Landlord's Costs Reduced in RTM Claim Dismissal

OUTCOME: Dismissed

© CROWN COPYRIGHT

Case Reference

: LON/00BE/LCP/2021/0008

HMCTS

: PAPER REMOTE

Property : [RESPONDENT], London, [POSTCODE]

Applicant: [redacted] : [COUNSEL]

Respondent: [redacted] : In person

Type of [NAME] : Costs to be paid by a [COMPANY]

Tribunal Members :

Judge Robert Latham

Venue of paper Determination

: 10 [ADDRESS] [POSTCODE]

Date of Decision : 29 October 2021

_______________________________________________

DECISION ____________________________________

The Tribunal determines that the Respondent is to pay the Applicant’s costs under section 88(4) of the Commonhold and Leasehold Reform Act 2002 in the sum of £3,016.08 (inclusive of VAT) namely: (i) Solicitor’s Fees: £2,000; (ii) Management Fees: £500; (iii) Disbursements: £13.40; (iv) VAT: £502.68.

FIRST - TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

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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 P: PAPERREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing. Neither party requested an oral hearing. The Respondent has provided a Bundle of Documents which extends to 146 pages. The [NAME]

1. The Applicant seeks a determination pursuant to section 88(4) of the Commonhold and Leasehold Reform Act 2002 (“the Act”) in respect of the costs incurred by the Applicant landlord in relation to a Claim Notice, dated 28 August 2020, which was dismissed on 19 March 2021 on a paper determination in Case No. LON/00BE/LRM/2020/0029 by Judge Pittaway and [NAME]. The Tribunal found that the Applicant was on the relevant day not entitled to acquire the Right to Manage (“RTM”) as a Notice of Invitation had not been served on one of the leaseholders.

2. In January 2019, the Applicant had made a previously [NAME] to acquire the RTM. On 20 January 202, a tribunal had dismissed this [NAME] in LON/00BE/LRM/2019/0021. The Applicant paid the Respondent’s costs in the sum of £4,555.92, namely legal fees and disbursements of £2,946.60, management fees of £850.00 and VAT of £759.32.

3. On 28 July 2021, the Tribunal gave Directions. Pursuant to those Directions, the Applicant has filed two Form N260 Statements of Costs (Summary Assessments). This breaks down the costs claimed between its costs for the initial assessment of the [NAME] and the costs in responding to the [NAME] before the tribunal.

Initial Assessment Tribunal Costs Solicitor Costs £1,485 £1,265.00 Management Fees £1,400 £800.00 Disbursements £13.40 - VAT £579.68 £423.00 Total: £3,478.08 £2,478.00

Total Claimed: £5,956.08

4. The Respondent has served a Statement of Case specifying the following grounds for disputing the costs claimed. The Respondent’s figures include VAT which obscures the fact that this is a tax payable in respect of the

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professional charges. The Tribunal is rather concerned with the reasonableness of the professional charges. The Respondent raises the following issues: (i) The pro forma invoices submitted by [NAME] to substantiate their claim for costs of £2,750 (+VAT). These have not been paid. It suggests that these are not sufficient to establish a liability to pay. (ii) The duplication of work between the two unsuccessful claims for RTM. The Respondent takes exception to the 90 minutes spent on assessing the leasehold titles, and suggests that 15 minutes would be more reasonable. (iii) The legal costs are unreasonably high; the work being performed by a Grade A Solicitor. Complaint is made of Ms [COUNSEL] hourly rate of £275. Reference is made to the 2010 Guideline Rate for a Grade A solicitor of £217 per hour; £275 is claimed. More work could have been delegated to someone more junior, particularly with regard to 2.3 hours spent on “Assessment of Supporting RTM Documents”. (iv) The professional advisors will be able to reclaim VAT, so this should not be payable. (v) The management fees totalling £2,200 are extraordinarily high. No adequate details have been provided to support these claims. No invoices are provided. The fees are merely claimed as “other expenses” in the two N260s. The Respondent questions whether it was open to the Applicant to claim any management fee given the close relationship between the landlord and [RESPONDENT], its managing agent. They share the same registered address, Company Secretary and directors. It refers to the FTT decision in [ADDRESS] (LON/00AX/LRM/2013/0018) in which this landlord was not allowed to recover any costs in respect of this managing agent because their relationship was so “inextricably entwined” (at [26]).

