., which are common when flats of this type are let in the private market. Such factors would obviously have a bearing on conclusions concerning the ‘demand’ side of the scarcity equation. Furthermore, no evidence was offered to suggest that there was a surplus of unlet basis unimproved accommodation to let. 28. In conclusion therefore, the Committee found it difficult to accept that ‘scarcity’ for this type of accommodation in the locality had been eliminated, although its incidence does seem to have diminished. It is clear that in recent years fair rents have been rising consistently faster than rates of inflation or any another indicator related more directly to housing costs and this suggests that a reduction in the incidence of scarcity has been making itself felt. 29. For the above reasons the Committee does not find it helpful to draw direct inferences from the market rent levels listed by the landlord as to what should be a fair rent for the subject properties. This does not mean that that evidence is irrelevant. It clearly indicates market rental levels for properties let to assured tenants with security of tenure. Nevertheless when coupled with the Committee’s conclusion, that an absence of scarcity has not been made out, it does not lead the Committee to believe that the matter can be resolved by a simple application of a ‘market rent less scarcity’ test. The obiter dicta in the BTE case, clearly deal with the position where a decision can be made on the evidence that there is no scarcity. In these circumstances therefore, the Committee consider themselves entitled to rely on their knowledge and experience of registered rent levels which are not demonstrated to have been falsely determined, and in particular on registered rents for comparable properties in the locality of the subject properties. The rents for the comparable properties at Ballbrook Court and Viceroy Court (see paragraph 18 above) were last determined in 1991. Furthermore, they have to be seen in the light of the Committee’s conclusion that there continues to be a diminution (but by no means elimination) of scarcity of similar properties in the area. Consequently, some adjustment would need to be made to reflect this fact. 30. Finally, it must be appreciated that the issue of ‘scarcity’ introduced by Section 70(2) of the Rent Act 1977 is but one, albeit an important, part of the fair rent scheme in that Act whereby Rent Officers and Rent Assessment Committees are required to consider what is fair, in the light of ‘all the circumstances’, in order to produce a rent which is fair to landlord and tenant. Fair rents are fixed for a minimum of two years and are therefore not susceptible to reflecting any volatility which market movements might produce. The rents determined in the past for the subject properties have not been demonstrated to be unsound and must be presumed to have reflected the scarcity element. It would be surprising therefore, even if it had proved possible to accept the landlord’s conclusion on the scarcity issue, to find that three years or so later, it would be ‘fair’ to increase the rent by over 100%, as contended for by the landlord in the case of subject properties. 31. However, as stated above, the Committee were unable to accept the landlord’s contention and have, in the light of their knowledge and experience of registered rent levels in the area for this type of property, coupled with their perception of a diminution, but by no means elimination of scarcity, concluded that fair rents for the subject properties should be determined as follows … Contemporaneously with that determination the rent officer was fixing the fair rents for flats 13, 15, 22 and 28. The landlord was dissatisfied and referred the matter to a differently constituted rent assessment committee supported by written submissions in substantially the same terms as before. Those submissions were not accepted, indeed the rent assessment committee stated that there were none. The rent assessment committee in their written reasons stated: Whilst the Committee was assisted by the suggested comparables …  it apprehended that preference should be given to Rent Assessment Committee registrations (see Guppy’s Bridport v Sandhoe (1975) 235 EG 689, [1975] 2 EGLR 66; and R v Brighton Rent Officers, ex p Elliott (1975) 29 P&CR 456. Accordingly the Committee looked at and derived assistance from the previously referred to Committee decision of 29th March 1993 in respect of flats at Spath Holme … The rents were fixed by reference to those registrations. The landlord appealed to the High Court pursuant to section 13 of the Tribunals and Inquiries Act 1971 in respect of each determination inviting that court to set it aside and to remit the matter for redetermination. The appeals came before Harrison J on April 29, May 3 and June 23 1994. In his reserved judgment given on August 17 1994 Harrison J explained the circumstances in which the appeals arose, the decisions of the rent assessment committee and their reasons and certain submissions of counsel. At p27 of the transcript he said: The issue in this case, put shortly, is whether the rent assessment committee were wrong in using the registered fair rent comparables rather than the assured tenancy comparables. In determining that issue, and having regard to the decided cases which I have quoted earlier in this judgment, I consider that the following principles are applicable: 1. A ‘fair rent’ under section 70 of the Rent Act 1977 is the market rent adjusted for the scarcity element under section 70(2) and disregarding the personal circumstances mentioned in section 70(1) and the matters specified in section 70(3). 