Ellis & Sons Fourth Amalgamated Properties Ltd v Southern Rent Assessment Panel

Rent Act 1977 — Statutory appeal under section 13 of the Tribunals and Inquiries Act 1971 from a decision of a rent assessment committee on an application for a certificate of fair rent under section 69 of the 1977 Act — Committee’s decision was challenged by the landlords on three grounds — First, it was said that the committee had misdirected themselves by criticising figures of return on capital value put forward by the landlords at the hearing, by drawing on the committee’s knowledge and experience of low yields from tenanted agricultural land, without putting such yields and any conclusions derived from them to the landlords for their comments — Secondly, the committee were said to have erred by taking into account, without putting the matter to the landlords for comment, information which one member of the committee had obtained while serving on another committee as to the probability that repair costs quoted by the landlords were higher than in an average year because of special reroofing expenditure — Thirdly, the committee were said to have erred in determining rents at a level below that at which a landlord would be prepared to come into the market and let, since it was implicit in section 70 that such a rent could not be fair — The judge rejected all these grounds — As regards the first, the committee were entitled to use their own knowledge and experience in considering yields canvassed at the hearing without offering such knowledge and experience for comment; this had been established since Crofton Investment Trust Ltd v Greater London Rent Assessment Committee — As regards the second ground, the information as to repairs, it would undoubtedly have been more satisfactory if this had been put for comment, but the matter was insignificant in the context of the actual decision — As to the third point, it was not for the committee to consider what rate of return would encourage landlords to let in a free market; the committee were concerned with the ‘constrained world of fair rents’ — Hence the appeal failed — The judge’s comments at the end of his judgment as to the advantages of proceeding by way of judicial review rather than by a statutory appeal should be noted as breaking new ground by offering a choice of remedies in an area formerly regarded as demarcated by the nature of the complaint and the relief sought — Appeal dismissed This was an appeal by landlords, Ellis & Sons Fourth Amalgamated Properties Ltd, from a decision of a rent assessment committee of the Southern Rent Assessment Panel. It arose from the committee’s decision on a reference from the rent officer of an application for a certificate of fair rent under section 69 of the Rent Act 1977. The subject property was vacant, there being no tenant in occupation. Although the panel were named as respondents they were not in fact a party to the statutory appeal. Treasury Counsel was, however, instructed as amicus curiae to assist the court in the absence of a respondent. David Neuberger (instructed by Bower Cotton & Bower) appeared on behalf of the appellants; Simon Brown (instructed by the Treasury Solicitor) appeared as amicus curiae. Giving judgment, MANN J said: There is before the court an appeal under section 13 of the Tribunals and Inquiries Act 1971. That the appeal is under that section attracts the provisions of Order 55 and in particular rule 7 para (7) of that order. The decision which is the subject of the appeal is a decision of the Southern Rent Assessment Committee dated March 15 1983. The subject matter of that decision was the fair rent for a house at 18 Cliffe Avenue, Hamble. The premises were vacant. The present appellant is the landlord. Being minded to let the property the appellant applied to the rent officer for him to fix a fair rent. He fixed a sum of £15.50 per week. That sum was confirmed by the committee. I should say a word about the statutory background, which is contained in the Rent Act 1977 as amended. I need refer to only two sections. The first is section 69, subsection (1) of which provides: A person intending . . . to let on a regulated tenancy a dwelling-house which is not for the time being subject to a tenancy . . . may apply to the rent officer for a certificate (to be known as a certificate of fair rent) specifying a rent which, in the opinion of the rent officer, would be a fair rent under a regulated tenancy of the dwelling-house . . . Section 70 provides in subsection (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 . . . Subsection (2) provides: 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. Those are the statutory provisions with which the rent assessment committee were concerned when they heard the appeal against the determination of the rent officer. The decision of the committee is an unusually long one. It condescends to great detail and I understand that the reason for that is that the house in question is but one of an estate of 155 houses owned by the appellant. The committee which gave the long and detailed decision was composed of a lawyer, a chartered surveyor and a justice of the peace. The decision is attacked on three grounds. The first centres upon para 24 of the decision, where the committee observe: We are aware from our own knowledge and experience that the yield on investment in tenanted agricultural land has recently been as low as 2 1/2% of92 capital value again on a vacant possession open market basis. Equally, we know by the same token that investors purchasing properties the subject of protected tenancies are content to accept yields of an order between 2% and 3% of open market vacant possession capital value. The former of these examples does not differ in its nature from tenanted residential property any more than does gilt-edged stock, and the latter example is plainly of more relevance. I omit some words. We remark, too, that the yield to redemption of gilt-edged stock itself may include an element of capital appreciation, although of a guaranteed kind, and may of course also allow an element of capital depreciation. (25). In short, the other comparisons to which we refer above lead us to the conclusion that the figures persuasively advanced by Mr Aldridge do not correspond with the kind of return which investors are content to accept against the open market vacant possession value of tenanted real property of at least two kinds, one of which is precisely of the nature which we are called upon to consider. It is the first sentence of that passage which is attacked. It is said that the committee should not have taken that matter into account without giving the surveyor called by the appellants an opportunity to deal with it. There is no affidavit before me asserting that the committee’s observation drawn from their experience was wrong. The second complaint is in relation to a passage in para 22 where the committee in relation to the appellants’ contention that the cost of repair should be deduced from the 1981 figure observed: We further doubt whether it would in any event be right to treat the annual cost of repair in 1981 as being representative of the annual cost of repair in every year. In the matter of 13 Hardwicke Way, Hamble . . . which concerned a property on the same estate as the subject property, Mr Donald on behalf of the company told