Cherry Tree Investments v Chairman of Greater Manchester Rent Assessment Committee and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Richards,MR JUSTICE RICHARDS |
| Judgment Date | 05 November 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J1105-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CO/4583/97, CO/2055/98, CO/473/98 CO,1929/98, C0/41/98 C0/1800/98 |
| Date | 05 November 1998 |
[1998] EWCA Civ J1105-3
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(CROWN OFFICE LIST)
Royal Courts of Justice
Strand
London WC2
Mr Justice Richards
CO/4583/97, CO/2055/98, CO/473/98
CO/1926/98,
CO,1929/98, C0/41/98
C0/1800/98
MR J BONNEY QC AND MR J GAVAGHAN (instructed by Drewitt Willan Solicitors, Manchester, M2 5WQ) appeared on behalf of the Applicants.
MR HOBSON (instructed by Treasury Solicitor) appeared on behalf of the first Respondent.
MR D WATKINSON (instructed by Legal Services Trust, Preston, PR1 2US) appeared on behalf of the third and fourth Respondents.
Thursday, 5 November 1998
There are before the court six extant appeals by landlords, pursuant to section 11 of the Tribunals and Inquiries Act 1972, from decisions of rent assessment committees determining fair rents under section 70 of the Rent Act 1977. The appeals have a number of issues in common, have been heard together and are conveniently dealt with in a single judgment. In one further appeal before the court the parties have agreed, subject to the approval of the court, to an order quashing the decision of a rent assessment committee.
On 9 October 1997 the Court of Appeal gave judgment in Curtis v. London Rent Assessment Committee and others [1997] 4 All ER 842. The court applied its earlier decision in Spath Holme Ltd v. Greater Manchester and Lancashire Rent Assessment Committee (1996) 28 HLR 107 and in the process confirmed and clarified the law concerning the determination of fair rents. All of the decisions now under appeal post-date Curtis and an important common issue is whether the rent assessment committees have approached their determinations in accordance with the principles laid down in Curtis. Other issues include the correct approach towards the deduction for "scarcity" under section 70(2) and the adequacy of the reasons given in the decisions.
Statutory framework
Section 70 of the Rent Act 1977 provides:
"(1) In determining, for the purpose 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 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, 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.
(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; …
It is unnecessary for me to set out the history of the section and of related provisions, which is dealt with at the outset of the judgment of the Court of Appeal in Curtis. It suffices to note that until the Housing Act 1988 came into force there were many fewer tenancies of residential properties at freely negotiated market rents. The 1988 Act, however, introduced new forms of tenancy, namely assured (or assured periodic) tenancies and assured shorthold tenancies at open market rents. Such rents were to be determined by the parties in the first instance and, on the proposal by a landlord of a new rent, by a rent assessment committee if required by the tenant. The existence of these new tenancies created a new source of evidence as to market rents, which have been relied on increasingly by landlords as comparables for the purpose of the determination of fair rents under section 70 of the 1977 Act.
General approach
The general approach now to be adopted towards determinations under section 70 is set out clearly in the following passages from the judgment of Auld LJ in Curtis:
"The nature of a fair rent
In my judgment, a fair rent is a market rent adjusted for scarcity and disregards.… The concept of 'fair' in such a context is elusive unless it is tied to particular criteria. Section 70 of the 1977 Act contains those criteria. Its scheme is to set out, in s.70(1), a number of circumstances which together would identify a market rent and, in s.70(2) and (3), the required adjustments where appropriate. It hardly needs saying that the assumption of a hypothetical absence of scarcity required by s.70(2) presupposes that the starting point in s.70(1) is market rent. Although I agree with the judgment of Harrison J indorsed by this court in the Spath Holme case, that, depending on the material available, there may be more than one route to determine a fair rent, every route must have that starting point. That is so, whether reliance is placed on market or fair rent comparables or on return on capital. In each of the former two methods there is a need to reassess their validity and applicability at the time of their use as comparables.… In the case of return on capital, which seems to be rarely used, the criteria in s.70(1) cannot be bypassed; the exercise must in some way identify a market rent en route to assessing a fair rent.
Market rent comparables, the best evidence
Clearly, rent officers and rest assessment committees should rely on the best evidence of fair rents; that has always been the approach of the courts …. Where close market rent comparables are available, it makes sense that they should be treated as the best evidence for the purpose …. The best evidence of the starting point for assessment of fair rents is now that of market rent comparables where they are available ….
Process of assessment
The assessment of a fair rent is routinely described as more of an art than a science. Lord Keith, in Western Heritable Investment Co Ltd v. Husband…, called it 'an exercise of [the valuer's] professional skill'. The members of a rent assessment committee, at least one of whom is normally a chartered surveyor, are expected to be experienced in such valuation and to know and to have a 'feel' for the rental property market in their area. But, however much experienced 'feel' or judgment the exercise requires and is given, the end product is a figure for rent of particular premises. Where the comparables are not exact and/or where there is a need to make disputed adjustments for hypothetical lack of scarcity or disregards …, it necessarily involves some working through—some sums, however few and approximate—some arithmetical markers whether in percentage form or otherwise on the way to the final figure. There is no other rational way of giving effect to the scheme of assessment set out in s.70 of the 1977 Act.
That is not to say that the committee should have no recourse to its general knowledge and experience of local market rentals, of the appropriate adjustments to make for differences between comparables and the subject premises, of the existence and degree of local scarcity, if any, and of their treatment of disregards where necessary …." ( [1997] 4 All ER 862j-865f).
Those passages apply and build upon part of the ratio of Spath Holme, that a "fair rent" under the 1977 Act is the same as a "market rent" under the 1988 Act save for the assumption of no scarcity and allowing for the statutory disregards, and general guidance given obiter by Morritt LJ in Spath Holme as to the use of market rent comparables and of registered rent comparables.
I should also mention three cases decided at first instance since Curtis. In Northumberland & Durham Property Trust Ltd v. London Rent Assessment Committee [1998] 24 EG 128, referred to in argument before me as Northumberland & Durham (No.1), Latham J held:
"It follows that in my judgment the respondent in this case went wrong in law in treating the appellant's obligation in putting forward the alleged comparables as being a requirement to establish that those comparables were compelling as if in some way the appellant had to satisfy some sort of burden of proof in relation to the rentals that were being suggested, otherwise they could be ignored. In my view the Committee should assess the evidence overall and make a proper value judgment on the whole of that evidence" (130, emphasis added).
In another case involving the same parties and referred to in argument before me as Northumberland & Durham (No.2), decided on 5 March 1998, Keene J recorded and expressed agreement with the following statement of common ground:
"Certain other matters are also common ground between the Appellant and the First Respondent. Thus, the committee must arrive at open market rents for the subject...
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