First-tier Tribunal Assesses Statutory Costs for Lease Extensions

OUTCOME: Allowed in Part

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FIRST-TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY) Case Reference : TR/LON/00AU/OC9/2023/0142 Property :

(x5) Flats 3, 10, 14, 16 & 18, 73 [ADDRESS], [POSTCODE]

Applicants : [redacted] [NAME] (Flat 14) 2. [NAME] (Flat 18) 3. [NAME] (Flat 16) 4. [COMPANY] (Flat 3) 5. [COUNSEL] (Flat 10)

Representative : [RESPONDENT] ([NAME]) Respondent : [redacted] : [COUNSEL] MW ([NAME]) Type of [NAME] : Costs: 1. Rule 13 Tribunal Rules. 2. Section 60 statutory costs. Tribunal Member :

Judge Robert Latham

Venue of Hearing : 10 [ADDRESS] [POSTCODE] Date of Decision : 29 April 2024

DECISION

2 Decision (i) The Tribunal does not make an order for costs against the Respondent pursuant to Rule 13 of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013.

(ii) The Tribunal assesses the following sums for the Section 60 statutory costs: Flat Solicitor’s [NAME]’s Costs VAT Total (inc VAT) 3 £3,000 £1,000 £800 £4,800 10 £3,000 £1,000 £800 £4,800 14 £4,500 £1,000 £1,100 £6,600 16 £3,000 £1,000 £800 £4,800 18 £4,500 £1,000 £1,100 £6,600

The [NAME]

1. On 9 October 2023, the Respondent issued an [NAME] in respect of the following: (i) an order that the Respondent's costs of these four sets of proceedings incurred between May 2023 and 23 August 2023 be paid by the Applicants pursuant to Rule 13 of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 (“the Tribunal Rules”). (ii) an [NAME] for the determination of Respondent landlord's reasonable costs payable by the Applicants pursuant to Section 60(1) of the Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) in respect of five applications for lease extensions.

(iii) confirmation as to the date(s) that the Applicants can serve fresh notices claiming new leases of their respective premises upon the Respondent pursuant to Section 42 of the Act.

2. On 9 January 2024, a Procedural Judge gave directions for the determination of these [NAME] which were amended on 7 February 2024, pursuant to which: (i) On 20 February, the Respondent filed a Bundle of Documents extending to 207 pages. This does not include any index. The critical documents are (a) the Respondent’s Statement (at i-v) and (b) the Respondent’s Applications for Costs (at ix-xviii). The Respondent has been represented by [RESPONDENT] [NAME]. References to this bundle will be prefixed by “R.__”.

3 (ii) On 19 March, the Applicants filed a Bundle of Documents extending to 597 pages. This has the merit of having an index. It also includes the applications and relevant notices in respect of the five flats. These had not been included in the Respondent’s Bundle. The critical documents are the Applicants’ Statements of Case in respect of (a) the Rule 13 [NAME] (at p7-16) and (b) the Section 60 [NAME]. These are drafted by [COUNSEL], Counsel, who has been instructed by the Respondent throughout these proceedings. The Applicants had been represented by [NAME] (UK) [COMPANY], Solicitors. Since 15 March 2024, they have been instructed by [COMPANY]. References to this bundle will be prefixed by “A.__”. (iii) On 2 April, the Respondent filed Statements of Case in Reply in respect of (a) the Rule 13 [NAME] (9 pages) and (b) the Section 60 [NAME] (5 pages). These are drafted by [COUNSEL], Counsel, who has been instructed by the Respondent throughout these proceedings.

3. The Respondent seeks an order for costs under Rule 13 in the sum of £18,649.80 (inc VAT) to be apportioned equally between the five claims. This is claimed in respect of the work done over the period 2 May 2013 and 23 August 2023.

4. The Respondent seeks Section 60 statutory costs against the Applicants in the following sums: Flat Solicitor’s [NAME]’s Costs VAT Total (inc VAT) 3 £4,500 £1,000 £1,100 £6,600 10 £4,500 £1,000 £1,100 £6,600 14 £6,000 £1,000 £1,400 £8,400 16 £4,500 £1,000 £1,100 £6,600 18 £6,000 £1,000 £1,400 £8,400

5. On 9 January 2024, when Judge Taglianini gave Directions, she noted that the parties had consented to the withdrawal of these applications. This withdrawal had been approved by the Tribunal. She questioned whether the Tribunal retained any [NAME] to determine the date(s) that the Applicants can serve fresh notices claiming new leases of their respective premises upon the Respondent pursuant to Section 42 of the Act. The parties now agree that the Tribunal has no [NAME] to do so. The Five Applications before this Tribunal 6. These applications involve five flats at [ADDRESS] (“the Block”), namely Flats 3, 10, 14, 16 and 18. Between 14 October 2022 and 7 February 2023, the Applicants issued applications to this Tribunal for the determination of the premium or other terms of acquisition remaining in dispute.

