Tenant Entitled to Reimbursement of Reasonable Costs for New Lease

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case Reference

: CHI/24UC/OC9/2022

Property

: 2 [ADDRESS] [POSTCODE]

Applicant: [redacted]

: [NAME], Solicitors (Wallington)

[EMAIL]

Respondents

: [redacted] [COUNSEL] [NAME]

: [COUNSEL], Solicitors (Guildford)

[EMAIL]

Type of [NAME] : Landlord’s costs new lease - Section 60(1) of the Leasehold Reform, Housing & Urban Development Act 1993

Tribunal Members : Judge Paul Letman MBE

Date and venue of : 16 May 2023 Paper Determination

Date of Decision : 1 June 2023

DECISION ON COSTS WITH REASONS

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Introduction 1. By [NAME] received on 27 October 2022 the Applicant seeks a determination of the costs payable to the Respondents in respect of his concluded claim to a new lease for an extended term of the above mentioned property pursuant to Chapter 2 of Part I of the 1993 Act.

2. Directions were made herein 0n 31 January 2023 for the sequential service of Statements of Case to include copy bills etc. and the preparation of a bundle. The parties duly complied therewith and have provided as required a Scott Schedule showing the amounts claimed and their rival contentions.

3. According to the said Schedule the Respondents are claiming £5,100 and the Applicant considers that £1,980 is the appropriate amount recoverable.

4. For the purposes of this decision the Tribunal has added its own comments (in blue type) in the said Schedule and the same is duly annexed hereto (hereinafter ‘The Schedule’).

Background

5. By way of brief background, it is noted that the Section 42 Notice of Claim herein was dated 04 March 2022 and proposed a premium of £16,400. The Counter-Notice was dated 13 May 2012 and proposed a premium of £36,087.

6. In the event it appears from the Completion Statement prepared by the [NAME] that the parties agreed a premium in the sum of £28,000. The said statement also shows the costs claimed by the Respondents in the sum stated above, and the Applicant’s solicitor’s costs in the sum of £1,360.00 (including VAT and disbursements of £145).

7. The agreed new lease was granted on 24 November 2022. The lease is in short form, incorporating the terms of the original lease dated 19 January 1996 subject to the required amendments contained in the said form.

Section 60

8. For the purposes of considering this [NAME], the tribunal refers to the terms of section 60 of the 1993 Act, which in so far as is presently material provides as follows:

‘60 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

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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.’ The Principles and Guidance 9. In [NAME] v Moss [2013] UKUT 415, [NAME], the [NAME], gave the following guidance on the approach to be adopted: “9. These provisions are straightforward and their purpose is readily understandable. Part I of the 1993 Act is expropriatory, in that it confers valuable rights on tenants of leasehold flats to compel their landlords to grant new interests in those premises whether they are willing to do so or not. It is a matter of basic fairness, necessary to avoid the statute from becoming penal, that the tenant exercising those statutory rights should reimburse the costs necessarily incurred by any person in receipt of such a claim in satisfying themselves that the claim is properly made, in obtaining advice on the sum payable by the tenant in consideration for the new interest and in completing the formal steps necessary to create it.

10. On the other hand, the statute is not intended to provide an opportunity for the professional advisers of landlords to charge excessive fees, nor are tenants expected to pay landlords' costs of resolving disputes over the terms of acquisition of new leases. Thus the sums payable by a tenant under section 60 are restricted to those incurred by the landlord within the three categories identified in section 60(1) and

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are further restricted by the requirement that only reasonable costs are payable. Section 60(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.

11. Section 60 therefore provides protection for both landlords and tenants: for landlords against being out of pocket when compelled to grant new interests under the Act, and for tenants against being required to pay more than is reasonable.” 10. Further, in considering the parties’ respective arguments on costs, although not bound by the same the tribunal has had regard to the essential guide to reasonableness in relation to contentious costs contained in CPR 44.4(3). This Rule provides, so far as appears presently to be material, that account should be taken of the following factors:

‘(b) the amount or value of any money or property involved; (c) the importance of the matter to all the parties; (d) the particular complexity of the matter or the difficulty or novelty of the questions raised; (e) the skill, effort, specialised knowledge and responsibility involved; (f) the time spent on the case; (g) the place where and the circumstances in which work or any part of it was done …;

11.

