Registered Fair Rents (Hansard, 12 April 2000)

§ Mr. Adrian Sanders (Torbay)

I beg to move, That leave be given to bring in a Bill to amend the Rent Act 1977 to limit the maximum fair rent registrable in respect of regulated tenancies.

The Bill is a technical measure to restore the position of protected tenants to what it was before the 15 February Court of Appeal judgment that the Rent Acts (Maximum Fair Rent) Order 1999 was made beyond the powers of the Landlord and Tenant Act 1985.

Most private tenancies entered into before January 1989 are regulated under the Rent Act 1977. Tenants have long-term security of tenure and both landlord and tenant have the right to have a fair rent determined by an independent rent officer. Both have the right to appeal to a rent assessment committee if they are not satisfied with the rent officer's decision. Rents are set every two years and become effective two years from the previous registration, or on the day of the rent assessment hearing.

Fair rents, as laid down by the 1977 Act, are decided by, first, the age, character, locality and state of repair of the building, and, secondly, the rent that could be achieved in the open market if the supply and demand for accommodation are balanced, which is usually referred to as "scarcity". Therefore, until 1988, fair rents were decided by comparisons with previous fair-rent decisions based on those two factors.

The system did not seem to be unfair to landlords, who continued to buy property in which protected tenants lived. They were able to buy property cheaply because the protected tenants were there. They received a reasonable, secure and unfailing return on the money that they had invested, and they were certain of capital gains when the tenant died or moved on.

The Housing Act 1988 had two main effects: it introduced assured and shorthold assured tenancies at open market rents, so now comparable market rents were available; and it prevented the emergence of future generations of regulated tenants by allowing tenancies to be inherited by spouses only. As a result of the latter effect, those affected by the Court of Appeal judgment are mainly pensioners or coming up to pension age.

Since the 1988 Act came into force, a number of developments—some of which were consequential on the Act—have had the effect of raising rents. The sale of council houses sanctioned by the 1988 Act added to the shortage of homes available at lower rents, and increased prices generally. The increased use of the rent assessment committee by landlords resulted in rent rises in 80 per cent. of cases heard, and in half of all cases the rent was increased by an average of 18 per cent.

In 1997, the case of London Rate Assessment Panel v. Curtis determined that market rent comparables should be used in all cases. That placed tenants at a disadvantage in obtaining reliable information on market rents actually paid, as opposed to those asked for. Landlords, on the other hand, usually have their own properties with which to compare, and were placed in a more powerful position.

A Department of the Environment, Transport and the Regions consultation paper, published in 1998 and sent to tenants and landlords, offered tenants some hope. Its tone was sympathetic to statutory tenants and it suggested that 367 rent increases should be capped at 10 per cent. plus inflation. Following representations by tenants, that was altered to 7.5 per cent. plus inflation, and the Government drafted a statutory instrument known as the Rent Acts (Maximum Fair Rent) Order.

What is galling for the statutory tenants, given that the judgment appears to result from a legal technicality, is the fact that the order was delayed because it had to be checked by the lawyers of the Law Officers' Department, but, on 11 January 1999, the statutory instrument became the Rent Acts (Maximum Fair Rent) Order 1999. It came into force on 1 February.

Spath Holme Limited, a Manchester-based landlord, took the matter to judicial review and the Court of Appeal found that the order was ultra vires vis-a-vis the Landlord and Tenant Act 1985.

It is important for the House to realise that the Court of Appeal did not rule on the principle of capping regulated fair rent increases, or on the level of the limits set in the order; it ruled merely that it was outside the powers conferred on Ministers by the parent legislation to set limits by regulations.

As a result of that judgment, thousands of tenants now face the prospect of rent increases similar to those that were common before the order came into force. This morning, I met a tenant of Lamont Properties, whose rent has increased from £135 to £255 a week; another tenant, of Clapham Properties, whose rent has increased from £4,000 a year to £9,000 a year; and a tenant of the Wellcome Trust, supposedly a charity, whose rent has increased from £3,100 to £8,500 since the Court of Appeal judgment.

The situation for tenants is actually more difficult than it was before the order was introduced. Through no fault of their own, they have been made responsible for the 368 difference between the capped rent and the uncapped rent, backdated for at least 28 days. DETR issued guidance to the Rent Service Agency to advise landlords that, if the difference between the capped and uncapped rent is large, it will be open to them to seek a county court order to obtain arrears for up to six months. Bearing in mind the fact that most statutory tenants are pensioners, not only will they have to pay retrospective arrears, but they may be forced to appear in the county court—an indignity that will horrify them and that they have done nothing to deserve.

Although initially refused leave by the Court of Appeal, the Government have indicated that they will petition the House of Lords to appeal. Although the ruling raises an important constitutional principle about the scope of ministerial discretion, it could be several months before an appeal is heard and there is no guarantee that it will be successful.

I present my Bill in the hope that the Government will consider another way to restore the limits on registered fair rent increases and to prevent vulnerable tenants from receiving unaffordable rent increases that may force many of them from their homes. Emergency legislation is required and there is not a day to lose.