First-tier Tribunal Determines Costs for Right to Manage Claim

OUTCOME: Allowed

© CROWN COPYRIGHT 2018

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : CAM/26UN/LPC/2018/0002 Property : 27-34 [ADDRESS] [POSTCODE] Applicant : [redacted] : [APPELLANT] Solicitors Respondent : [redacted] : Mr [COUNSEL] of Application : S88(4) Commonhold and Leasehold Reform Act 2002 – to determine the amount of costs payable by the respondent to the applicant Tribunal Member : Judge John Hewitt Date of Determination : 3 December 2018 Date of Decision : 7 December 2018

DECISION

2 The issue before the tribunal and the decision of the tribunal 1. The sole issue before the tribunal was the amount of costs payable by

the respondent to the applicant pursuant to s88(4) Commonhold and

Leasehold Reform Act 2002 (the Act).

2. The decision of the tribunal is that the amount of costs so payable is

£3.062.16.

3. The reasons for the decision are set out below.

NB Later reference in this Decision to a number in square brackets ([ ]) is a reference to the page number of the hearing file provided to us for use at the hearing.

Procedural background 4. The respondent sought to acquire the right to manage the subject

property. The claim notice dated 11 July 2018 and given pursuant to

s79(1) is at [5].

5. The [NAME] gave a counter-notice (without making any

admissions as to the validity of the claim notice). It is dated 9 August

2018 [10]. The counter-notice stated (so far as material):

1. I allege that, by reason of Section 72 of Chapter 1 of Part 2 of the [Act], namely that the premises are not a self-contained building of part of a building, on 11 July 2018 [the respondent] (‘the company’) was not entitled to acquire the right to manage the premises specified in the claim notice.

6. On 16 August 2018 the respondent made an application to the tribunal

pursuant to s84(3) in which it sought a determination that it was on the

relevant date entitled to acquire the right to manage the premises.

The application was allocated Case Ref: CAM/26UH/LRM/2018/0004

(the RTM proceedings).

Directions were given on 22 August 2018 [49].

On 14 September 2018 the respondent in the RTM proceedings (the

applicant in these costs proceedings) filed and served its statement of

case in answer [54].

By an email dated 17 September 2018 from Mr [NAME] to the

tribunal, the [COMPANY] indicated a wish to withdraw the RTM

proceedings. That email was taken as a request for a consent pursuant

to rule 22 and consent was duly given. Thus the withdrawal took effect

on or about 18 September 2018.

7. On 19 September 2018 the applicant made this costs application

pursuant to s88(4) of the Act [71].

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Directions were given on 21 September 2018 [1]. The parties were

notified that the tribunal proposed to determine the application on the

papers without an oral hearing pursuant to rule 31 unless an oral

hearing was requested. The tribunal has not received any such request.

Pursuant to the directions the applicant’s solicitors have lodged with

the tribunal a file of material papers which includes the schedule of

costs claimed the parties’ rival submissions and the documents relied

upon by them in support of their respective submissions.

The costs claimed 8. The costs are claimed pursuant to s88 which, so far as material,

provides:

88 Costs: 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) …

(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.

9. The schedule of costs claimed is at [105].It is sufficiently detailed for

summary assessment purposes and may be summarised:

Item

Amount

VAT

Solicitors’ costs

£2,441.50

£488.30

Postage, telephones etc £ 30.00

£ 6.00

Photocopying

£ 22.80

£ 4.56

HM Land Registry fees £ 69.00

£ -

Sub-totals

£2,563.30 £498.86

VAT

£ 498.86

Total

£3,062.16

4 10. The applicant’s solicitors are based in [NAME] and the following

charge-out rates have been adopted:

Grade A £230

Grade B £165

Grade C £125

Grade D £ 90

11. The respondent’s statement of case in answer is at [169-174]. The

respondent’s case is twofold:

11.1 The (original RTM tribunal) application could have been

avoided; and

11.2 The reasonableness of the costs incurred.

Application avoided 12. The gist of the arguments are:

12.1 The counter-notice merely stated the premises did not comprise

a self-contained building or a part of a building – but did not

expand or explain why that was asserted.

