Betts and others v Vivamat Properties Ltd

Rent Act 1977, section 71(4) — Variable rents — Appeal by statutory tenants, of whom the case of one was considered as an example, from a decision of a rent assessment committee of the London Rent Assessment Panel — Tenancy agreement, after reserving the rent payable quarterly, provided for a fixed sum in respect of services to be paid by way of addition to the rent at the same times and manner as the rent — It also provided for recovery by the landlords once a year in arrear of any excess of the cost of services over the said fixed sum — The rent officer determined a total rent of £1,460 a year, variable in accordance with section 71(4) of the 1977 Act, which included an amount for services of £660 as at the date of registration — On appeal to the rent assessment committee, the committee reduced the total figure of £1,460 to £1,300 on account of certain disadvantages which they noted — Although the matter was not clear, the judge considered that the committee accepted the rent officer’s figure of £660 in respect of services — On appeal to the High Court it was contended by the tenant that the committee, having arrived at the total fair rent including the amount attributable to services, should have divided the latter amount into two parts — Part should have been assessed as a new fixed annual sum on account of future service charges bearing the same proportion to the new total rent as the fixed sum mentioned in the tenancy agreement bore to the old total rent — The balance in respect of services would then be payable separately each year in arrear — Held, rejecting this contention, that the committee had acted correctly — The suggested apportionment of the amount attributable to services between a fixed sum by way of addition to rent and a variable figure was inconsistent with section 71(1) of the 1977 Act — The committee’s decision meant that the total fair rent of £1,300 comprised rent in the strict sense and the whole of the amount attributable to services, any increases in the latter through the working of the variation terms being recoverable by the landlord at the end of each yearly period in arrear — Appeal dismissed 96 This was an appeal under the Tribunals and Inquiries Act 1971 by five statutory tenants of a block of flats, Embassy Court, Portsmouth Road, Surbiton, Surrey, for which services were provided. The judgment takes one of the five, Mr W C Murray, as an example. The respondents were the landlords, Vivamat Properties Ltd. Nicholas Wood (instructed by Lake Parry & Treadwell) appeared on behalf of the appellant; David Neuberger (instructed by Green David Conway & Co) represented the respondents. Giving judgment, HODGSON J said: I hope I do justice, in an impromptu judgment, to the arguments very ably advanced by both counsel in this case. This is an appeal by five statutory tenants against the decision of a rent assessment committee which was given after a hearing on December 20 1982. The same principles apply to all five appellants, so I shall take one as an example; that of Mr Murray. I am told he is the chairman of the tenants’ association of the block of flats at Embassy Court, the property in question. He held over, as a statutory tenant, at the end of his tenancy. That would be June 8 1973. In the agreement there were provisions for service charges. Clause 2, subclause (8) reads: To pay by way of addition to the said rent hereby reserved and at the time and in manner aforesaid the annual sum of £161.00 and such further annual sum as hereinafter provided in respect of the cost of the following services. . . The services are then set out. Subclause (9) reads: To pay or refund to the Landlords on the Twenty-fifth day of March in every year any excess or increase over and above the said annual sum of £161.00 which the Landlord’s Surveyors shall certify is (when added to the said sum of £161.00) the proper proportion attributable to the said Flat of the cost of supplying the services hereinbefore mentioned to the whole of the said Building for the previous yearly period. Those two clauses were of advantage to the tenants. As the service charges increased with inflation, all the tenants had to pay periodically was what came to be the comparatively small sum of £149. Any increase was delayed until the end of the year, so that for the year, or those parts of it — three quarters of the year, half the year and a quarter of a year — the tenants, for those periods, had the use of the money which was being expended by the landlord. It had the advantage to the landlord — an advantage which in the present circumstances was highly unlikely ever to inure to his benefit — that if the service charges decreased below the value of £149, then there was no way in which the tenant could recover that difference. In 1982 the landlord applied for registration of rent. Mr Murray attended a meeting. The meeting took place on September 22 1982. By letter dated October 1 1982 the rent officer sent a notification of the registration of rent to Mr Murray. The rent determined by the rent officer was £365 per quarter, or £1,460 per annum. Under ‘Remarks’, he wrote: ‘Including variable amount for services currently assessed at £660 per annum.’ Mr Murray appealed to the rent committee from that decision. His submissions are contained in his notice of appeal. He was represented at the meeting. The decision of the committee was given on December 20 1982. The details of the registration are set out. So far as Mr Murray is concerned, the fair rent was entered as £1,300 variable. In column 10, which sets out the rent officer’s rent, the entry for Mr Murray’s flat is £365 per quarter or £1,460 per annum. That is asterisked. On the London Rent Assessment Panel’s document there is a sentence against that asterisk which reads: ‘Including variable amount for services currently assessed at £660 per annum.’ The committee gave their reasons. The fourth and fifth paragraphs should be read. The tenants considered that the loss of the resident caretaker was a drawback. Cleaning contractors were now provided, and the rubbish, for example, was only cleared twice a week. The schedule for services however showed a lower figure since the caretaker left. The committee therefore determined a lower overall figure than the rent officer had fixed on all the flats because of the above factors relating to the services. We determined that the rents were variable in accordance with the tenancy agreements in respect of the subject flats. When the committee wrote ‘with the tenancy agreements’, I have no doubt that more precisely they would have stated ‘the relevant provisions of the tenancy agreement’. As a result of that determination, from then on Mr Murray had to pay quarterly the sum of £365, which included the whole of the services for the year subject to any increase that might be recoverable at the end of the year. So he lost the advantage of only having to pay a small part of the services quarterly and not being obliged to pay the rest until the end of the year. That decision is the decision which is attacked. The attack is based on the grounds set out by Mr Wood, dated April 19 1983. I think I can fairly summarise them by saying that the allegation is that the committee reached its decision without having