LKP looks at some of the key points in the proposed new rules for the replacement to the Leasehold Valuation Tribunal (LVT) which disappears next year. The LVT is to be reformed as part of a new “Property Chamber” (PC).
A change in the administrative rules may not sound very exciting but the proposals under consideration are the biggest changes seen at the LVT in the last 12 years. Most importantly these changes are ones that will worry many managing agents and landlords and be welcomed by may leaseholders.
The Ministry of Justice (MoJ) began taking over responsibility for the LVT from the Department of Communities last year. This move will be complete when the LVT is reformed as part of the new PC some time next year. The MoJ has recently finished consulting on the procedural rules for the proposed PC. This new body is intended to take over from six existing first tier property related tribunals, including the Leasehold Valuation Tribunal.
The change from LVT to PC has given the MoJ the opportunity for a major re-write of the procedural rules last amended in 2003. LKP have made various submissions to the consultation and the Tribunal Procedures Committee is currently reviewing those comments along with all the submissions. We summarise some of the key proposals from the MoJ below:
Disclosure: -the current system
Under the current rules the LVT has little or no power to sanction a respondent for non compliance.
Leaseholders often face respondents who flagrantly breach the Tribunals directions for disclosure with claims such as “we could not find the papers”, “the applicants request for information was not clear”, “this is a fishing trip”, “disclosure would be disproportionate”, “we have already disclosed all information”,“the applicant has had 4 days to read the papers before the hearing which should be enough” -Lets not even mention the fact that papers often happen to arrive in a complete jumble with pages upside down or duplicates or those key invoices which just happen to be in the wrong place – or missing completely.
However, if an applicant does not follow the rules the LVT has the power to throw the case out. So many of you will have faced the constant scream from a respondent that your case should be thrown out as frivolous, vexatious or an abuse of the process.
The new disclosure rule proposals:
The PC will have powers to sanction both sides equally. Non compliance with directions may be considered in the regard to costs. While respondents can still choose to ignore the PC directions they may do so at their peril. The PC will have the power to exclude their evidence and in extremis to even exclude a party from a hearing.
Costs- the current system:
The LVT is intended to be a “no cost” environment where both sides must bear their own costs if they have acted reasonably. The reality is that we have an entirely one sided system. Almost all leases allow the landlord to pass on their costs unless something called a s20c application is made seeking to limit those costs at the LVT. Even when a s20c award is made sometimes landlords “forget” not to pass on their costs.
At most the Tribunal can award £500 to either side if the case unreasonably taken or unreasonably defended. So if a respondent wins he may get to pass on all his costs and may argue for the additional £500. If leaseholders win they have no right to claim any of their costs other than for £500.
Partly as a result of this cap the landlords know their one sided coin gives them an ideal opportunity to flood the LVT with their barristers in the hope of winning while at the same time forcing applicants to either arrive with a lay team or risk yet more expense to pay counsel which they know can never be recovered.
The new cost rule proposals:
The cap on costs (at £500) be removed and both sides are may be entitled to make a claim for costs if the other side has failed for follow directions or has defended a case unreasonably.
The proposed PC rules will stay as “non cost” based unless there has been unreasonable conduct or in order to sanction non-compliance with directions.
What this means is that the PC remains as a “no cost” environment unless one of the parties fails to follow directions, or brings or defends a case unreasonably.
For leaseholders this means no change as they have always been obliged to follow directions or risk their case being thrown out. It also means no difference for leaseholder on costs. If an Applicant has a bad case they have always risked the landlord passing on his costs, under the terms of the lease. This continues as before and the PC will have the same powers to pass on costs for those few leases which do not have such a provision.
This is a new item under consideration. Practice directions would allow the head of the PC to set a more standardised set of procedures and format that each case should follow. This might provide better consistency between cases and give applicants a better idea of how a case is likely to progress. This is far better than turning up to find a Tribunal chairman wanting to speak in Latin claiming Res Judicata. It would be hoped that practice directions might also limit some of the more hackneyed tricks used by landlords counsel to delay, defer and disrupt cases.
For landlords these changes are potentially a big issue. They would run the risk of jeopardising their case if they don’t follow directions they run the risk of facing the applicants cost in cases where they should have accepted their error.
The new rules appear far more robust than the existing ones. They provide a consistency between the various property chambers, and more importantly they appear to offer much better balance between the leaseholder and the landlord. These changes may finally force some landlords to behave.
Under its new rules we might even see the PC return to the lay environment it was always intended to be. Fewer dodgy barristers looking for legal loopholes, less “legal torture”.
Our recommendation to anyone thinking of preparing a case for next year. Keep a time sheet of your work you may be able to claim your costs.
A copy of the MoJ consultation can be read here