Court Costs In Leasehold Proceedings Payable To Successful Party Even If LVT Could Not Order Costs

If a Landlord successfully obtains a Judgment in the Court that a Leaseholder has acted in breach of the terms of a Lease, the Judge can order the Leaseholder to pay the Landlord’s costs even if a Leasehold Valuation Tribunal had jurisdiction to consider the same issue but could not order costs.

Any Claimant seeking judicial confirmation that a Leaseholder is in breach of the terms of a Lease will have to decide if the proceedings are heard in the County Court or the Residential Property Tribunal Service by a Leasehold Valuation Tribunal Panel.

Issues of interpretation of Leases should normally be dealt with by the County or High Court. Disputes on the reasonableness of service charges should, as a matter of public policy, be dealt with by the Residential Property Tribunal Service.

Costs will effect that decision. If a successful claim is brought by the Landlord in the County or High Court then a Costs Order will be made which will cover a significant part, if not all, of the Landlord’s costs in obtaining that Order. If proceedings are brought in the Residential Property Tribunal Service then Costs Orders are only made in exceptional circumstances where a party has acted vexatiously and will often be limited to £500.00. There may also be a determination preventing the Landlord’s costs being added to the service charges.

The recent case of Claudia Elka Kussens -v- Realreed Limited in the High Court offers useful assistance on costs for Landlords where a claim is brought in the Courts. The Leaseholder had appealed against an Order that she pay her Landlord’s costs in her Landlord’s successful claim for a declaration under the Commonhold and Leasehold Reform Act 2002 that she had breached the terms of her Lease in subletting her property. The Leaseholder argued that the proceedings under Section 168 of the Commonhold and Leasehold Reform Act 2002 could have been brought in the Residential Property Tribunal Service and so a Costs Order should not have been made. She said firstly the Judge had incorrectly decided that the County Court could hear an application for a declaration under Section 168(4) and secondly, that the Judge was not entitled to award costs on a standard basis when the Residential Property Tribunal Service, designated to hear such applications, was not able to do so.

The High Court decided that although the Judge was wrong to consider he had jurisdiction under Section 168(4) to make a declaration in the County Court, under Section 15 of the County Courts Act 1984 the Court could hear any action founded on a contract and the Lease was such a contract. Section 15 gave the Judge jurisdiction to consider alleged breaches of the terms of the Lease and meant that any determinations were also effective under Section 168. The Courts had a wide discretion with regard to costs and the Judge had applied the general rule that the successful party’s costs were paid on a standard basis by the unsuccessful party as he was entitled to do.

The Court also noted that neither party had objected to the proceedings in the County Court prior to the trial hearing, in particular the Leaseholder had not raised the issue of the case being referred to the Residential Property Tribunal Service. There was therefore no good reason why the Judge should not make a Costs Order in the County Court under the usual costs provisions. The Appeal was refused.

Leaseholders cannot argue that a Costs Order should not be made against them if it is a matter where the Residential Property Tribunal Service might also have jurisdiction to consider the matters claimed. Both parties should consider whether or not proceedings should be in the County or High Court if they are also seeking to recover their reasonable legal costs which will not usually be obtainable in the Residential Property Tribunal Service otherwise.

If you have any queries concerning the matters raised please contact
Jeremy Teall, Partner and Housing Management Team Leader on
020 8567 3477 or e-mail jteall@prince-evans.co.uk

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