Determination of fair rent

‘Fair rent does not mean reasonable rent but is the market rent minus the legislative exceptions’

THE determination of fair rent by court regarding houses and shops situated in a rent control area is regulated by article 8 of 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 court for rent assessment if they consider that the amount payable is not fair. However, there is a reservation that no application can be submitted to court before the lapse of two years from the date the tenant received possession of the premises or from the last increase or reduction of the rent. It is also lawful for the tenant and the landlord to enter into negotiations and agree on any other increase in rent in writing, provided the increase will not be higher than the rate stated in the law and that no increase will be applied before the afforementioned lapse of two years. The law in article 8(4)(a) 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 and Public Order, which was originally 14 per cent, gradually reduced to 8 per cent and then to 0 per cent for the period 22.4.2013-21.4.2023.

However, there is a reservation in the law, which is not affected by this reduction and provides that the fair rent can be determined based on 90 per cent of the average rent in the proximity of the premises in question. Therefore, if the rent payable is lower than 90 per cent, it can be increased and determined on this basis, unless the tenant is a refugee or a sufferer; in such a case, the rate cannot be higher than 80 per cent. For the determination of the fair rent, an expert valuer or a valuer appointed by the court must make a valuation, taking into account the market rent and the average rent in the proximity area, as well as all the circumstances, such as age, character, size, location, condition of the premises, where the building is listed, whether the landlord executed any works, the costs and services provided and so on.

The legal framework for the determination of fair rent was examined by the Rent Control Court in a judgment issued on January 20 in an application by a tenant for the reduction of the rent. As stated in the judgment, the procedure before the court includes the conduct of a search, either by the Court on its own motion or after an application by a litigant, through the officers/valuers of the Land Registry, whose appointment is approved by the Supreme Court and provided they have the relevant qualifications. The valuers, following court instructions, carry out a search and prepare a written valuation which they submit and copies are given to the litigants. The court may, in exceptional cases, order the preparation of further valuations. After giving the right to the litigants, landlord and tenant, to be heard and considering the restrictions and circumstances of the particular case, the court determines the fair rent as from the date of the filing of the application under examination.

The court added that in cases of re-assessment of the fair rent, the important primary actors are the expert valuers, whose testimony helps guide the court to its findings. The testimony of the litigants is of secondary importance, since their subjective perception regarding fair rent is of little value.

In the particular case, the court held that the premises in question did not fall under the meaning of the term “immovable property” as interpreted in the authority of Fysentzides and consequently it was not statutory under the Rent Control Law. The court had no jurisdiction to try the case and therefore dismissed the application, which was also found to be premature, since it was filed before the lapse of two years from the last increase of the rent.

George Coucounis is a lawyer in Larnaca and the founder of George Coucounis Llc, [email protected]