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Section 13 Rent Increases and Contractual Provisions

If parties have contractually agreed on the mechanism to be adopted for increasing the rent, they cannot also make use of the statutory provisions in Section 13 of the Housing Act 1988 for increasing the rent.

In Chouhan and Thomas v The Earl’s High School, the Upper Tribunal agreed with the First Tier Tribunal that they had no jurisdiction to determine a rent increase when the tenancy agreement included a contractual mechanism for such increases.

Facts
In 2002, Mr Chouhan and Miss Thomas entered into a written tenancy agreement with Dudley Borough Council. The tenancy agreement was described as an assured weekly tenancy but because the landlord was a local authority the tenancy could not be an assured tenancy under the 1988 Act.

The agreement included a clause for the rent to be altered. The clause permitted the landlord to give the tenant a month’s notice to increase or decrease the rent. The agreement also stated that such an increase would not be more than the level of rent which a Rent assessment committee would determine if they had jurisdiction.

In November 2011, the tenant’s property (along with other property) was transferred to the Official Custodian of Charities who in turn granted Dudley Borough Council a head lease of the property for a term on 125 years. Upon this transfer, the tenant’s lease became an assured shorthold tenancy.

On the 28 July 2015, agent’s served a notice on the tenants proposing a rent increase. The guidance notes which accompanied the notice advised the tenants that they could refer the matter to the First Tier Tribunal if they did not agree with the proposed rental. A referral was made.

Decisions
The First Tier Tribunal held that the tenancy was not an assured tenancy to which the provisions of Section 13 applied because the tenancy contained a contractual provision for varying the rent. The decision was appealed.

The Upper Tribunal agreed with the First Tier Tribunal’s decision. The Upper Tribunal held that the agreement is not a record of the statutory rights which apply to what became an assured tenancy. Instead, the agreement is a binding contractual agreement between the parties regulating the manner in which the rent can be varied and as such, Section 13 of the 1988 Act does not apply and the Tribunal lacks jurisdiction.

Comment
In its closing remarks the Upper Tribunal suggested that the parties should consider removing the rent clause from the current tenancy because of the issues raised in this case. If the clause is removed any further dispute about a rent increase will fall within the Tribunal’s jurisdiction under Section 13, which has to be in everyone’s interest.

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