Tenant Entitled to New Lease Under Statutory Costs Determination

OUTCOME: Allowed

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00AP/OC9/2024/0601 Property :

[ADDRESS],[POSTCODE] Applicant : [redacted] : In person Respondents : [redacted] (2) [NAME] (3) [COUNSEL] (4) [COUNSEL] : In person Type of [NAME] : Section 91 of the Leasehold Reform, Housing and Urban Development Act 1993 Tribunal Member : Tribunal Judge I Mohabir Date 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 to the Respondents under section 60 of the Act for the grant of a new lease in relation to the property known as [ADDRESS],[POSTCODE] (“the property”).

2. The factual background to the [NAME] and can be summarized as follows.

3. The freehold title to the property is held by the Respondents.

4. The Applicant holds a long lease of the property for a term of 125 years from 1 January 1984.

5. On or about 31 October 2023, the Applicant’s solicitors purported to serve a section 42 notice on the Respondents claiming the right to the grant of a new lease (“the first notice”). The [NAME] contended that this notice was invalid.

6. By a letter dated 18 November 2023, the Applicant’s solicitors served a further section 42 notice on the Applicant for the grant of a new lease (“the second notice”). By a counter notice served on or about 16 January 2024, the Applicant admitted the Respondents right to a new lease and attached a copy of the draft lease for approval.

7. Subsequently, the Applicant decided not to proceed with the transaction.

8. The costs claimed by the Applicant are:

Profit costs

£2,404.50

Valuation fees £1,257.40 plus VAT

Land Registry fees £21 (agreed)

9. The parties were unable to agree the Respondent’s costs and the Applicant

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

payable to the Respondents pursuant to Section 60 of the Act.

Relevant Statutory Provision 10. 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,

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3 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) [NAME] 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) [NAME] 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 [NAME] under this Chapter, means the landlord for the purposes of this Chapter, any other landlord (as defined by section 40(4)) or any third party to the tenant's lease.

Decision 11.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. 12. It should be said from the outset that the Tribunal was presented with a bundle comprised of 167 pages, most of which contained information and/or documents that were irrelevant to its determination.

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4 13. In the hearing bundle, the Tribunal could not find an invoice from the [NAME] showing the final costs incurred, VAT or any disbursements incurred. The only document from which the Tribunal could discern the Respondents legal costs is a breakdown found at page 75 in the bundle. However, this document does not state if VAT is charged on the profit costs incurred. The Tribunal must presume this. There is no invoice from the Respondent’s valuer. These figures could only be ascertained from other documents such as the Applicant’s statement of case.

14. So far as the Tribunal understood it, the Applicant’s challenge to the Respondents legal and valuation costs is her assertion that they are excessive. In particular, the Applicant submits that the valuation costs are not reasonable because, in her view, the report is flawed for a number of reasons and provided an unrealistic valuation. Given that the merits of the report were never considered by the Tribunal, the test to be applied in relation to the cost of the report is whether it is reasonable and nothing else. Hourly Rate 15. From the breakdown found at page 75 in the bundle, it seems that most of the fee earning work was carried out by a fee earner with 0-2 years post qualification experience at an hourly rate of £195 per hour. In addition to a degree of supervision, some work appears to have been carried out by a Partner including the preparation of the draft lease.

16. On any view, this matter was what can be described as “standard” statutory lease extension with no complication, and for which existing templates for any documents, such as the draft lease, only requires a degree of amendment for each transaction. Indeed, the transaction did not proceed beyond the preparation and service of the counter notice and the draft lease. 17.Whilst the Tribunal accepts that this matter was partly transactional, it was also quasi litigious. Therefore, the use of the current hourly guideline rates provides a useful and obvious benchmark when the assessment of the Respondent’s costs fall to be assessed.

18. 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. Earlier Tribunal costs decisions do not bind this Tribunal no do they establish a precedent hourly rate(s) to be adopted in other cases where costs such as these fall to be assessed. 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.

19. 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 rate for a [NAME] in the [NAME] of £196.

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5 The rate claimed by the [NAME] at the [NAME] is in fact £195, below the guideline rate. Therefore, the Tribunal did not reduce the hourly rate further.

20. As stated earlier, the majority of the fee earning work was carried out by the [NAME]. Adopting an hourly rate of £195, this results in approximately 12 hours of fee earning time being incurred. The Tribunal found his was unreasonable given the very limited extent of this transaction.

21. The Tribunal found that 5 hours of fee earning time was reasonable at a rate of £195 per hour and concluded that base costs of ££975 was reasonable. This figure was then uplifted by, say, £300 being 1 hour’s attendance for a Grade A fee earner in the [NAME] for supervision and the drafting of the lease.

22.

Accordingly, the Tribunal concluded that the Respondent’s reasonable legal costs payable by the Applicant is £1,275 plus VAT, if applicable. Valuer’s Costs 23. In short, the Tribunal found the cost of £1,257.50 plus VAT to be reasonable in this instance and within industry norms and was allowed as claimed. As stated earlier, the Applicant’s view about the demerits of the report is not relevant to the test of reasonableness. In addition, comparative cheaper quotes from other valuers is not conclusive evidence that the cost of the Respondent’s valuer is unreasonable. In this area of work, a range of quotes can always be obtained depending on the charging rates of the individual firm of valuers. The landlord is not obliged to accept the cheapest quote. The test is whether the costs incurred are within a reasonable range, and the Tribunal was so satisfied.

24. As the Tribunal understood it, the Land Registry fees of £21 are not challenged by the Applicant.

25. The total costs payable by the Applicant is, therefore, £2,553.50 plus VAT, if applicable. 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.

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6 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).