First-tier Tribunal Orders Claimant to Pay Respondent's Costs Due to Unreasonable Conduct

FIRST-TIER TRIBUNAL

[NAME]

(RESIDENTIAL PROPERTY)

Case references :

LON/00AG/LBC/2025/0643 and LON/00AG/LSC/2025/0867

Property : [NAME] 2, 34 [ADDRESS] [POSTCODE]

Applicant: [redacted]

Respondent: [redacted]

Type of applications :

(1) Determination of an alleged breach of covenant and (2) Service [NAME] under section 27A Landlord and Tenant Act 1985

Tribunal member : Judge N O’[NAME] , [NAME] : 10 [ADDRESS] [POSTCODE]

Date of Determination : 16 December 2025

Date of determination (costs) : 9 March 2026

Decision

(1) The Applicant shall pay the Respondent’s costs of the proceedings summarily assessed in the sum of £36,000 pursuant to Rule 13(1)b of the Tribunal Procedure (First-tier Tribunal)([NAME]) Rules 2013 within 28 days of this determination.

Introduction

1. The Applicant is the freeholder of 34 [ADDRESS] [POSTCODE] (the building). The building consists of a substantial Victorian semi-detached villa which has been converted into 5 flats. The Applicant is a company that is wholly owned by the leaseholders of the flats. The Respondent has been the leasehold owner of [NAME] 2 since 2016.

2. On 23 June 2025 the tribunal received two applications from the Applicant. The first (LON/00AG/LSC/2025/0867) was an [NAME] for a determination pursuant to section 27A of the Landlord and Tenant Act 1985 (the 1985 Act) in respect of the Respondent’s liability to contribute to the Applicant’s costs of insuring the building by way of a service charge. The second (LON/00AG/LBC/2025/0643) was an [NAME] under section 168(4) of the Commonhold and Leasehold Reform Act 2002 (the 2002 Act) for a determination that the Respondent had breached the terms of his lease by (1) failing to keep the garden demised with [NAME] 2 in good condition and by (2) initiating a claim against the [NAME] without the consent of the Applicant. Both applications were listed for a final hearing on 10 November 2025.

3. By a determination dated 16 December 2025 the tribunal dismissed both applications. It noted that in the course of the hearing the Respondent had indicated through counsel, should the applications be dismissed, that he intended to make an [NAME] for his costs pursuant to Rule 13(1) b of the 2013 Rules. The Tribunal directed that the Respondent’s written costs submissions should be filed by 27 January with any submissions in response to be sent to the tribunal and the other side by 27 February 2026.

4. The tribunal has received lengthy written submissions in respect of costs from the Respondent together with a costs schedule claiming costs in the sum of £58,092. The tribunal received similarly lengthy submissions in respect of costs from Mr [APPELLANT] on behalf of the Applicant.

5. At paragraph 33 of our determination we required the Applicant to confirm in writing that Mr [COUNSEL] was its representative for the purposes of these proceedings if it had not already done so. The tribunal has on file a series of emails from a [NAME] and another leaseholder called [NAME] indicating that they were content for Mr [APPELLANT] and [NAME] to represent [APPELLANT[COMPANY] in the tribunal proceedings. Assuming that Mr [NAME] and [NAME] are the two of the five leaseholders of [ADDRESS], the other three being Mr [RESPONDENT], [NAME] and Mr [RESPONDENT], we are satisfied that the Applicant has in substance complied with that direction.

The Respondent’s Submissions

6. The Respondent has filed submissions in support of the [NAME] for costs running to 25 pages. The Respondent submits, essentially that the Applicant acted unreasonably by [NAME] two applications that, objectively had no reasonable, or even arguable, prospects of success, including claims for orders that the Tribunal had no jurisdiction to make. The Respondent submits that throughout the proceedings the Applicant constantly reframed and reformulated the basis upon which it brought both applications. The Respondent criticises the Applicant for not seeking legal advice at an early stage. The Respondent also criticises the Applicant’s conduct of the proceedings. The Respondent submits that the applicant, or more particularly the other leaseholders, circumvented the correct procedures in reaching the decision to bring proceedings against him and did not comply with the Applicant’s articles of association when deciding to initiate the proceedings. The Respondent also submits that the Applicant founded its claims on assertions that it knew to be false; firstly that the only part of the building affected by subsidence was [NAME] 2 and secondly that the sole cause of the subsidence was two lime trees within the demise of [NAME]

2. The Respondent also criticises the Appicant for filing an incomplete bundle and for including without prejudice correspondence in its bundle. The Respondent seeks to have his costs assessed on the indemnity basis i.e. without any deduction.

