Determination of fair rent

Determination of fair rent

by George Coucounis

THE determination of the fair rent by the 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 the Court for the assessment of the fair rent payable for the rented property, if they consider that the amount of the rent payable is not fair. However, there is a reservation that no application can be submitted to the 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 in writing any other increase of the rent, provided the increase will not be higher than the rate stated in the law from time to time and that no increase will be applied before the lapse of two years from the date the property was rented or the rent was last increased. 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% and it was gradually reduced to 8% and then to 0% from 22.4.2013 until 21.4.2023.

However, there is a reservation in the law, which is not affected by the decrease of the rate of the increase and provides that the fair rent can be determined based on 90% of the average rents of the proximity area to the rented premises. Therefore, if the rent payable is lower than 90% of the amount of the average rents, 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%. For the determination of the fair rent, there is a need for the preparation of a valuation by an expert valuer or by a valuer appointed by the Court giving him relevant instructions, 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 legal framework and generally the procedure for the determination of the fair rent was examined by the Rent Control Court in a judgment issued on 20.1.2021 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 as experts in the field of valuations of land and rents. The valuers, following the instructions of the Court, carry out a search and prepare a written valuation which they submit to the Court 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 the 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; the evaluation of their testimony leads the Court to its findings. The testimony of the litigants themselves is of secondary importance, since their subjective perception regarding the reasonable and 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, it dismissed the application, which was also found to be premature, since it was filed before the lapse of 2 years from the last increase of the rent.