Tenant Granted Permission to Recover Legal Costs from Landlord

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case references : LON/00BK/LSC/2023/0389 LON/00BK/LAC/2024/0016 Property : [ADDRESS] [POSTCODE] Applicant : [redacted] C/o [APPELLANT] : Ms [COUNSEL] of Counsel instructed by [NAME] : [RESPONDENT] : Mr [COUNSEL] of application : Various applications concerning legal costs Tribunal members : Judge N [NAME] and date of hearing : 3 March 2025 at 10 [ADDRESS] [POSTCODE] Date of decision : 17 March 2025

DECISION

2 The Decision of the Tribunal The Tribunal makes an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 limiting the Respondent's liability to pay an administration charge in respect of the Applicant’s costs which form the subject matter of these applications to 70% of the costs claimed, namely £5,943. This sum is payable within 28 days of the date of this decision. The applications 1. By a decision dated 22 April 2024 in application reference LON/00BK/LSC/2023/0389 (“the 2024 proceedings”), a differently constituted Tribunal made the following determinations against [RESPONDENT], which was also the Respondent in the 2024 proceedings: (1) The Tribunal determines that the administration charge of £563.60 being the Landlord’s costs of earlier proceedings is payable by the Respondent within 28 days from the date of this decision. (2) The Tribunal determines that the sum of £22,917.38 for major works is payable by the Respondent and payable within 28 days from the date of this decision. (3) The Tribunal determines that the on-account service charge for the half year commencing on 29 September 2023 in the sum of £1, 879.84 is payable by the Respondent and payable within 28 days from the date of this decision.

2. There are two applications currently before the Tribunal under references LON/00BK/LSC/2023/0389 and LON/00BK/LAC/2024/0016.

3. In application reference LON/00BK/LAC/2024/0016, the Applicant seeks a determination under Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”) that a variable administration charge in the sum of £8,490.00 charged by the Applicant in respect of the legal costs of the 2024 proceedings is reasonable and payable by [COMPANY].

4. In application reference LON/00BK/LSC/2023/0389, the Respondent seeks orders under section 20C Landlord and Tenant Act 1985 (“the 1985 Act”) and under paragraph 5A of Schedule 11 to the 2002 Act in respect of the same legal costs.

3 5. At paragraphs 7 to 9 of the 2024 Decision, it is recorded that 5-6 [NAME], London, [POSTCODE] is a four storey, mid-terrace Victorian building which has been converted into seven flats. The Property is [ADDRESS], [POSTCODE].

6. The Respondent holds a long lease of the Property and the Applicant is the freehold owner. The Respondent’s current lease is dated 3 October 2016 and it incorporates the provisions of the original lease which is dated 12 January 1983. The hearing and procedural matters 7. An oral hearing took place on 3 March 2025 at 10 [ADDRESS] [POSTCODE]. [NAME] of Counsel represented the Applicant and Mr [COUNSEL] represented [COMPANY].

8. At the commencement of the hearing, the parties agreed that the applications solely concern legal costs and that there are no issues currently before the Tribunal which require the professional expertise of a Tribunal expert. 9. [COMPANY] filed and served an updated witness statement of Mr [NAME] at 00.15 am on 3 March 2025 despite the fact there was no Direction of the Tribunal permitting it to do so.

10. However, this witness statement primarily consisted of argument and, having considered the overriding objective pursuant to rule 3 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 (“the 2013 Rules”), the Tribunal determined that it was fair and just to permit the Respondent to rely upon the late witness statement as a skeleton argument in accordance with its case management powers pursuant to rule 6 of the 2013 Rules.

11. This was on the basis that if, during the course of the hearing, the Respondent sought to rely upon any new evidence which the Applicant was not in a position to deal with, Counsel for the Applicant would be permitted to draw the matter to the Tribunal’s attention.

12. When Ms [NAME] was responding to a question from the Tribunal on the issue of why the Applicant had used a Grade A solicitor throughout, Mr [COUNSEL] sough to interrupt Ms [COUNSEL] with a comment concerning an alleged connection between the landlord and the solicitor. The Tribunal stopped Mr [COUNSEL] from interrupting Ms [NAME].