4 7. The tenants at Flats 7, 11 and 15 have also sought lease extensions. They had the same solicitor as these Applicants. On 24 January 2023, they issued three sets of proceedings (K00EC306; K00EC307; K00EC308) in the Shoreditch and Clerkenwell County under section 48(3) to enforce the grant of their new leases on the basis that all the terms of the acquisition have been either agreed between the parties or determined by this Tribunal.

8. On 8 March 2023 (at R.3-5), the Applicants applied (i) to stay the five applications, pending the transfer of the three claims issued in the County Court to this Tribunal; (ii) for consolidation of all the applications; and (iii) for [COMPANY] to be joined as a party. On 24 April 2023 (at R.20), the Respondent applied for a determination that the Tribunal did not have [NAME] to determine whether a new insurance provision should be included in the new leases because the terms of acquisition had been agreed. It was said that premiums had also been agreed. The letter referred to the Court of Appeal in [NAME] v Goldwin- Austen [2014] EWCA Civ 27; [2014] 1 P&CR 15.

9. On 2 May 2023 (at (A.115), the Tribunal held a video CMH. Judge Helen Carr ordered that the applications be consolidated. The parties were represented by [NAME] and [NAME] respectively. The Judge set the matter down for a preliminary hearing as to whether the terms of acquisition had been agreed. Dependent upon the outcome of the preliminary matter, the tribunal would issue further Directions. On 15 June, the matter was set down for hearing on 30 August. Judge Carr directed that the Respondent should file a Bundle by 2 June. The Respondent sought an extension until 16 August. The amened Directions provided for Skeleton Arguments to be served on 23 August.

10. Between 17 July and 23 August, there was an exchange of without prejudice letters (at R.22-R.55). On 16 August 2023, there was also a jurisdictional hearing at the County Court in respect of the three other tenants. The parties had prepared a Bundle of more than 1,000 pages for the County Court. The Judge decided that he had no time to determine the [NAME] at a 45 minute appointment. The Respondent’s time estimate was wholly unrealistic.

11. On 22 August, the Respondent served a 17 page Skeleton Argument (at R.38054). On 23 August (at R.55), the Applicants notified the Respondent that they were minded to withdraw their applications before this Tribunal. They declined to set out their position on the issue of insurance of the Block. They asserted that “on an objective factual assessment of the Notices served and the correspondence and subsequent negotiations between the parties, the terms of acquisition were not agreed”. They asserted that the Respondent’s applications disputing [NAME] in the three County Court claims was misconceived and would inevitably fail. However, to avoid costs, they saw no benefit in continuing with the

5 separate Tribunal proceedings. These tenants would issue new claim Notices of Claim. The letter concluded: “If the Applications are withdrawn the parties will either be able to reach an agreement on the insurance covenants by alternative dispute resolution within the context of the three County Court Claims or seek a determination by the Court in respect of those insurance arrangements before it is necessary for our clients to issue any sort of proceedings in connection with their new proposed Claims. That agreement or determination although not binding on our clients will be persuasive evidence of the form of insurance for our clients’ leases.” The Issue of Insurance 12. The substantive issue in dispute now seems to be the provision that should be made for insurance in the new leases. The lease for Flat 14, dated 4 September 1998, is at A.149. The lessees occupy their flats under tripartite leases between the landlord, tenant and [APPELLANT] (“[NAME]”) a management company owned by the lessees. The landlord covenants to ensure that the block is insured in accordance with the provisions of the head lease 13. At the time of the grant, there was a Headlease, dated 6 October 1983. The [NAME] was responsible for insuring the premises demised by the Headlease which included the Block. Since the grant of the leases, the Landlord has insured the Block in accordance with the provisions of the Headlease. The insurance covers the whole building but is apportioned to the Block in accordance with its use as 18 long leasehold flats.

14. Some years ago, the Headlease was surrendered and the [NAME]’s interest vested in the Respondent by virtue of s. 139 of the Law of Property Act 1925. The Applicants argue that this renders the insurance covenant defective. Irrespective of whether this is correct or not, the Respondent has agreed that the insurance provisions should be clarified and modernised by incorporating the insurance covenant directly into the new lease together with provisions for re-instatement. The sticking point is that the Respondent is not prepared to hand over the insurance of its freehold property to [NAME]. The Rule 13 [NAME]

15. The parties accept that [ADDRESS] Company (1985) [COMPANY] v Alexander [2016] UKUT 0290 (LC); [2016] L&TR 34 is the leading authority of Rule 13(1)(b). The Upper Tribunal (at [28]) adopted a three- stage approach. The first stage is to consider the reasonableness of the conduct. The second stage is whether in the light of the unreasonable

6 conduct, the Tribunal ought to make and order for costs and the third is the terms of any costs order.

