Small claims court exit fee battle fails … but it has cost Fairhold thousands

SUSANWOOD2Susan Wood (left) failed in her court struggle earlier this week to be reimbursed the £1,150 in exit fees paid when her late father’s retirement leasehold flat was sold in 2010.

Wood, a long-standing activist with the Campaign Against Retirement Leasehold Exploitation (Carlex), argued that as the fee was for a service that was not carried out – ostensibly to vet the capability of the flat’s purchaser for “independent living” – she should receive the money back.

Exit fees have long been a source of controversy in retirement leasehold. The Office of Fair Trading believe them to be unfair, but has not ruled against them, and McCarthy and Stone, which included them in its leases for years, now declines to enforce them (although as it has sold almost all its freeholds this is of little practical importance).

The issue was heard on January 2 in the small claims division of Sheffield County Court, but Fairhold, a freehold owning company within the Tchenguiz Family Trust, was taking no chances.

Barrister Paul Letman ... has form with lay applicants

Barrister Paul Letman

Barrister Paul Letman was sent up from London to fight the case, which may have cost many times more than the sum disputed.

Wood gave a polished outline of her case, which rested on the simple point that she had been charged for something that had not, in fact, been done. Only if this argument failed did she ask the court to rule that the transfer fee represented an “unfair term” under consumer contract legislation.

But Letman successfully argued on points of law that the lease did not say that the transfer fee was a fee for a service, nor did this represent an unfair contract term.

Wood could have refused to accept the last minute complex legal argument of the freeholder, presented by Letman, that that had not been outlined before the day of the hearing. The judge asked whether she wanted an adjournment, but Wood declined.

As a result, the case went ahead and she lost.

But the positive news for any other lay applicants disputing exit fees is that any future litigant can be informed, via Carlex, of the landlord’s legal arguments.

“This is very far from being a disaster,” said Wood. “Mine was a simple argument. But I was not legally represented and I cannot dispute a point of law. There is also a limit to how much time I can spend on this issue.

“I am delighted to have brought this case. From the start, Fairhold tried to delay proceedings. However, the court rejected all their attempts. The most serious issue was when they tried to have the case moved to a higher court, which would have put me at risk of being responsible for their costs had I lost. But the court agreed with me that it should properly be heard as a small claim,” said Wood.

King’s Court, Sheffield, where Susan Wood's late father had a retirement leasehold flat

King’s Court, Sheffield, where Susan Wood’s late father had a retirement leasehold flat

Small Claims Courts are designed for ordinary people to have their cases heard in a comparatively informal environment, where legal costs are not usually awarded. The judge made it clear that the case was reasonable, and Fairhold did not, in fact, ask for costs.

Wood made a strategic mistake in not accepting the judge’s offer of an adjournment. Far too often lay representatives just want to get on with the case, for which they have prepared for months.

It’s also far too common for landlords’ barristers to present information at the very last stage, although this is frowned on in the Civil Procedure Rules.

But once you have “accepted” a document it is as if it were never late and is given equal weight to other evidence.

“The good news is that we now have all the legal arguments used by the landlord in this case,” said Wood. “Anyone planning to mount a similar challenge over exit fees can be provided with the full bundle of Fairhold’s arguments.

“Although I lost this particular case, it does not create a legal precedent for any future challenges. I do hope many more people will now be encouraged to take similar action against these pernicious fees.

“A Small Claims Court is the ideal forum. I had a fighting chance of winning, otherwise Fairhold would not have expended so much effort and money on its defence.”

LKP sends congratulations to Sue for having the courage to bring the first case on exit fees.

Here is to the next one!