Accordingly, I approach the parties’ submissions on costs in the light of the foregoing statutory provisions, principles and guidance. The Parties’ Respective Cases

12. The parties’ respective cases are set out in the Schedule. One of the principal points of difference is in respect of the hourly rates charged, both solicitor and surveyor rates. So far as the solicitor rates are concerned I note that for the purposes of the SCCO, Solicitors’ Guideline Hourly Rates,’ [NAME] are within National Grade 1. The Guideline Rates for this Grade are the following exclusive rates (with the relevant experience of the solicitor or legal executive shown in parenthesis):

Band A (over 8 yrs) Band B (over 4 yrs) Band C (less) Band D (trainee) £261

£218

£178 £126

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13. The Respondents rely upon a solicitor’s hourly rate of £295, the Applicant contends that the reasonable rate is £250. In support the Respondents point to other tribunal decisions, for example, LON/OOBA/OC9/2022/0106 in which £400 for a grade A [NAME] was allowed, as well as the personal service offered by [NAME] and the fact that this is relatively complex and specialised work.

14. I accept the points made by the Respondents justifying their rate of £295 per hour plus VAT, this is indeed specialist work and the Guideline Rate of £261 is only a general guide and in any event not far removed from the rate claimed. I also note the higher rates awarded in other decided cases, such as that cited, where those rates for this kind of work are consistently above the guideline rates for the Grade and Band appropriate to each.

15. So far as the [NAME]’s hourly rate of £250 is concerned, this too looks in my view to be eminently reasonable for this kind of specialist work by an [NAME] employed by a [NAME] such as [NAME]. Support may be found in the tribunal decisions for this rate also; in particular, I note the 2021 decision in BG/LON/00AH/OC9/021/0083 concerning a flat in Croydon, in which the [NAME]’s fees were reduced from £350 per hour plus VAT to £250 per hour plus VAT.

16. As for the specific points taken in respect of each item of costs, these are briefly addressed individually by the tribunal’s comments (in blue type) in the Schedule. The sum of the costs taken from the Schedule amounts to £2,100 plus VAT for the legal fees and £1,425 plus VAT for the [NAME]’s fees. Reviewing these amounts overall, from experience these figures do not strike the tribunal as disproportionate or otherwise unreasonable nor for that matter too low.

17. In the circumstances, the tribunal determines that the total costs payable by the [NAME] under section 60 including VAT are: (a) Legal fees in the sum of £2,520 and (b) [NAME]’s fees in the sum of £1,710. The total recoverable costs are therefore in the sum of £4,230.00 inclusive of VAT.

Enclosure- The Schedule attached

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Right of Appeal

Pursuant to rule 36(2)(c) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (SI 2013/1169) (‘the Rules’) the parties are duly notified that they have a right of appeal against the decision herein.

That right of appeal may be exercised by first [NAME] a written [NAME] to this tribunal for permission to appeal under rule 52 of the Rules. An [NAME] for permission to appeal must be sent or delivered to the tribunal so that it is received within 28 days of the latest of the dates that the tribunal sends to the [NAME]:

(a) written reasons for the decision or (b) notification of amended reasons for, or correction of, the decision following a review (under rule 55) or (c) notification that an [NAME] for the decision to be set aside (under rule 51) has been unsuccessful.

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CHI/24UC/OC9/2022/0022 IN THE MATTER OF THE LEASEHOLD REFORM HOUSING AND URBAN DEVELOPMENT ACT 1993 (AS AMENDED)

IN THE MATTER of the property known as 2 [ADDRESS], [POSTCODE]

BETWEEN :

[APPELLANT]

and

[APPELLANT] and [APPELLANT]

[NAME]

THE SCHEDULE (reproducing the Parties’ Statement of Costs, with the Tribunal’s Comments)

Legal Fees:

Description of Fee Earners: A: Name: [COUNSEL]: Consultant Solicitor Hourly Rate: £295.00 Experience: Specialist lease extension and collective enfranchisement solicitor with 12 years’ post qualification experience in lease extension and collective enfranchisement work. Applicant’s Comments:-

It is accepted that this [NAME] has at least 12 years post qualification experience in the specialist field of leasehold enfranchisement but the hourly rate is excessive and an alternative rate of £250.00 per hour is suggested. Respondent’s Comments: The area of collective enfranchisement and lease extension is a specialist area in which care is required. This matter was further complicated by the fact that there are ongoing injunctive proceedings between the parties due to alleged breaches of the lease by the leaseholder. The matter was not therefore a

