First-tier Tribunal Decides RTM Company Costs Under Commonhold Act

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AM/LCP/2023/0009 Property : One N1, 6 – 24 [ADDRESS] [POSTCODE] Applicant: [redacted] : [APPELLANT] Respondent : [redacted] : [RESPONDENT] of application : Application to decide the costs to be paid by an [COMPANY] under s.88(4) of the Commonhold and Leasehold Reform Act 2002 Tribunal member(s) : Judge [NAME] : Paper determination Date of Decision : 25 January 2024

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DECISION

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DECISION

The tribunal determines that the costs payable by the Respondent in respect of the withdrawn Claim Notice is assessed at £6,777.45 and is payable within 35 days after the date that this decision is sent to the parties.

BACKGROUND

1. This claim for costs under the provisions of s88 of the Commonhold and Leasehold Reform Act 2002 (the Act) was made by the applicants on 16 June 2023. Directions were issued on 16 August 2023, combining this claim with the claim for the right to acquire the management of the property at One N1, 6 – 24 [ADDRESS] [POSTCODE] under case ending 0027.

2. This decision relates solely to the costs of the withdrawn Claim Notice, which was withdrawn on 30 March 2023. The Respondent is by virtue of s88(1) liable for the reasonable costs incurred by the landlord. Such costs are by section 89(2) limited to the time at which the Claim Notice is withdrawn.

3. In preparation for this determination, we were provided with a bundle of papers running to 62 which contained the application, the directions, the parties respective statement of case and the Applicants response. We have noted the contents of same.

4. In addition, we asked the parties to comment on the additional costs sought for dealing with this application and received a lengthy submission from the Applicants and a response from the Respondent. This response does not appear to challenge the Applicants’ right to recover the fees for the costs application but does challenge the sums claimed.

5. In respect of the costs to the date of withdrawal, the Applicant, the Respondent in those proceedings ending 0027, seeks to recover £4,350.45 inclusive of VAT and disbursements originally claimed at £15.45 but subsequently increased by £396 to include HM Land Registry copies. In addition to these costs there was a claim of £5,700, inclusive of VAT for the fees of Mr [COUNSEL], Counsel. Thus, the total claimed was, inclusive of VAT and disbursements of £10,446.45.

6. For the Applicants we were told that solicitors were not instructed and that all legal leg work was carried out by [COMPANY],(SEM) in the main Mr [NAME] at an hourly rate of £180. In addition, [NAME], respectively the director of Residential & Commercial management and the Managing Director provided assistance at an hourly of £215. The last employee of SEM was [COUNSEL] whose charge out rate was £95 per hour.

7. Counsel, Mr [COUNSEL], was instructed via direct access at an hourly rate agreed at £250 plus VAT but it seems he limited his costs to £4,750 plus VAT.

8. We were provided with a statement of costs which listed the members of SEM who were involved, their qualifications and rates. In a schedule of works done by SEM, which was broken down into 4 sections, we were told the tasks undertaken and the fee earner involved. Some 22.5 hours appears to have been spent in collating information for Counsel to draft the Counter Notice.

9. Counsel appears to have spent in excess of 20 hours drafting the Counter Notice, which was dated 23 February 2023. The schedule to the Counter Notice runs to some 6 pages and raises a number of objections to the Claim Notice, whilst still raising the possibility of adding more grounds of objection.

10. The Applicants statement of case contains a schedule detailing the complexities it is said that were faced by the landlord. We have noted same. The Counter Notice contains no less than 7 allegations of breaches of the Act as reasons why the Respondent should not acquire the right to manage.

11. In the skeleton argument from the Respondents Counsel, Mr [COUNSEL] raises four over arching points, which we have noted.

12. In reaching our decision we have considered the statements from both sides. The objections to the sums claimed have been considered and the counter offer noted. The sum of £2,650 is submitted as being the reasonable costs of the Applicant and we note the complaints concerning the attempt by SEM to recover these costs before they had been assessed.

13. In the response from the Applicants there is a 9-page response settled by Counsel. It contains extensive replies to each matter raised in the 3-page Respondents statement.

