This is a significant case about the costs which a landlord can claim from a tenant under a clause which is found in most leases. This is where the tenant covenants:
To pay all reasonable costs charges and expenses ( including solicitors' costs and surveyors' fees) incurred by the Lessor in or in contemplation of any proceedings or the preparation of nay notice under s.146 Law of Property Act 1925 notwithstanding forfeiture is avoided otherwise than by relief granted by the Court.
In this case the tenant applied to the LVT (as it then was) for a determination of the insurance she had to pay. The LVT determined the amount payable as £205.
That should have been that but the landlord was represented by counsel and afterwards he found that he had incurred over £6000 legal costs. He wanted that back but the tenant refused to pay. So there was another LVT hearing which found that the tenant had to pay those costs on account of the above clause.
The tenant appealed.
The Upper Tribunal allowed the appeal. It said that
- A determination by the First Tier Tribunal is a pre-condition of the service of a s.146 notice ( ie it followed Freeholders of 69 Marina St Leonards on Sea v Oram [2012] L&T R 4)
- But it does not follow that the landlord will always be able to recover his costs in establishing the amount of a service charge or administration charge. In the case before it, there was no evidence that the landlord contemplated proceedings for the forfeiture of the lease or the service of a s.146 notice. Further, the amount owing was below the statutory threshold (£350) and so he could not have contemplated forfeiture.
Comment This case suggests that it is no longer enough to rely on the above clause without an intention to forfeit. The landlord will have to record, for example, in correspondence, that his actions are aimed at getting permission to serve a s.146 notice as a preliminary step towards forfeiture.