16. The Respondent contends that the unreasonable conduct of the Applicants is their decision to bring separate proceedings before this Tribunal and in the County Court. All eight tenants should have applied to the [ADDRESS] for a vesting order pursuant to section 48(3) once the terms of acquisition were agreed. The [NAME] could and should have been withdrawn as soon as the Applicants and their solicitors realised that the applications should have been made in the County Court. They knew this by 20 January 2023, because cases brought by their fellow tenants on identical facts were issued in the County Court on that date. By refusing to withdraw their claims earlier, the Applicants appear to have proceeded on the footing that they could force the Respondent to engage in costly and unnecessary litigation without exposing themselves to a costs risk. By 2 May 2023, when the CMH was held, there could have been no doubt that the Applicants knew that they had issued in the wrong forum because the Respondent’s letter to the FTT, dated 24 April 2023, set out the law. The Applicants acted unreasonably in not withdrawing the four applications until 23 August 2023, the date set for the exchange of Skeleton Arguments, thereby ensuring that the Respondent would incur all the full costs of the hearing.

17. The Applicant’s position is that that the Respondent was not bound to succeed. The Applicants did not accept that the Respondents were bound to succeed. It was not unreasonable of them to withdraw the applications some seven days before the date of the preliminary hearing. The Applicants’ conduct was not unreasonable; if it was, it does not meet the high threshold to merit a penal costs order.

18. In its Reply, the Respondent repeats that the Applicants knew or should have known by January 2023 that the Tribunal did not have [NAME] to determine their [NAME]. However, the Respondent is only claiming Rule 13 costs in respect of the costs incurred between 2 May and 23 August 2023. By August 2023, the Tribunal’s lack of [NAME] had been pointed out to the Applicants by the Respondent on numerous occasions. If there had been any doubt on the matter, the question was settled on 16 August 2023 when the 3 leaseholders who had made applications to the County Court established that the County Court was the correct forum to hear their claims. The Applicants have been represented by [NAME] who are experts in enfranchisement law at all times. The Respondent provided a detailed Chronology which is lacking in relevant detail. For example, it is stated that premiums were agreed at “various dates”.

7 The Five Applications Flat 14 19. On 14 October 2022 (at A.53-64), [NAME] and [NAME] issued their [NAME] in respect of Flat 14. The Tribunal allocated the case reference: LON/00AU/2022/0804. Their [NAME] was for a determination of the premium or other terms of acquisition that remained in dispute. At Section 8, the Applicants pleaded that they had offered a premium of £9,641, whilst the Respondent had proposed one of £15,500. At Section 9, it was stated that the terms remained in dispute: “The Respondent has not agreed any terms of the proposed new lease, in the circumstances the Applicants have been compelled to make this [NAME] in order to protect their statutory right to a new lease”.

20. On 23 February 2022, Mr [NAME] and Mr [NAME] had served their Section 42 Claim Notice (at A.29). They had proposed a premium of £9,641. In respect of the other terms and conditions”, the notice stated: “Other terms and conditions: pursuant to section 57(6)(a) of the LRHUDA 1993, to remedy the defect in the existing lease that HM Land Registry do not hold a copy and therefore the existing terms and conditions are unknown, that the new lease should be in the form annexed to this notice.” 21. On 19 April 2022, the Respondent served its Section 45 Counter-Notice (at A.35-37). The landlord proposed a premium of £15,500, In response to the proposed terms, the landlord stated: “the terms of the New Lease shall be as the existing Lease subject to modernisation required where appropriate in accordance with Section 57 of the Act.” 22. On 19 January 2023, the Tribunal issued its standard Directions. The first step was for the landlord to submit a draft lease to the tenant for approval by 16 February 2023. Provision was made for the parties’ valuers to exchange valuation evidence by 6 February 2023. It is unclear what steps were taken pursuant to these Directions or when/whether the premium was agreed. Flat 18 23. On 15 October 2022 (at A.65-74), [NAME] issued her [NAME] in respect of Flat 18. The Tribunal allocated the same case reference: LON/00AU/2022/0804. Her [NAME] was for a determination of the premium or other terms of acquisition that remained in dispute. At Section 8, the Applicant stated that the premium was not in dispute. At Section 9, it was stated that the terms remained in dispute: “The lease terms remain in dispute because the Respondent has indicated it intends to modernise the existing lease terms pursuant to section 57 of the Leasehold Reform Housing and Urban Development Act 1993 without providing any specifity (sic) as to what it intends by such modernisation.