FINDINGS

14. We remind ourselves that this is supposed to be a ”No fault right to Manage” but since its inception landlords have sought to raise every conceivable objection open to them, this is notwithstanding the opening line of the schedule to the Counter Notice in which the right to rely on any ground, even if not specified in the Counter Notice, is reserved.

15. It is accepted that the Applicant is entitled to recover costs down to the withdrawal of the Claim Notice. Section 88 says this-

88Costs: general (1)A [COMPANY] is liable for reasonable costs incurred by a person who is— (a)landlord under a lease of the whole or any part of any premises,

(b)party to such a lease otherwise than as landlord or tenant, or (c)a manager appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises, in consequence of a claim notice given by the company in relation to the premises. (2)Any costs incurred by such a person in respect of professional services rendered to him by another are to be regarded as reasonable only 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. (3)A [COMPANY] is liable for any costs which such a person incurs as party to any proceedings under this Chapter before the appropriate tribunal only if the tribunal dismisses an application by the company for a determination that it is entitled to acquire the right to manage the premises. (4)Any question arising in relation to the amount of any costs payable by a [COMPANY] shall, in default of agreement, be determined by the appropriate tribunal.

Of relevance to this matter is s89, which says this:

89Costs where claim ceases (1)This section applies where a claim notice given by a [COMPANY]— (a)is at any time withdrawn or deemed to be withdrawn by virtue of any provision of this Chapter, or (b)at any time ceases to have effect by reason of any other provision of this Chapter. (2)The liability of the [COMPANY] under section 88 for costs incurred by any person is a liability for costs incurred by him down to that time. (3)Each person who is or has been a member of the [COMPANY] is also liable for those costs (jointly and severally with the [COMPANY] and each other person who is so liable). (4)But subsection (3) does not make a person liable if— (a)the lease by virtue of which he was a qualifying tenant has been assigned to another person, and (b)that other person has become a member of the [COMPANY]. (5)The reference in subsection (4) to an assignment includes— (a)an assent by personal representatives, and (b)assignment by operation of law where the assignment is to a trustee in bankruptcy or to a mortgagee under section 89(2) of the Law of Property Act 1925 (c. 20) (foreclosure of leasehold mortgage).

16. Of particular importance are section 88(2) and s89(2). Both limit the amount for which a claim for costs can be made. The costs cannot be claimed for the period after 30March 2023 and there does not seem to be any suggestion that they have been, although we did raise the question as to whether the costs of the application for costs could be recovered. We had extensive submissions from the Applicants again by Counsel, and a much shorter submission from [NAME] for the Respondent. We accept the submissi0ns of Mr [RESPONDENT] on this point, which were not truly challenged.

17. The first point of contention is the time spent and the charging rates of the members of SEM. We rely on the Statement of Costs of the Applicant for the narrative and respond utilising that numbering.

18. At item 1 it is said that 11 hours were spent on the steps set out therein at a fee of £1,980. It is said that Mr [NAME] is an experienced managing agent, an associate of the RICS and a member of the Institute of Residential Property Managers with over 20 years’ experience. That being the case it is difficult to see the need for [NAME] and [NAME] [NAME] to be involved. They seem to have done no more than review the work done by Mr [COUNSEL] and Counsel, who it is accepted by the Respondents is very experienced. These costs seem unnecessary and would not have been expected to have been incurred by someone who was paying the costs themselves. We therefore disallow those in their entirety.

19. As to the charges of Mr [NAME], it is right to say he has no legal qualifications and there was a great weight put on the shoulders of counsel to settle the objections. Mr [COUNSEL] involvement was to facilitate and respond to requests made of him by his barrister. The only evidence we have of agreed charging rates is an extract said to be from the [NAME] agreement with the Applicant. There are no signatures or evidence that the costs were agreed. However, we accept for this matter these are the rates. Would a person having to pay for this themselves have expected a detailed Counter Notice to have been issued when the two primary points were whether the building qualified, either because it was not one building, or more than 25% of the occupants were non-residential. It would seem that some of the points had no real merit, for example the shared ownership point.

20. Taking these matters into account we find that the rate of £180 per hour is reasonable but the time spent excessive having regard to s88(2). We find that 6 hours would have been sufficient to have raised a suitable Counter Notice, given the involvement of Counsel. We therefore allow £1080 for item 1.

