A rent assessment committee (RAC) - a route of appeal for many tenants (and landlords) - has admitted it acted unreasonably in approving a huge rent increase.
More than 400,000 private tenants still have what are termed "fair rents", which means they are covered by a 1977 Act that allows appeals against rent increases through RACs and local authority rent officers.
But many of these tenants - who will have moved into their properties before 1989 - have in fact had large rent increases imposed in recent years by RACs. They may be able to use this out-of-court settlement to challenge other RAC decisions.
RACs are quangos, originally set up to protect tenants from rapacious landlords who increase rents unreasonably. But more recently they have been accused of buoying up rents as a way of implementing, by the back door, the Government's policy of encouraging more privately let properties. In London, four in five appeals to RACs in recent years have led to rent increases higher than those proposed by rent officer arbiters at local authorities.
The tenant in this case, Helen Holdsworth, a 72-year-old pensioner living in west London, obtained High Court approval in April for a judicial review of the decision of the London Rent Assessment Committee.
The RAC had last year given her landlord permission to increase her rent from pounds 1,600 a year to pounds 2,860. The landlord had appealed to the RAC against the decision of the local authority rent officer, who had assessed the rent at pounds 1,900. The property is described by Miss Holdsworth as a "damp, one-bedroom basement flat with no services, on a main road".
Miss Holdsworth claimed that the RAC's decision was wrong in ignoring other local rents, that it had failed to justify its decision, and had made an error in law in failing to accept that rents had been forced up by scarcity. Under the 1977 Rent Act, RACs are supposed to discount that element of the market rent that results from scarcity. The solicitor for the RAC has accepted that its decision should be quashed, because it had not sufficiently discounted scarcity and failed to give proper reasons for its decision. The RAC is also to pay Miss Holdsworth's legal costs.
Miss Holdsworth says: "Obviously it is very important, because it is the first test case of a tenant against a RAC. I am a bit disappointed not to have gone to court, because we would have won and it would have been more clearly a precedent, which was why we took the case. But it can still be used by other tenants, provided they know about it."
The case has been financed by individual donations, usually of pounds 5 or pounds 10 a time, by other tenants who now hope to get their own rents reduced. Many of those affected are retired people whose savings put them above the threshold for eligibility for housing benefit.
"Not many statutory tenants [those whose rents are controlled by the Rent Act] are on housing benefit, because they have savings," says Miss Holdsworth. "You don't get much benefit with pounds 3,000 savings and most of us have saved more than pounds 3,000 in our lives. I was a teacher, and most of our pension has to be taken as a lump sum, and you can never get housing benefit then." People with pounds 16,000 of savings are not entitled to any housing benefit.
Miss Holdsworth was one of a group of pensioners who had been unhappy with the increases imposed on "fair-rent" tenants, and set up the Campaign for Fairer Fair Rents. Over the five years to last year, rents controlled under the Rent Act rose by an average of 14 per cent a year. Before the outcome of Miss Holdsworth's case, the campaign had advised tenants not to appeal against rent officers' decisions because of the likelihood of the rent being increased further. The members of RACs are appointed by two government departments, the Lord Chancellor's Department and the Department of the Environment, and comprise a mix of lawyers, surveyors and lay people.
Tenants whose rental agreements have begun since 1989 are not subject to the "fair rents" system, and are not affected by Miss Holdsworth's case. New tenants are now usually given assured shorthold tenancies, often lasting six months although they can be longer, and rents are agreed by negotiation between landlord and tenant. These tenants have been able to appeal to RACs in some circumstances where they consider the rent unreasonably high, but the Government now intends to abolish this facility as well as potentially reducing housing benefit paid (see panel).
Deregulation of housing rents has led to big increases for people who are on these assured shorthold tenancies. Many have their rent paid by housing benefit, which has been reflected in a doubling in the housing benefit bill in the past six years.
Louise Ayriss, policy officer of the Chartered Institute of Housing, which represents housing professionals, says the impact of Miss Holdsworth's case could be significant for long-term tenants. "It is welcome, especially as the tenants are often very elderly and vulnerable, and have been in their properties all their lives. But it is a declining tenancy type."
The Department of the Environment would not comment on the implications of Miss Holdsworth's case. A spokesman said: "Fundamentally, RACs are independent."