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Service charge miscellany

Aster Communities v Kerry Chapman & Ors (2021) EWCA Civ 660

The Court of Appeal dsimissed Aster’s appeal from the Upper Tribunal and upheld the UT’s reasoning on setting conditions on Aster’s application for dispensation from section 20 consultation requirements in respect of balcony re-asphalting works. Aster were to pay the leaseholder’s legal costs of the application, and pay for the leaseholders to obtain an expert report on the necessity of complete re-asphalting. Our report on the UT judgment is here.

 

Ramjotton v Patel (2021) UKUT 19 (LC)

The FTT had erred in deciding a figure for the landlord’s litigation costs in Tribunal proceedings which were to be demanded as an administration charge. The FTT could not make a costs order, save under rule 13, and it was not a proper response to an application by the tenant under paragraph 5A Schedule 11 Commonhold and Leasehold Reform Act 2002

The FTT was empowered, as we have seen, to make “whatever order it considers to be just and equitable”, but that is not a power to make a costs order in the form seen in the May review. The FTT’s order has to relate to the tenant’s application to reduce or extinguish the administration charges. The power in paragraph 5A to do what is just and equitable is not inconsistent with and indeed does not have any impact on the limitations on costs orders in rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013. Paragraph 5A was enacted in response to the commonplace situation where the FTT cannot make an order for costs (because the special grounds in rule 13 are not made out), yet the landlord has a contractual power to recover costs by way of administration charges, and it is that contractual power that the FTT can control when making an order under paragraph 5A. It is open to the FTT to say that the landlord should not recover any litigation costs by way of administration charge – just as section 20C of the 1985 Act enables it to order in relation to service charges – or to say that certain elements of the costs could not be recovered, or to decline to make such an order.

The relationship between paragraphs 2 and 5A of Schedule 11 to the 2002 Act had not been addressed before:

The relationship between paragraphs 2 and 5A of Schedule 11 to the 2002 Act has not previously been the subject of argument and decision in this Tribunal. Paragraph 2 says that administration charges are payable only insofar as the amount of the charge is reasonable, while paragraph 5A enables the FTT to make whatever order is just and equitable on an application to reduce or extinguish an administration charge in respect of litigation costs. The amount of the costs incurred by a landlord might be perfectly reasonable yet it may not be just and equitable for the tenant to pay them because he was successful in the FTT. In those circumstances the FTT would make an order extinguishing the tenant’s liability for those costs and the question of reasonableness would not arise.

Where the tenant was unsuccessful in the FTT a variety of questions may arise. It might be found to be just and equitable for him to pay the landlord’s costs by way of administration charge (even though he was not liable to pay costs under rule 13); where the FTT makes that determination, should it also assess the reasonableness of the costs? If it does, would that create an issue estoppel preventing further litigation on that point? If it does not, could the tenant to make an application later under paragraph 5 of Schedule 11 for reasonableness to be determined? Where the tenant was partially successful, is it open to the FTT to assess reasonableness of the landlord’s costs and then reduce the tenant’s liability by ordering that he pay a proportion of them by way of administration charge, thus preventing a further round of proceedings?

However, on the facts and argument in this case, where both parties were not arguing that there should have been an assessment of reasonableness (at this stage) and no demand for the administration charge had yet been made, the Upper Tribunal could only consider

whether, and to what extent, it is just and equitable for the tenant to pay the landlord’s litigation costs by way of administration charge, and if the tenant wishes to challenge the reasonableness of costs that are found to be chargeable to him in that way he may do so under Schedule 11 to the 2002 Act in the usual way. The questions raised in paragraph 45 above must remain unanswered.

The FTT’s order replaced with an order that the tenant was liable to pay an administration charge with a reduction of 10% in respect of an issue on which the tenant was successful.

 

Shearbarn Holiday Park Ltd v Wornell & Ors (2021) UKUT 99 (LC)

The Upper Tribunal dismissed an appeal by the landlord against an FTT finding that a consent order in a previous Upper Tribunal appeal which provided for ‘no order as to costs’ prevented the landlord from seeking to recover its legal costs as an administrative charge under a contractual entitlement in the lease.

the contract was that there should be no order as to the costs of the s. 84 proceedings as between the s. 84 applicants and the appellant rather than a contract that the appellant should bear those costs; but in my judgment that does not alter the position. The hypothetical reasonable person, with all the background knowledge which would have been available to the parties, would have understood them to be contracting on the basis that the appellant and the s. 84 applicants would all bear their own costs of the s. 84 proceedings; and, in the case of the appellant, that it would do so without recourse to their recovery, not only from the s. 84 applicants, but also from the (much smaller) number of chalet leaseholders who had neither opposed the s. 84 application nor been involved in those proceeding.

 

Chuan-Hui & Ors v K Group Holdings Inc & Ors (2021) EWCA Civ 403

The Court of Appeal determined that sums demanded from leaseholders by a Tribunal appointed manager for maintenance during their period of appointment were service charges under the lease for the purposes of Landlord and Tenant Act 1985, even if the obligation to pay them rose from the Tribunal’s management order. The Upper Tribunal had been right to hold that althouh the charges were ‘recovered’ under the Management Order, they were paid under the lease.

Arrears of charges demanded by the Tribunal appointed Manager therefore fell to be recovered as arrears of service charge by the ‘maintenance trustee’ (in this case, more generally whoever was entitled to demand service charges under the lease) after the end of the period of the Management Order.

 

 

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

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