7. Mr [APPELLANT] on behalf of the Applicant submits that the applicant has acted reasonably throughout. He submits that the Applicant did seek independent legal advice prior to submitting its applications but submits, correctly, that any advice it received is confidential and privileged from disclosure. He asserts that the Applicant acted on the basis of the legal advice it received, an in particular that it had been advised that the Respondent had breached his lease entitling the Applicant to claim damages. The Applicant has chosen not to disclose this advice and so in our view it is a point that does not assist either side.

8. Mr [RESPONDENT] asserts that the Respondent had previously agreed that he should pay a greater proportion of the cost of insurance but accepted that the additional amount had never been agreed. Mr [NAME] seeks to go behind the findings of the tribunal insofar as we found that the Respondent did not breach a covenant of his lease by notifying the [NAME] of the subsidence affecting the building. He submits that by intimating a claim in respect of the subsidence affecting his [NAME], the Respondent breached the terms of his lease because neither statute nor the lease permitted him to make any such claim on the building’s insurance. The fact that an act is not expressly permitted by statute or by the lease does not mean that it amounts to a breach of any covenant. He submits in particular that if the extension erected by the previous leasehold owner of [NAME] 2 caused subsidence which led to an increase in the insurance premium payable by the Applicant that this would amount to a breach of leasehold covenant by Mr [RESPONDENT] and considers that Mr [RESPONDENT] should be liable to pay the increased premium as damages. Mr [APPELLANT] submits that the Applicant made every effort to resolve the dispute amicably without recourse to litigation.

9. Additionally Mr [NAME] considers that the amount claimed is disproportionate. He submits that the Applicant estimated that the value of the claims at just over £5,000.

Rule 13(1)b: The law and relevant authorities.

1. The tribunal may make an order under Rule 13(1)b of the 2013 Rules if it is satisfied that a party has acted unreasonably in bringing defending or conducting proceedings.

2. [ADDRESS] Co v Alexander [2016] UKUT 290(LC) the Upper Tribunal declined to adopt a wider interpretation of ‘unreasonable conduct’ to encompass, by way of 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 and went on to observe at para 24;

‘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 Ridehalgh 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 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?’

3. In [NAME] v GP Ilfracombe Management Company Ltd [2024] EWCA Civ. 1241 the Court of Appeal defined the that the test as follows at paragraph 15;

“A good practical rule for the tribunal to consider is; would a reasonable person acting reasonably have acted in this way?”

4. At paragraph 28 of [ADDRESS] the Upper Tribunal set out the three-stage approach which the tribunal should adopt when considering whether to make an award of costs under Rule 13(1)b;

“At the first stage the question is whether a person has acted unreasonably. A decision that the conduct of a party has been unreasonable does not involve an exercise of discretion but rather the [NAME] of an objective standard of conduct to the facts of the case. If there is no reasonable explanation for the conduct complained of, the behaviour will properly be adjudged to be unreasonable, and the threshold for the [NAME] of an order will have been crossed. A discretionary power is then engaged and the decision maker moves to a second stage of the inquiry. At that second stage it is essential for the tribunal to consider whether, in the light of the unreasonable conduct it has found to have been demonstrated, it ought to make an order for costs or not; it is only if it decides that it should make an order that a third stage is reached when the question is what the terms of that order should be’.

5. Finally at paragraph 43 of [ADDRESS] the Upper Tribunal gave the following guidance on the approach which the tribunal should take when considering such applications;

“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 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.

Has the Applicant acted unreasonably?

6. In our view the Applicant acted unreasonably in bringing both sets of proceedings. Its primary goal in these proceedings was to obtain damages for breach of covenant and compensation for the increase to the [NAME] premiums it has paid since 2019, and also to vary the proportion of the insurance cost payable by the [NAME]. It is difficult to believe that either [NAME] was made with the benefit of any legal advice as any competent lawyer would have advised the Applicant that the Tribunal had no jurisdiction to make the orders it sought.

7. Furthermore, leaving aside the unavailability of the remedies sought, there was no legal basis for the Applicant’s [NAME] for a determination that the Respondent was liable to pay, as a service charge, a higher proportion of the insurance premium then that provided by the lease.