2. There are various methods of assessing the fair rent, including the use of registered fair rent comparables and the use of assured tenancy comparables. 3. The method or methods adopted by a rent assessment committee may vary according to the particular circumstances of each case. 4. The rent assessment committee must consider, and have regard to, the method or methods suggested to them by the parties. 5. In deciding which method to adopt the rent assessment committee must take into account relevant considerations and give adequate reasons for their choice of method. 6. Subject to compliance with those requirements, the rent assessment committee is free to adopt the method which appears to them, on the evidence, to be the most appropriate method provided it is not a method which is either unlawful or unreasonable. He recorded that there was no dispute that the aim is to arrive at the market rent less scarcity, and, that that was a matter for the committee subject to the safeguards contained in the principles to which he had referred. The significance of those safeguards he emphasised by 83 reference to the rival comparables of assured tenancies and regulated tenancies which were for two-bedroom flats £4,290 and £2,700, for one-bedroom flats £3,300 and £2,200 and for bedsits £2,400 and £1,650. After quoting from the judgment of Griffiths LJ in London Rent Assessment Committee v St George’s Court Ltd (1984) 48 P&CR 230*, at p235 he continued: *Editor’s note: Also reported at [1984] 1 EGLR 99. That, of course, was a case where the fair rent comparables of other flats within the same block of flats related to regulated tenancies rather than to assured tenancies. However, the general point still remains in the present case that weighty reasons need to be shown to depart substantially from market rents recently agreed on similar flats within the same block of flats. The fact that those market rents related to assured tenancies rather than to regulated tenancies may provide the weighty reason to depart from them in favour of registered fair rents for comparable properties nearby, but, if that is so, an adequate explanation should be given by the rent assessment committee to justify such a conclusion. He then summarised the reasons why the Rent Assessment Committee preferred the regulated tenancy comparables as the security of tenure under an assured tenancy, the continued existence of scarcity and the fact that the registered rent comparables had not been shown to be unsound. In relation to the issue of scarcity he divided the question into two issues, whether the rent assessment committee was entitled to conclude that scarcity had not been eliminated and whether if it had not that was an adequate reason for not adopting the assured tenancy comparables. He answered the first in the affirmative. With regard to the second he pointed to passages in paras 26, 28 and 29 of the rent assessment committees Reasons and proceeded: In my view, that involves a misunderstanding of the BTE case which I have already quoted earlier in this judgement. That case does not decide that the ‘market rent less scarcity’ approach based on assured tenancy comparables can only be adopted where there is no scarcity. It can be adopted where there is a scarcity element provided that the market rent is adjusted to eliminate that element. Having approached the matter on the basis that they could only adopt that approach if there were no scarcity element, they failed to consider what the market rent would be, using assured tenancy comparables, by adjusting that rent to eliminate the scarcity element which they found still existed. They were therefore not in a position to judge whether the market rent, so adjusted, still showed any significant disparity between the two sets of comparables because, if it had done, it might have cast doubt on the reliability of the registered rent comparables. I am therefore of the opinion that the scarcity reason given by the committee for not adopting the assured tenancy comparables was wrong because it involved a misunderstanding of the position and resulted in a failure to take into account an important consideration which could have affected the decision as to which valuation method to adopt. Of course, the scarcity element is already eliminated in the registered rent comparables by virtue of the operation of section 70(2) of the 1977 Act, but the committee did not say that they had adopted the registered rent comparables because there was thereby no need to adjust for the scarcity element whereas there would have been a need to do so if they had adopted the assured tenancy comparables. Their reason for not adopting the assured tenancy comparables was that they thought that they had to find that there was no scarcity before they could adopt that method. If they had appreciated the true position, there is nothing to suggest that there would have been any difficulty in adjusting the market rent to eliminate the scarcity element. The committee does not have to quantify the scarcity element in any precise way. It is clear from the last two