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By J
22/01/2012

The best thing in life is free

But, like John Lee Hooker, I need money. It’s one of the reasons (a) I keep a close eye on costs cases and (b) I don’t get involved in the never-ending attempt by law students to get us to teach them about constructive trusts on this blog. Plantation Wharf Management Co Ltd v Jackson and another is a case that falls under the first category. No students here.

Whether a lease allows for recovery of legal costs is not usually a straight-forward proposition. in Sella House Ltd v Mears [1989] 1 EGLR 65, the Court of Appeal indicated that, in general terms, one would need to find a clause in “clear and unambiguous terms” before allowing for recovery. As against that, in Iperion Investments Corp. v Broadwalk House Residents Ltd [1995] 2 EGLR 47, the Court of Appeal did allow for the recovery of legal costs in a lease which did not necessarily contain such “clear and unambiguous” terms. In practice, it can be very difficult for landlords and tenants to know in advance whether the court/LVT will follow Sella House or Iperion.

In this case, the leaseholders had issued proceedings in the LVT disrupting the reasonableness of their service charges. Aside from some “modest amendments” the LVT found against the leaseholders. The LVT did, however, find that there was no contractual right to legal costs (i.e. it followed Sella House) and, in the event that it was wrong about that, indicated that it make an order under s.20C, Landlord and Tenant Act 1985.

The appellant successfully appealed to the Upper Tribunal. The lease did not refer to the recovery of legal costs, but it did refer to “professional advisers” and the costs of enforcing covenants. It was “extremely difficult” to consider legal proceedings without employing lawyers. The lease did not need to expressly refer to lawyers and legal costs if it was clear that, in context, that is what was intended. In this regard, it was relevant that the appellant was a lessee-owned company. There was a possibility that, if it did not recover its costs, there would be a “disaster”. It also followed that the reasoning for the order under s.20C was flawed and, as result, that question was remitted for reconsideration.

Two points seem to me to have emerged from this case. First, the lease need not expressly mention legal costs if, in context, it is clear that these were intended. That must be right. There is no magic to any particular form of words in this area, but it is useful to have it stated again and for the decision in Sella House to be put in context. Secondly, however, is the importance of lessee-owned companies recovering their costs. I’m slightly surprised that the Embassy Court case wasn’t cited on this point (Embassy Court v Lipman (1984) 271 EG 545), as it’s a very useful Court of Appeal authority on why it would be simply unrealistic to leave lessee-owned companies out of pocket in respect of reasonably incurred professional fees.

 

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.

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