Landlord Law Services

Legal help, services and support for private residential landlords

The Landlord Law Market Rent and Tribunal Kit – Section 1.2

Understanding the open-market rent

On this page:

1. Introduction
2. Things the tribunal will not consider
3. What is the open market rent?
4. Learning from Tribunal decisions

1. Introduction 

When deciding what rent to propose for your property (whether this is the initial rent or a rent increase), you should aim to make it well supported and defensible.

You don’t want your tenant referring the rent to the First-tier Tribunal and the tribunal determining a lower rent.

So first, you need to understand what the tribunal will be looking at when making its decision, if your rent or proposed rent is challenged.

Back to the top

2. Things the tribunal will not consider

We need to consider this first.

The tribunal’s task is to determine the open-market rent for the property. It is not concerned about whether the proposed increase seems fair to the landlord or tenant.

So when assessing the open-market rent, the tribunal will disregard:

  • The fact that the existing tenant is in occupation. The property must be valued on the basis of an open-market letting and not as a letting to a sitting tenant. The rent should not therefore be reduced merely because the tenant has lived at the property for a long time.
  • The size of the rent increase. If the existing rent is very low and the proposed increase brings it up to, or just below, the open-market rent, the size of the increase will not in itself justify a reduction. This applies even though the increase may seem very large to the tenant.
  • Improvements made by the tenant other than improvements they were required to make under the tenancy. It would be unfair for tenants to have to pay a higher rent because of improvements they carried out and paid for themselves.
  • Any deterioration in the property due to the tenants’ neglect. It would be equally unfair for a tenant to obtain a lower rent because of their own failure to comply with their obligations under the tenancy.
  • The landlord’s financial circumstances. For example, increases in the landlord’s mortgage payments, insurance premiums or other expenses do not justify a higher rent. 
  • The affordability of the new rent for the tenant. The tenant’s financial circumstances do not affect the open-market valuation, although hardship may sometimes be relevant to the date when the tribunal’s rent takes effect.
Back to the top

3. What is the open market rent?

For this, we need to look at section 14 of the Housing Act, which says that the Tribunal

… shall determine the rent at which, …, the appropriate tribunal consider that the dwelling-house concerned might reasonably be expected to be let in the open market by a willing landlord under an assured tenancy …

Determining the market rent for a property is not an easy matter.  It will depend on a number of factors which a Tribunal will need to consider when making their determination.

For example:

  • The type and size of the property;
  • Its condition, subject to the statutory disregards explained above;
  • Its location;
  • The facilities, furniture and appliances provided by the landlord;
  • Any garden, parking or other amenities;
  • The terms of the tenancy; and
  • The rents being achieved for genuinely similar properties nearby.

The tribunal will consider the actual property in its existing condition. A property does not have the same rental value as a recently modernised comparable merely because it has the same number of bedrooms and is situated in the same area.

We will look at these issues in more detail in the rest of Part 1 of this kit.

Back to the top

4. Learning from Tribunal decisions

Published First-tier Tribunal decisions can help you understand how tribunals assess open-market rents and weigh the evidence presented by landlords and tenants.

They may show, for example:

  • Which comparable properties the tribunal found most useful;
  • The weight given to advertised rents compared with rents actually achieved;
  • How differences between properties affected the assessment;
  • How the tribunal dealt with the condition and facilities of the property; and
  • Why particular evidence was accepted or rejected.

Each case depends upon its own facts. First-tier Tribunal decisions are not binding precedents which another tribunal must follow, so you should not assume that the result in one case will be repeated in yours.

However, reading relevant decisions can help you understand the tribunal’s approach and prepare stronger evidence.

You will find summaries of selected decisions, with links to the published decisions, on the Tribunal Case Reports page in Part 5 of this kit.

In the next section, we discuss how to inspect and assess your property.

Back to the top
Market Rent and Tribunal Kit Logo

This part is still in development.

Form 4A
Back