sentences of paragraph 29 and from paragraph 31 of the decision letter that they adjusted the registered rent comparables to allow for the diminution of the scarcity element. In much the same way, they could have adjusted the market rent derived from the assured tenancy comparables to eliminate the scarcity that they found still existed. Having failed to do so, they deprived themselves of an important indication as to which of the two valuation methods was more reliable. Having indicated that for those reasons he would allow the appeal he then considered the security of tenure reason. He quoted the relevant passage from para 26 of the reasons and indicated that he shared the landlord’s concern whether there was sufficient evidential basis for the proposition that an assured tenant would pay an inflated rent for the advantage of security of tenure. He accepted that as the security of tenure enjoyed by a tenant under a regulated tenancy had to be disregarded as a personal circumstance, but that enjoyed by an assured tenant did not, any inflation in the rent of the latter would have to be discounted before use as a comparable for the former. But, as he observed at p37 of the transcript, In this case, the committee simply relied on their assertion that the rents for the assured tenancies would be inflated for the security of tenure element without attempting to discount the rents for that element to ascertain how the discounted market rents compared to the registered rent comparables. If they had done that exercise, they would have been able to form a view about the reliability of the two sets of comparables. Finally, he referred to para 30 of the reasons and the reference to whether ‘it would be fair to increase the rent by over 100%’. It was and is common ground that fairness in the sense of reasonableness in amount for the tenant to pay was an irrelevant consideration. He stated that had that been the only ground of appeal he would not have thought it sufficient. But: when combined with the other matters that I have already dealt with I am left with the feeling that there is a real possibility that the question of reasonableness may have influenced the committees decision. These appeals are brought by the chairman of the rent assessment committee because of concern at the implications of the judge’s findings that rent assessment committees are not at liberty to choose the registered rent comparables from other blocks in preference to the assured tenancy comparables in the same block without having ‘worked through’ the latter comparables first. He submits that such an approach is a new development and goes beyond and is inconsistent with what the authorities require. He is concerned that if the decision of the judge is right rent assessment committees will not be free to adopt their own (reasonable) method of determination. He contends that the judge misunderstood the judgment of Griffiths LJ in London Rent Assessment Committee v St Georges Court Ltd and, in consequence, wrongly placed the onus on the committee to justify the rejection of the assured tenancy rents with weighty reasons. He submits that the rent assessment committee were entitled to reject the assured tenancy rents as comparables without giving any reasons at all, but in fact did so for the good reasons which they stated, namely that they would have to be discounted for security of tenure and scarcity. The landlord supports the decision of the judge for the reasons he gave, but with a different emphasis, and for the additional reasons raised in their respondents’ notice. In summary, the landlord submits that the reasons for the determination reveal three errors of law and that, in consequence, in the exercise of their discretion the rent assessment committee made a perverse decision. The alleged errors of law are: first, that the committee did not appreciate that the fair rent is the market rent for the property discounted to remove the effect of scarcity; second, that they considered that they could only use the comparables afforded by the rents payable under the assured tenancies for similar flats in the same block if they concluded that there was no scarcity; and, third, that they decided that such rents could not be used as comparables as they would have to be discounted on account of the effect of the security of tenure enjoyed by the tenant. The perverse result relied on is the rejection of the comparables afforded by other virtually identical flats in the same block in favour of less similar premises in other buildings. Before considering these submissions further there are some general points which should be noted. The first relates to the legislative background against which the authorities to which we were referred were decided. The concept of regulated tenancies and fair rents was introduced by Rent Act 1965. That Act, and the Rent Act 1968, did not apply the regime of regulated tenancies and fair rents to furnished tenancies. But the Rent Act 1974 assimilated furnished with unfurnished tenancies. From then until 1988 tenancies of residential properties at open-market rents were unusual. Since January 1989 84 however most new tenancies have been assured tenancies which are by definition at open-market rents. Thus, between 1965 and 1974 most rent comparables were either open-market rents for furnished tenancies or registered fair rents which were open-market