R v London Rent Assessment Panel, ex parte Cliftvylle Properties Ltd.

Rent Act 1977 — Reasons for rent assessment committee’s decision — Adequacy of reasons challenged by landlords — Complaint that committee did not offer adequate reasons for the amount within the fair rent which they attributed to the provision of central heating and hot water by the landlords — Metropolitan Properties Co (FGC) Ltd v Good relied on by landlords — Good case distinguished by judge — In present case landlords themselves did not base their figure for central heating and hot water on actual costs, but ‘plucked a figure out of the air’ — As a result of the number of flats sold on long leases the cost of the heating supplied to the diminished number of regulated tenants was too high to be used as a basis of charge — In these circumstances the committee were entitled to rely on their own knowledge and experience in determining the amount fairly attributable to the supply of central heating and hot water and could not be expected to give further reasons — General principle laid down that in the normal situation the actual costs of services constitute powerful evidence as to their value and a rent assessment committee who depart from that figure should explain why — Where, however, as in the present case, actual costs are of little or no assistance, and the committee have to make a judgment based on their knowledge and experience, a detailed explanation is not appropriate — In such cases the guidance given by the Divisional Court in Metropolitan Property Holdings Ltd v Laufer and Guppys (Bridport) Ltd v Sandoe is applicable — Hence the reasons given in the present case were ‘totally adequate’ — Application for judicial review dismissed This was an application for judicial review by Cliftvylle Properties Ltd, landlords of a block of flats at Malford Court, Woodford Road, London E18. The respondents were a committee of the London Rent Assessment Panel. Jonathan Brock (instructed by Mortimer Rabin & Co) appeared on behalf of the applicants; A Moses (instructed by the Treasury Solicitor) represented the respondents. Giving judgment, WOOLF J said: This is an application for judicial review in respect of a decision of a rent assessment panel given on October 13 1981. Usually these matters come before a court by way of an appeal under the Tribunals and Inquiries Act 1971, but no point has been argued on the fact that this is an application for judicial review. The grounds on which judicial review is sought are threefold. First of all, the panel gave no adequate reasons for their calculation of the value of the provision of services by the appellant landlords in aid of101 their determination of the fair rents, the subject of their determination. Secondly, there was no evidence before the panel on which they could reasonably determine the value of the aforesaid services in the sum certified. Thirdly, in all the circumstances the decision of the panel disclosed an error of law on the face of the record and ought to be quashed. The decision was in respect of a property known as Malford Court, Woodford Road, London E18, and concerned five flats at that building. It is important to note that the block of flats had been the subject of a change in the manner of occupation over the years. At one time all the flats had been rented at rack rents. There came a time when a substantial proportion of the flats were sold on long leases. The consequence of this is that the heating services, which had previously been provided on a central basis, were changed, so that the flats which had been sold on long leases had their own heating and hot-water services. It was only those flats which were still rented on rack rents that were provided with the centralised heating and hot water. Although this may not be the case in respect of all of the latter categories of tenancies, the flats with which I am concerned are all ones which were subject to rent control and in respect of which, from time to time, fair rents had to be assessed. The panel fixed registered rents for the flats in question, which in the case of one flat was £1,100, in the case of another was £1,125, and in the case of three flats was £1,175. They broke down the part of that rent which was attributable to services, and in the case of two of the flats, the lowest numbers, the amount attributable to services was £310. In respect of the last three flats, the figure with regard to services was £360. The argument before the court is limited to the amount which is attributable to services. There is no dispute that, of the figures which I have just given which were attributed by the panel to the services, a proportion of the sum was with regard to known and accepted costs of services other than heating and hot water. In the case of the two flats it was £74.34, and in the case of the three flats, £85.80. It is only with regard to the remaining figure which was attributed to the cost of heating and hot water that the decision of the panel is challenged. The panel, in giving their decision, recorded the evidence of Mr Beck and Mr Lashbrook, whose evidence was submitted in writing on behalf of the landlords. Mr Beck in his evidence pointed out that all the facts had been the subject of a previous committee decision. Updating the basic rent of these at 15% per annum and adding the current cost of services would lead to a rent in the case of one flat of £1,949 per annum, which he conceded was obviously too high and arose from the very high heating and hot-water costs. Valuing these more realistically at £500 per annum led to a fair rent of £1,400 per annum. It is recorded by the panel in their decision that he invited the committee to register for that flat and the other flats a rent of £1,450. The panel then went on to refer to the other proof of evidence, that of Mr Lashbrook, which had been submitted to them. They recited the fact that he had indicated that a substantial sum had been paid in respect of repairs. Then the decision went on to say, as part of Mr Lashbrook’s evidence: The landlords could no longer carry virtually three-quarters of the cost of the hot water and background central heating to the 28 rented flats remaining of the original 102. Other services would be apportioned on a rateable value basis as before, which would lead to total charges of £1,124.44 for flats 11 and 16 and £1,135.90 for numbers 41, 47 and 48. Mr Lashbrook attached, as part of his evidence, a schedule setting out the basis of those figures. That is before me. The panel also recorded the evidence of Mr Kenton, who made comments on those figures on behalf of certain of the tenants. He, in fact, was a solicitor. His comments were that heating charges, even on Mr Beck’s suggested figures, were still too high and on the old rateable value basis it would be no more than £248 per annum. Pausing there, the evidence, as I understand it, which was being given on behalf of the landlords and which is correctly summarised in the decision, was really to this effect. In this property, because of the fact that only part of the building was now using the central heating and central hot-water system, the costs