Recovery of enforcement costs by landlord: Richard Granby represents successful landlord in appeal to the Upper Tribunal

Assethold Limited v Neilo Franco [2022] UKUT 285 (LC)

Richard Granby represented the successful appellant in an appeal to the Upper Tribunal against a decision that enforcement costs were not recoverable by the landlord by way of an administration charge under a “s.146 clause” in a residential long lease.

The landlord and tenant had been through several rounds of litigation in the County Court and the First Tier Tribunal. The instant set of proceedings were for on account service charges and administration charges incurred in pursuing the current and earlier sets of arrears. The landlord issued a claim in the county court expressed to be pursuant to an intention to forfeit the lease, the County Court transferred those parts of the claim within the jurisdiction of the First tier Tribunal (“FTT”) to the FTT – at the trial the FTT Chair ‘double hatted’ as a District Judge. The tenant filed a defence in the County Court but did not engage with proceedings in the FTT.

The FTT determined, or purported to determine, that part of the on-account service charges claimed in respect of anticipated major works were unsubstantiated, there was no proof the s.20 consultation process had been complied with and that there was no contractual basis for administration charges in respect of the landlord’s enforcement costs. Perhaps surprisingly given the second conclusion the FTT then went on to find that the cost of earlier proceedings were only irrecoverable because they “should of” been sought in those proceedings and to assess the landlords costs of the current proceedings on the basis of what the FTT considered “proportionate”.

The Landlord appealed to the Upper Tribunal and the County Court, the County Court appeal was stayed pending determination of the appeal against the FTT decision.

On appeal the Tribunal allowed the landlords appeal against the FTT’s reduction of the service charge payable – the tenant had not filed a statement of case as directed and it was not for the landlord to substantiate the charge in the absence of any challenge from the tenant, the FTT had also been wrong to apply s.20 LTA 1985 to on account demands for service charges.

In respect of administration charges the Upper Tribunal accepted there was a contractual basis for the claim for work done by managing agents and solicitors up to the issue of the claim (indeed there had to be given the FTT’s findings on the cost of proceedings) and that the steps taken were taken with a view to forfeiture. The s.146 clause was in the form:

To pay all costs charges and expenses (including Solicitors’ costs and Surveyors’ fees) incurred by the Lessor for the purpose of or incidental to the preparation and service of a notice under Section 146 of the Law of Property Act 1925…    

The same form as that in Kensquare Ltd v Boakye [2021] EWCA Civ 1725; [2022] H.L.R. 26 which the Court of Appeal had held were sufficient to cover the costs of enforcement before the FTT.

The appeal in respect of the cost of previous proceedings was dismissed- the FTT had applied the wrong test but the landlord had not supplied any contemporaneous evidence that the earlier proceedings had been brought with a view to forfeiture.

On costs the Upper Tribunal agreed with the landlord – the FTT had simply had no jurisdiction to consider the reasonableness (within the meaning of schedule 11 of the Commonhold and Leasehold Reform Act 2002) of the costs claimed under the CPR as there had been no demand for those costs as an administration charge. The cost claimed under the CPR for the County Court proceedings would need to be assessed by the County Court under the CPR.

This appeal raised two issues of general importance – firstly, the importance in a double hatting case of not muddling the two jurisdictions being exercised, the tests to be applied are meaningfully different. The second is the significance of the tenant’s statement of case directed in the FTT (even in transferred cases where a defence has been filed) in defining what is in issue and the danger where the FTT identifies issues of its own at a final hearing, particularly with lay representation.

Richard was instructed by Lorraine Scott, partner in the specialist landlord and tenant solicitors firm, Scott Cohen Solicitors.