rents discounted for scarcity. From 1974 to 1988 the first alternative was no longer available. Since 1988 there have been old regulated tenancies and an increasing number of assured tenancies at open-market rents. Second, there was no dispute of substance material to the facts of this case as to the accuracy of the general principles formulated by the judge at pp27 and 28 of his judgment, which I have quoted. The chairman suggested that the fifth and sixth principles should be glossed to take account of the right of rent assessment committees to use their own knowledge and experience. The landlord suggested that the expression of the second principle should recognise that in the light of the changed legislative background some preference should be accorded to the rents payable under assured tenancies. Third, it was common ground, and is well established, that the fair rent which is to be determined is the market rent for the property in question disregarding the personal circumstances referred to in section 70(1), the specified disregards referred to in section 70(3) and discounted for any scarcity within section 70(2). The cases emphasise that the starting point is the market rent. Thus, in Mountview Court Properties v Devlin (1970) 21 P&CR 689* at p691 Lord Parker LCJ referred to ‘the market rent and therefore the fair rent’. In Tormes Property Co Ltd v Landau [1971] 1 QB 261 at p267, Lord Parker LCJ referred to ‘fair rent which will be market rent less scarcity’. Similar judicial statements may be found in Metropolitan Property Holdings Ltd v Finegold [1975] 1 WLR 349† , at p352, and BTE Ltd v Merseyside and Cheshire Rent Assessment Committee (1991) 24 HLR 514‡  at p517. *Editor’s note: Also reported at (1970) 215 EG 303. † Editor’s note: Also reported at [1975] 1 EGLR 75. ‡ Editor’s note: Also reported at [1992] 1 EGLR 116. In considering the arguments for the chairman, I find it necessary to put them in the context of the wider and in some respects logically prior contentions of the landlord. Thus the first question is whether the rent assessment committee appreciated the nature of the fair rent they were required to determine. I have already referred to the fact that it is common ground, and anyway well established, that it is the market rent less the statutory disregards and discounted to remove any element of scarcity. I find it surprising that this is nowhere stated in the reasons for the determination. Para 17, which I have quoted in full, is the passage in which the committee set out the principles which they consider to be applicable, but make no reference to market rents. In para 21 of the reasons, the committee referred to the landlord’s approach described as ‘market rent less scarcity’ requiring two important findings to be made of which the first was stated to be ‘that in law section 70(2) of the Rent Act 1977 exhaustively defines the term ‘fair rent’ for the purposes of that Act’. That is not so and even if it was intended to refer to section 70 as a whole the statement is incomplete for it ignores the important element of the market rent held to be implicit in the term fair. I will consider later the committee’s rejection of the assured tenancy comparables on the ground that there was still an element of scarcity and security of tenure and for the moment pass over the intervening passages in the reasons. But at para 30 the committee returned to the concept of fair rents as they understood it. In the sentence ‘It would be surprising therefore even if it had proved possible to accept the landlord’s conclusion on the scarcity issue, to find that three years or so later it would be ‘fair’ to increase the rent by over 100% as contended for by the landlord …’, it is evident that the committee were using the word fair in the sense of reasonable. It is common ground that such an approach is contrary to the judgment of Hutchison J in BTE Ltd v Merseyside and Cheshire Rent Assessment Committee (1991) 24 HLR 514, and wrong in law. Subject, therefore, to any different approach indicated in the passages dealing with the rejection of the assured tenancy comparables, in my view, the reasons for the determination reveal an error of law in that the committee did not appreciate the meaning of ‘fair rent’ as interpreted by the courts. The possibility of this error must be borne in mind when considering the other points. I turn then to the reasons given for rejecting the comparables on which the landlord relies. As the judge recorded there were essentially two, of which the first was security of tenure. In this context the judge accepted the view of the committee that the rents under the assured tenancies would have to be discounted. The reason was that he considered that the security of tenure enjoyed by the tenant under a regulated tenancy had to be disregarded as a personal circumstance. Thus unless the rent payable under the assured tenancy was discounted for the security of tenure the tenant enjoyed under such a tenancy the comparison of the rents would not be like for like. The judge does not appear to have had the benefit of the argument advanced in this court by the landlord, without objection from the chairman, to the effect that the security of tenure attaching to a regulated tenancy is substantially the same as that enjoyed by the tenant under an assured tenancy and is not a personal circumstance to be disregarded