13. During Mr [RESPONDENT] representations on behalf of the Respondent, Ms [RESPONDENT] asked the Tribunal if she could seek clarification concerning Mr [NAME] submission. She then went onto explain that she was seeking clarification as to why Mr [NAME] was arguing that the costs of the

4 2024, proceedings insofar as they concerned the major works, were irrecoverable unless the major works were (as is contended by the Applicant) service charge costs.

14. The Tribunal considered that it would be in the Respondent’s interests for this aspect of the Respondent’s case to be clarified so that the Tribunal as well as the Applicant could understand Mr [APPELLANT] submissions fully. Mr [NAME] raised the point that he had not been permitted to interrupt Ms [NAME]. However, Ms [NAME] had sought permission to speak in order be able to understand what Mr [NAME] was saying. She did not interrupt Mr [NAME], without seeking permission, in order to present her own case. This is why Ms [NAME] was permitted to speak.

15. During the course of the hearing, the Tribunal raised concerns regarding the Applicant’s costs which had not been identified by Mr [COUNSEL], namely, the use of a Grade A solicitor throughout and the time spent on correspondence, emails and documents. Ms [NAME] agreed that this was appropriate as part of the Tribunal’s jurisdiction to determine what was just and reasonable.

16. As regards the Respondent’s application under section 20C of the 1985 Act, Ms [APPELLANT] formally confirmed, on behalf of the Applicant, that the Applicant will not seek to recover the costs which form the subject matter of these applications from the Respondent through the service charge. It is therefore not necessary to make an order under section 20C of the 1985 Act.

17. The Tribunal asked Mr [RESPONDENT] whether the Respondent wished to make oral application under paragraph 5A of Schedule 11 of the 2002 Act in respect of the costs of the hearing of 3 March 2025. The Tribunal indicated a willingness to hear such an application and, on behalf of the Applicant, Ms [APPELLANT] did not object. However, Mr [APPELLANT] did not make such an application and the costs of the hearing of 3 March 2025 are therefore not before this Tribunal. 18. [NAME] indicated that he wishes to challenge the apportionment of the service charge costs. However, this Tribunal cannot go behind the determinations which were made in the 2024 proceedings (in respect of which Mr [RESPONDENT] stated that the Respondent had been refused permission to appeal). The applications before this Tribunal solely concern the Applicant’s litigation costs of the 2024 proceedings, which the Applicant is seeking to recover as an administration charge.

19. During the course of the hearing, the Tribunal noted that at page 25 of the original lease there is provision that “the Total Expenditure shall not include any expenditure incurred by [NAME] in an Accounting Period in carrying out his obligations under Clause 5(4) of this Lease insofar as they relate to any part of the Building occupied for the time

5 being by [NAME] his tenants licensees servants or agents”. Mr [NAME] is of the view that this provision has not been complied with. Whether or not that is correct is not a matter before this Tribunal and the Tribunal cannot provide either party with advice. However, the parties may wish to seek independent legal advice on this issue. The Tribunal’s Determination 20. Paragraph 5A of Schedule 11 to the 2002 Act provides that: (1) A tenant of a dwelling in England may apply to the relevant court or tribunal for an order reducing or extinguishing the tenant's liability to pay a particular administration charge in respect of litigation costs. (2) The relevant court or tribunal may make whatever order on the application it considers to be just and equitable.

21. The question for the Tribunal what is “just and equitable”. This provision provides the Tribunal with a wide discretion to exercise having regard to all the circumstances of the case.

22. In the 2024 proceedings, the Tribunal found the legal costs are potentially recoverable by the Applicant pursuant to clause 3(e) of the original lease of the Property (which, as stated above, has been incorporated into the current lease).