8 In the circumstances the terms of acquisition are not fully agreed and the Applicant has been compelled to make this [NAME] in order to protect her statutory right to a new lease”.

24. On 23 February 2022, Ms [NAME] had served their Section 42 Claim Notice (at A.30). She proposed a premium of £19,572. In respect of the other terms and conditions”, the notice stated: ““as in the existing lease save for such modifications as required by section 57 of the LRHUDA 1993”.

25. On 19 April 2022, the Respondent served its Section 45 Counter-Notice (at A.38-40). The landlord proposed a premium of £12,223, In response to the proposed terms, the landlord stated: “as in the existing Lease subject to modernisation required where appropriate in accordance with Section 57 of the Act.” 26. On 19 January 2023, the Tribunal issued its standard Directions. The first step was for the landlord to submit a draft lease to the tenant for approval by 16 February 2023. It is unclear whether the landlord complied with this Direction. Flat 10 27. On 26 October 2022 (at A.97-108), [NAME] issued his [NAME] in respect of Flat 10. The Tribunal allocated the case reference: LON/00AU/2022/0825. His [NAME] was for a determination of the premium or other terms of acquisition that remained in dispute. At Section 8, the Applicant pleaded that he had offered a premium of £9,711, whilst the Respondent had proposed one of £15,500. At Section 9, it was stated that the terms remained in dispute: The Respondent has not agreed any terms of acquisition in respect of the terms of the new lease. The Applicant has therefore been compelled to make this [NAME] to protect his statutory right to a new lease”.

28. On 27 February 2022, Mr [NAME] had served his Section 42 Claim Notice for Flat 10 (at A.33). He proposed a premium of £9,711. In respect of the other terms and conditions”, the notice stated: ““as in the existing lease save for such modifications as required by section 57 of the LRHUDA 1993”.

29. On 19 April 2022, the Respondent served its Section 45 Counter-Notice (at A.47-49). The landlord proposed a premium of £15,500, In response to the proposed terms, the landlord stated: “as the existing Lease subject to modernisation required where appropriate in accordance with Section 57 of the Act.”

9 Flat 16 30. On 26 October 2022 (at A.75-86), [NAME] issued his [NAME] in respect of Flat 16. The Tribunal allocated the case reference: LON/00AU/2022/0877. His [NAME] was for a determination of the premium or other terms of acquisition that remained in dispute. At Section 8, the Applicant pleaded that he had offered a premium of £12,223, whilst the Respondent had proposed one of £20,400. At Section 9, it was stated that the terms remained in dispute: The Respondent has not agreed any terms of acquisition in respect of the terms of the new lease. The Applicant has therefore been compelled to make this [NAME] to protect his statutory right to a new lease”.

31. On 27 February 2022, Mr [NAME] had served his Section 42 Claim Notice (at A.31). He proposed a premium of £12,223. In respect of the other terms and conditions”, the notice stated: “as in the existing lease save for such modifications as required by section 57 of the LRHUDA 1993”.

32. On 27 April 2022, the Respondent served its Section 45 Counter-Notice (at A.41-43). The landlord proposed a premium of £20,4000. In response to the proposed terms, the landlord stated: “as the existing Lease and Deed subject to modernisation required where appropriate in accordance with Section 57 of the Act. Flat 3 33. On 7 February 2023 (at A.87-96), [COMPANY] issued its [NAME] in respect of Flat 3. The Tribunal allocated the case reference: LON/00AU/2023/0113. Its [NAME] was for a determination of the premium or other terms of acquisition that remained in dispute. At Section 8, the Applicant pleaded that he had offered a premium of £10,399, whilst the Respondent had proposed one of £18,300. At Section 9, it was stated that the terms remained in dispute. Five issues were identified: (i) the definition of the Property; (ii) the management covenants; (iii) the insured risks; (iv) the division of responsibilities; and (v) the insurance provisions.

34. On 15 June 2022, [COMPANY] had served its Section 42 Claim Notice (at p.32). It proposed a premium of £10,339. In respect of the other terms and conditions”, the notice stated: “as in the existing lease save for such modifications as required by section 57 of the LRHUDA 1993”.

35. On 8 August 2022, the Respondent served its Section 45 Counter-Notice (at p.44-46). The landlord proposed a premium of £18,300. In response to the proposed terms, the landlord stated “as the existing Lease and Deed subject to modernisation required where appropriate in accordance with Section 57 of the Act.”

