litigation costs
📖 What is litigation costs? Meaning and definition
In the context of UK tenancy law, 'litigation costs' often appear as a type of 'administration charge' that a landlord might seek to recover from tenants. These are contractual costs specified within a lease. Tenants, particularly those in long leasehold interests, may find themselves liable for these costs, which arise from legal proceedings, such as those heard by the First-tier Tribunal (Property Chamber).
Tenants have legal avenues to challenge these charges. Under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, a tenant can apply to the Tribunal for an order to reduce or extinguish their liability to pay such an administration charge. This means the Tribunal can assess whether the charge is reasonable and decide if the tenant should pay all, some, or none of it.
Additionally, tenants can apply under section 20C of the Landlord and Tenant Act 1985 for an order that the landlord's costs in connection with Tribunal proceedings are not to be included in service charges. This prevents landlords from automatically recovering their legal expenses through the service charge mechanism, even if they were the 'successful' party in the dispute. The Tribunal considers various factors, such as the success of each party and any offers to settle, when making such determinations.
The Tribunal's role is to ensure fairness, and it can reduce the amount recoverable, for example, by ordering that only a proportion of the administration charges for litigation costs may be recovered via the service charge. This acknowledges that neither party may be wholly successful and aims to prevent undue burden on tenants.
📋 Requirements
- The costs must be an 'administration charge in respect of litigation costs' as defined in the lease.
- The tenant must be a tenant of a dwelling in England.
- An application must be made to the First-tier Tribunal (Property Chamber) for an order to reduce or extinguish the liability.
- The Tribunal will consider factors such as the success of each party and any settlement offers.
📝 Procedure
- A tenant applies to the Tribunal for an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002.
- The tenant may also apply under section 20C of the Landlord and Tenant Act 1985 to prevent costs from being included in service charges.
- The Tribunal may convene a case management conference (CMC) to discuss how to deal with the application.
- The Tribunal holds hearings and may carry out inspections.
- The Tribunal makes a determination, which may include reducing or extinguishing the tenant's liability for the administration charge in respect of litigation costs.
💡 Examples
- A group of tenants applied to the Tribunal to reduce their liability for an administration charge related to the landlord's legal costs in a previous dispute over service charges.
- The Tribunal decided that only half of the administration charges for litigation costs could be recovered from a tenant because neither the tenant nor the landlord was entirely successful in the original claim.
- A landlord sought payment of costs and Tribunal fees from tenants, but the tenants applied for an order to prevent these from being regarded as relevant costs for service charge purposes.
- A tenant successfully argued that a significant portion of the landlord's initial claim for litigation costs was unreasonable, leading to a substantial reduction in the amount payable.
📚 Legal basis
- Commonhold and Leasehold Reform Act 2002
- Landlord and Tenant Act 1985
- Tribunal Procedure (first-tier Tribunal) (Property Chamber) Rules 2013
❓ Frequently asked questions
What are 'litigation costs' in a tenancy context?
These are legal expenses incurred during a dispute, often specified in a lease as an 'administration charge' that a landlord might try to recover from tenants.
Can my landlord make me pay their litigation costs?
Your lease might include a clause allowing your landlord to charge you for their litigation costs as an administration charge. However, you can challenge this at the First-tier Tribunal.
How can I challenge litigation costs charged by my landlord?
You can apply to the First-tier Tribunal under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 to reduce or extinguish your liability for such charges.
What is a 'section 20C order' and how does it relate to litigation costs?
A section 20C order, under the Landlord and Tenant Act 1985, prevents a landlord's legal costs from being included in service charges. This is important because it stops landlords from recovering their legal expenses through service charges, even if they won the case.
Will the Tribunal always reduce the litigation costs I have to pay?
Not necessarily. The Tribunal considers factors like who was successful, if any settlement offers were made, and the overall circumstances. They might reduce the costs, extinguish them entirely, or uphold them.
Does being a 'successful party' guarantee I won't pay the other side's costs?
No, even a successful party has no automatic expectation of a section 20C order. The Tribunal will still assess the overall fairness and circumstances of the case when deciding on cost recovery.