23. By clause 3(e), the Respondent covenanted: “To pay to [NAME] as arrears of rent all costs charges and expenses (including solicitors’ costs and Counsels’ and surveyors’ fees) incurred by [NAME] for the purpose of or incidental to the preparation and service of a notice under sections 146 and 147 Law of Property Act 1925 notwithstanding that forfeiture may be avoided otherwise than by relief granted by the Court” 24. Ms [NAME] took the Tribunal to a notice pursuant to section 146 of the Law of Property Act 1925 dated 3 July 2024 which was served in respect of all three sums which were found in the 2024 proceedings to be payable by the Respondent, and to related correspondence. On the basis of these documents, the Tribunal is satisfied on the balance of probabilities that the litigation costs of the 2024 proceedings were incurred or the purpose of and/or incidental to the preparation of the section 146 notice.

25. Mr [NAME] argued that the dispute which resulted in the 2024 Tribunal decision should have been resolved by negotiation and/or mediation and that the Applicant was unwilling to mediate. However,

6 he did not suggest that the Respondent would (or should) have agreed to pay the sums which the Tribunal ultimately found to be reasonable. There was no obligation on the Applicant to accept any lower sum.

26. Mr [APPELLANT] also argued that the cost of the major work which formed part of the subject matter of the 2024 proceedings was unreasonably high. This Tribunal does not have jurisdiction to overturn or go behind a previous Tribunal’s decision and so evidence was not heard on this issue.

27. Mr [NAME] also submitted that the sum which was found to be payable in the 2024 proceedings in respect of the major works was not a service charge. Section 18 of the 1985 Act includes provision that: (1)In the following provisions of this Act “service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent— (a) which is payable, directly or indirectly, for services, repairs, maintenance improvements or insurance or the landlord's costs of management, and (b) the whole or part of which varies or may vary according to the relevant costs.

28. The charges in respect of major works fall within this definition and it is also noted that Mr [NAME] did not explain why the term “service charge” is relevant under clause 3(e) of the lease.

29. Mr [COUNSEL] informed the Tribunal that the Applicant’s solicitor had sent unnecessarily aggressive correspondence to the Respondent but he was not able to refer the Tribunal to any such correspondence in the hearing bundle.

30. Mr [NAME] also argued that legal costs in the sum of £8,490.00 are disproportionately high given that the sum in dispute in the 2024 proceedings was in the region of £25,000. The Tribunal accepts Ms [NAME] submission that the level of costs as a proportion of the sum in dispute is not unusually high. However, the Tribunal does not find that it is just and reasonable to order the Respondent to pay costs at this level on the facts of the present case.

31. The Tribunal is satisfied that the Applicant’s Grade A solicitor’s hourly rate is appropriate for this type of work in the part of the country in which the solicitor practises. The Tribunal is also satisfied that Counsel’s fees are appropriate in the circumstances of this case. However, the Tribunal is not satisfied that it was reasonable to use a

7 Grade A solicitor throughout, particularly given the relatively straightforward nature of the 2024 proceedings.

32. The Tribunal also finds, in the absence of any explanation, that the time spent by the Applicant’s solicitor collating, reviewing, preparing documents, and corresponding was slightly higher than the Tribunal would consider to be reasonable. The Applicant did not include any of the underlying documents in the bundle to show their length and/or complexity and, from the 2024 Tribunal decision, this appears to have relatively straightforward dispute. Ms [COUNSEL] did not have instructions as to why a Grade A solicitor was used throughout or as to the time spent on the 2024 proceedings by the solicitor.

33. Having considered all of the circumstances, including the level of success of the Applicant in the 2024 proceedings and the matters set out above, the Tribunal finds that it is just and equitable to make an order under paragraph 5A of Schedule 11 to the 2002 Act limiting the Respondent's liability to pay an administration charge in respect of the Applicant’s costs which form the subject matter of these applications to 70% of the costs claimed, namely £5,943. The Tribunal is also satisfied that these costs are reasonable having carried out, as is necessary in the absence of a detailed explanation, a broad-brush assessment. These costs are payable within 28 days of the date of this decision.

Name: Judge N [NAME]: 17 March 2025

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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 application for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application 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 making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).