10 Rule 13 Costs 36. This is normally a no costs [NAME]. Rule 13(1)(b) of the Tribunal Rules only permits a Tribunal to make a penal costs order if satisfied that a person has acted unreasonably in bringing, defending or conducting proceedings. [ADDRESS], the Upper Tribunal (“[NAME]”) gave detailed guidance on what constitutes unreasonable behaviour (emphasis added):

22. In the course of the appeals we were referred to a large number of authorities in which powers equivalent to rule 13(1)(b) were under consideration in other tribunals. We have had regard to all of the material cited to us but we do not consider that it would be helpful to refer extensively to other decisions. The language and approach of rule 13(1)(b) are clear and sufficiently illuminated by the decision in Ridehalgh v Horsefield [1994] Ch 205. We therefore restrict ourselves to mentioning [NAME] v Secretary of State for the Home Department [2015] UKFTT 00059 (IAC) a decision of McCloskey J, Chamber President of the Upper Tribunal (Immigration and Asylum Chamber), and Judge Clements, Chamber President of the First-tier Tribunal (Immigration and Asylum Chamber). [NAME] provides guidance on rule 9(2) of the Tribunal Procedure (First Tier Tribunal) (Immigration and Asylum Chamber) Rules 2014 which is in the same terms as rule 13(1) of the [NAME]’s 2013 Rules. In it the tribunal repeatedly emphasised the fact-sensitive nature of the inquiry in every case.

23. There was a divergence of view amongst counsel on the relevance to these appeals of the guidance given by the Court of Appeal in Ridehalgh on what amounts to unreasonable behaviour. It was pointed out that in rule 13(1)(b) the words “acted unreasonably” are not constrained by association with “improper” or “negligent” conduct and it was submitted that 10 unreasonableness should not be interpreted as encompassing only behaviour which is also capable of being described as vexatious, abusive or frivolous. We were urged, in particular by Mr [NAME], to adopt a wider interpretation in the context of rule 13(1)(b) and to treat as unreasonable, for example, the conduct of a party who fails to prepare adequately for a hearing, fails to adduce proper evidence in support of their case, fails to state their case clearly or seeks a wholly unrealistic or unachievable outcome. Such behaviour, Mr [NAME] submitted, is likely to be encountered in a significant minority of cases before the FTT and the exercise of the [NAME] to award costs under the rule should be regarded as a primary method of controlling and reducing it. It was wrong, he submitted, to approach the [NAME] to award costs for unreasonable behaviour on the basis that such order should be exceptional.

24. We do not accept these submissions. An assessment of whether behaviour is unreasonable requires a value judgment on which views might differ but the standard of behaviour expected of parties in tribunal proceedings ought not to be set at an unrealistic level. We see no reason to depart from the guidance given in [NAME] at 232E, despite the slightly different context. “Unreasonable” conduct includes conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event

11 to an unsuccessful outcome. The test may be expressed in different ways. Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or Sir [NAME] “acid test”: is there a reasonable explanation for the conduct complained of? 25. It is not possible to prejudge certain types of behaviour as reasonable or unreasonable out of context, but we think it unlikely that unreasonable conduct will be encountered with the regularity suggested by Mr [NAME] and improbable that (without more) the examples he gave would justify the [NAME] of an order under rule 13(1)(b). For a professional advocate to be unprepared may be unreasonable (or worse) but for a lay person to be unfamiliar with the substantive law or with tribunal procedure, to fail properly to appreciate the strengths or weaknesses of their own or their opponent’s case, to lack skill in presentation, or to perform poorly in the tribunal room, should not be treated as unreasonable.

26. We also consider that tribunals ought not to be over-zealous in detecting unreasonable conduct after the event and should not lose sight of their own powers and responsibilities in the preparatory stages of proceedings. As the three appeals illustrate, these cases are often fraught and emotional; typically those who find themselves before the FTT are inexperienced in formal dispute resolution; professional assistance is often available only at disproportionate expense. It is the responsibility of tribunals to ensure that proceedings are dealt with fairly and justly, which requires that they be dealt with in ways proportionate to the importance of the case (which will critically include the sums involved) and the resources of the parties. Rule 3(4) entitles the FTT to require that the parties cooperate with the tribunal generally and help it to further that overriding objective (which will almost invariably require that they cooperate with each other in preparing the case for hearing). Tribunals should therefore use their case management powers actively to encourage preparedness and cooperation, and to discourage obstruction, pettiness and gamesmanship.

37. The [NAME] address the situation where an applicant withdraws their claim at [35] to [37]. Parties should be encouraged make sensible concessions. Concessions are an important part of contemporary litigation.