12.2 In January 2017 an adjoining block acquired the right to manage

and in respect of that block the landlord did not make the same

assertion.

12.3 By email dated 13 August 2018 Mr [APPELLANT] sought

clarification from the applicant’s solicitors and stated that if no

reply was received by 15 August 2018 an application would be

made to the tribunal.

12.4 By letter dated 21 August 2018 [48] the applicant’s solicitor

explained the part of the building comprising 27-[ADDRESS]

could not be independently developed and the water supply is

shared with other parts of the larger building and cannot be

separated. The letter went on to seek confirmation that position

was accepted and stated that at that time the applicants costs

stood at £1,080 incl of VAT.

12.5 By email of the same day Mr [NAME] replied and challenged

what has been asserted and he sought further clarification. Mr

[NAME] asserts clarification was not forthcoming. He submits

that if clarification had been given at the outset the original RTM

application would not have been issued and if clarification had

been given following the email of 21 August 2018, it would have

been withdrawn sooner and the costs incurred in the

preparation of the landlord’s statement of case would have been

avoided.

12.6 Having received the landlord’s statement of case on Friday 14

September 2018 the [COMPANY] sought to withdraw its

application as soon as possible on Monday 17 September 2018.

Mr [RESPONDENT] complains that the landlord did not disclose vital

information prior to service of its statement of case.

12.7 Mr [NAME] also makes submissions as to some merits in the

RTM application and seeks to cast some doubt on the landlord’s

assertions about independent redevelopment of the building and

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the water supply, but as the RTM application was withdrawn

and not pursued by the [COMPANY], I will not take them into

account now.

13. The applicant’s statement of case in response is set out in paragraphs 3-

7 [179-181]. On this topic the applicant submits:

13.1 It is not the role of the applicant’s solicitor to provide detailed

explanations or advice as to why a claim to right to manage is

ineffective. It is the [COMPANY] and its promoters to the

thoroughly investigate the validity of the claim and/or to seek

expert advice as to the eligibility and legality of the claim before

embarking on it. It is argued that it is paradoxical of Mr

[NAME] assertions that some of the costs incurred ae

excessive when some of the costs reflect the time spent on

explaining to the [COMPANY] why the subject premises do not

meet the statutory criteria to qualify for the right to manage.

13.2 Mr [NAME] had two months from the date of the counter-

notice to investigate eligibility and to submit an application to

the tribunal but he was impatient, did not investigate eligibility

thoroughly and submitted the application prematurely on 16

August 2018. Had Mr [APPELLANT] awaited the applicant’s

solicitors’ letter dated 21 August 2018 and investigated it

properly instead of rejecting it out of hand on the day of receipt,

and proceeding in defiance of what the letter stated the original

application might well have been avoided.

13.3 It may also be noted that further clarity on the technical issues of

the part of the building and whether it qualified to right to

manage were set out in a letter dated 7 September 2018 from the

applicant’s solicitors to the tribunal (copied to the respondent’s

representative) in the context of an application concerning

expert evidence.

Discussion 14. I have given careful thought to the rival arguments. On balance I prefer

those of the applicant. It is wise for an [COMPANY] and its promoters

to give careful thought to the eligibility of the building to qualify for the

right to manage and to check that the premises meet the qualification

test set out clearly in s72 of the Act.

That is a fundamental and basic point. I note that claim notice was

given by [COMPANY] on behalf of the [COMPANY] and I infer it has some expertise in this field.

15. I find it was unreasonable of Mr [NAME] to demand a reply to his

email of 13 August 2018 within two days – in the middle of the holiday

season – and against the threat that a failure to do so will result in an

application to the tribunal. The application was received by the tribunal

on 16 August 2018. On 21 August 2018 a reasonably detailed

explanation was sent to Mr [APPELLANT] by the applicant’s solicitors. Mr

[APPELLANT] rejected it out if hand the same day. There is no evidence that

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Mr [NAME] sought advice on the letter or gave it any measured

consideration.