of the provision of the hot water and central heating were far higher than normal. Therefore this was a case where it was not possible for an expert, on behalf of the landlords, to adopt the normal approach with regard to services. In a normal case where you are dealing with services the actual costs are the best guide as to what would be the proper charge to be included in the fair rent for services. Where, however, you have a history such as here, where the landlords have chosen to change the manner in which a property is provided with hot water and heating, so those flats which remain on the central system have to have attributed to them a very expensive form of heating and hot water, it is unrealistic to ask a committee to take into account the whole of the actual cost of the charges. It is only fair in fixing a rent to make a discount for the additional costs which are incurred because of the way the property is managed. Mr Beck’s figure, as recorded in his actual evidence which I have read, was to say that that figure should be at least £500. He was unable to give any reasoning in support of that figure. He did, as counsel on behalf of the landlords indicated in argument before me, pluck a figure out of the air as being the figure which the committee should ‘at least’ fix. But he was doing that as a matter of his judgment and experience. When the panel came to their conclusion they expressed it in these terms: The members considered the matter most carefully and decided, except in the case of flat 11, there were grounds for a small increase in the registered rent. The committee made their own calculation as to the value of the central heating and hot water which was appreciably less than Mr Beck’s and added this to the known and accepted cost of the other services. They then say that having regard to all the evidence put before them, to their inspection, to their own knowledge and experience and having regard to the provisions of the Act, the committee determined the figures set out in the schedule to which I have already referred. Having been supplied with that decision, very properly and sensibly those acting on behalf of the landlords sought, in a series of letters, further and better particulars of that decision. It would not be incorrect to say that the answers were not expansive. However, I should refer to the last response to these approaches. It is dated April 6 1982. The relevant passage reads as follows: The committee were concerned to determine what they considered to be the value to the tenants of the central heating and hot water. This they have done. The method by which they arrived at their conclusion is entirely a matter for them using their own knowledge and experience as they are entitled to do. In the circumstances you will appreciate that it is not possible to give you any further information beyond that which appears in the decision. Mr Brock, on behalf of the landlords, says in support of the grounds of the application to which I have referred, that is a wholly inadequate reasoning and that the decision, even amplified by the letter to which I have made reference, does not go far enough. With respect to his very able and clear argument, I disagree. The decision makes it clear that the actual costs are not appropriate in this case. That is something which was accepted, for very good reasons, by Mr Beck, the landlords’ own expert. They also make it clear by their decision that they do not accept Mr Beck’s ‘at least’ figure which was based on his experience. They equally did not accept the figure which was put forward by Mr Kenton, who appeared on behalf of certain of the tenants. The decision makes it clear that, instead, the committee have based their decision on their knowledge and experience. Where, as here, there is no actual figure that can be used as a guide, what else can a committee do but listen carefully to an expert’s evidence which is provided, as was done here, who gives his judgment, and then taking that into account, decide, largely based on their own knowledge and experience, what is an appropriate figure?  They are, in my view, in exactly the situation which Mr Beck was in. They have got to make a judgment. To use counsel’s words, they have got to pluck a figure out of the air. If they do so, and they do so bona fide, there is no way in which they can give more reasons than by saying the figure is derived by them from their knowledge and experience. Therefore, on the facts of this case, it is my view that the reasons which were given were totally adequate. I perhaps should just make reference to a previous decision of mine which also dealt with the question of the reasoning of a panel of this sort in dealing with services. That is the case of Metropolitan Properties Co (FGC) Ltd v Good (1981) 260 ESTATES GAZETTE 67. In that case I indicated that the reasoning given by the panel, which went slightly further than that in this case, was inadequate. However, that was a case where it was not said that the actual costs did not form a basis for calculating what is the appropriate sum as to services. As I said at the outset of this judgment, in the normal situation the actual costs of services are going to be very powerful evidence as to what the further costs of services should be. If a tribunal such as a rent assessment panel are going to depart from that figure and pick out some other figure, then of course they must explain why they do so in order that those who are affected by their decision can decide whether they have been justly treated, and in102 particular as to whether they should seek to take the matter further either by way of an appeal or by some alternative route. I therefore do not regard the case of Metropolitan Property Holdings v Good as being on all fours with this case. The criticism that I made in that case would not be appropriate in this case. In my view, better guidance can be found as far as this case is concerned in two other authorities to which I have been referred. The first is Metropolitan Property Holdings Ltd v Laufer (1975) 29 P & CR 172. The second case is Guppys (Bridport) Ltd v Sandoe (1975) 30 P & CR 69.*  It is true, as was pointed out by counsel on behalf of the landlords, that these were cases where what was under consideration was the question of rent rather than the element of services. The judgments were dealing with a situation where judgment has to play a large part. But because of the circumstances of this case, where the actual costs of services are of little assistance in fixing the amount attributable to services in calculating fair rent, the general approach indicated in those cases is applicable. I do not think it is necessary for me to do more, with regard to citing those authorities, which I respectfully adopt, than say that in my view the limitation of the ability to give detailed reasoning which was referred to in both leading judgments in those cases is directly applicable here. *These two cases are also reported at (1975) 233 EG 1011 and 235 EG 689, [1975] 1 EGLR 77 respectively — Ed. It follows, therefore, that this application will be dismissed. The application was dismissed with costs.