38. At [43] the [NAME] stated: “We conclude this section of our decision by emphasising that such applications should not be regarded as routine, should not be abused to discourage access to the tribunal, and should not be allowed to become major disputes in their own right. They should be determined summarily, preferably without the need for a further hearing, and after the parties have had the opportunity to make submissions. We consider that submissions are likely to be better framed in the light of the tribunal’s decision, rather than in anticipation of it, and applications made at interim stages or before the decision is available should not be encouraged. The applicant for an order should be required to identify clearly and specifically the conduct relied on as unreasonable, and if the tribunal considers that there is a case to answer (but not otherwise) the respondent should be given the opportunity to respond to the criticisms

12 made and to offer any explanation or mitigation. A decision to dismiss such an [NAME] can be explained briefly. A decision to award costs need not be lengthy and the underlying dispute can be taken as read. The decision should identify the conduct which the tribunal has found to be unreasonable, list the factors which have been taken into account in deciding that it is appropriate to make an order, and record the factors taken into account in deciding the form of the order and the sum to be paid. The Tribunal’s Determination on the Rule 13 [NAME]

39. The Tribunal is satisfied that this is not an appropriate case for a penal costs order under Rule 13(1)(b) of the Tribunal Rules. The Respondent contends that the unreasonable conduct of the Applicants was their decision to bring separate proceedings before this Tribunal and in the County Court. The alleged unreasonable conduct does not meet the high threshold required by the [NAME] in [ADDRESS].

40. The Applicants issued their applications before this Tribunal to protect their right to acquire extensions to their leases. They needed to issue applications either before this Tribunal or the County Court. Otherwise, their rights to lease extensions would have lapsed. The Applicants have acted on legal advice.

41. The issues raised by the Applicants are much more complex that those suggested by the Respondent in its [NAME], which itself was accompanied by 207 pages of documents. On a Rule 13 cost [NAME], it should not be necessary for the Tribunal to analyse the underlying dispute between the parties. In the current case, it has been necessary for the Tribunal to seek to do so. It is apparent that in four of the five cases, the premium was in dispute. This would have been a matter for this Tribunal. It is unclear when the premiums were agreed.

42. On any lease extension, it is always open to the parties to modify the terms of the existing terms. The [NAME] under section 57(6) for this Tribunal to do so is limited to where (a) it is necessary to do so in order to remedy a defect in the existing lease; or (b) it would be unreasonable in the circumstances to include, or include without modification, the term in question in view of changes occurring since the date of commencement of the existing lease which affect the suitability on the relevant date of the provisions of that lease.

43. The Respondent places considerable reliance on the Court of Appeal decision in [NAME] v [NAME] which held that a counter-notice under s.45 which included the following counter proposal: “The new leases terms should contain such modifications and amendments as the landlord is entitled to under and/or as may be necessary to give effect to the requirements of Chapter II of Part I of

13 the Act and without prejudice to the generality of the above such further reasonable modifications to be agreed” [ADDRESS] decided that such a counter proposal was capable of acceptance and that the modifications and amendments proposed were objectively ascertainable and could be determined by the county court in the event of any dispute. The editors of Hague consider that the same principles would be applied in construing a tenant’s notice.

44. The Tribunal notes that the Respondent is only seeking its costs for the period 2 May 2023 and 23 August 2023. However, the Tribunal is satisfied that the Applicants were entitled to consider the Respondent’s Skeleton Argument before deciding whether to proceed with their applications.

45. The Tribunal notes that the Applicants do not accept that the Respondent’s [NAME] on the jurisdictional issue was bound to succeed. The decision to withdraw was rather taken to avoid the escalating cost of the proceedings and on the basis that the terms of the new lease terms should be determined by the County Court.

46. From the material before the Tribunal, it is far from clear what terms of the new leases were in dispute and whether these fell within the [NAME] of this Tribunal, the County Court or neither. This Tribunal is also unclear on the material before it that these applications would have been struck out had the Respondent’s [NAME] been on 30 August. At the hearing, the Tribunal would have used its case management powers to identify (i) what issues had been in dispute between the parties when these applications had been issued; (ii) the extent to which the issues had been agreed between the parties; and (iii) whether any outstanding issues fell within the [NAME] of this tribunal. It is not for this Tribunal to determine these issues on a Rule 13 [NAME]. The Section 60 Statutory Costs 47. Section 60 provides, insofar as relevant for the purposes of this decision: “(1) Where a notice is given under section 42, then (subject to the provisions of this section) the tenant by whom it is given shall be liable, to the extent that they have been incurred by any relevant person in pursuance of the notice, for the reasonable costs of and incidental to any of the following matters, namely—

(a) any investigation reasonably undertaken of the tenant's right to a new lease;

(b) any valuation of the tenant's flat obtained for the purpose of fixing the premium or any other amount payable by virtue

14 of Schedule 13 in connection with the grant of a new lease under section 56;

(c) the grant of a new lease under that section;

but this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void.

