Landlord Cannot Recover Litigation Costs from Tenant After Legal Challenge

OUTCOME: Allowed

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER

(RESIDENTIAL PROPERTY)

Case reference : CAM/26UE/LLD/2025/0001

Property : 52 [RESPONDENT], Elstree, Borehamwood, [POSTCODE]

Applicant: [redacted]

Respondent: [redacted]

Type of [NAME] : For the determination of the liability to pay Administration Charges

Tribunal members : Judge Bernadette MacQueen

Roland Thomas, MRICS

Date of hearing : 5 February 2026

Date of decision : 26 February 2026

DECISION

Decisions of the Tribunal

(1) The Tribunal determines that the administrative charge of £11,060 is not payable by the Applicant under the Lease.

(2) The Tribunal makes the determinations as set out under the various headings in this Decision.

(3) The Tribunal makes an order under section 20C of the Landlord and Tenant Act 1985, so that none of the [APPELLANT] of the Tribunal proceedings may be passed to the lessees through any service charge.

(4) The Tribunal makes an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, extinguishing any liability to pay an administration charge in respect of litigation [APPELLANT] in relation to the proceedings.

The [NAME]

1. The Applicant was the registered long leaseholder of 52 [RESPONDENT], Elstree, Borehamwood, [POSTCODE] (“the Property”). The Property was part of a purpose-built block of 15 flats, of which [COMPANY] was the freeholder.

2. The relevant lease was dated 1 March 1965, registered with HM Land Registry under title number HD42628, and made between [RESPONDENT] (1), [COMPANY] (2) and [APPELLANT] (3) (“the Lease”). [RESPONDENT] was the Applicant’s landlord; they had appointed [APPELLANT] (“[NAME]”) as their managing agent for the Property.

3. The Applicant had made an [NAME] to the Tribunal dated 29 November 2023 in which he had sought a determination under section 27A of the Landlord and Tenant Act 1985 as to the payability of service charges (“the First [NAME]”). A hearing had taken place on 27 March 2025 and, at the commencement of that hearing, the Applicant had changed his position and confirmed that only one service charge item remained in dispute. The Tribunal had given a written decision dated 7 April 2025, determining that the total amount claimed by the Respondent was payable, and declined to make an order under section 20C of the Landlord and Tenant Act 1985, or under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.

4. Following the Tribunal’s decision, on 8 April 2025, [NAME] had sent the Applicant a demand for administration charges incurred by the Respondent in connection with the First [NAME] in the sum of £11,060 (the “[APPELLANT]”). A copy of this demand was at page 102 of the Respondent’s bundle. The [APPELLANT] were described as:

“TPP Management Fees for time spent dealing with your [the Applicant’s] [NAME] on behalf of the Respondent, including preparing the FTT bundle and attendance at the FTT hearing to represent the Respondent. Time charged 73.73 hours at £150 per hour inc VAT as per timesheet”.

The Hearing

5. The Applicant appeared in person at the hearing. [COUNSEL] [NAME], Counsel, appeared on behalf of the Respondent, instructed by [NAME]. [COUNSEL], Senior Partner of [NAME], also attended to give evidence. [RESPONDENT], sole director of the Respondent, was also present.

6. The Applicant had prepared two bundles of documents labelled “Bundle 1” and “Bundle 2”. The Respondent had produced a composite hearing bundle which contained the documents that the Applicant had included in his bundles, and also included the Tribunal’s Directions, [NAME]’s Management Agreement with the Respondent and a complete copy of the decision of the Tribunal in the First [NAME]. There was no dispute as to the documents before the Tribunal and therefore, for ease of reference, the Tribunal used the Respondent’s bundle as this was paginated and indexed. Counsel for the Respondent had also produced a skeleton argument and a bundle of authorities.

7. Neither party requested an inspection and the Tribunal did not consider that one was necessary, nor would it have been proportionate to the issues in dispute.

Issues in Dispute

8. The issues before the Tribunal were whether the [APPELLANT] are recoverable under two provisions of the Lease:

(i) The entire sum is recoverable from the Applicant as an administration charge under clause 3(xvi) of the Lease.

(ii) Further, or alternatively, the [APPELLANT] are recoverable from all the [NAME] by way of service charge under paragraph 13 of the Seventh Schedule to the Lease.

The Lease

9. The Respondent relied on two clauses within the Lease, namely Clause 3(xvi), and Paragraph 13 of the Seventh Schedule.

