The determination of fair rent by the court regarding houses and shops situated in Rent Control areas is regulated by the Rent Control Law, which provides that no increase can be imposed upon a statutory tenant unless as provided in the law. It is lawful for the statutory tenant or the landlord to apply to the court for the assessment of the fair rent payable for the rented property. However, there is a reservation that no application can be submitted before the lapse of two years from the date the tenant received possession of the premises or from the last increase or reduction in the rent.
It is also lawful for the tenant and the landlord to enter into negotiations and agree in writing any other increase of the rent, provided the increase will not be higher than the rate stated in the law. The law provides that the maximum increase rate cannot be higher than the one defined every two years through an order by the Council of Ministers after a recommendation by the Minister of Justice, which was originally 14 per cent and it was gradually reduced to eight per cent and then to zero per cent from 22.4.2013 until 21.4.2019.
However, there is a reservation in the law, which is not affected by the increase rate and provides that the fair rent can be determined based on 90 per cent of the average rents of the proximity area to the rented premises. Therefore, if the rent payable is lower than 90 per cent of the average rents, it can be increased and determined on this basis, unless the tenant is a refugee or a sufferer in which case the rate cannot be higher than 80 per cent.
For the determination of the fair rent, there is a need for the preparation of a valuation by an expert valuer or by oner appointed by the court 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, the character, the size, the location, the condition of the premises and where the building is listed whether the landlord executed any works, the costs and services provided.
The above are discussed in a judgement issued by the Rent Control Court regarding an application for the determination of the fair rent of a property situated in a Rent Control area, the rent of which was very low compared to the average rents in the proximity area. At the time of the filing of the application the average rate of 90 per cent was applicable, while the increase rate was zero per cent.
The court referred to the order of the Council of Minister that the increase rate was zero per cent, however it stated that this rate does not affect the reservation in the provision of the law according to which the rent can be increased up to 90 per cent of the average rents of the proximity area. The Court added that the law exempts from the factors which are taken into consideration when examining an application for the determination of the fair rent, the personal circumstances of the litigants.
The tenant’s allegation that the turnover of his business was reduced and the reasons for such a reduction could not be examined by the court, since they are clearly ‘personal circumstances’. The court accepted the evidence adduced by the two experts and was satisfied that the method used in their valuations was correct and since the difference was minor, it adopted both valuations and determined the average rents of the shops in the proximity area, 90 per cent of which was five times higher than the rent payable for the premises. As a result, the court ordered that the increase claimed was justified and reasonable and determined the fair rent accordingly.