reasonable costs
📖 What is reasonable costs? Meaning and definition
In UK tenancy law, particularly in processes like collective enfranchisement or lease extensions, 'reasonable costs' are those expenses that a tenant may be liable to pay to their landlord or other relevant parties. These costs must have been incurred in pursuance of a legal notice, such as one given under section 13 or section 42 of relevant legislation. The principle is that the tenant is responsible for costs that are proportionate and necessary for the landlord to undertake specific actions related to the tenant's claim.
These costs can cover a range of activities. For example, they include investigations to determine if an interest in a property is liable for acquisition, verifying property titles, providing necessary documents, valuations of property interests, and the legal conveyance or grant of a new lease. The key is that these activities must have been 'reasonably undertaken' and the costs themselves must be 'reasonable'.
Crucially, for professional services, costs are only considered reasonable if they are what one would 'reasonably expect to have been incurred' in similar circumstances, as if the landlord were acting voluntarily. This means that inflated or unnecessary professional fees would not be recoverable. The determination of what constitutes reasonable costs, especially when not agreed upon, can be made by a tribunal or other relevant authority, which will assess the fairness and necessity of the expenses.
📋 Requirements
- Costs must have been incurred in pursuance of a legal notice (e.g., under section 13 or section 42).
- Costs must be 'reasonable' and 'incidental' to specific matters outlined in the legislation.
- Investigations undertaken must have been 'reasonably undertaken'.
- For professional services, costs are reasonable only if they might reasonably be expected to have been incurred in voluntary circumstances.
- The costs must not be of a type that would be void if stipulated to be borne by the tenant on a voluntary sale.
📝 Procedure
- A tenant gives a notice (e.g., under section 13 or 42) initiating a process like collective enfranchisement or lease extension.
- The landlord or relevant party incurs costs in pursuance of this notice.
- These costs relate to specific matters such as investigations, valuations, or the grant of a new lease.
- The tenant becomes liable for the 'reasonable costs' incurred by the landlord.
- If the parties do not agree on the amount, an application can be made to a tribunal (e.g., the First-tier Tribunal) for a determination of the reasonable costs payable.
💡 Examples
- A tenant seeking a lease extension is liable for the landlord's reasonable costs for investigating the tenant's right to a new lease and for the valuation of the flat to determine the premium.
- In a collective enfranchisement claim, the leaseholders are responsible for the freeholder's reasonable costs associated with verifying the title to the property and the legal conveyance of the interest.
- A landlord's legal fees of £2,100 and surveyor's fees of £1,350 (including VAT) were submitted for determination as 'reasonable costs' payable by the tenant under a statutory claim.
- Costs for professional services, such as those from a solicitor or surveyor, are only deemed reasonable if they align with what would typically be incurred in a similar, voluntary transaction.
📚 Legal basis
- Section 60(1) of the 1993 Act
❓ Frequently asked questions
What kind of costs are considered 'reasonable'?
Reasonable costs typically include expenses for necessary investigations, property valuations, verifying titles, and legal work related to the grant of a new lease or conveyance, provided these activities were reasonably undertaken.
Can a landlord charge any amount they want for 'reasonable costs'?
No, costs must be genuinely reasonable. For professional services, they are only considered reasonable if they are what one would expect to incur in similar circumstances if the transaction were voluntary.
What if I disagree with the landlord's costs?
If you cannot agree on the amount of reasonable costs with your landlord, you can apply to a tribunal, such as the First-tier Tribunal (Property Chamber), for a determination.
Do 'reasonable costs' include VAT?
Yes, 'reasonable costs' can include VAT, as seen in cases where legal and surveyor's fees were submitted for determination including VAT.
Are there any costs that are never considered 'reasonable'?
Costs that would be void if stipulated to be borne by the tenant on a voluntary sale are explicitly excluded from being considered reasonable costs under the relevant legislation.
Should I get legal advice if my landlord is claiming 'reasonable costs'?
It is advisable to seek advice from a qualified solicitor experienced in leasehold enfranchisement or lease extensions if you are facing a claim for 'reasonable costs' to ensure your rights are protected and the costs are properly scrutinised.