10. Clause 3(xvi) obliged the Applicant: [redacted]

11. Paragraph 13 of the Seventh Schedule set out the [APPELLANT] and expenses payable to the landlord to which the tenant was to contribute by way of service charge. Paragraph 13 stated:

“All fees charges expenses and commission payable to any Solicitor Accountant Surveyor Architect or Managing Agent whom the Landlord may from time to time employ in connection with the management and for maintenance of the Reserved Property including the cost of causing to be prepared statements of the annual Service Cost and each service charge and incidental thereto”.

Administration Charge - Clause 3(xvi) of the Lease

The Respondent’s Position

12. The Respondent submitted that the [APPELLANT] were payable by the Applicant under Clause 3(xvi) of the Lease as they had been incurred by the Respondent for the purpose of or incidental to the preparation and service of any notice under section 146 or 147 of the Law of Property Act 1925.

13. Counsel for the Respondent relied upon Barrett v Robinson [2015] [NAME]. 1 at [52] and submitted that forfeiture need not be the whole or the primary reason for the expenditure and that it was sufficient that such an eventuality formed part of the reason for the expenditure. Whilst the Respondent acknowledged that the [APPELLANT] were in response to an [NAME] brought by the Applicant, it was their position that they had forfeiture proceedings in mind at the time they were dealing with the First [NAME].

14. On behalf of the Respondent, the Tribunal heard oral evidence from [NAME]. Additionally, the Tribunal had before it three written statements from [NAME] (director of the Respondent), [RESPONDENT], a leaseholder, and [RESPONDENT], whose mother was a leaseholder. These witnesses did not give oral evidence to the Tribunal and were therefore not available for cross examination.

Evidence of [NAME]

15. The Tribunal heard evidence from [RESPONDENT] who confirmed that [NAME] had been the Respondent’s managing agents since October 2025. He confirmed that [NAME] liaised and communicated with [RESPONDENT], the sole director of [RESPONDENT], in relation to all management and maintenance matters relating to 52-66 [RESPONDENT].

16. [NAME] told the Tribunal that, when the major works, the subject of the First [NAME], had been discussed at a meeting of [RESPONDENT] on 2 August 2023, [NAME] had been told that any non-payment would result in legal proceedings being initiated (page 163 of the bundle). Further, when the Applicant had not made payment, letters chasing payment had been sent to the Applicant on 18 September 2023, 26 September 2023 and 6 November 2023.

17. [APPELLANT] told the Tribunal that, as the Applicant’s First [NAME] had disputed the payability of the service charge, [NAME] had responded to that [NAME], but has been mindful that if the Respondent was successful and the amount was found by the Tribunal to be payable, and if the Applicant still refused to pay, forfeiture proceedings could be used to collect the service charge arrears. It was therefore the Respondent’s position that forfeiture had always been in the mind of the Respondent.

18. In terms of the debt recovery process used by [NAME], [NAME] stated that ordinarily they used [NAME]; however, because the Applicant had raised an issue with the appointment of the director, [NAME] Solicitors had been used instead as they had specialism in this area.

19. In cross examination [NAME] confirmed that the paperwork from [NAME] was dated December 2025, whereas the First [NAME] had concluded in April 2025. [NAME] confirmed that [NAME] had not been instructed in relation to the Property but rather the information from [NAME] was included within the bundle to demonstrate the Respondent’s debt recovery process.

Written Statements

20. In her written statement, [RESPONDENT] (director of the Respondent) confirmed that she had asked [RESPONDENT] about the action that could be taken to recover service charge arrears from the Applicant if he did not pay. She confirmed that [APPELLANT] had answered by explaining that action could be taken in the County Court to obtain a judgement against the Applicant and that this judgement could be enforced by obtaining a charging order, and that in addition to the County Court judgement route, forfeiture of the Applicant’s lease was also an option to recover the arrears.

21. In their written statements, both [NAME] and [NAME] confirmed that [NAME] had telephoned them separately to ask them to complete a witness statement on behalf of the Respondent in the First [NAME]. [RESPONDENT] and [NAME] stated that whilst they were speaking to [NAME], they had asked what action could be taken to recover the Applicant’s outstanding service charges. Both statements confirmed that [APPELLANT] had advised that, if the Applicant did not make payment, and if the Tribunal determined that the Applicant was liable for these [APPELLANT], an [NAME] seeking a County Court judgment could be made and enforced by way of a charging order against the Applicant’s property. [APPELLANT] statement recorded:

“Mr [NAME] also said on this phone call that forfeiture of the Applicant’s lease was being considered, subject to support and approval from the freeholder”.

