First-tier Tribunal Rules on Statutory Costs for New Lease

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BK/OC9/2024/0624 Property : 69 [ADDRESS],[POSTCODE]

Applicant : [redacted] : [COUNSEL], Solicitors Respondent : [redacted] : [COMPANY], Solicitors Type of [NAME] : Section 91 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal Member : Tribunal Judge I [NAME] of Decision : 4 February 2025

DECISION

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2 Introduction 1. This is an [NAME] made by the Applicant under section 91 of the Leasehold Reform, Housing and Urban and Development Act 1993 (as amended) (“the Act”) for a determination of the statutory costs payable by the Respondent under section 60 of the Act for the grant of a new lease in relation to the property known as 69 [ADDRESS], [POSTCODE] (“the property”).

2. The factual background to the [NAME] is common ground and has,

helpfully, been set out by the Applicant in its Reply and can be summarized as

follows.

3. The Applicant is the freehold owner of premises known as [ADDRESS] [POSTCODE] (“the building”) of which the property forms

part.

4. The building is subject to a head lease dated 8 January 1988 and made

between (1) [COMPANY] and (2) [COMPANY]. This headlease is owned by [RESPONDENT].

5. The Respondent holds a long lease of the property for a term of 125 years from

29 September 1983.

6. On or around 27 October 2023, the Respondent made an [NAME] for the

grant of new Lease by way of Notice of Claim (“the Notice”) pursuant to the

provisions of Chapter II of the Act.

7. On or around 20 December 2023, the Applicant served a Counter-Notice

pursuant to Section 45 of the Act (“the Counter-Notice”) admitting the

Respondent’s entitlement to the grant of a new lease for the Flat.

8. The terms of acquisition were not agreed within the six-month period specified

by Section 48(2) of the Act, being 19 June 2024. The Respondent failed to

make the requisite [NAME] to determine the terms in dispute pursuant to

section 48(1) of the Act and accordingly the Notice of Claim was deemed

withdrawn pursuant to Section 53 of the Act on 19 June 2024.

9. Consequently, the Respondent is liable for the statutory costs incurred by the

Applicant up to the date of the deemed withdrawal of the Notice. Statutory

costs have not been agreed. On or about 25 September 2024, the Applicant

made an [NAME] to the Tribunal seeking determination of its statutory

costs payable pursuant to Section 60 of the Act.

10. The costs claimed by the Applicant are:

Competent Landlord's legal fees (including VAT) - £3,960.00

Competent Landlord's valuation fees (including VAT) - £1,620.00

Competent Landlord's Land Registry fees (including VAT) - £3.60 (agreed)

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Competent Landlord's courier fees (including VAT) - £10.20 (agreed)

[NAME]'s legal fees (including VAT) - £312.00 (agreed)

11. .This decision is, therefore, limited to the Applicant’s disputed legal and valuation fees.

Relevant Statutory Provision 12. Section 60 of the Act provides: Costs incurred in connection with new lease to be paid by tenant. (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 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.

(3) Where by virtue of any provision of this Chapter the tenant's notice ceases to have effect, or is deemed to have been withdrawn, at any time, then (subject to subsection (4)) the tenant's liability under this section for costs incurred by any person shall be a liability for costs incurred by him down to that time.

(4) A tenant shall not be liable for any costs under this section if the tenant's notice ceases to have effect by virtue of section 47(1) or 55(2).

(5) A tenant shall not be liable under this section for any costs which a party to any proceedings under this Chapter before a leasehold valuation tribunal incurs in connection with the proceedings.

(6) In this section "relevant person", in relation to a claim by a tenant under this Chapter, means the landlord for the purposes of this Chapter, any other

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4 landlord (as defined by section 40(4)) or any third party to the tenant's lease.

Decision 13.The Tribunal’s determination took place on 4 February 2025 and was based

solely on the written representations filed by the parties. The Tribunal’s

approach was to conduct what effectively amounts to a summary assessment

of the Applicant’s costs. Legal Costs 14. The Applicant’s legal costs is comprised of work carried out by a Grade A

(Miss [NAME]), a Grade C (Miss [NAME]) and a Paralegal fee earners at hourly rates

of £575, £375 and £240 respectively. 15. The vast majority of the work appears to have been carried out by the Grade A

and C fee earners incurring a total of approximately 6.3 hours of fee earning

time. This was in relation to the consideration of the claim notice, the

preparation of the counter notice, the preparation of the draft lease,

instructing a valuer and communication with the Applicant and the

Respondent’s solicitors.