16. In these circumstances I find it was not unreasonable of the applicant

to proceed and draft its statement of case in answer to the original RTM

application.

17. That said, whilst I am aware that some commercial landlords who

regularly oppose RTM application frequently (and unhelpfully) merely

state in their counter-notice that statutory requirements have not been

met without explaining why or on what basis, housing association and

social housing providers often take a more pragmatic approach

and give some guidance to their tenants, and some positively encourage

RTM. In the present case I understand that the applicant’s solicitors

were instructed rather late in the day and lack of full information may

have constrained what they could say in the counter-notice dated 9

August 2018. They did however, give a fuller explanation by letter dated

21 August 2018 and it is unfortunate that Mr [NAME] rejected that

letter out of hand.

Reasonableness of costs incurred The respondent’s case 18. Mr [RESPONDENT] accepts the expenses and HM Land Registry fees claimed.

19. Mr [NAME] complains that the break-down set out in the schedule

does not provide sufficient detail and that the time spent generally is

excessive (but he does not give any examples) and again he makes the

point that some costs could have been avoided. Mr [NAME] also

argues that the RTM had acted reasonably at all times. I am not sure

about that but in any event it is not to the point. Equally not to the

point are the several allegations made by Mr [NAME] to the effect that

the right to manage was pursued due to alleged continuous

overcharging of service charges.

20. Mr [RESPONDENT] also suggests that the landlord has an in-house legal team

and that costs could have been limited if the matter had been dealt with

in-house. No evidence was presented to show that the legal costs

lawfully recoverable by an in-house legal would have been less than the

costs of an external law firm.

21. S88(1) clearly imposes a statutory liability on the [COMPANY] to pay

the reasonable costs incurred by a landlord in consequence of a claim

notice served by the [COMPANY].

The applicant’s response 22. The applicant’s response is set out in paragraphs 8- 19 [181-183].

23. It is submitted that it was not unreasonable of the applicant to deploy

external legal advice and that it was prudent to do so because it was

discovered at an early stage that the building did not qualify.

7 24. It is also submitted that given the complexities and the history of

litigation it was not unreasonable that the matter was supervised by a

grade A fee-earner and that the time incurred was reasonable.

25. The point was also re-made that a good amount of the costs incurred

arose as a direct consequence with the respondent pushing on with an

unmeritorious claim without taking appropriate advice.

Discussion 26. I find that it was reasonable for the applicant to engage [NAME] who specialise in right to manage matters. Very technical

issues can sometimes arise. There was no evidence before me that the

applicant’s in-house legal team has the relevant expertise. 27. The applicant is a substantial provider of a range of housing and as

regards the subject development it has used the services of [NAME] on a regular basis. I find it was reasonable for the applicant

to do so with regard to the right to manage application.

28. No direct challenge has been made to the charge-out rates claimed. I

find that they are well within the rates frequently come across in central

London by firms of solicitors acting and specialising in this area of

work.

29. I have gone through the schedule of costs claimed carefully. A large part

of the claim £1,412 concerns 5.5 hours of work done on documents. The

breakdown of the seven items is well within what is reasonable for a

claim such as this. The remainder of the time claimed is much as to be

expected. It is supported by an invoice addressed to the applicant.

30. In my judgment the costs claimed were reasonably incurred and are

reasonable in amount and I find that these costs would have been

incurred if the circumstances were such that the applicant was directly

liable for them.

31. Accordingly, I determine that the costs payable by the respondent to

the applicant are £3,062.16.

Judge John Hewitt 7 December 2018

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 Tribunal at the [NAME] which has been dealing with the case.

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

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3. If the application is not made within the 28-day time limit, such application 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 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 (i.e. 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.