Royal British Legion Housing Association Ltd v East Midlands Rent Assessment Panel

Rent Act 1977 — Fair rent — Housing association — Section 70 of 1977 Act applied to housing associations by section 86 — Appeal on a point of law by association — Complaint that rent assessment committee was in error in including in the assessment of a fair rent an amount attributable to the depreciation of the lift cage, warden-call system, television aerial, fire-fighting equipment, cleaning equipment and guest room furniture — The objection in this case was by the landlord, complaining that the rent was too high — This is not infrequently done by housing associations — The association had in fact requested that no sum should be included in respect of the items in question and pointed out that it received a grant under Part II of the Housing Associations Act 1985, which covered, inter alia, depreciation on items of capital equipment — The association did not wish to pass on to its tenants any part of the burden of paying for such depreciation It was submitted on behalf of the appellant association that there was no rule of the law which required a fair rent to include an allowance for depreciation if neither the landlord nor the tenant wished such an allowance to be made — The judge pointed out that no authority had yet considered a case where a landlord had argued against the inclusion in a fair rent of an element of depreciation — It was common ground that, apart from the issue of ‘personal circumstances’ in section 70(i) of the 1977 Act, an allowance for depreciation could lawfully be made — The judge said that for the purposes of the present case he did not need to go further and rule on the question whether such an allowance must be made — The rent assessment committee in their reasons had referred to the decision in Perseus Property Co Ltd v Burberry, but the committee had based their own decision in the present case on the strict instruction in section 70(i) of the 1977 Act that ‘personal circumstances’ had to be disregarded The committee had expressed the view that the direction to exclude personal circumstances applied to corporate bodies equally as to individuals — Thus the committee could not concern itself with the financial fortunes or misfortunes of landlords or tenants, with any grants, reliefs or benefits received by landlords or tenants or with the landlord’s charitable status — The receipt of grant aid by the landlord, as in the present case, was as much a ‘personal circumstance’ as the fact that many tenants in sheltered accommodation were in receipt only of the state retirement pension — The argument that the payment of the housing association grant was a reason for not charging depreciation on capital items in the fair rent was unsound Schiemann J could find no error in the reasoning of the committee and indeed agreed with it — There was no authority binding on him to the contrary — He rejected an argument that the fact that the appellants had a statutory entitlement to the grant made it not a personal circumstance; the same might be said of the entitlement of tenants to a state pension — Appeal dismissed The following cases are referred to in this report. Crown Estate Commissioners v Connor (1986) 19 HLR 35; [1986] 2 EGLR 97; 280 EG 532 Mason v Skilling [1974] 1 WLR 1437; [1974] 3 All ER 977; (1973) 29 P&CR 88, HL 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 Perseus Property Co v Burberry (1984) 17 HLR 243; 273 EG 405 This was a statutory appeal by the landlord, The Royal British Legion Housing Association Ltd, against the decision of a committee of the East Midlands Rent Assessment Panel on the ground of error of law by the committee in including an allowance for depreciation on certain items of equipment in the determination of a fair rent. Kim Lewison (instructed by Vizards) appeared on behalf of the appellant association; Robert Jay (instructed by the Treasury Solicitor) represented the respondent panel. Giving judgment, SCHIEMANN J said: The appellant is the Royal British Legion Housing Association, a registered housing association. It is the landlord of a large number of dwellings held on tenancies which are ‘housing association tenancies’ within the meaning of section 86 of the Rent Act 1977, as amended. In accordance with the statutory scheme of the Rent Act 1977, as amended, rents for those dwellings are registered as fair rents. By virtue of section 88 of the Act, housing associations cannot charge more than the registered rent, but there is no statutory inhibition on their charging less. The East Midlands Rent Assessment Panel registered rents for these dwellings and gave reasons for their decision on February 12 1988. That is the decision under challenge. It includes in the registered rent a sum attributable to depreciation of the lift cage, warden-call system, TV aerial, fire-fighting equipment, cleaning equipment and guest room furniture, notwithstanding that the landlord expressly requested that no sum be included in respect of these items. This has led to the unusual position that the landlord is challenging a registered rent on the basis that it is too high. The reason for this, at first blush, odd situation is that the appellant recovers from central government funds housing association grant paid under Part II of the Housing Associations Act 1985. The grant covers, inter alia, depreciation on items of capital equipment. The appellant does not wish to pass on to the tenants any part of the burden of paying for such depreciation, since if that burden is not borne by the tenants it will be met out of housing association grant. The statutory background to the committee’s decision is contained in the following sections. Section 87 of the Rent Act 1977 provides: (1)  There shall be a part of the register under Part IV of this Act in which rents may be registered for dwelling-houses which are let, or are, or are to be, available for letting, under a housing association tenancy. (2)  In relation to that part of the register the following (and no other) provisions of this Act — and there follows a reference to (inter alia) sections 70 and 71 — shall apply in relation to housing association tenancies, and in their application to such tenancies shall have effect as if for any reference in those provisions to a regulated tenancy there were substituted a reference to a housing association tenancy. Section 70(1) provides: 132 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, and (b) if any furniture is provided for use under the tenancy, the quantity, quality and condition of the furniture . . . (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. (3)  There shall be disregarded — (a) any disrepair or other defect attributable to a failure by the tenant under the regulated tenancy or any predecessor in title of his to comply with any terms thereof; (b) any improvement carried out, otherwise