16. The Respondent’s challenge to the Applicant’s legal costs are twofold. Firstly, he contends that the Applicant’s legal fee earners should only be entitled to the current solicitors guideline hourly rates of £398, £260 and £148 for the Grade A, C and the Paralegal respectively for firms in the London Band 2 area.

17. Secondly, the fee earning time reasonably incurred should be limited to 1.5, 1.3 and 0.3 hours respectively at the guideline hourly rates. Taken together, this provides a total of £979.40.

18. Unsurprisingly, the Applicant submits that the guideline hourly rates are of no [NAME] given the specialist nature of leasehold enfranchisement work and refers to a number of earlier Tribunal decisions, which have reflected this. In addition, the Applicant submits that the intention behind section 60 of the Act was to provide a landlord with an indemnity for its (reasonable) costs. Hourly Rate 19. As to the hourly rate to be applied overall to both notices, the Tribunal was satisfied that there was no reason to depart from the guideline hourly rates contended for by the Respondent.

20. On any view, this matter was what can be described as “standard” statutory lease extension with no particular complication, which the Applicant’s

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5 solicitors routinely deal with and for which existing templates for any documents only require a degree of amendment for each transaction. 21.Whilst the Tribunal accepts that this matter was partly transactional, it was also quasi litigious. Therefore, the use of the hourly guideline rates provides a useful and obvious benchmark when the assessment of the Applicant’s costs fall to be assessed.

22. In the Tribunal’s judgement, there is strong presumption that the hourly guideline rates should be adopted unless there are good reasons to depart from them. Of course, each case is fact specific and has to be considered on a case by case basis. The earlier Tribunal costs decisions in favour of the Applicant and/or his solicitors do not bind this Tribunal no do they establish a precedent hourly rate(s) to be adopted in other cases where their costs fall to be assessed. There are, of course, cost decisions against the Applicant and/or its solicitors, which the Tribunal has not been referred to. If anything, this range of decisions support the Tribunal’s view that each case is fact specific and costs have to be assessed on that basis.

23. As stated earlier, this case involved no complexity of law and/or fact. Therefore, the Tribunal was satisfied that there was no good reason to depart from the hourly rates contended for by the Respondent of £398, £260 and £148 respectively for a Grade A, C and the Paralegal fees earner in the [NAME] in relation to the work caried out. Costs Incurred 24. The work carried out by the Grade A and C fee earners appears to have been more or less equal in terms of time costing. The Tribunal considered that the time costs of approximately 3 hours work in total contended for by the Respondent was unrealistic for this type of transaction.

25. The Tribunal found that the total of in excess of 6 hours work carried out by the Applicant’s fee earners to be excessive for the limited extent of the work carried out. The Tribunal found a total of 5 hours divided equally between the two levels of fee earner to be reasonable. Applied to the hourly rates of £398 and £260, this provides a total of £1,645. The 0.3 hours of work carried out by the Paralegal is not challenged by the Respondent. Again, adopting an hourly rate of £148, this provides a figure of £88.80.

26. Therefore, the total legal costs the Tribunal found to be reasonable is, say £1,734 plus VAT. As a cross check, the Tribunal notes that the Applicant’s solicitor’s interim bill of costs dated 21 December 2023 was for £1,253, which appears to cover the cost of a significant proportion of the work carried out. Allowing an uplift for the preparation of the draft lease, it supports the Tribunal’s view that the costs allowed are reasonable.

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6 Valuer’s Costs 27. In short, the Tribunal found that approximately the 4 hours charged by the Applicant’s valuer for the preparation of his report was reasonable. However, in the valuer’s written submissions prepared by Mr [NAME] dated 15 January 2025 at paragraph 12, the Tribunal notes that the valuation fees are limited to £1,350 plus VAT. The Tribunal found this to be reasonable in this instance and within industry norms and allowed as claimed. The Tribunal considered that the figure of £500 plus VAT contended for by the Respondent to be untenable. Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) 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 [NAME] which has been dealing with the case. The [NAME] for permission to appeal must arrive at the [NAME] 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 (Lands Chamber).