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straightforward lease extension [NAME] and this required an [NAME] solicitor. We disagree that £295 per hour is excessive. The Tribunal has frequently awarded higher hourly rates – e.g. JM/LON/OOBA/OC9/2022/0106 £400 for a Grade A [NAME], £325 for a Grade B [NAME], £250 for a Grade C [NAME]. The respondent’s solicitor’s hourly rate is substantially lower than the ‘going rate’ for a solicitor of her experience, and this is in recognition of the fact that the solicitor handles the matter throughout (which saves duplication when outsourcing tasks to more junior lawyers). It is also the selling point of [COMPANY] that one receives a personal service from a single point of contact. [NAME] are also instructed in relation to the ongoing litigation. No printouts of time spent have been provided. No time records have been provided.

Time printouts have not been produced as the respondent’s solicitor does not routinely time record when acting for landlord clients as the firm’s system cannot differentiate between s.60 and non-recoverable costs. The solicitor instead keeps a tally log within the file sleeve of s.60 recoverable costs and this has been used to relay the fees in the table below. A copy of the handwritten file sleeve can be provided if required. No evidence has been produced which show that the sums sought do not exceed any sums for which the Landlord is liable to pay their solicitors. Invoices for the s.60 legal and valuation costs rendered to the Respondent have been produced to the Applicant. Further copies are enclosed. The Tribunal accepts the evidence of the invoices for the purposes of the indemnity principle and the veracity of the times claimed as incurred for the purposes of assessment.

ITEM COST DESCRIPTIO N COST APPLICANT’S COMMENTS RESPONDEN T’S COMMENTS TRIBUNAL’S COMMENTS (IN BLUE)

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Attendances on the Freeholder Routine emails/letters 5 @ £29.50 each £147.50 Apply reduced rate at £25.00 per letter. £125.00 For the aforemention ed

reasons , there is

no reasonable basis for reduction of the hourly rate For the reasons relied upon in relation to the hourly rates, the tribunal accepts the rate of £29.50. Time on documents; for the work done and in the light of the explanation offered this does not appear to the tribunal to be an unreasonable amount of time. Routine telephone attendance: 2 @ £29.50 £59.00 £50.00 Section 60(1)(a) costs - Investigation reasonably undertaken of the tenant’s right to a new lease and preparation and service of the Respondent’ s.45 counter- notice Attendance on the Tenant & Tenant’s Solicitors ([NAME]) Routine emails/letters 3 @ £29.50 Work done on documents Title and deposit request considering s.42 notice, Investigating tenant’s right to a new lease, preparation of counter notice (excluding draft lease annexed to £88.50 £75.00 Time spent on documents excessive and unreasonable We disagree that the time spent was excessive. The ongoing litigation proceedings between the parties are material to both deduction of title and consideratio

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counter notice) 2 hours 54 minutes @ £295 £855.50 £250.00 n of whether or not to admit the claim in the counter notice, and it was necessary to look at this – as well as the work involved in preparing and serving the title and deposit notices, considering the applicant’s s.42 notice and preparing the counter notice. Less than three hours is not therefore excessive or unreasonabl e. Section 60(1)(b) costs - Consideratio n and advice on valuation of the tenant’s flat obtained for the purpose of fixing the premium Attendances on the Surveyor ([NAME]) Routine letters/emails 2 @ £29.50 Consideratio n of valuation for purpose of fixing the £59.00 £50.00 The number are

not challenged so our above comments re: hourly rate stand This is recoverable and 12 minutes is not unreasonable As above, in re rates. [NAME] were entitled to consider the valuation once obtained, indeed they would have been at fault not to do so. The time taken is also patently reasonable.