proper regard to the provisions of section 71(4) of the Act. What it was suggested that the committee should have done had it paid proper attention to the provisions of section 71(4) is clearly set out in para 12 of the affidavit of Mr Simes, who appeared for all the tenants at the hearing. It is worth setting it out in full. I respectfully contend that what the rent assessment committee ought to have done is to proceed as follows: — (a) to satisfy itself that the terms as to variation are reasonable; and being so satisfied; (b) to arrive at a figure which is reasonable for the combination of a new rent and a service charge and which is based upon the last complete maintenance year in which all the accounts have been settled; (c) of that figure, carefully to apportion the amount attributable to rent; (d) of the balance attributable to services, to assess part thereof as a new fixed annual sum payable on account of future service charges, which should bear the same relation to the new rent as the old fixed annual sum paid on account of the service charges bore to the old rent. In my judgment, had they been empowered to do so, that would have been a perfectly just and sensible thing for the committee to have done. But, in my judgment, they had no right to make a decision in those terms. Under the terms of the Rent Act 1977, section 3(1) provides: So long as he retains possession, a statutory tenant shall observe and be entitled to the benefit of all the terms and conditions of the original contract of tenancy, so far as they are consistent with the provisions of this Act. Section 71 deals with the question of what is the rent which has to be registered. Section 71(1) reads: 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, whether or not those sums are separate from the sums payable for the occupation of the dwelling-house or are payable under separate agreements. It seems clear to me that that is a mandatory provision, and that when the committee was deciding what rent to register, they were obliged to register ‘Rent Act’ rents rather than ‘strict landlord’ rents. They had to register a single sum for both the rent strictu sensu and that part of the rent attributable to services. That they did. Section 71(4) reads: Where, under a regulated tenancy, the sums payable by the tenant to the landlord include any sums varying according to the cost from time to time of — (a) any services provided by the landlord I pause there to say that this is a regulated tenancy and the sums payable to the landlord do include sums varying according to the cost from time to time of services. The subsection goes on: . . . the amount to be registered under this Part of this Act as rent may, if the rent officer is satisfied or, as the case may be, the rent assessment committee are satisfied, that the terms as to the variation are reasonable, be entered as an amount variable in accordance with those terms. Clearly the committee looked at the terms in the agreement, to which I have referred. They came to the conclusion — in my view, the correct conclusion — that subclause (8) of clause 2 was inconsistent with section 71(1). They also came to the conclusion that on the facts of this particular tenancy, it was reasonable that the landlord should be entitled to vary upwards the amount to be paid by the tenant if the services became or were shown at the end of a year to have exceeded the services included in the rent fixed under section 71(1). It seems to me that the scheme of section 71 is a simple one and a fair one. First of all, the committee has to fix a rent in accordance with section 71(1) which must be inclusive of rent — if I may call it that — and services. We should then consider section 71(4). That section looks at the agreement to see whether it is reasonable. It might be possible to have provisions for, as it were, a repayment to a97 tenant, but in these days of inflation it would be very unusual to find such a term in an agreement. But that section looks at the agreement to see whether the terms as to variations are reasonable, such terms, of course, as are not inconsistent with the statutory tenancy. If it decides that they are not reasonable — perhaps they give the landlord an unfair advantage over the tenant, or for some other reason — they may not make the rent under section 71(1) variable at all. In that case, the tenant, no matter what the increase in the rent over the period of two years before the landlord can come back to the rent officer, will be fixed at that figure. That is a permissive power given to the committee to alleviate, so far as the tenant is concerned, the obligation to pay any more over the two years. But in this case, it is clear that having heard both sides, the committee considered that it would be fair to allow the landlord to charge the tenants with any extra cost at the end of the year. They stated in their reasons — and to me they seem to be perfectly sensible reasons — ‘We determined that the rents were variable in accordance with the tenancy agreements in respect of the subject flats.’  The term ‘rents’ is there used within the section 71(1) meaning. That, in my view, clearly means that in accordance with subclause (9) of clause 2, if the landlord at the end of the year finds that the services have cost more than he has recovered from his tenants, then he can, subject to the provisions of the agreement and the certification of the landlord’s surveyor, exact that sum from the tenant, Mr Murray. In my judgment, as satisfactory as it would have been had they been able to, the committee had no power to fix or register a rent in the way in which, in paragraph 12 of Mr Simes’ affidavit, they were asked to do. The rent officer did apportion between rent and services. As I have shown, in terms, certainly in their reasons, the committee did not. But I read the comment — if that is what it is — on the registration — if that is the right word — as meaning that the committee were accepting the £660 for services arrived at by the rent officer as being the figure that they themselves were adopting. It is true that the two paragraphs in the reasons which I have read at first sight seem to militate against that view. But I think they can equally easily be read as saying that because of what they found about the services, the true value of the flats is less than the rent officer had found, and that therefore the global figure — if that is the correct word — which they were assessing under section 71(1) should be reduced. It is alleged that by the decision which they came to, the committee have deprived Mr Murray of his rights under Schedule 19 to the Housing Act 1980. Para 15 of Schedule 19 provides: This Schedule does not apply to service charges payable by the tenant of a flat the rent of which is registered under Part IV of the 1977 Act, unless the amount registered is, in pursuance of section 71(4) of that Act, entered as a variable amount. That is just what the committee did in this case. In brief, therefore, attractive as the proposal put forward by Mr Simes might have been, in my judgment it would not have come within the mandatory requirements of section 71(1). In those circumstances, the appeal fails. There is no need, in my judgment, for any remission to the committee. The appeal was dismissed with costs.