[NAME] statement recorded that:

“Mr [APPELLANT] also mentioned that forfeiture of the Applicant’s lease was being considered subject to the freeholder’s agreement and assistance”.

The Applicant’s Position

22. The Applicant told the Tribunal that he had brought the First [NAME] because he wanted to have a resolution as to the amount of service charge he was liable to pay. He stated that he had “serious and genuine concerns” and had turned to the Tribunal for help. The Applicant stated that in essence he had wished to raise two issues, namely: was [RESPONDENT] an elected director of the Respondent; and, had the section 20 notice been properly served and the correct procedure followed. He further confirmed that once the Tribunal had made its decision, he had paid the outstanding amount the next day. He told the Tribunal that it had never been his intention not to pay, he had simply wanted confirmation from the Tribunal that the amount was payable.

23. The Applicant submitted that there had been no mention of forfeiture in the First [NAME], including in any witness statement. The Applicant asked the Tribunal to note that the Respondent had not contacted the freeholder to ask if they would contemplate a forfeiture action until 3 June 2025; this was after the Tribunal had given its decision on the First [NAME], and after the Applicant had paid the outstanding amount of service charges. It was the Applicant’s position that the Respondent had made this approach to the freeholder because they were aware that the Applicant wished to challenge the [APPELLANT]. The Applicant further noted that no response from the freeholder was included within the bundle, and without the freeholder’s support, forfeiture action could not be taken.

Tribunal Decision – Clause 3(xvi) of the Lease

24. In Barrett v Robinson, the Deputy President considered a clause by which the lessee covenanted: “To pay all reasonable [APPELLANT] charges and expenses (including solicitors' [APPELLANT] and surveyors' fees) incurred by the [NAME] in or in contemplation of any proceedings or the preparation of any notice under section 146 of the Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the Court.”

25. It was held that for [APPELLANT] to be recovered under this clause, the landlord must show that they were incurred in or in contemplation of proceedings or the preparation of a notice under section 146 of the 1925 Act. At [51] and [52] of the judgment, the Deputy President stated:

“51… Sometimes it will be obvious that such expense has been incurred, as when proceedings claiming the forfeiture of a lease are commenced, or a notice under section 146 is served. In other circumstances it will be less obvious. The statutory protection afforded by s.81 of the 1996 Act requires that an [NAME] be made to the first-tier tribunal for a determination of the amount of arrears of a service charge or administration charges which are payable before a s.146 notice may be served, but proceedings before the First-tier Tribunal for the determination of the amount of a service or administration charge need not be a prelude to forfeiture proceedings at all. The First-tier Tribunal's jurisdiction under s.27A of the 1985 Act covers the same territory, and proceedings are often commenced in the County Court for the recovery of service charges without a claim for forfeiture being included. A landlord may or may not commence proceedings before the first-tier tribunal with a view to forfeiture; a landlord may simply wish to receive payment of the sum due, without any desire to terminate the tenant's lease, or may not have thought far enough ahead to have reached the stage of considering what steps to take if the tenant fails to pay after a tribunal determination has been obtained.

52. [APPELLANT] will only be incurred in contemplation of proceedings, or the service of a notice under s.146 if, at the time the expenditure is incurred, the landlord has such proceedings or notice in mind as part of the reason for the expenditure. A landlord which does not in fact contemplate the service of a statutory notice when expenditure is incurred, will not be able to rely on a clause such as cl.4(14) as providing a contractual right to recover its [APPELLANT].”

26. At [57] the Deputy President stated: “It is always necessary to consider the terms of the particular indemnity covenant and whether any relevant contemplation or anticipation existed in fact in the circumstances of an individual case.” Therefore, whether or not the [APPELLANT] claimed were incurred for the purpose of or incidental to the preparation and service of a notice under sections 146 or 147 of the Law of Property Act 1925 is a question of fact to be determined by this Tribunal on the basis of the evidence before it.