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premium 12 minutes @ £295 £59.00 Zero minutes as the expert would have provided a figure . [COMPANY] (Kensington) [COMPANY] v Wisbey [2016] UKUT 203 “If a solicitor instructs a [NAME] to produce a valuation and then considers the valuation once it is provided, then

the solicitor’s costs

are “incidental to”

the valuation. If they

are incidental to the valuation then they are properly recoverable providing they

are reasonable having regard in particular to section 60(2).” Section 60(1)(c) costs – The preparation and grant of the new lease Attendances on the freeholder Routine letters/emails : 4 @£ 29.50 Attendance on the Tenant and Tenant’s solicitors (Carpenter & £118.00 What attendance? £100.00 This is a sub- heading and the letters/ emails are detailed by number as to the left. The number are not challenged by the applicant so the issue is the hourly rate. Our It is inevitably the case that [NAME] had to communicate with their client/s, particularly where the premium was subject to negotiation.

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Co.) comments on this above stand. Preparation of the draft lease document (which necessitates reading the existing lease to identify any potential defects), considering amendments to the draft lease provided, drafting the completion statement and dealing with completion formalities account for 2 hours and 48 minutes. The remaining 42 minutes covers consideration of the current position in relation to the litigation which was a material consideration in the context of completing the new lease. The time spent here by [NAME] does appear to be unreasonable, given the simple form of the lease extension and limited modifications to the existing lease. The implications of the existing litigation have already been considered and charged above. Allow 2 hours only. Total this item, £590 TOTAL LEGAL FEES, £2,124.00, properly rounded to £2,100 plus VAT 5 @ £29.50 £147.50 £125.00 Work done on documents – preparation of draft lease, completion statement, attending to completion, checking position with litigation colleague regarding ongoing litigation between the parties for breach of the lease and impact on completion Excessive time spent on all items, suggest 1.5 hours maximum 3.5 hours @ £295 £1,032.50 £375.00 TOTAL: £2,566.50 , but say £2,500.00 £1,150.00

Grades of [NAME];

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Grade A; Solicitors with over 8 years PQE including at least 8 years litigation experience Grade B; Solicitors and legal executives with over 4 years PQE including at least 4 years litigation experience Grade C; Other solicitors and legal executives and fee earners of equivalent experience Grade D; Trainee solicitors, [NAME] and fee earners of equivalent experience

Valuation Fees:

[NAME]: Hourly Rate: £250.00

Experience: as an [NAME] an hourly rate of £375 would not be out of place and is a rate this [NAME] routinely charges on other matters. Respondent’s comments

Hourly rate excessive, suggest £200.00

ITEM COST DESCRIPTIO N COST APPLICANT’S COMMENTS RESPONDE NT’S COMMENTS TRIBUNAL’s COMMENTS (IN BLUE) Preparing for inspection (searching for plans, downloading them), inspecting and measuring the property (not including travel from London and back). 1.5 hours @ £250 £375.00 Excessive and unreasonable, Respondent suggest 30 minutes £100.00 The property is large, arranged on two floors and difficult to measure due to the sloping ceilings, dormers etc and the need to establish 1.5 metres levels to The tribunal accepts that taken with the next item this is a reasonable time to spend for these various tasks. measure to. So taking 1 hour just for this including Taking internal and External photos. 0.5 hours for searching for and finding plans. Land

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Reg, Planning Department etc is minimum Legal documents review i.e., Section 42 Notice, reading lease etc. 0.5 hours @ £125.00 This should be considered with the above. Zero suggested Included in the time assessed above. Comparable evidence research including accessing and searching databases, [NAME], [NAME] and Land Registry and agent’s websites, telephoning local agents to verify information, 1.5 hours @ £375.00 1 hour maximum £200.00 If only this could be done in such a short period of time. Invariably the agent you want to speak to about a particular comparable is not there and again a minimum of 1 hour can be spent on this alone. The data bases are quicker, but they are not instant and need searching through dozens of non- comparable properties to select the right ones. 0.5 hours is the very minimum for It is no doubt right for the [NAME] to spend time selecting the best comparables and important that information is verified for a reliable and through valuation. The total time therefore appears reasonable.