a committee of this panel, one of whose members is also a member of this committee, on November 11 1982 that the expenses of repair on the estate are affected by re-roofing which has been taking place there generally, and that is a point which we consider we are entitled to bear in mind as being part of our collective knowledge of the locality. It is said that that is a point which should have been put to Mr Donald. Again, there is no affidavit evidence asserting that the point is wrong. The third argument by means of which the decision is assaulted is that a fair rent must be one that is fair to the landlord and fair to the tenant and that there was cogent evidence that the landlord would not let at less than £24.19 and accordingly that that was evidence of what was fair for the landlord to receive. I shall deal separately with points 1 and 2 on one hand and with point 3 on the other. Points 1 and 2 raise very similar considerations. Those considerations fall to be examined against the background of the decision in Crofton Investment Trust Ltd v Greater London Rent Assessment Committee [1967] 2 QB 955. In that case the then Lord Chief Justice, Lord Parker, was concerned with two arguments. As to the first one, he said this: I am quite satisfied that this committee, that is to say, a committee of this kind under a procedure which is clearly to be intended to be informal and not to be carried through with the precision of a court of justice, is fully entitled to act, as it has been said, on their own impression and on their own knowledge. It is idle in my view to think of gentlemen manning this committee and sitting may be day after day without acquiring experience and knowledge of conditions in the locality, and to say that they should shut their eyes to what they know of their own knowledge, and act only on such evidence as may or may not be put before them, seems to me to reduce the matter to absurdity. In relation to the second argument he said this: The second way in which Mr Caplan puts this case is that even if they are entitled to act on their own knowledge, yet here rules of natural justice, or, to put it more simply, fairness, demanded that before they approached the matter as they did in paragraph (4) of their decision, namely, to proceed directly to a fair rent eliminating a scarcity element, they should have so informed the landlords’ representative in order to enable the landlords’ representative to deal with the point and to call evidence, if need be, that there were not a substantially greater number of prospective tenants than there were premises. It is quite clear that whenever a new point emerges, something which might take a party by surprise or something which the committee have found out and of which the parties would have no knowledge, fairness would clearly dictate that they should inform the parties and enable them to deal with the points. How, then, do those passages relate to the points at paras 22 and 24?  So far as the point on para 24 is concerned, it is quite plain that the yield rates were in the forefront of the landlords’ argument. If one looks, for example, at para 15 one finds this in the narrative of the landlords’ case: It was difficult to say what return the landlord should have. One might ask what else he would do with the money. He may, for example, invest it in property where there was no ‘below market’ control, or in gilt-edged stock. A long-dated gilt to 2007-08 would, at the date of the hearing, show a yield to redemption of 11.3% or 11.179%, depending upon which one chose. There were obvious differences between gilts and residential property. Gilts are trouble-free and have 100% security. Yield rates being before the tribunal, and the tribunal being entitled to use their own knowledge and experience, it seems to me that they were perfectly entitled to observe: ‘We are aware from our own knowledge and experience that the yield on investment in tenanted agricultural land has recently been as low as 2 1/2%.’  They were adding from their own knowledge and experience to the possible yields canvassed by the landlords. I think they were perfectly entitled so to do. Even if I am wrong in that, having regard to the absence of any assertion by way of affidavit that the tribunal’s knowledge or experience was wrong, I would not exercise the discretion which I have under Order 55 to fault the decision. Secondly, repairs. Is this a point which should have been put?  It would, in my judgment, undoubtedly have been more satisfactory if the point had been put. The matter again, however, is not suggested to have been wrong, and I also regard the point upon repairs as being insignificant in the context of the actual decision. Accordingly, for those two reasons, the absence of assertion that what was said was wrong and the immateriality of the point in the context of the decision, I would again use my discretion and not fault the tribunal’s decision. There remains the third and final point, that is to say, that the rent could not ex hypothesi be a fair rent in the sense of being fair to the landlords because there was cogent evidence that the landlords would not let at that rent. The tribunal rejected the landlords’ approach to this, which was an approach based upon yield upon capital, and proceeded upon the basis of comparables. It is clear the tribunal were entitled to adopt that approach — see, for example, Tormes Property Company Ltd v Landau [1970] 1 QB 261. Not only were they entitled to adopt that approach but, in my judgment, they were impelled to reject the landlords’ approach. That was an approach based upon a return on a capital sum achievable in an open and free market. But we are not concerned with the world of open and free markets, we are concerned with the constrained world of fair rents, and I cannot for my part see how the committee could have derived assistance from any consideration such as that the landlords would not let at that rent because they would get too low a rate of return on the capital asset which they could otherwise realise in a free market. For those reasons, this appeal fails. I add this. The appeal is under section 13 of the Tribunals and Inquiries Act 1971 and therefore attracts Order 55. The appellant is perfectly entitled to take that course, but as Mr Brown, who very helpfully appeared as amicus in this case, pointed out, a challenge to a decision of a rent assessment committee by way of judicial review has three possible advantages. First, it enables the committee to be represented. The probability is that they would make use of that ability and thus avoid the delay such as occurred in the present case, which has occurred through the appointment of an amicus. Secondly, costs can follow the event in either direction. Thirdly, it permits the possibility of an appeal if a landlord’s appeal against the committee’s decision is successful. I of course postulate in looking at those advantages that the tenant does not appear. In the present case there is no tenant, but I understand that it is rare for tenants to appear on these occasions. So I would commend for consideration by those who are thinking of challenging a decision of a rent assessment committee that they should proceed by way of an application for judicial review. I do not think any question of costs can arise. The appeal was dismissed. No order for costs was made.