Tuesday, 10 July 2018

Service Charge Challenges: Avoiding Payment of Landlord's Costs

Residential service charge challenges. Some you win, some you lose. For some nice wins by lessees and tenants have a look at http://www.breakinglaw.co.uk/2017/10/service-charge-victory-insurance.html


Your landlord is likely to tell you that it is too risky for you to challenge service charges because, if you lose, it will cost yer!  Where your lease says, in effect, that they can bill you for what amounts to an administration charge to cover their costs of successfully defending a service charge challenge then that could turn out expensive for you. I have to tell you that this could happen. And it is not widely appreciated that as a result of a 2015 Court of Appeal decision you could still be saddled with having to pay these costs (subject to the reasonableness of their amount) even where the claim is decided as a 'small claim' in the county court. The usual restrictions on the costs which the winner can recover will not apply. However, what you can now do as a result of a law change on 6 April 2017 is to apply to the county court under schedule 11 paragraph 5A of the Commonhold and Leasehold Reform Act 2002 (phew!) for an order which would wipe out or reduce your liability for the administration charges covering these costs before the case is heard. You would succeed on such an application if the court thought it was 'just and equitable' for you to do so. The more outrageous the wording of the lease, the better your chances.

The county court will frequently transfer service charge cases (or certain issues raised in them) to be decided by a tribunal. The Upper Tribunal (Lands Tribunal) in Avon Ground Rents Ltd v Child [2018] UKUT 2014 (LC) has just been giving guidance on how costs should be dealt with where there has been a transfer. This is the position-

  • If you want to make a schedule 11 application (see above) then it would be wise to issue not only an application for this in the county court which would catch the landlord's administration charges for the work done in the county court but a separate application to the tribunal to catch the work done in the tribunal ( and the standard tribunal application form for service charge challenges already makes provision for an additional application under schedule 11). 
  • The tribunal judge can deal with the landlord's county court costs but they must not involve any other non-lawyer member of the tribunal in their decision on this because they would not have jurisdiction to poke their noses in. If there has been a nose-poking which led to an adverse decision against you then you may have a ground to appeal it.
  • If the administration charges are decided against you but without having been previously demanded of you by the landlord then the probability is that the landlord would not have yet become entitled to receive them and any court or tribunal order for their payment would be bad  and appealable.