Costs in the LVT

The case of Christoforou and others v Standard Apartments Ltd [2013] UKUT 586 (LC) is now rather less important than it would have been, say, 3 years ago, but is still worthy of note.

Mr Christoforou was the leaseholder of a flat in a building of which the freehold was owned by Standard Apartments. In the usual way, the lease obliged him to pay service charges. There was also a covenant requiring him to indemnify the landlord in respect of costs incurred in remedying a breach of covenant by the leaseholder. A service charge dispute arose and the freeholder issued proceedings in the LVT, resulting in minor deductions to the service charges claimed.

Those proceedings had involved the freeholder incurring just over £20,000 in legal costs. Those costs were charged to Mr Christoforou under the covenant which required him to indemnify the landlord against the costs of remedying a breach. He disputed the costs and there followed an application to the LVT for a determination of the same. We can largely skip over the LVT decision, for there was an appeal to the Upper Tribunal.

The first issue was whether there was a contractual obligation to pay the costs. Here, the UT found for the landlord. There was no doubt or ambiguity about the meaning of the contractual terms. Further, the charges were administration charges within the meaning of Sch.11, Commonhold and Leasehold Reform Act 2002, such that they had to be “reasonable.” Here, the tenant attempted to dispute the costs by contending that the normal practice of billing in six minute units led to higher costs being billed. Again, the UT was having none of it. This was a common method of billing and, in any event, it was clear that the total bill delivered by the solicitors to the freeholder (and, hence, sought from the tenant) had already been discounted as against the total amount of work actually done.

Finally, the tenant attempted to raise an argument based on Sch.12, para.10(4), CLRA 2002. This provides that:

“A person shall not be required to pay costs incurred by another person in connection with proceedings before a leasehold valuation tribunal except by a determination under this paragraph or in accordance with provisions made by any enactment other than this paragraph.”

That, said the tenant, means what it says and he couldn’t be required to pay the costs incurred before the LVT. The difficulty for the tenant was that this argument had been run – and rejected – in two previous cases (Canary Riverside Pte Ltd v Schilling LRX/65/2005, LT and Staghold Ltd v Takeda [2005] 3 EGLR 45, CC) as it had been held that this was a procedural restriction which prevented the LVT from awarding costs otherwise than in very specific circumstances; it did not prevent a party from relying on a contractual right to costs.The UT accepted that analysis.

Now, in England, none of this matters any more, since the FTT(PC) has wider costs powers (see r.13, FTT Rules – wasted costs and/or unreasonable behaviour). But this remains good law for Wales and for those few cases which are working their way through the English system, having started in the LVT but now being concluded in the FTT(PC).

 

Posted in FLW case note, Housing law - All, Leasehold and shared ownership.

About J

J is a barrister in London. He loves service charges and all things leasehold law related. He also likes beating rogue landlords and mortgage companies.

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