21. The work done under item 2 is that which could have been done by an unqualified member of staff at an expense which would have been inhouse. It is the equivalent of a legal secretary applying for Land Registry copies, presumably done online and collating same. The same applies to what is referred to as “[NAME] leaseholder information”, presumably details already held by SEM. However, we accept that some time was spent on this and would allow £500 as being a reasonable claim.

22. As we have found above, we do not consider there should be any charges for Mr and Mr [NAME] as we said at paragraph 18 above.

23. Accordingly, the sum allowed for the costs of SEM is assessed at £1,580 plus VAT. The disbursements, as reviewed are allowed at £411.45.

24. We then turn to the costs associated with claiming the costs. They are said to be £1.060. Again, they include the costs of [NAME] as well as Mr [NAME]. As we said before given the further detailed involvement of Counsel, we see no reason for Mr [COUNSEL] to be involved and disallow his costs in full. The 4 hours claim by Mr [NAME] are excessive. The application is in standard format and would have taken no more than 15 minutes to complete. Similarly, the statement of costs is in a simplistic format. Taking the matter in the round we consider that no more than 1 ¼ hours would have been required and reduce the costs to £225 plus VAT.

25. We then turn to the question of Counsels fees. Dealing firstly with the fees for drafting the Counter Notice, which is a document of some 6 pages in length. The Counter Notice refers to various sections of the Act and reserves the right to refer to additional grounds. The grounds set out are that the Building did not qualify, that there were substantial non- residential parts, there were failures to comply with s78 of the Act, that there were insufficient members of the company, that the shared ownership properties of which 17 had not fully stair cased should be ignored, the status of the live/work units, the identity of the signatories for the corporate members, a question as to whether the claim notice was served on the other named landlords, the signature on the claim notice and finally an allegation that there had not been service on all landlords.

26. We consider that some of these issues could and should have been dealt with by requesting copies of the documents, which should have been supplied by the Respondents. They did not need to appear in this initial Counter Notice. Some may have been, as suggested by the Respondents, fishing expeditions. The applicants reply suggests that a good deal of paperwork was produced.

27. We must however consider the provisions of s88 (2) Any costs incurred by such a person in respect of professional services rendered to him by another are to be regarded as reasonable only 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.

28. Would a client expect to pay £5,700 for Counsels fees for drafting the Counter Notice. We doubt it. We do however bear in mind that the standard directions often state that the Counter Notice shall stand as the respondent’s statement of case and accordingly it must be reflective of the case to be advanced. It did however contain matters that we consider had little or no merit, such as the staircasing point, the signatures to the claim form and the challenge to the Companies Register. It was however, sufficiently detailed to result in the withdrawal of the Claim Notice. Taking the matter in the round we consider that a fee for Counsel should be £3,000 plus VAT being a total of £3,600.

29. In so far as the fees for the costs claim are concerned these are shown as £2,000 plus VAT as set out on the schedule of work done for the cost’s

application. Again, would a client expect this level of involvement for Counsel in respect of the recovery of costs alone. We have not seen Counsel’s fee note but assume the same hourly rates applied. We do not consider there should be a fee for the hearing as this was ‘limited’ to the question of the acquisition rights. We are unclear what role Counsel would have in amending the statement of costs and the schedule thereto. The drafting of the statement of claim is an unnecessary expense. It mirrors the terms of the Counter Notice. Again, taking it in the round we consider a fee of £500 plus VAT would be sufficient for any work required of Counsel for this application. We therefore allow the fee of £600 inclusive.

SUMMARY

The costs allowed to the time of withdrawal are:

Costs of REM £1,896 inclusive

Disbursements £411.45

Counsel’s fees £3,600 inclusive

Total costs for 88(4) £5,907.45

Costs allowed for claiming costs

Costs of REM £270 inclusive

Counsel’s fees £600 inclusive

Total costs for pursuing the cost claim £870.00

Total costs payable by the Respondent £6,777.45

Judge Dutton

ANNEX – RIGHTS OF APPEAL

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

2. The application for permission to appeal must arrive at the Regional Office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

3. If the application is not made within the 28-day time limit, such application must include a request to 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 application for permission to appeal to proceed despite not being within the time limit.

4. The application for permission to appeal must identify the decision of the Tribunal to which it relates (ie give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking.