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Reasonable rents: Restricted contracts

This content applies to England

Reasonable rents, including applying for and the determination of reasonable rents, and the reconsideration of a reasonable rent after it has been registered.

Tenants and licensees with restricted contracts are entitled to reasonable rents fixed by the First-tier Tribunal (Property Chamber).[1] The reasonable rent can be re-registered every two years.[2] The Tribunal can increase or reduce the rent but cannot reduce it below what would be recoverable under a regulated tenancy.[3] The term 'reasonable rent' is different from 'fair rent' and unlike fair rent there is no further definition of it.

Tenants and licensees with restricted contracts

There are now relatively few tenants or licensees with restricted contracts. This is because the Housing Act 1988 stated that no new restricted contracts could be created on or after 15 January 1989 and that if the rent of an existing restricted contract was varied by agreement it should be treated as a new contract and would no longer be a restricted contract.[4] However, a re-registration of a rent by the First-tier Tribunal (Property Chamber) does not count as a variation by agreement and so the occupier would still have a restricted contract.

There is no restriction on the amount of rent that can be agreed between a restricted contract tenant and her/his landlord where there is no existing reasonable rent registered.

Setting a reasonable rent

Reasonable rents are set by the First-tier Tribunal (Property Chamber) which took over the functions of the Rent Assessment Committees from 1 July 2013.[5] See the page on Rent assessment for more information on this.

Applying for a reasonable rent

Either the landlord or the tenant can refer a restricted contract letting to the First-tier Tribunal (Property Chamber)[6] to have a rent fixed by contacting the offices of the Rent Assessment Panel for the area where the accommodation is situated. If there are joint tenants all the tenants must apply.[7] The application does not have to be on a prescribed form but must be written and contain the names and addresses of the landlord and tenant.[8] The landlord and/or tenant can give notice in writing to the Tribunal that s/he wishes to make an oral presentation or wishes to send written representations. Other procedures of the First-tier Tribunal (Property Chamber) are the same as for fair rents.

Determination of a reasonable rent

The First-tier Tribunal (Property Chamber) can either approve the rent asked for, or increase or reduce it to a sum it thinks reasonable in all the circumstances.[9] It can also dismiss the reference. An approval, increase or reduction can be limited to a fixed period, eg for the period of a particular tenancy.[10] The Tribunal is not obliged to discount tenants' improvements and scarcity but it must not reduce the rent below that which would be recoverable under a regulated tenancy[11] and must only increase or reduce the rent if the existing rent is not reasonable. Once the rent is registered it is unlawful to ask for or receive rent higher than the registered rent[12] and the tenant can recover any amount s/he has overpaid.[13]

The Rent Assessment Panel must keep a register of reasonable rents.[14]

Reconsideration of rent after registration

Where a reasonable rent has been registered the landlord or the tenant may refer the rent to the Tribunal to be reconsidered.[15] The First-tier Tribunal (Property Chamber) will not consider the application until two years has elapsed from a previous registration, unless made on the joint application of the landlord and tenant or because of a change of circumstances within the two year period, for example in the terms of the contract or the condition of the property.[16]

[1] s.77(1) Rent Act 1977, as amended.

[2] s.80(2) Rent Act 1977.

[3] s.78(3) Rent Act 1977.

[4] s.36 Housing Act 1988.

[5] First-tier Tribunal and Upper Tribunal (Chambers) (Amendment) Order 2013 SI 2013/1187.

[6] s.77(1) Rent Act 1977.

[7] Turley v Panton [1975] 236 EG 197, 29 P&CR 397.

[8] Rent Assessment Committees (England and Wales) (Rent Tribunal) Regulations 1980 SI 1980/1700.

[9] s.78(2) Rent Act 1977.

[10] s.78(4) Rent Act 1977.

[11] s.78(3) Rent Act 1977.

[12] s.81(1) Rent Act 1977.

[13] s.81(3) Rent Act 1977.

[14] s.79(1) Rent Act 1977.

[15] s.80(1) Rent Act 1977.

[16] s.80(2) Rent Act 1977.

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