27. Turning to the facts of the matter before this Tribunal, the Tribunal finds that the [APPELLANT] were not for the purpose of or incidental to the preparation of a notice under section 146 or 147 of the Law of Property Act 1925 or in contemplation of proceedings. The Tribunal reaches this decision for the following reasons:

28. The First [NAME] before the Tribunal was brought by the Applicant because he wished to challenge the payability of the service charges.

29. The invoice for the [APPELLANT] clearly stated that the £11,060 was for:

“TPP [[NAME]’s] Management Fees for time spent dealing with your [the Applicant’s] [NAME] on behalf of the Respondent, including preparing the FTT bundle and attendance at the FTT hearing to represent the Respondent”

30. The Tribunal finds that this description is clear and makes no mention that the [APPELLANT] were in any way connected to or in contemplation of forfeiture proceedings. The Tribunal accepts the Applicant’s evidence that no mention was made of forfeiture throughout the First [NAME].

31. Turning to [NAME] evidence, he told the Tribunal that [NAME] were informed at a meeting on 2 August 2023 that non-payment of the service charge for the major works would result in “legal proceedings”. However, the Tribunal does not find that this is sufficient to show that forfeiture proceedings were contemplated. The minutes record that there were “some concerns raised over non-payment for the works” and that the reply given by [NAME] was that “any non-payment will result in legal proceedings being initiated”; however, the Tribunal finds that this is no more than a general statement that do not mention forfeiture and were not directed at the Applicant.

32. [APPELLANT] produced letters sent to the Applicant to chase payment of his service charge contribution for the major works on 18 September 2023, 26 September 2023 and 6 November 2023. He also produced an email of 26 September 2023 to the Applicant which stated that “we will continue with our debt recovery procedure, which will lead to this matter being passed to a debt recovery solicitors, who will take legal action to recover the unpaid charges and their legal fees and [APPELLANT]”. However, these letters do not refer to forfeiture proceedings.

33. [NAME] confirmed that [APPELLANT] Solicitors were used as the Applicant’s case did not progress through what the Respondent describes as “their standard process” for debt collection using [APPELLANT] solicitors. This was because the Applicant had raised issues that related to company law (namely the appointment of a director). However, there was no evidence before the Tribunal to show that forfeiture proceedings were contemplated. The Tribunal is not satisfied, on a balance of probabilities, that the referral of non-payment of service charges to a firm of solicitors is sufficient to show that forfeiture was contemplated in the Applicant’s case.

34. The Respondent produced written statements confirming that forfeiture was an option available to the Respondent. However, the Tribunal attaches less weight to these statements as the makers were not available for cross examination and their evidence was not agreed. Further, these witness statements showed only that [NAME] was asked to give detail of the options available rather than stating that forfeiture was contemplated.

35. The Tribunal accepts the Applicant’s evidence that he had brought the First [NAME] because he had a genuine belief that the director was not properly appointed and that the service charge was not payable. It was never his position that he was refusing to pay but rather he wanted the Tribunal to clarify whether he had to pay. The Tribunal accepts that the Applicant had set this out in his communication with the Respondent and in his First [NAME]. Further, the Tribunal accepts the Applicant’s evidence that, as soon as the Tribunal made its decision in the First [NAME], he had paid the outstanding service charge.

36. The Respondent as a management company would not be in a position to bring proceedings for forfeiture of the Lease. It was not until after the First Applicant had concluded that the Respondent contacted the landlord regarding forfeiture. At page 101 of the bundle the Respondent produced a copy of an email sent from [NAME] to the freeholder dated 3 June 2025 (after the Tribunal’s determination of the First [NAME]). This email was sent by [NAME] and stated:

“We need to collect the £11K debt to reimburse [NAME] for this cost. One option may be to bring proceedings to forfeit his lease but we would need your full support and approval to do this, before we discuss this further with solicitors.

Please can you let me know if you would be interested in trying to forfeit his lease, if this is possible based on the arrears being administration charges as opposed to service charges?”

37. Therefore, on the facts of this case and on the balance of probabilities, the Tribunal is not satisfied that the [APPELLANT] were expended for the purpose of or incidental to the preparation and service of a notice under sections 146 and/or 147 of the Law of Property Act 1925 or in contemplation thereof. The Tribunal finds that the [APPELLANT] were expended in order to respond to the Applicant’s case before this Tribunal. The Tribunal therefore finds that the sums claimed are not recoverable as an administration charge pursuant to clause 3(xvi) of the Lease.