(2) For the purposes of subsection (1) any costs incurred by a relevant person in respect of professional services rendered by any person shall only be regarded as reasonable if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs."

48. In [NAME] v Moss [2013] UKUT 415, [NAME], the Deputy President, gave the following guidance on the approach to be adopted: “9. These provisions are straightforward and their purpose is readily understandable. Part I of the 1993 Act is expropriatory, in that it confers valuable rights on tenants of leasehold flats to compel their landlords to grant new interests in those premises whether they are willing to do so or not. It is a matter of basic fairness, necessary to avoid the statute from becoming penal, that the tenant exercising those statutory rights should reimburse the costs necessarily incurred by any person in receipt of such a claim in satisfying themselves that the claim is properly made, in obtaining advice on the sum payable by the tenant in consideration for the new interest and in completing the formal steps necessary to create it.

10. On the other hand, the statute is not intended to provide an opportunity for the professional advisers of landlords to charge excessive fees, nor are tenants expected to pay landlords' costs of resolving disputes over the terms of acquisition of new leases. Thus the sums payable by a tenant under section 60 are restricted to those incurred by the landlord within the three categories identified in section 60(1) and are further restricted by the requirement that only reasonable costs are payable. Section 60(2) provides a ceiling by reference to the reasonable expectations of a person paying the costs from their own pocket; the costs of work which would not have been incurred, or which would have been carried out more cheaply, if the landlord was personally liable to meet them are not reasonable costs which the tenant is required to pay.

11. Section 60 therefore provides protection for both landlords and tenants: for landlords against being out of pocket when compelled

15 to grant new interests under the Act, and for tenants against being required to pay more than is reasonable.”

49. The Respondent seeks Section 60 statutory costs against the Applicants in the following sums: Flat Solicitor’s [NAME]’s Costs VAT Total (inc VAT) 3 £4,500 £1,000 £1,100 £6,600 10 £4,500 £1,000 £1,100 £6,600 14 £6,000 £1,000 £1,400 £8,400 16 £4,500 £1,000 £1,100 £6,600 18 £6,000 £1,000 £1,400 £8,400

50. The Respondent states that these were fixed fees agreed between the Respondent and its solicitors. Upon the receipt of the Section 42 Claim Notices, the Respondent’s solicitor, [COUNSEL], estimated to its client that if the lease extensions were very straightforward and unprotracted that the costs (per notice/new lease) were likely to be in the region of £2,000 plus VAT plus [NAME]’s costs. It was agreed with the Respondent, a longstanding and trusted client of the firm, that an appropriate sum would be discussed and agreed between them once the full extent of the work involved was known. The lease extensions proved to be complex and protracted, and the sums subsequently agreed to be charged for each matter between Mr [RESPONDENT] and the Respondent, took into account the significant amount of work carried out by the Respondent’s solicitor in respect of each claim, the complexity and non-standard nature of the work compared to more straightforward lease extension matters, and the experience and expertise of the solicitor with conduct. Although the work carried was not charged with reference to an hourly rate, Mr [NAME] standard hourly rate is £450 plus VAT when charging on a time recorded basis. An estimate of the time spent by the Respondent on the five applications is provided at R.74-78.

51. The increased fees agreed between the Respondent and its solicitors in respect of Flat 14 and Flat 18 reflect the additional work carried out by Mr [NAME] in relation to those two matters as and recoverable under S.60, as reflected in the summaries of work at pp. 76 and 78. In particular those matters, being the first two of the five S.42 notices served, both involved the preparation/consideration of a further version of a complex draft lease compared to the other three 52. The [NAME]’s costs reflect the standard fixed fee for surveying each property, providing a written report and general advice to the Respondent, as well as for their input in negotiations with the Applicants. It is submitted that the [NAME]’s fixed costs are at market rate and are reasonable.

16 53. The Applicants note that the Respondent has produced no time sheets in support of the time purportedly spent by Mr [NAME]. They contend that Mr [NAME] hourly rate ‘standard’ hourly rate of £450 plus vat is unreasonable. Mr [NAME] office is in Peterborough, which is [NAME] in the solicitor guidelines rates - £272 per hour for a Grade A partner during the relevant period.

