Managing agents and landlords often view the First-tier Tribunal (LVT) with trepidation, not least because of the increased frequency with which leaseholders are applying to prevent landlords from recovering costs incurred at the FTT. Brady Solicitors explain how it needn’t be all doom and gloom and show that FTTs are indeed taking a balanced view of Section 20c applications.
The legal bit
Let’s get the techy stuff out of the way at the start: Most residential leases allow for the landlord to recover their property management legal costs through the service charge. These costs can include the costs of legal proceedings at the county court or FTT – regardless of whether the landlord or the leaseholder initiated these proceedings. However, managing agents and landlords are finding that leaseholders are increasingly exercising a right under Section 20c of the Landlord and Tenant Act which lets them apply for an order to prevent the costs that a landlord incurs at the FTT from being recovered through their service charge. And this can of course have a significant effect on the costs of bringing or defending a hearing in the FTT.
In a number of recent cases we have found however that the FTT has taken a balanced view of Section 20c applications and has allowed the landlord full costs recovery, as highlighted in this recent case handled by Bradys’ service charge team:
The leaseholder had failed to pay her service charge and ended up with proceedings being issued against her in the county court. The leaseholder defended the non-payment and the county court transferred the case to the FTT. In essence, the leaseholder disputed the ‘reasonableness’ of the service charge amounts, and that the services provided were of a reasonable standard.
The LH delivered her lever-arch bundle of documents to us on the morning of the FTT hearing – and the Tribunal went ahead despite no one having had the chance to properly read the documents. We gave evidence to show that both the service charge amount and the services provided were in the range of reasonableness afforded to Landlords, and the Tribunal agreed with our arguments. In their report they also made it clear that they saw no reason to make an order under Section 20c, with four key grounds for this decision:
- Ongoing non-payment of the service charge meant that the landlord had no option but to bring proceedings to recover it.
- The block was managed by a not-for-profit, leaseholder-controlled company that held no assets other than the freehold and the reserve funds collected through the service charge.
- The FTT had found in favour of the landlord (this is an important point!)
- With the claim having been transferred to the FTT from the county court, the landlord had no choice but to continue to instruct their solicitors and incur the associated costs.
We think this should give encouragement to managing agents and landlords to bring those difficult service charge arrears cases to the FTT. (We do of course have ways around the situation in the event that the FTT does make a Section 20C order, but that is perhaps a topic for another article.)
Leaseholder communications remain as important as ever, plus good record-keeping to demonstrate reasonableness.
For advice on any aspect of property management litigation or how to handle cases in the FTT, please do get in touch with us on 0115 985 3450 or by email.
The Brady Solicitors blog is for information and entertainment purposes only. Whilst we make every effort to ensure all information is accurate and up to date, it does not constitute a comprehensive review of the applicable law and should not be relied upon as such. For help with a specific legal matter or dispute please contact a solicitor (preferably one at Brady Solicitors!)