with the consequence that the rent payable under the latter does not have to be discounted on that account. The contention that the security of tenure of a tenant under a regulated tenancy must be ignored as a personal circumstance derives from the decision of the House of Lords in Mason v Skilling [1974] 1 WLR 1437*. In that case under the legislation in force in Scotland which was in all relevant respects the same as that in England the rent assessment committee decided to adopt the method of assessment of a fair rent by reference to the fair yield to the landlord on the capital value of the house. The question arose, if that method were adopted, whether the house should be valued with vacant possession or with the sitting tenant. The Court of Session decided that the presence of a sitting tenant was a circumstance to be regarded so that the latter basis should be adopted. The House of Lords disagreed on the ground that though the presence of a sitting tenant was a circumstance it was a personal circumstance which was to be disregarded. At p1440 Lord Reid said: *Editor’s note: Also reported at (1974) 230 EG 1271. It is quite true that the fact that there is a sitting tenant is a ‘circumstance’ but, in my opinion, it is excluded by the Act. Section 42(1) directs that regard shall be had to ‘all the circumstances (other than personal circumstances).’ In my view the tenant’s right to remain in possession is a personal circumstance. A right to possess a house (or anything else) appears to me to pertain to the person who has the right, whether the right is statutory or contractual. The house itself remains the same whoever is entitled to possess it. Moreover, under the Act the tenant’s right to possess lasts so long, but only so long, as he complies with certain obligations. I am confirmed in this view by the fact that all the circumstances specified at the end of the subsection relate entirely to the house itself. In Palmer v Peabody Trust [1975] 1 QB 604* the landlord was a housing trust with the consequence that the tenant did not enjoy security of tenure. The tenant claimed that the rents payable under protected tenancies were not comparable on that ground. Lord Widgery LCJ said, at p608, *Editor’s note: Also reported at (1974) 232 EG 83. Furthermore I have a difficulty in saying whether or not the presence of statutory security is a personal circumstance. Under the section, as I read it, personal circumstances are to be ignored. I find it difficult to say that the presence or absence of security inherent in a particular tenancy is a personal circumstance, but I do not find it necessary to decide the point finally today and it may be that we shall have to look at it on another occasion. The only authority to which we have been referred on this point is Mason v Skilling (sub nom Skilling v Arcari’s Executrix) 1974 SLT 46, in the House of Lords on appeal from Scotland. The report which I have does not otherwise assist me in identifying the particular case. It was concerned with a rent assessment committee who had chosen to make their calculations of fair rent by reference to the capital value of the premises. When they came to pursue 85 that course, the question arose: should the premises be valued as with a sitting tenant or as vacant? The House of Lords held that they were to be valued as vacant, and certainly I think that it is right that Lord Reid was positively taking the view that the presence of a sitting tenant with a right of security was a personal consideration and to be ignored on that account. However, as I have said, I do not find it necessary to decide the matter finally today. I express my doubts and difficulties on the meaning of ‘personal circumstances,’ and it is a matter to which we may have to return. Later at p609 he added: The Act of 1968 which requires us to make this somewhat artificial assumption of no scarcity in section 46(2) does, by a side wind, in my view also require us to regard presence or absence of security as a matter which can technically be taken into account as a relevant circumstance but one which in practice can have only minimal effects, if any, on the amount of the rent to be fixed. For the landlord it is submitted that if the method of assessment adopted is the capital value/fair yield method then, as Mason v Skilling requires, the presence of a sitting tenant must be ignored as a personal circumstance for the value will depend on a personal attribute of the tenant, namely his age. But if the method adopted is the comparable rent payable under an assured tenancy then the security of tenure attached to a regulated tenancy is not a personal attribute. For the chairman it is submitted that such a distinction is untenable; if the circumstance is personal for one method of assessment it must be personal for the others. I prefer the submissions for the landlord. I see no a priori reason why a circumstance which is personal in one context must be personal in all others. If the method of assessment adopted is the capital value/fair yield basis, which was the case in Mason v Skilling, then the individual tenant and his attributes have an effect on the valuation. In the case of rent comparables the personal attributes of the individual tenant have no bearing on the assessment of the fair rent for the subject property. The relevance in this case arises from the view of the committee that