54. In the instant case, the Respondent was dealing with eight more or less identical transactions at the same time. The Respondent has adduced no evidence that it obtained a fixed fee/quantum discount arrangement with the solicitors or valuer nor that it attempted to obtain such an arrangement but had been unable for good reason to do so. It is submitted that a reasonable discount would have been in the region of 33%.

55. Save for the dispute about the insurance provisions in the new leases and whether the FTT had [NAME] to determine the terms of acquisition (the costs of which are not recoverable by virtue of s.60(5)), the Applicants contend that the lease extension claims were all straight-forward. The Respondent avers that Mr [RESPONDENT] estimated the costs for each notice to be in the region of £2,000 plus vat. That sum should, however, be discounted to reflect the multiple simultaneous transactions and duplication of work. The Applicants note that on 28 October 2022, Mr [COUNSEL], their then solicitor, sent an email to Mr [COUNSEL] indicating that he expected the s.60 costs to be around £800 (exclusive of vat) for each flat. The Applicants provided a detailed commentary on the costs claimed at A.346-363. The Applicants suggest that the following sums should be allowed for the solicitors’ costs (exc VAT): (i) Flat 3: £1,053, (ii) Flat 10; £1,170; (iii) Flat 14: £1,404; (iv) Flat 16: £1,053 and (v) Flat 18: £1,365.

56. In its Reply, the Respondent note that Mr [RESPONDENT] is based at 69 [ADDRESS], [POSTCODE]. The Guideline Hourly rate is between £398 to £546 ph. It is noted that the Applicants’ solicitor charges £500 ph. The Respondent suggests that if the Tribunal considers that a discount should be applied, the appropriate rate would be 10%-20% at most. In [COMPANY] (Kensington) [COMPANY] v Wisbey [2016] UKUT 203 (LC) at [36], the [NAME] considered that the appellant could have obtained a 20 % discount. The Respondent contends that the lease extensions should have been straight forward but the Applicants were seeking extensive amendments to the insurance provisions in the existing leases which went far beyond what is necessary to remedy any defect in the leases under s. 57(6). The proposed changes were wholly impractical as the Applicants sought to deprive the Respondent of its right and obligation to insure its building and to hand that right and obligation over to the [COMPANY]. These negotiations were not litigation costs.

57. In assessing costs, the Tribunal has regard to the following: (i) Mr [NAME] is based in EC4 is based in EC4 and an hourly rate of £450 is not unreasonable.

17 (ii) Mr [NAME] states that his normal fee would have been in the order of £2,000 + VAT. The Tribunal accepts that there was additional work in respect of the terms of the new leases. These would have fallen within the scope of section 60(1)(b). However, the main variation sought seems to have been common to all the applications. (iii) The Tribunal notes that these were estimated fees. The solicitors were dealing with 8 lease extensions. Many of the issues would have been similar. The Applicants suggest a 33% discount; the Respondent one of 10% to 20%. The Tribunal notes that in [ADDRESS], the [NAME] considered a discount of 20% to be appropriate. In the current case, the Tribunal makes a discount of 25%. (iv) The Summary of the solicitor’s costs (at p.74-78), seems to be premised on Mr [COUNSEL] hourly rate of £450. The Tribunal would have expected some of the work to be undertaken by a [NAME]. Where work is undertaken by a partner, the Tribunal would have expected the time to have been less. (v) Some of the estimated time seems to be excessive. For example, the following time is claimed for instructing the [NAME], arranging the inspection, and discussing the report with the [NAME] and the client: (i) Flat 3: 1 hr 40 mins; (ii) Flat 10; 1hr 45 mins; (iii) Flat 14: 1hr 40 mins; (iv) Flat 16: 1hr 50 mins and (v) Flat 18: 1 hr 50 mins. (vi) It is common grand that more work was involved in respect of Flats 14 and 18, than the other flats. (vi) Having regard to these factors, the Tribunal makes a reduction of 33% in respect of the solicitor’s costs. (vii) The Tribunal notes that there is no challenge to the costs claimed in respect of the [NAME].

58. The Tribunal therefore assesses the following sums for the Section 60 statutory costs: Flat Solicitor’s [NAME]’s Costs VAT Total (inc VAT) 3 £3,000 £1,000 £800 £4,800 10 £3,000 £1,000 £800 £4,800 14 £4,500 £1,000 £1,100 £6,600 16 £3,000 £1,000 £800 £4,800 18 £4,500 £1,000 £1,100 £6,600

Judge Robert Latham 29 April 2024

18

ANNEX - RIGHTS OF APPEAL

1. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written [NAME] for permission must be made to the First-tier Tribunal at the Regional office which has been dealing with the case.

2. The [NAME] for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

3. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed despite not being within the time limit.

4. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.