costs recovery
📖 What is costs recovery? Meaning and definition
In the context of UK tenancy law, costs recovery often arises in disputes concerning service charges or leasehold matters. Landlords may seek to recover various expenses, including legal fees, accountant's fees, and administrative costs like chasing letters, from lessees. However, tribunals have powers to limit or extinguish this ability, ensuring fairness for tenants.
For example, under Section 20C of the Landlord and Tenant Act 1985, a tribunal can order that a landlord's costs from tribunal proceedings cannot be passed on to lessees through service charges. Similarly, Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 allows a tribunal to extinguish any liability an applicant (tenant) might have had to a respondent (landlord) for the costs of proceedings.
This means that even if a landlord incurs significant legal or administrative costs during a dispute, they may not always be able to recover these from their tenants. The tribunal's decision on costs recovery is a crucial aspect of the overall outcome, impacting the financial burden on both landlords and tenants. Tenants can specifically apply for orders that costs not be recoverable as charges, using the aforementioned legal provisions.
In some cases, specific legislation, such as Section 60(1) of the Leasehold Reform, Housing and Urban Development Act 1993, allows for the determination of sums payable, which can include legal and valuation fees, by an applicant in respect of a new lease, indicating scenarios where certain costs are indeed recoverable.
📋 Requirements
- The costs must be related to legal proceedings, such as tribunal applications concerning service charges or leasehold matters.
- The party seeking to recover costs must have incurred expenses like legal fees, accountant's fees, or administrative charges.
- A tribunal must make a determination or order regarding the recovery of these costs, often under specific statutory provisions.
- For tenants, an application can be made for costs not to be recoverable as charges.
📝 Procedure
- A party incurs costs, such as legal or accountant's fees, during legal proceedings.
- An application is made to a tribunal, for example, under Section 27A of the Landlord & Tenant Act 1985 for service charge determination.
- Alongside, or as part of the main application, an application may be made for costs not to be recoverable, citing Section 20C of the Landlord and Tenant Act 1985 or Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act…
- The tribunal hears the case and makes a decision, which includes whether any costs are recoverable or if liability for costs is extinguished.
- The tribunal may also order one party to reimburse the other for tribunal fees paid.
💡 Examples
- A landlord sought to recover £330 plus VAT for legal fees and £20 for a chasing letter from their tenant, but the Tribunal ordered that these costs could not be passed through the service charge.
- Tenants successfully applied to the First-tier Tribunal for an order under Section 20C of the Landlord and Tenant Act 1985, preventing the landlord from recovering their legal costs of the proceedings via service charges.
- A tribunal determined that a respondent landlord was not entitled to recover the costs of proceedings and extinguished any liability the applicants (tenants) had for those costs under the Commonhold and Leasehold Reform Act 2002.
- In a case concerning the grant of a new lease, the tribunal found that the applicant was payable for legal fees of £3,137.00 plus VAT and valuation fees of £1,750 plus VAT.
📚 Legal basis
- Landlord and Tenant Act 1985
- Commonhold and Leasehold Reform Act 2002
- Leasehold Reform, Housing and Urban Development Act 1993
❓ Frequently asked questions
What kind of costs can a landlord try to recover?
Landlords might try to recover various expenses, including legal fees, accountant's fees, and administrative costs like sending chasing letters, incurred during disputes.
Can a tenant prevent a landlord from recovering costs?
Yes, tenants can apply to a tribunal for an order that a landlord's costs not be recoverable, often citing Section 20C of the Landlord and Tenant Act 1985 or Paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.
What does it mean if costs are 'passed to the lessees through the service charge'?
This means that the landlord includes their legal or administrative expenses in the service charges that tenants are required to pay, effectively making the tenants cover the landlord's costs.
Will I always have to pay my landlord's costs if they win a case?
Not necessarily. A tribunal has the power to order that a landlord's costs cannot be recovered from tenants, even if the landlord is successful in other aspects of the case, or to extinguish any liability for such costs.
Can a tribunal order a landlord to pay my costs?
Yes, a tribunal can order a landlord to reimburse an applicant (tenant) for specific costs, such as the tribunal fees paid by the applicant, within a set timeframe.
Where can I find the specific laws about costs recovery?
Relevant laws include the Landlord and Tenant Act 1985 (especially Section 20C), the Commonhold and Leasehold Reform Act 2002 (Paragraph 5A of Schedule 11), and the Leasehold Reform, Housing and Urban Development Act 1993 (Section 60(1)).