## In this section

**Determination**

**Maximum Fair Rent **

(v1 2014)

The Rent Acts (Maximum Fair Rent) Order 1999 limits fair rent increases by linking the increase to a Retail Price Index (RPI) formula. The Order came into force on 1 February 1999 and applies to applications for registration made on or after that date.

Under the Order, rent officers still determine fair rents in accordance with s70 of The Rent Act 1977. However, they must also calculate what is known as the “maximum fair rent” according to a formula linked to RPI.

The Maximum Fair Rent Order sets out the formula used for calculating the Maximum Fair

Rent.

The formula is:

**MFR = LR [1 + (x − y) + P]**

**y**

Where **MFR **is the Maximum Fair Rent

**LR **is the amount of the existing registered rent

**x **is the Retail Price index published in the month preceding the month in which the rent is

being registered

(Note: RPI is published 1 month in arrears, so the RPI published in the preceding month is the RPI FOR the month prior to the preceding month, so the RPI to use is the RPI for 2 months ago)

**y **is the published index for the month in which the rent was last registered

**P **is 0.075 for the first application for registration of rent after 1 February 1999 and 0.05 for every subsequent application

Where rent not a multiple of 50 pence it should be rounded up to nearest multiple of 50

Pence

It is important to emphasise that the 7.5% enhancement can only used for the first application on or after 1 February 1999. All subsequent applications are subject to 5% enhancement. If the first application after 1 February 1999 is exempt from MFR for whatever reason (no previous registration, improvements, etc) then the second application is still subject to the 5% enhancement.

All variable charges are removed before the application of the MFR formula and added back in afterwards.

The rent officer must register the fair rent determined under Section 70 of the Rent Act if it is at or below the maximum fair rent calculated under the Maximum Fair Rent Order.

The rent officer must register the “maximum fair rent” calculated under the Order if the fair rent determined under the Rent Act is more than that figure. A statement giving the uncapped rent will appear in ‘Remarks’ on the rent register.

The exception to this is where the maximum fair rent calculated under the order is LESS than the existing registered rent. This should be a rare occurrence, but it is possible if RPI suffered a significant reduction. (It would be good practice to double check the figures used).

In these instances, the existing registered rent should be registered again. If the case also has variable charges this test should be done on the base rent excluding the existing variable charges. You would then add back the NEW variable charges to the existing base rent and register that figure as the registered rent.

The capping provisions do not apply if there is no existing registered fair rent. Neither do they apply where the rent officer considers that:

because of a change in the condition of the property or common parts, and

as a result of repairs or improvements (including the replacement of any fixture or fitting) carried out by the landlord,

the rent **at the time of the last registration** would have been at least 15% more.

It is important to emphasise that the 15% increase test is for increases that are directly attributable to the change in condition of the property NOT due to a change in general rental levels in the market.

**Example:**

You have a case last registered in January 2007 at £60.50 and to be re-registered in January 2009

You have determined a S70 Rent of £75

The formula is:

**MFR = LR [1 + (x − y) + P]**

**y**

Where **MFR **is the Maximum Fair Rent

**LR **is the amount of the existing registered rent

**x **is the RPI published in the month preceding the month in which the rent is

registered.

(Note: RPI is published 1 month in arrears, so the RPI published in the preceding month is the RPI FOR the month prior to the preceding month, so the RPI to use is the RPI for 2 months ago)

**y **is the published index for the month in which the rent was last registered

**P **is 0.075 for the first application of rent after the Order came into force and 0.05 for every

subsequent application

Where rent not a multiple of 50 pence it should be rounded up to nearest multiple of 50

Pence

**Application:**

**LR **= £60.50

**x **is the RPI for November 2008 which is 216.0 (The RPI PUBLISHED IN the month preceding the date the rent is to be re-registered. In this case the re-registration is in January 2009, so the RPI to use is PUBLISHED IN December 2008, which is the RPI FOR November 2008)

**y **is the RPI for January 2007 which is 201.6 (The RPI FOR the month the rent was last registered)

The calculation is therefore:

60.50 x (1+ (216.0 - 201.6) / 201.6 + 0.05 which is 60.50 x (1 + 14.4 / 201.6 + 0.05)

Or 60.50 x (1 + 0.0714 + 0.05)

Or 60.50 x 1.1214 = 67.85

The Maximum Fair Rent is rounded up to £68.00

Your S70 Rent was £75

The Rent to be registered is the lower of the S70 Rent or MFR, so in this example, the MFR £68 is the registered rent.

**Related pages;**

- Repairs / improvements
- Services
- Rent register – notifying the parties