Service Charge Provision - Paragraph 13 of the Seventh Schedule of the Lease

38. The Respondent submitted that the First [NAME] related primarily to the maintenance of the Reserved Property, namely the repair and decoration thereof. The Reserved Property was defined in the Lease as “the part of the Property not included in the Flats being the property more particularly described in the Second Schedule”. In essence the Second Schedule defined the Reserved Property as including “the gardens grounds paths and (forecourts) forming part of the Property...and also the halls staircases landings and other parts of the building forming part of the property which are used in common by the Owner or occupier of any two or more of the Flats”. It also included the main structural parts of the building such as the roofs, external parts, cisterns, tanks and pipes etc.

39. The Respondent submitted that the collection of the [APPELLANT] of maintenance by way of service charge was an integral part of management and maintenance of the Reserved Property, without which it would be impossible for the Respondent to comply with their obligations in the Lease. Further that the Respondent’s only source of income was the service charge, and without collecting the charge, including by way of Tribunal proceedings, maintenance of the property would be impossible. Therefore, it was the Respondent’s position that the collection of service charges necessarily involved responding to the Applicant’s [NAME] under section 27A of the Landlord and Tenant Act 1985, that being part of the process of the administration of service charge arrears.

40. It was the Respondent’s position that because paragraph 13 of the Seventh Schedule referred explicitly to solicitors’ fees, it was the intention that legal fees were recoverable under this paragraph. Further, the paragraph specifically referred to [APPELLANT] incidental to the preparation of the service charge, suggesting that [APPELLANT] associated with the collection of service charges would be recoverable. The Respondent therefore submitted that the [APPELLANT] fell squarely within the scope of paragraph 13.

41. The Applicant submitted that a lease could grant permission to charge litigation [APPELLANT] but that, in order to do so, it must include a clearly worded clause that specified that the landlord was able to recover legal and professional fees associated with a tenant’s breach of lease. The Applicant submitted that this clause should specify that these [APPELLANT] could be charges as an administration or service charge and should clearly define what types of [APPELLANT] were recoverable such as legal advice, tribunal fees and professional fees. It was the Applicant’s position that the Lease made no such provision for the recovery of litigation [APPELLANT].

Tribunal Decision - Service Charge Provision - Paragraph 13 of the Seventh Schedule of the Lease

42. The [NAME] brought before the Tribunal is in relation to the demand that has been sent to the Applicant alone for the [APPELLANT]. If the Respondent chooses to charge the [APPELLANT] as a service charge, this amount will need to be properly demanded from all [NAME] in accordance with the Lease. The Respondent would need to satisfy themselves that the amount is payable under the Lease, that the work included is not covered within the management fee that [NAME] are already paying, and that the amount charged has been reasonably incurred. In the event of a dispute as to payability and reasonableness, an [NAME] could be made to this tribunal.

43. It is therefore premature for the Tribunal to consider the payability and the reasonableness of the [APPELLANT] given that they have not been demanded as a service charge.

44. Further, and in any event, it would appear that [NAME] have already received a demand for £500 on 2 October 2024 described as “share of expected [APPELLANT] to defend [NAME]”. This demand does not form part of the [NAME] before this Tribunal. However, again, any dispute as to payability and reasonableness of this demand can be determined with an [NAME] made to this tribunal.

45. For the avoidance of doubt, it is not possible for the Respondent to demand the [APPELLANT] as a service charge under the Lease from the Applicant alone.

[NAME] under s.20C and Paragraph 5A in these Cost Proceedings (CAM/26/UE/LLD/2025/0001)

46. The Applicant applied for an order under section 20C and Paragraph 5A in these proceedings.

47. Counsel for the Respondent averred that if the Tribunal does not find the [APPELLANT] payable under the Lease then this [NAME] falls away. However, Counsel advised that if the litigation [APPELLANT] are payable, [NAME] had stated that he had incurred 30 hours of work and along with Counsel’s fee the [APPELLANT] were £9,372.50.

48. For the reasons set out above, the Tribunal does not find that the [APPELLANT] are payable under the Lease as an administration charge.

49. In relation to an order under section 20C, given the findings made in this decision, the Tribunal determines that it would be just and equitable to make an order under section 20C of the 1985 Act so that the Respondent may not pass any of their [APPELLANT] incurred in connection with the proceedings before the Tribunal through the service charge.

Name: Judge Bernadette MacQueen Date: 26 February 2026

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 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 (Lands Chamber).