tenancies to which security of tenure are attached by statute command a higher rent than those which do not. That circumstance does not appear to me to be properly described as ‘personal’ when the statute is requiring the determination of a fair rent ‘under a regulated tenancy’. Further it seems unlikely that Parliament could have intended that the security of tenure of such a tenancy should be disregarded with the consequence that two tenancies having substantially the same security of tenure have to be treated as being different in that respect. In my view, if the committee were entitled to conclude and correct in their view that tenancies enjoying security of tenure command higher rents than those which do not (as to which it is unnecessary to decide) they were wrong in law in holding that the rents for the assured tenancies would have to be discounted on that ground, since the like security was enjoyed by regulated tenancies as well and was a circumstance to be taken into account. Accordingly, I pass to the second ground relied on by the committee for rejecting the rents for the assured tenancies as comparables, namely the existence of scarcity. The sentence in para 26 which reads ‘Furthermore if the Committee were to adopt the method of ‘market rent less scarcity’ approach contended for by the landlord it would need to be satisfied that there was virtually no scarcity in the market’ if read literally is and was accepted to be wrong in law. Moreover, as the judge observed, the statement in para 29 that the dicta in the BTE case ‘clearly deal with the position where a decision can be made on the evidence that there is no scarcity’ betrays a misunderstanding of what that case decided. In my judgment, these two passages show that the committee thought that discounted market rents could not be used to determine the fair rent. But in that they were wrong for market rent adjusted for scarcity is precisely what the fair rent is required to be. Thus, in my view, the second reason given for rejecting the rents payable under the assured tenancies as comparables was bad in law too. But it goes further than that, for although it is not clear what the committee thought was the use of a ‘market rent less scarcity test’ if it could not be used if there was scarcity it does seem to confirm the doubt I expressed earlier that the committee did not have in mind the requirement that the fair rent should be the market rent less the disregards and discounted for scarcity. If they had they must have appreciated that the existence of scarcity could not be sufficient reason to reject these comparables. Moreover I do not accept the submission that the rent assessment committee rejected the assured tenancy comparables in favour of the registered rent comparables because the former could not be applied without a discount being applied for one or both of the reasons they gave. First, this is not what they said. Second, if that was the reason then they would have needed to explain why that was a reason to reject the former when it was, as they recognised, an exercise which had to be carried out before applying the latter. In my view, all three errors of law for which the landlord contends have been made out and this appeal should be dismissed. This conclusion does not deal with the matters of principal concern to the chairman, namely the ability of rent assessment committees to use their own knowledge and experience in deciding and applying the method they think best for the determination of the fair rent in any given case. This submission was based on the contention that the judge had misunderstood the comments of Griffiths LJ in London Rent Assessment Committee v St George’s Court Ltd (1984) 48 P&CR 230. That case concerned the rejection as comparables of the registered fair rents of other flats in the same block. It was in that context that Griffiths LJ, at p235 stated: Of course, all the circumstances would have to be taken into account when deciding on the weight to be attached to the rent of a comparable property, but, when one is dealing with a purpose-built block of flats, with flats of the same lay-out, one on top of another, very weighty reasons would have to be shown before it would be permissible to depart — certainly to depart substantially — from the fair rent that had very recently been assessed for one of those similar flats. The chairman submitted that fair rents and market rents were not the same so that there was no reason to require weighty or indeed any reasons for rejecting the latter in favour of the former. I do not agree. First, as the judge made plain in the passage in his judgment dealing with this case, which I have quoted, he appreciated that the dictum of Griffiths LJ related to the determination of fair rents by reference to registered fair rents. Second, his comment is apt once it is realised that the fair rent to be determined is a market rent less the disregards and discounted for scarcity. Thus, third, if there is no scarcity and no disregards then the rents should be the same whether the tenancy is a regulated tenancy or an assured tenancy. It is quite true, as the chairman submitted, that the question of which method to adopt for ascertaining the fair rent is a matter for the rent assessment committee and that in the decided cases some preference may have been shown for taking as comparables the registered fair