8. The Applicant’s claim for a declaration that the Respondent had breached his lease by notifying the [NAME] of the subsidence affecting his [NAME] and/or by [NAME] a claim against the insurance policy was also unarguable. Mr [NAME], in his costs submissions, was at pains to differentiate between merely notifying an [NAME] of the existence of subsidence (something which a leaseholder has a statutory right to do by virtue of section 30A of the 1985 Act) and [NAME] a claim against the policy of insurance in respect of the damage caused. In its statement of case the Applicant asserts that because the lease does not permit the Respondent to institute a claim under the buildings insurance to do so amounts to a breach of the lease. We do not consider that either action could amount to a breach by the Respondent of Paragraph 7 of the Sixth Schedule to the lease for the reasons set out in paragraph 17 of our determination.

9. In our view the dispute between the parties boils down to the fact that the Applicant believes that the subsidence affecting the building is connected to the glass extension which Mr [RESPONDENT]’s predecessor in title built in 2014, and that consequently it considers that all responsibility for the increased costs of insuring the building should rest with the present leasehold owner of [NAME] 2 and should not fall on any of the other leaseholders. This is evident from paragraph 11 of the Applicant’s statement of case which states;

However, under the Lease, the [NAME] is liable for the cost of the

increased insurance premiums, that is the [NAME] is liable for the increased costs of insuring the building as a result of the extension and, in the current circumstances, the related subsidence issues. The reason is that the [APPELLANT] is not to be prejudiced by the Tenant’s actions.

10. There is no basis for this submission. If the Applicant wished to ensure that other leaseholders were indemnified in respect of any damage caused by the extension, or provide for any increase to the insurance premium to be payable by the owner of [NAME] 2, then it ought to have taken appropriate steps when it was asked to consent to the alterations in 2014.

11. The second part of the breach of lease [NAME] was a claim for a declaration that the Respondent had breached the covenant in his lease requiring him to keep the garden in ‘a proper state of cultivation’ because of the presence of tree roots underneath it. The argument was in our view in reality a vehicle through which the Applicant sought to hold the [NAME] accountable for the subsidence affecting the building. The Applicant’s case essentially was that the garden was not in a ‘proper state of cultivation’ because the subsidence was caused by tree roots growing underneath the Respondent’s garden. Leaving aside the question whether that was arguable as a matter of law, the Applicant was aware that the subsidence affecting the building continued to progress after the implicated trees in the Respondent’s garden were removed in 2020.

12. We bear in mind the fact that the Applicant is a leaseholder-owned company with no assets other than its interest in the freehold. Nevertheless we are satisfied that it is right to make a costs order given the conduct of the Applicant. There is no reasonable explanation for the conduct. In our view the Respondent’s conduct in issuing the [NAME] for a determination of service charges went beyond the pursuit of a weak claim. Similarly in pursuing the [NAME] for a declaration of a breach of covenant it appears that the Applicant’s primary aim was the recovery of damages, something the tribunal cannot do.

13. We consider that the Applicant acted unreasonably in bringing these proceedings and we consider that we should make acosts order pursuant to Rule 13(1)b. We now come to the quantification of those costs. The Applicant submits that the amount of costs sought by the Respondent is disproportionate to the value of the matters in dispute. That might be true in relation to the cost of the insurance premium however the [NAME] for a declaration that a leaseholder has breached his or her lease is generally a precursor to forfeiture proceedings, with potentially very serious consequences for the Respondent.

14. The Respondent has sought costs on the indemnity basis. In our view the Respondent should be limited to the costs that it ought reasonably have incurred in defending the proceedings. Even taking into account the potential seriousness for the Respondent of any finding of that he had breached his lease, the sum sought by the Respondent is disproportionate, particularly as many of the arguments advanced by the Applicant were so obviously without foundation. The amount claimed for solicitors costs comes to £23, 160 and counsel’s fees are claimed in the sum of £25,250. We consider that it should have been possible to conduct this litigation in a more proportionate way without such extensive reliance on counsel particularly as the work was undertaken by a Grade A solicitor. We reduce the sum recoverable by way of solicitors costs to £20,000 and reduce the sum recoverable in respect of counsel’s fees to £10,000 resulting in recoverable costs of £36,000 inclusive of VAT. This should be paid within 28 days of this determination.

Name : Judge N O’[NAME] : 10 March 2026

Rights of appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have.

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.

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].

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.

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.

If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal