Landlord Cannot Pass Tribunal Costs to Leaseholders Through Service Charges

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AY/LDC/2021/0188 HMCTS code : V: VIDEOREMOTE Property : [ADDRESS] [POSTCODE] Applicant : [redacted] : Mr [COUNSEL], counsel instructed by [COMPANY] : [NAME] of [ADDRESS] [POSTCODE] Representative : Ms [COUNSEL], counsel instructed by [COMPANY] of [NAME] : Section 20ZA [NAME] (withdrawn) – rule 13 costs and section 20 of the Landlord and Tenant Act 1985 Tribunal members : Judge Tagliavini Mr Trevor Sennett MA FCIEH Venue & date of hearing : 10 [ADDRESS] [POSTCODE] 16 November 2021 Date of decision : 17 December 2021

DECISION

2

Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to] by the parties. The form of remote hearing was V: VIDEOREMOTE. A face-to-face hearing was not held because it was not practicable, and all issues could be determined in a remote hearing. The documents that the tribunal was referred to are in a bundle of 399 pages, the contents of which have been considered by the tribunal. Decisions of the tribunal (1) The tribunal makes an order under section 20C of the Landlord and Tenant Act 1985 so that none of the landlord’s costs of the tribunal proceedings may be passed to the lessees named by the applicant in this [NAME] through any service charge. (2) The tribunal declines to make any order for costs under rule 13 of The Tribunal Procedure (First-tier) (Property Chamber) Rules 2013. The [NAME]

1. The Applicant had sought a determination pursuant to s.20ZA of the Landlord and Tenant Act 1985 (‘the 1985 Act’) in an [NAME] dated 26 July 2021, seeking the tribunal’s dispensation of the section 20 consultation requirements for works relating to a full roof replacement (pitched roof front and back) and flat roof terraces.

2. The subject premises comprise 30 residential flats which are held on a mixture of long leases, AST’s and regulated tenancies. There are also 28 commercial units owned by [NAME], who contribute towards the Service Charge for external items in addition to their rent. There are 17 privately held long leasehold units with the remaining 13 owned by [APPELLANT] of which the applicant is a wholly owned subsidiary.

3. Shortly before the hearing, on 15 November 2021, the [NAME] for dispensation from consultation was withdrawn by the applicant. The respondents sought an [NAME] under section 20C of the 1985 Act in addition to an order for costs under rule 13 of The Tribunal Procedure (First-tier) (Property Chamber) Rules 2013 (‘the 2013 Rules). The hearing 4. The Applicant was represented by Mr [COUNSEL] of counsel at the hearing and Ms [COUNSEL] [NAME] appeared on behalf of 7 of the 17 long [NAME]. As the remaining applications concerned questions of

3 costs, the tribunal invited the respondents to present their argument with the applicant responding. The respondent’s applications on costs 5. Ms [RESPONDENT] submitted that as the respondents had effectively been successful in their objections to the applicant’s section 20ZA [NAME], they should not now be required to bear the landlord’s costs as it would not be ‘just and equitable’ to require them to do so; [COMPANY] and [NAME] [2017] UKUT 70 (LC).

6. In support of the [NAME] for an award of costs of £26,037 (inc. VAT) incurred by 7 of the 17 long [NAME] under rule 13 of the 2013 Rule, Mr [NAME] submitted that the [NAME] should not have been made in the first instance, as the respondent’s expert’s report from Mr [RESPONDENT] (Hons) MRICS dated 2 November 2021 and served on the applicant on 3 November 2021, made it clear that patch repairs were required, not a full roof replacement. Ms [APPELLANT] submitted that the applicant had been aware of this view prior to [NAME] its [NAME] for dispensation from consultation.

7. Ms [APPELLANT] submitted that the applicant had behaved unreasonably to the standard identified in [ADDRESS] Co (1985) [COMPANY] v Sinclair [2016] UKUT 290 (LC) and the applicant should have known a full roof replacement was not required at that time. The applicant’s case on costs 8. Mr [APPELLANT] submitted that the [NAME] under section 20C of the 1985 Act should not be granted by the tribunal. Mr [NAME] submitted that such an [NAME] should not in any event be granted’ lightly’ as it had been appropriate to make the [NAME] in the first instance, as the applicant had relied on the evidence of its own expert, [APPELLANT] at that time.

9. Mr [NAME] submitted that had consultation gone ahead, the costs of the experts would have been passed to the [NAME] in any event, through the service charge accounts. These charges might then have become subject to an [NAME] under section 27A of the 1985 Act and should not at this stage be borne by the applicant.

10. Mr [APPELLANT] criticised the amount of costs claimed by 7 of the long [NAME] under rule 13 of the 2013 Rules as excessive. Mr [NAME] submitted that the [NAME] had failed to satisfy the test set out under rule 13 and that the applicant had not at any time acted frivolously, vexatiously or otherwise in a manner that amounted to an abuse of process. Mr [APPELLANT] submitted the applicant had acted

4 reasonably in relying upon its initial expert’s opinion, and that it had withdrawn its [NAME] once it had an opportunity to discuss the late served report of the [NAME].

11. From the respondents’ Statement of Case in Reply served on 13 October 2021, it was only made clear at that point, that not all works were objected to, but rather their extent and cost.

In all the circumstances, the respondent had not made out its case for an award of costs under rule 13. The tribunal’s decision and reasons Rule 13 costs 12. The tribunal finds that the respondent has failed to satisfy the high standard set by rule 13 for an award of costs under the three-stage test. Rule 13(1) states: (a) costs have been incurred as a result of any “improper, unreasonable or negligent act or omission on part of any legal or [NAME] representative which is unreasonable to expect that party to pay”, the Tribunal may order payment of wasted costs. (b) a person who has acted: “unreasonably in bringing, defending or conducting proceedings”, the Tribunal may order payment of unreasonable conduct costs.

13. In [NAME] its determination the tribunal reminds itself of the Upper Tribunal’s determination of [ADDRESS] and the three stage test it set out, which tribunals are required to follow in [NAME] its determinations under r.13. The first of these stages is: Has the person acted unreasonably? The UTLC said that ‘if there is no reasonable explanation for the conduct complained of, the behaviour will be adjudged to be unreasonable, and the threshold for [NAME] of an order will have been crossed.’ 14. The tribunal finds that the applicant provided a reasonable explanation for [NAME] its [NAME] for dispensation, based on the expert’s advice at that time. Consequently, the tribunal finds that the first test has not been met and the [NAME] for r.13 costs must fail.

15. For completeness, in considering whether any Order should be made under r.13, the tribunal would have been minded to exercise its discretion and would not have made an order for costs under

5 r.13. The tribunal finds that works to the roof and flat roof terraces are in any event required and are likely to be carried out in the near future by the applicant. In any event, the tribunal finds the costs claimed by the 7 [NAME] to be excessive and is unlikely to have made an award for this amount, if any. [NAME] under s.20C 16. The tribunal determines that in light of the applicant’s withdrawal of the entirety of its [NAME], it is just and equitable in the circumstances for an order to be made under section 20C of the 1985 Act, so that the applicant may not pass any of its costs incurred in connection with the proceedings before the tribunal through the service charges of the 17 [NAME] named in this [NAME].

Name: Judge Tagliavini Date: 17 December 2021

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 ([NAME]), 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 ([NAME]).