Tenant Must Pay Landlord's Costs for Lease Extension Claim

OUTCOME: Allowed

© CROWN COPYRIGHT 2013

FIRST-TIER TRIBUNAL [NAME] (RESIDENTIAL PROPERTY) Case Reference : MM/LON/00BK/0C9/2022/0113 Property : 26 [ADDRESS] [POSTCODE] Applicant : [redacted] : [RESPONDENT] Solicitors Respondent : [redacted] : [COUNSEL] [NAME] of Application : Assessment of costs under section 60(1) of the Leasehold Reform Housing and Urban Development Act 1993 and fees under section 56. Tribunal members : Judge Professor Robert M. Abbey

Date of Decision

8 September 2022

:

DECISION

2 The background

1. The applicant is the long leaseholder of the building in which the property is situate and the competent landlord for the purposes of the Leasehold Reform, Housing and Urban Development Act 1993 (the “1993 Act”). The Applicant is the competent landlord by virtue of its lease dated 21st April 2010 for a term of 999 years from 21 April 2010.

2. The Applicant’s lease is subject to a lease of the property dated 31st May 1984 for a term of 99 years from 25th March 1976. The lease is held by the Respondent. The respondent is thus the long leaseholder of 26 [ADDRESS] [POSTCODE]

3. The leaseholder respondent served a section 42 notice seeking to exercise his right to a lease extension under S48 of the 1993 Act and a Counter notice was served.

4. No application was made by the Respondent pursuant to Section 48 (1) of the Act within the time limit prescribed by Section 48(2) of the Act. An application was required to have been made by the 24th February 2022.

5. 8. In view of the fact that no application had been made the Respondent’s claim for the grant of a new lease became deemed withdrawn pursuant to Section 53 of the Act.

6. On the 10th March 2022 the Applicant’s solicitors wrote to the Respondents solicitors advising them of the deemed withdrawal and setting out details of the costs recoverable pursuant a Section 60 of the Act.

The application

7. By an application dated 9 June 2022 the applicant has now applied for an assessment of the landlord’s costs under section 60(1) of the 1993 Act and surveyor’s fees under section 56.

8. Directions were issued dated 13th June 2022 for the future management of the claim. Further to those directions a bundle was lodged containing the applicant’s costs schedule and submissions made on behalf of the applicant.

9. Neither party having requested an oral hearing, the application was considered by way of a paper determination.

The Legal costs

3 10. The costs in issue are limited to legal costs in the sum of £2090 (plus VAT), disbursements of £21 plus VAT plus an additional disbursement of Couriers fees of £10 plus VAT. The applicants’ s valuation fees were not agreed between the parties and therefore are being considered by the Tribunal in the sum of £925 plus VAT of £185 giving a total of £1110.00.

The Applicant’s case

11. The Tribunal was provided with an itemised schedule of the legal fees. This did identify the date of each activity and it did give a brief description of the activity, the type of fee earner involved, (by reason of the level of the hourly rate) and the time spent and resultant cost. The schedule listed one fee rate per hour of £495 (Grade A). There was also an assistant Grade A fee earner involved where the charge out rate was at £385 per hour.

12. The applicant says that “On the 13th June 2022 the [NAME] issued Directions for the future management of the claim. …. On the 4th July 2022 the Applicant submitted its statement of costs in accordance with Direction number 4 of the Directions dated 13th June 2022. The Respondent was required to send to the Applicant its statement of case setting out any dispute to the costs claimed by the 25th July 2022. The Respondent has not complied with Direction 5 and accordingly has not disputed any of the costs claimed.

13. In the above circumstances the Applicant respectfully submits that the [NAME] determine all of the costs claimed being those set out in the [NAME] application dated 9th June 2022.”

14. The applicant says that the rates charged are reasonable and properly payable by the respondent. The respondent has not submitted anything to the Tribunal relating to the costs application. The applicant says the work was necessary given the nature of the proposed transaction and therefore it was proportionate for the applicant to incur the costs and disbursements listed above.

15. Disbursements in the sum of £21 in respect of land registry fees were not disputed and are therefore agreed as is the case for the courier fees.

The Respondent’s case

16. As was noted above, the Respondent was required to send to the Applicant its statement of case setting out any dispute to the costs claimed by the 25th July 2022. The Respondent has not complied with Direction 5 and accordingly has not disputed any of the costs claimed.

4 Relevant Statutory Provision and Case Law 17. The statutory law applicable to this dispute is set out in the Appendix annexed to this decision.