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This Preparing detailed comparable evidence spreadsheet including applying indexed adjustment for time and considering and applying subjective adjustment percentages to identify extended lease value of subject flat. 2 hours £250.00 @ £500.00 This should be incorporated in the

above time. Zero suggested. An absolutely ridiculous proposition. Apart from the time spent creating the Excel spreadsheet this is a time- consuming task where the valuers skill comes into play not just [NAME] the mechanical adjustments In the tribunal’s view the [NAME] should be compiling the comparable evidence spreadsheet as part of the exercise above and will have started the process of applying subjective adjustments to them as part of that. Nonetheless, further time is required to complete this exercise. Allow, 1.5 hours. 3 hours overall for this and the above, appears ample. Allow this item, £375. for time and tenure (both Requiring index inputs) but then [NAME] to put the Comparables on a par with the subject property. This requires time for due Consideration ns as it is a Fundamental part of the Valuation exercise. 2 Hours is the Minimum such a task should take for a property of this nature Writing valuation 1.2 hours @ £300.00 This should take no more This depends on

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report including premium calculations. than 1 hour. £200.00 the complexity of the report and the This is a broadly reasonable time to spend writing up and checking the report and to disallow the extra 0.2 of an hour actually incurred is in my view unwarranted. premium calculations. In this case marriage value was involved which makes the calculations more complex. 1.2 hours is the minimum and in reality more time was spent on this. Peer review. 0.3 hours @£250 TOTAL: £75.00 £1,750.00 Not recoverable Zero suggested £500.00 Why? It is good and normal valuation practice and a PI requirement. Carried out by a qualified MRICS. 20 minutes minimum time to check report, comparables spreadsheet adjustments and premium calculations. The tribunal agrees that this is good practice and should take place. However, it is primarily a safeguard for the author/[NAME] and should be treated in the same way as any overheard of the business and not charged out separately to the client, or for these purposes the Applicant. Time disallowed. [NAME], £1,425 plus VAT

Disbursements (in case details are required in addition to the s.60 fees):

Land Registry fees of £20.70 were incurred Chaps transfer fee (sending completion monies to the respondent) £30 plus VAT = £36 It is understood by the tribunal from the comments above, that these costs are accepted by the Respondent not to be recoverable as section 60 costs

31 May 2023 Dated 20th February 2023

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[NAME] The costs detailed above do not exceed the costs which the Freeholder is liable to pay in respect of the work which this breakdown covers. An invoice for the recoverable s.60 legal fees is enclosed and this is excludes non-s.60 cost items which were separately invoiced. Further copy invoices are enclosed

Dated 8th March 2023

[NAME] for the Applicant

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Sales Invoice No. F0191271 Customer No. C0018156 Date 16/05/2022

Mrs [NAME] 1b [ADDRESS] [POSTCODE]

2 [ADDRESS] [POSTCODE] Leasehold Reform Housing and Urban Development Act 1993

To: taking your instructions, attending at the above property, and reporting to you with our valuations and premium calculations as at the 5 March 2022. To: Our fees as agreed.

£1,750 plus VAT

Job Reference No. J0054903 KR/MO VAT % FEE 20.00 1,750.00 SUB TOTAL £ 1,750.00 VAT TOTAL £ 350.00 TOTAL £ 2,100.00

Payment is due in accordance with our terms of business. Please notify any query to our office in writing within 14 days of receipt of invoice.

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Invoice No: F0191271 Tel: [PHONE]

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F:14 VAT NUMBER: 221348538

PAYMENT OPTIONS Payment terms 14 days 3/10/2022 Due Date £0.00 Amount Due 543325 \ Z285/2 [ADDRESS] [POSTCODE]

[NAME] & Mrs [NAME] [NAME] [ADDRESS] [POSTCODE] VAT INVOICE T: F: DX: W: [PHONE]

2401 Guildford www.[NAME].co.uk Our Ref: Z285/2 INVOICE NUMBER DATE 543325 26/09/2022 MATTER Matter No.: Z285/2 Mr S [NAME] & Mrs S [NAME] 2, [ADDRESS] [POSTCODE]

SUMMARY OF FEES & DISBURSEMENTS Amount (ex VAT) VAT Total Professional Fees £2,500.00 £500.00 £3,000.00 Total: £2,500.00 £500.00 £3,000.00

Total Amount - Amount Paid - Amount to be transferred from Client = Total Amount Due £3,000.00 £3,000.00 £0.00 £0.00

With [COUNSEL] Consultant Solicitor

If you wish to pay your Bill by bank transfer then please use the details below.

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above matter

Invoice: 543325 Page: 2 of 2 Professional Fees Date Description Author Units Amount VAT (ex. VAT) 26/09/2022 To our recoverable Section 60 costs, for dealing with the NT 1 £2,500.00 £500.00 Total: 1 £2,500.00 £500.00