5. On 19 October, the Applicant served a Statement in Response. By an email dated 22 October, the Respondent requested the Tribunal to disregard this. The Statement should have been provided on 12 October; it was rather provided on 19 October when the Applicant files its Bundle for the hearing. Having regard to the Overriding Objectives in Rule 3 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, The Tribunal is satisfied that it should have regard to the Statement in Response. No prejudice has been caused by the delay. This Statement was the final document to be filed and the Directions made no provision for the Respondent to respond to this. The Tribunal notes that the Directions were amended because the Respondent had failed to file its Statement of Case in time.

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6. However, the Respondent raises a more substantial point. The Applicant is now seeking to rely on documents which should have been provided at an earlier stage and to which it has had no opportunity to respond. The Tribunal will not have regard to any documents which the Applicant should have disclosed with its initial Statement of Case. However, the Applicant is entitled to reply on the points of law raised by the Respondent and to refer the tribunal to any relevant authorities.

7. The Applicant makes the following response to the points raised by the Respondent: [redacted] relevant. The Applicant is liable to pay these sums. The Tribunal should trust [NAME], as officers of the court, not to mislead it. (ii) The duplication of work: There was a gap of over a year between the two notices. The Applicant needed to make a fresh assessment of the validity of the new claim. The overall provision of 90 minutes spent on assessing the leasehold titles was reasonable. (iii) The legal costs: Miss [NAME] is the sole fee earner at the firm. She has specialised in RTM matters since September 2007. Costs have not been claimed for time spent on some elements which were not carried out by Miss [NAME]. On 1 October 2021, the Guideline Rate for a Grade A Fee Earner in Oxford was increased to £261 per hour. (iv) The Applicant is not registered for VAT for this property. (v) The management costs: the Upper Tribunal has upheld a landlord’s right to recover management fees in [RESPONDENT] (No.3) [COMPANY] v [NAME] Co [COMPANY] [2014] UKUT 30 (LC). The management fees are those which the Applicant is obliged to pay to [APPELLANT] in accordance with the management agreement which it has signed. Any work on a RTM claim is outside the standard management duties and a schedule of charges specifies the sum that the landlord is liable to pay in respect of such services. The managing agent needs to carry out work as soon as the Claim Notice is received. Whether a Counter Notice is served or not, contractors need to be reviewed and contacted. There is no guarantee that a challenge will succeed. A managing agent must therefore plan for the potential effect of the RTM. The Applicant provides a copy of the management agreement between [APPELLANT[COMPANY] and [COMPANY]. This should have been provided with its initial Statement of Case.

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The Statutory Provisions

8. Section 88 of the Act:

“(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) A [COMPANY] is liable for any costs which such a person incurs as party to any proceedings under this Chapter before the appropriate tribunal only if the tribunal dismisses an [NAME] by the company for a determination that it is entitled to acquire the right to manage the premises.

(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.”

The Principles

9. The Act confers rights on tenants of leasehold flats to acquire the Right to Manage their flats without the need to show any fault by their landlord. It is a matter of basic fairness, necessary to avoid the statute from becoming penal, that the tenant exercising their statutory right should reimburse the costs necessarily incurred by any person in receipt of such a claim in satisfying themselves that the claim is properly made and in completing the formal steps required by the Act.

10. On the other hand, the statute is not intended to provide an opportunity for the professional advisers of landlords to charge excessive fees. Section 88 (2) provides a ceiling by reference to the reasonable expectations of a person paying the costs from their own pocket; the costs of work which would not have been incurred, or which would have been carried out more cheaply, if the landlord was personally liable to meet them are not reasonable costs which the tenant is required to pay. Section 88(2) provides protection for both landlords and tenants: for landlords against being out

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of pocket when compelled to surrender the right to manage and for tenants against being required to pay more than is reasonable.