than in pursuance of the terms of the tenancy, by the tenant under the regulated tenancy or any predecessor in title of his . . . (e) if any furniture is provided for use under the regulated tenancy, any improvement to the furniture by the tenant under the regulated tenancy or any predecessor in title of his or, as the case may be, any deterioration in the condition of the furniture due to any ill-treatment by the tenant, any person residing or lodging with him, or any sub-tenant of his. Section 71(1) provides: 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 is submitted on behalf of the appellant that there is no rule of law which requires a fair rent to include an allowance for depreciation if neither the landlord nor the tenant wishes such an allowance to be made. No authority has yet considered a case where the landlord argued against such an allowance. However, it is common ground that, apart from the issue arising from the words ‘other than personal circumstances’ in section 70(1), an allowance can lawfully be made. It may be that such an allowance must be made, but I do not need to rule on that for the purposes of the present application. The decision under challenge reads so far as presently relevant as follows: The Committee gave careful consideration to the representations made on behalf of the Landlords that no account be taken of items for which the Landlords obtain funding from other sources, or which for other reasons the Landlords do not request to have included in the assessment of service charges. The Reasons for Decision of Committees in other areas, submitted in evidence, were noted. The Committee is well aware that there is divergence over the correct interpretation of the phrase ‘personal circumstances’ in section 70(1) of the Rent Act 1977. The decision in the case of Perseus v Burberry* mentioned in two of those examples was referred to, but the Committee are of the opinion that the point established there was that depreciation is an aspect to be considered. The fact that the Landlord in that case had requested a decision to that effect does not mean that it is only to be considered if the Landlord specifically requests it, merely that depreciation is now established as a relevant factor. The Committee take the same view on the issue generally, as did the previous Committee and will therefore repeat verbatim the rationale set out in the 1985 Reasons for Decision: ‘The Committee is required to determine a fair rent regardless of personal circumstances from which it follows the Committee cannot concern itself with the financial fortunes or misfortunes of Landlords or Tenants in fixing a fair rent. Equally so, the Committee in their view cannot be influenced in their objective assessment by any Housing Benefits received by Tenants, or any grants or reliefs received by the Landlord nor indeed by the Landlords’ charitable status. Upon this basis, the Committee has sought to evaluate in rental terms what the Landlord provides and is required to provide for the use and benefit of the Tenant regardless of the sources from which the Landlord or Tenant derive their finances. That being so, the Committee has looked carefully at each item of service, and sought help in their valuation of such by looking first at the available evidence of the costs of such to the Landlords, whether actually paid or not, and where no such evidence is available, to use their experience to determine the value of such services. Secondly, the Committee has related the evidence of cost to the value of that service to the Tenant, to guard, wherever it can, against the possibilities (happily not arising in this case) of the Landlords’ extravagance, unfair charges, uneconomic management and further to ensure that the value of all services have in fact been taken into account, a step necessary where a Landlord by inadvertence or misconception has omitted to charge for a provided service.’ Specifically, it is the view of this Committee that, bearing in mind that a Company or Corporation, whether or not a charitable body, is just as much a ‘person’ in the eyes of the law as is an individual, the receipt of any kind of grant aid or relief from expenditure by the Landlord on account of the Landlords’ charitable status, is neither more nor less a ‘personal circumstance’ than the fact that many individual Tenants living in sheltered accommodation will be in receipt only of the State Retirement Pension which is subject to cost of living indexation, and have entitlement to rent rebate etc. To take into account any reliefs available to the Landlords would create a two-tier structure of gross rents for sheltered accommodation, depending upon whether the Landlord does or does not enjoy charitable status. This would inevitably be an unfair result. *Editor’s note: Reported at [1985] 1 EGLR 114; (1984) 273 EG 405. Apart from authority, I find no error in the reasoning of the panel and indeed agree with it. There is no authority binding me to come to an opposite conclusion, although there are some which do touch on the meaning of the phrase ‘personal circumstances’ in similar legislation. Thus, in Mason v Skilling [1974] 1 WLR 1437 the House of Lords held that a sitting tenant’s right to remain in possession was a personal circumstance and had to be ignored. In Palmer v Peabody Trust [1975] QB 604, Lord Widgery CJ, giving an unreserved judgment which was concurred in by Melford Stephenson and Talbot LJJ, seemed in passing to have cast some doubt on Mason. McCowan J in Crown Estate Commissioners v Connor (1986) 19 HLR 35* held that a right in a tenant to assign was not a personal circumstance. *Editor’s note: Reported also at [1986] 2 EGLR 97; (1986) 280 EG 532. I do not find the last two cases of help in reaching a conclusion in the present case: certainly, they do not displace the conclusion to which I have come independently of them. I accept Mr Jay’s submission, on behalf of the respondents, that the statute requires the rent officer and the panel to distinguish between matters relevant to the property on the one hand and matters relevant to the landlord’s or tenant’s financial situation on the other. The latter are properly categorised as personal considerations notwithstanding that other landlords or other tenants might be regarded as being in the same category. It is argued on behalf of the landlords in the instant case that the fact that the appellant is entitled, under a public general Act of Parliament, to grant is not a ‘personal circumstance’ to be disregarded, since the entitlement applies equally to all housing associations. The same might, in my view, be said of all tenants in receipt of a state pension etc and yet that fact would, in my view, undoubtedly fall to be disregarded as a personal circumstance. In those circumstances, I would dismiss this application. Application was dismissed with costs. Leave given to appeal.