Lydia Anderson of Brady SolicitorsAs the First-tier Tribunal (Property Chamber) approaches its first birthday, Brady Solicitors’ Lydia Anderson investigates the Tribunal’s willingness to use its new costs powers.

As most are now aware, the First Tier Tribunal (Property Chamber), which arrived in July 2013, brought with it a new set of rules, including Rule 13, which relates to the costs that the Tribunal can award.

As a reminder, the Tribunal now has the powers to order costs on the following basis:

  • Wasted costs against a party’s representative.
  • A fee paid in connection with the proceedings to be reimbursed by the other party.
  • Costs to be paid by one party to the other if they have acted unreasonably in ‘bringing, defending or conducting proceedings’. At present there is no definition as to what is deemed ‘unreasonably’.

The original costs limit of £500 that applied at the LVT has been removed, making it possible for the FTT to make unlimited costs orders.

Parties can obviously continue to use their contractual entitlement to costs under the terms of the lease, either by recovering the costs through the service charge or, in the case of the landlord, through a Section 146 Clause in the lease that enables them to recover all costs incurred in the proceedings.

Nevertheless a costs order under Rule 13 may apply if appropriate, and in its present wording appears to be appealing, particularly to landlords needing to deal with proceedings being brought against them.

A recent case however should act as a warning to landlords seeking to rely on the FTT making costs orders under Rule 13.

Mr Z Virani and Chelsea Harbour Limited 2013 dealt with an application made by Mr Virani (the leaseholder) against Chelsea Harbour Ltd (the landlord) for a 27A Application, i.e. a determination of the reasonableness of service charges for a particular period.

A week before the application was due to be heard, Mr Virani sought an adjournment claiming stress, which was refused by the Tribunal.

Just two days later, Mr Virani repeated the request for an adjournment to be told by the Tribunal that his application would need to be made on the day of the hearing.

On the day of the hearing itself, following Mr Virani’s request for adjournment being refused by the Tribunal, his representative (an employee of Mr Virani), withdrew the application in its entirety on Mr Virani’s behalf.

Such action inevitably left Chelsea Harbour Ltd with unnecessary costs incurred in dealing with an application which was withdrawn on the day of the hearing.

Whilst there is no definition as to what is deemed ‘unreasonable’ under the new Rule 13, it would not have been naïve to assume that an application for a costs order under this rule would be successful, thus benefiting from the Tribunal’s new unlimited costs orders.

Unfortunately, whilst the Costs Order was granted under Rule 13, the Tribunal limited those costs to the costs of the hearing itself.

The Tribunal felt that Mr Virani had been reasonable in making his application against Chelsea Harbour Ltd in the first instance, and did not believe the application for a full costs order on the basis of unreasonable behaviour was justified.

Whilst the Tribunal agreed that withdrawing the application on the day of the hearing was unreasonable, the costs of the hearing were awarded simply because Mr Virani could have withdrawn his application sooner than the day of the hearing itself.

In their comments, the Tribunal made it clear that a costs order under the new Rule 13 were for exceptional cases, and for those where a party has acted ‘so unreasonably’ that it would be deemed unfair if the party were not awarded their legal costs.

As is shown in this case, landlords may be reluctant to make an application for a Costs Order under Rule 13 due to the risk that, if the order is refused or deductions are applied, putting the remainder of those costs through the service charge would be more difficult if challenged under Section 19 of the Landlord and Tenant 1985.

This case also shows that the new ‘unlimited’ costs orders of the Tribunal are applied stringently and in very exceptional cases, despite the new Rules appearing to take away the Tribunal’s ‘costs free’ jurisdiction.

Expert legal advice at the FTT

For help and advice with dealing with service charge disputes, including at the First-tier Tribunal, contact the Brady Solicitors team by email or call 0115 985 3450.