18. Judicial guidance on the application of costs provisions was given in the case of [NAME] v [ADDRESS] Ltd [2010] UKUT 81 (LC), LRA/58/2009. That case concerned the proper basis of assessment of costs in enfranchisement cases under the 1993 Act, whether concerned with the purchase of a freehold or the extension of a lease. The decision (which related to the purchase of a freehold and, therefore, costs under section 33 of the Act, but which is equally applicable to a lease extension and costs under section 60) established that costs must be reasonable and have been incurred in pursuance of the initial notice and in connection with the purposes listed in sub-sections [33(1)(a) to (e)]. The respondent tenant is also protected by section 33(2) which limits recoverable costs to those that the applicant landlord would be prepared to pay if it were using its own money rather than being paid by the tenant.

19. In effect, this introduces what was described in [NAME] as a “(limited) test of proportionality of a kind associated with the assessment of costs on the standard basis.” It is also the case, as confirmed by [RESPONDENT], that the landlord should only receive its costs where it has explained and substantiated them.

20. It does not follow that this is an assessment of costs on the standard basis (let alone on the indemnity basis). This is not what section 60 says, nor is [NAME] an authority for that proposition. Section 60 is self-contained.

21. There is further guidance in [COMPANY] v [NAME] 2012 UKUT 215: - 20. The value of a dispute and the amount to be gained, or lost, by a party, is always a matter that a party will bear in mind when considering whether to incur costs and the level of those costs.

21. While the issues involved in enfranchisement claims can undoubtedly be complex and LVT decisions in [COMPANY] v [COMPANY] 1005/03, followed in [COMPANY] v Twin LON/00BK/0C9/2007/0026 and [COMPANY] v Allen LON/00AH/OLR/2009/0343 establish that the LVT accepted that a landlord is entitled to instruct the solicitors of its choice and is not obliged to instruct the cheapest or most local solicitors, the LVT were perfectly entitled to take into account the actual sum in dispute in determining whether the costs of professional services in investigating the tenant’s right to a new lease were reasonable and that the investigation was reasonably undertaken.

5 22. The LVT were entitled to determine that costs far in excess of the amounts involved were not costs that “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” and the appeal on this ground therefore fails. The case of [NAME] has in setting out the details above helped further clarify how reasonable costs are to be determined in an enfranchisement claim such as this one.

22. Leggatt J in [COMPANY] v [NAME] [20 15] EWHC 404 (Comm) at [13] wrote further guidance and clarification saying: -

“…. it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone (of reasonable and proportionate costs) is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances.”

Thus, a court would look at what expenses were reasonable and appropriate by looking at the least amount a party in proceedings could be reasonably anticipated to have spent in order to have demonstrated to the court that it had presented its case in an effective and competent manner. Overall, the Tribunal will take a broad-brush approach to the question of costs but only in the light of the clear judicial guidance set out above.

The tribunal’s decision

23. The provisions of section 60 are well known and the tribunal does not propose to set the legislation out in full. (For reference purposes an extract of the legislation and in particular section 60 is set out in an appendix to this decision along with details of appeal rights in an annex). However, costs under that section are limited to the recovery of reasonable costs of an incidental to any of the following matters, namely: -

i. Any investigation reasonably undertaken of the tenant’s right to a new lease; ii. Any valuation of the tenant’s flat obtained for the purpose of fixing the premium or amount payable by virtue of Schedule

6 13 in connection with the grant of a new lease under section 56 iii. The grant of a new lease under that section.

24. Subsection 2 of section 60 provides that: -

“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”.

25. The applicant has set charges using hourly rates detailed above (Grade A). The tribunal accepts the hourly rates mentioned above as being appropriate in the case.

Accordingly, the Tribunal felt it should allow the claim as drawn especially as the respondent failed to engage with the process in relation to this costs application. Therefore, the Tribunal has carefully considered the details of the claim and has concluded that it seemed appropriate given the nature of the matter. The Tribunal considers the sum claimed including surveyors’ valuation fees to be a reasonable amount for costs in this case given the nature of the dispute.

26. For all these reasons the Tribunal approves the costs claimed by the applicant as claimed including the surveyor’s valuation fees.

Name: Judge Professor Robert M. Abbey Date: 8 September 2022

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APPENDIX

Leasehold Reform, Housing and Urban Development Act 1993

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 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.

(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)A tenant 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)A tenant 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 a tenant 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.

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Annex - Rights of Appeal

1. 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.

2. 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.

3. 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.

4. 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.