A valuation report prepared either by a Land Registry valuations’ officer or by a valuer to determine the fair rent of a property situated in a rent control area should consider the assumptions set out in the Rent Control Law, taking into account the market rent and the average rents of the proximity area, as well as all the circumstances, other than the personal ones, such as the age, character, size, location, condition of the premises and where the building is listed whether the landlord executed any works, the costs and services provided.
The interpretation of the term ‘proximity area’ is also important and is found in case-law to mean a neighbourhood, a building block, the neighbouring or opposite properties in the same street. The valuation should be based on the comparison of the property with other rented properties situated in the proximity area and should define their advantages and disadvantages. Also, the market rent is assessed, which is the estimated amount for which a property should be rented on the date of valuation between a willing landlord and a willing tenant on appropriate lease terms.
After the average rent in the proximity area is calculated, the fair rent is set at 90 per cent of that, unless the tenant is a refugee or a sufferer, so the rate is 80 per cent. Despite the existence of the order of the Council of Ministers providing for a zero-rent increase until 21.4.2019, where the rent payable is estimated to be less than 90 per cent of the average the landlord may apply to court for an increase. Likewise, if the rent is higher than 90 per cent of the average, the tenant is entitled to apply to the court for a reduction.
An issue arose regarding the valuation report prepared by a Land Registry valuations’ officer in an application for deduction of the rent, whereby the Rent Control Court accepted his findings instead of those of the valuer appointed by the landlord, reducing the rent by half. The landlord filed an appeal before the Supreme Court, which set aside the judgment of the court of first instance, finding errors in the officer’s valuation and ordered the case be re-tried.
The Supreme Court stated the essential error committed by the officer was that he did not accurately determine the advantages and disadvantages of the three building complexes compared and the shops therein. Moreover, he did not make any quality or time adjustments in his comparison between the shop under valuation and the other shops to take into consideration the advantages of the said shop. Therefore, the Supreme Court held that the valuation of the officer was vulnerable and the court of first instance shouldn’t have relied on it. Since the shops compared for valuation purposes were not of the same age or condition, nor the services provided to them were the same, the officer should have made the relevant adjustments.
Furthermore, the Supreme Court held that the Rent Control Court was also mistaken since it hadn’t considered the average rents in the proximity area. It had only taken into account the market rent when determining the fair rent, while it had completely disregarded the average of the rents and the other circumstances such as age, condition and the services provided to the shop in comparison to the other shops.
At the same time, the Supreme Court held that the valuation prepared by the landlord’s valuer was unfounded, since he narrowly defined the proximity area and ignored similar neighbouring premises which had to be compared after making the necessary adjustments. It concluded that under the circumstances, there was no acceptable evidence to determine the fair rent for the shop under valuation and ordered re-trial.