Disputes between landlords and their tenants can arise for a variety of reasons, for example if a tenant falls into arrears following non-payment of service charges.
The county courts and the leasehold valuation tribunal (now the FTT) have historically limited recoverability of costs to minimal, fixed costs incurred on issuing proceedings for the recovery of outstanding charges.
Eleanor Cornthwaite, an expert in long residential leasehold disputes, considers the impact of a recent court of appeal decision concerning the recoverability of costs.
The rules
Current rules provide that a court cannot order the payment of costs, other than the fixed costs of issuing proceedings for claims that don’t exceed £10,000.
Courts and tribunals generally follow these rules and refuse to permit landlords to recover costs despite leases containing cost recovery clauses.
While it is an area currently rife with disputes and confusion, a recent decision by the court of appeal has provided greater clarity on the matter.
Chaplair Ltd v Kumari
In the case of Chaplair Ltd v Kumari, the claimant landlord and defendant tenant had entered into a lease which stated the tenant was liable to pay for legal costs incurred by a landlord in or in contemplation of any proceedings under sections 146 and 147 of the Law of Property Act 1925.
This is the legislation which stipulates that a notice must be served to the tenant, specifying the breach and providing the opportunity to remedy the issue before the landlord can issue proceedings for possession.
After Kumari failed to pay ground rent and service charges, the landlord issued court proceedings and was successful in recovering these charges.
An appeal was lodged against an order that Kumari pay Chaplair’s costs relating to earlier leasehold valuation tribunal (LVT) proceedings. The court dismissed the appeal and also refused permission for a second appeal against an order for Kumari to pay the costs of the claim.
The decision confirms the status of legal cost clauses in contractual agreements so is welcome news for landlords looking to recover legal costs for lease breach disputes.
The case is helpful because it confirms the status of contractual agreements on costs. It suggests that there has to be good reason for depriving a successful litigant of their right to rely on the terms of the lease.
This area of law is complex, so it is vital that landlords seek expert legal advice to ensure that they have the best chance of recovering their costs.
For more information on recovering costs or any other residential leasehold dispute matter please call Eleanor Cornthwaite on 0161 761 4611 or email eleanor.cornthwaite@whnsolicitors.co.uk