rents of similar premises. Thus in Mason v Skilling [1974] 1 WLR 1437 at p1439, Lord Reid said: In my view, this section leaves it open to the rent officer or committee to adopt any method or methods of ascertaining a fair rent provided that they do not use any method which is unlawful or unreasonable. The most obvious and direct method is to have regard to registered rents of comparable houses in the area. In the initial stages this method may not be available but as the number of comparable registered rents increases the more likely it will be that it will lead to a correct result. Of course it must be open to either party to show that those comparable rents have been determined on a wrong basis but until that is shown it must be assumed that rents already determined have been rightly ascertained. In Western Heritable Co Ltd v Husband [1983] 2 AC 849 at p859 Lord Brightman said: There is, I think, implicit in grounds (1) and (2), the proposition that the requirement in subsection (1) of section 42 to have regard to ‘all the circumstances’ imposes on an assessment committee the duty to take into consideration ‘a fair return on capital’ as one of ‘the circumstances.’ I disagree. I accept that there may be the exceptional case in which a committee 86 are justified in taking into consideration what would be a ‘fair return on capital,’ leaving aside the precise definition of ‘capital’ in this context. I do not accept that a committee’s decision can be challenged as erroneous in law merely because the committee have failed to take into consideration a ‘fair return on capital’ but have based their decision exclusively upon comparables. The Act is concerned with the determination of a ‘fair rent,’ that is to say, a rent which is fair to the landlord and fair to the tenant, and yield on invested capital is not an essential ingredient of that determination. If comparables are available which do not reflect or are discounted so as not to reflect, scarcity value, such comparables are the best guide to a fair rent. But those and other similar statements were made in the legislative context to which I referred earlier. In that context the evidence of tenancies of dwelling-houses at open-market rents was limited. Section 12 of the Tribunals and Inquiries Act 1971 imposes a duty on rent assessment committees to give reasons for the decision. The extent to which that duty requires detailed reasons must vary with the nature of the decision and of the case generally: cf Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577; Mountview Court Properties v Devlin (1970) 21 P&CR 689, at p692; Metropolitan Property Holdings Ltd v Laufer (1974) 29 P&CR 172; Guppys (Bridport) Ltd v Sandoe (1975) 30 P&CR 69* and Guppys Properties Ltd v Knott (1979) 253 EG 907, [1980] 1 EGLR 67† . *Editor’s note: Also reported at [1975] 2 EGLR 66. *Editor’s note: Also reported at [1980] 1 EGLR 67. In this case there are a number of flats in the same block let on assured tenancies at, by definition, open-market rents which are virtually identical to those for which a fair rent is to be determined. In my judgment, if, in those circumstances, a rent assessment committee wishes to exercise its discretion to adopt some other comparables or method of assessment it will be failing in its duty to give reasons if it does not explain why. In this case the third reason given by the rent assessment committee as recorded by the judge was that the registered rent comparables had not been demonstrated to be unsound. That is not, of course, a reason for rejecting the assured tenancy comparable. It is not for the court to say in advance what would be a good reason for doing so, but if such a reason involves ‘working through’ such comparables so be it: that consequence is no ground for rejecting the validity of its cause. But it should also be noted that the registered rent comparables are not in their nature any more or less sound than the open-market rent with or without discount. Any registered rent has built into it at least two variables, namely the open market rent and the discount for scarcity. Each should have been considered at the time of the original determination. The assessment of the soundness of that registered rent for use as a comparable would require each of those variables to be reconsidered at the time of their possible use as a comparable. In this connection it was also objected that if rent assessment committees were required to give detailed reasons that might necessitate giving detailed arithmetical workings or quantifying the degree of scarcity involved contrary to statements in Guppys Properties v Knott [1978] EGD 255 and Metropolitan Property Ltd v Laufer (1974) 29 P&CR 172. But those statements were made in relation to the facts of those cases. It does not follow that there will not be cases in which the duty to give reasons will require such workings or quantification to be afforded. In my judgment, the landlord has demonstrated that the rent assessment committee erred in law in the three respects I have mentioned. In consequence they arrived at a decision which can properly be described as perverse. In those circumstances it is unnecessary to deal with the other matters raised by the landlord in its respondent notice. For all those reasons I would dismiss both these appeals. GLIDEWELL LJ and SIR JOHN MAY agreed and did not add anything. Appeal dismissed.