11. Section 88(3) makes express provision where disputes arise over the Right to Manage. A [COMPANY] is liable for the costs incurred by the landlord before the tribunal only if the tribunal dismisses the [NAME].

The Tribunal’s Determination

12. On 28 July 2021, the Tribunal gave Directions so that it could determine this [NAME] in a proportionate manner. The Applicant was directed to provide its Statement of Case which was to include the following:

“(i) A schedule of costs sufficient for a summary assessment. The schedule must identify the basis for charging legal and/or other costs. If costs are assessed by reference to hourly rates, detail must be given of fee earners/ case workers, time spent, hourly rates applied and disbursements. The schedule should identify and explain any unusual or complex features of the case. (ii) Copies of the invoices substantiating the claimed costs; (iii) Copies of any other documents upon which reliance is placed.” 13. The Documents upon which the Applicant sought to rely are at p.33-75 of the Bundle. The provision for the Applicant to serve a Response to the Respondent’s Statement of Case does not provide for the Applicant to rely on the further documents (at p.97-112 of the Bundle) to which the Respondent has had no opportunity to respond.

14. There were no unusual or complex features to this case. This was a straight forward [NAME] for the RTM. The Applicant, its managing agents and solicitor have considerable experience in dealing with such applications.

15. The Applicant claims legal costs of £2,750. The Tribunal accepts that the Applicant has a liability for these fees. Costs of £2,950 were claimed in respect of the first [NAME]. The Tribunal accepts that [NAME] needed to make a fresh assessment of the new claim. However, she would have been familiar with this property. The Guideline figures to which the Respondent refers were set in 2020. The Tribunal rather prefers to have regard to Guideline Rates issued on 1 October 2021.The Tribunal accepts that [NAME] hourly rate of £261 is not excessive. However, given her experience and prior knowledge of the case, The Tribunal considers the time engaged to be excessive for this [NAME] and assesses the legal costs in the sum of £2,000.

16. The Applicant claims fees for its managing agent in the sum of £2,200. £850 was claimed in connection with the previous [NAME]. When the Applicant filed its Statement of Case, it provided no justification for the sum claimed. The Tribunal considers that there is considerable merit to the

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points raised by the Respondent. However, the Tribunal accepts that some input will be required from a landlord or its managing agent in respect of any RTM claim. Some work will be required as soon as the Claim Notice will is received. Contracts will need to be reviewed and contractors contacted. However, once the claim is denied, little further work will be required. Even were a FTT to determine that the claim is valid, the Right to Manage would only be acquired three months after the determination became final (section 90(4)). This would give a [NAME] more than sufficient time to prepare for the handover of management. On the basis of the material filed in support of its claim, the Tribunal can see no justification for allowing more than £500.

17. In its Reply, the Applicant has provided a copy of the management agreement between [APPELLANT[COMPANY] and [COMPANY] dated 18 November 2019. This should have been provided with its Statement of Case. The Tribunal has not received any representations from the Respondent on this. The Tribunal does not consider that it should have regard to this.

18. However, if the Tribunal is wrong on this, it notes that the additional fee specified for services in connection with a Right to [NAME] is “minimum £100 + VAT per flat plus £150 + VAT per hour for court appearance”. If the sum is premised on there being 14 flats, the sum claimed is manifestly excessive for the work that might reasonably be expected to be involved. The claim for the Right to Manage was determined on the papers.

19. The Tribunal allows the of £13.40 for disbursements. The Tribunal is further satisfied that VAT is payable.

20. The Tribunal assesses costs as follows:

(i) Solicitor Costs: £2,000 (ii) Management Fees: £500 (iii) Disbursements: £13.40 (iv) VAT: £502.68

Total: £3,016.08.

21. The Tribunal makes no order for the refund of the tribunal fees of £100 paid by the Applicant. The Tribunal has substantially reduced the costs claimed by the Applicant. The Tribunal is satisfied that this [NAME] would not have been necessary, had the Applicant been more realistic about the costs claimed.

Judge Robert Latham, 29 October 2021

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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).