Two cases about legal costs

1. Chaplair Limited v Kumari [2015] EWCA Civ 798

Many landlords issue money claims for service charges arrears in order to obtain judgment as a precursor  to taking  forfeiture proceedings. Their claims will  be allocated to the small claims track if they are  worth less than £10,000. In such circumstances, can the landlord claim costs? Most leases have a costs clause which has the tenant indemnifying the landlord for his legal costs. But until  Chaplair Limited v Kumari [2015] EWCA Civ 798  District Judges would invariably refuse to award the landlord anything more than his court fees.  In Chaplair, however, Aden LJ relied on the contractual right of the landlord to recover his costs and said that that right overrides the small claims costs regime. Thus  contractual costs are now recoverable subject to the court’s equitable power to disallow unreasonable expenses.

Comment 

This is obviously good news for landlords.

 

2. Sinclair Gardens Investments (Kensington) Ltd v Avon Estates (London) Ltd  [2016]  UKUT 317 (LC)

Can a landlord claim his legal costs from the lessees in respect of an application before the First-tier Tribunal as to whether service charges are reasonable?  

This was one of the issues in the above case. It was a term of the long residential lease  that the landlord  was entitled to ‘employ architects surveyors solicitors accountants contractors builders gardeners… for the purpose of or in relation to the estate and the block…and to pay them all proper fees charges salaries wages costs expenses and outgoings.’  The landlord decided that this clause was enough to justify claiming such costs as part of its service charge demands.

But the FTT held that the clause restricted its legal costs to those incurred in respect of the management of the estate and not in legal proceedings before the Tribunal.  The Upper Tribunal agreed. It noted that there is litigation which might be said to relate to a building’s management. One example is whether the landlords or the tenants are responsible for repairing window frames.  But an application in respect of whether service charges are reasonable is not, according to the Upper Tribunal, an application relating to management.

Comment

There is nothing in this decision which would prevent a landlord relying on the type of costs clause discussed in Chaplair above where the landlord is pursuing a tenant for unpaid service charges.