Arms and the man
In the second part of our look at legal costs barrister Amanda Gourlay of Tanfield chambers sets out how recent case law has added to the leaseholder burden.
The Court of Appeal has not been kind to lessees in recent years.
First, in Freeholders of 69 Marina v Ghooram, Oram [2011] EWCA Civ 1258, it held that the landlord must serve a notice – known in the industry as a “section 146 notice” – before forfeiting a lease for non-payment of service charges.
Previously, where the service charges were reserved as rent, it was generally accepted that there was no need to serve such a notice because there is no obligation to serve one when forfeiting a lease for non-payment of rent.
The imposition of this requirement might on its face appear to be a positive for lessees.
It was not, because the Court of Appeal also decided that the landlord was entitled to recover his/her costs of obtaining a determination of the amount of service charge payable, if that determination:
Was sought as a prelude to a section 146 notice or forfeiture, and
If the lease allowed the recovery of costs “incurred in or in contemplation of proceedings under section 146 of the Law of Property Act 1925”.
Not every lease allows the landlord to put the cost of FTT proceedings through the service charge, and even where the lease allows for the service charge to bear the cost of the proceedings, the FTT has the power to prevent that happening by way of an order under section 20C of the Landlord and Tenant Act 1985.
In many post-69 Marina cases however, that no longer mattered. Provided that the lease contained a forfeiture clause and a requirement that the lessee meet the costs incurred in or in contemplation of proceedings under section 146, 69 Marina meant that landlords had a route to the recovery of FTT proceedings directly and completely from lessees.
Suddenly, some lessees found themselves facing demands for payment of thousands of pounds.
Last year, in Barrett v Robison [2014] UKUT 322 (LC), the Upper Tribunal (Martin Rodger QC) applied a whisper of a brake to 69 Marina. Rehearsing the expressions of surprise which had echoed through the service charge world when 69 Marina was handed down, the Deputy President identified a number of points that lessees may be able to take to resist claims for costs, including:
The landlord must show that, as a matter of fact, it was incurring costs in contemplation of section 146 proceedings;
The right to forfeit must actually exist at the date of the incurring of the costs: for example, it must not have been waived.
As an Upper Tribunal judge however, Martin Rodger QC was bound by the Court of Appeal’s decision in 69 Marina. He could not ignore it – or hand down a decision which conflicted with it.
Permission to appeal to the Court of Appeal has been granted in Robinson. The appeal is due to be heard in April 2016.
There is however no need to wait until 2016 for further controversy. This summer, the costs imbalance in service charge claims was compounded when the Court of Appeal handed down its judgment in Chaplair Ltd v Kumari [2015] EWCA Civ 798.
Chaplair deals with the recoverability of contractual costs in cases allocated to the small claims track in the county court. To my mind, it is not a satisfactory judgment.
In summary, Chaplair has two parts to it. In the first, the Court of Appeal decided that FTT costs can be recovered in the county court if the lease allows the landlord to recover its costs. That, of itself, was relatively uncontroversial compared with what followed.
The second, eye-watering aspect of the judgement attempted to resolve the conflict between the procedure rules governing small claims, and leases which allowed landlords to recover their costs from the lessee directly.
Most cases allocated to the small claims track have a value of less than £10,000. The small claims track is intended to be the track of choice for courts dealing with issues which are relatively straightforward and do not require the parties to have legal representation.
To that end, the small claims track rules prevent the parties from recovering the legal costs that they incur in bringing or defending the case, save where the other side behaves unreasonably.
The Court of Appeal was asked whether and how a landlord’s contractual right to costs fitted into the small claims framework.
It decided that, if the lease allowed the recovery of costs, the landlord was entitled to them, despite the procedure rules limiting the recovery of cases allocated to the small claims track.
Interestingly, in Graham v Sandmartin (unreported (Southend County Court 04/11/11)), a decision on the same point in the county court, and therefore superseded by Chaplair, HHJ Moloney QC reached the opposite decision.
He went so far as to say that he considered that they may even be a point under Article 6 (right to a fair trial) of the European Convention on Human Rights if a landlord was entitled, by virtue of the lease, to recover its costs in a small claim, whereas a tenant would never be so entitled.
I doubt that HHJ Moloney QC has spent very much time in the FTT, where, absent unreasonable behaviour, the landlord’s worst case scenario – that it has to pay its own costs – is the lessee’s best.
Related posts:
Leasehold Costs
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Marathon House celebrates its ‘first’ LVT victory – £425 of legal costs
Pay first, argue later: Plantation Wharf shows how LVT’s £500 limit on legal costs can be bypassed
Baroness Gardner raises issue of leasehold tribunal legal costs in Lords …
Thanks for these last couple of posts. Grim to think of a certain kind of predator using the information to prey on the unsuspecting, but better that the information is out there.
I know of a solicitor, yes, a solicitor, advising a client to withhold service charges because, among other things, his phone line wasn’t working. If a solicitor is as clueless as that about leasehold what hope does the average layperson have when advised by such people?
OM/Estates and Management now known as First Port took me to Leicester County Court on Feb 2nd 2015 for approximately 3 years of unpaid service charges which I had not paid amounting to approximately £6,000. They used the solicitors JB. Leitch and their costs were over £6,000. I used no solicitors and represented myself. On the day itself at Court JB Leitch presented me with a Notice of Discontinue. Six months later First Port as they became known repaid themselves my service charges. They also repaid an additional £1,500 of service charges which was not included in their Court Action that I signed a letter Chris Owens sent that I would not go after them for all the historical debts they still owe. I refused to sign it and also I refused to sign the letter at Court that I would not divulge information to third parties. I am able to talk freely which is very important to me.
Sebastian O Kelly wrote an article on the Campaign against retirement leasehold exploitation website regarding this. It is under Phoenix House, Ms Jacqueline Henderson.
I’m fighting am ongoing battle against a well documented rogue managing agent for 5 years (their MD was a former part time judge at the LVT…). In and out of the County Court over 15 times and one excursion to FTT (formerly LVT) whereby we substantially gained significant reduction in service charges and halved out buildings insurance. The big problem is that I’m fighting an aggressive firm of solicitors who advertise service charge arrears on “no-win no-fee” basis and claim 100% success (for landlords/managing agents). They are claiming £ 14,000 in legal costs Can anyone identify a legal firm who promotes “no-win no-fee” for leaseholders?
There is no doubt that the discontinuance was to prevent certain information being disclosed in court. Those without such information and the wherewithal to pay legal bills need to be careful. .
Jacq, thank you for the info will contact soon.
AJG not responding.
You are 7 years to late with this information. But a big thank you the Leasehold Knowledge Partnership for this and the many articles you given us.
Norman thank you for your help over the past 4 years, I hope you are getting better and that you continue to provide valuable info.
The system is such a mess, and who can afford expensive solicitors and barristers to untangle it all? I wrote to my MP who wrote to the housing minister, who appears to be under the delusion that the system is fair. Most of our rights, weak as they may be, are in fact impossible to enforce. ie: The directors of the company owning the freehold Sylvase ltd, was in fact a group of well known property solicitors. Need I say more?
When Grant Shapps became the first Housing Minister for the coalition government he constantly claimed the systems in leasehold were “balanced”. Over the years LKP has provided much evidence to show this was not true. By the time we got to Housing Minister Mark Prisk he had understood things were less than balanced. Now we are in a phase when the current Minister Brandon Lewis is being assured the systems are “mostly working well”
Minister’s mostly base their view on what officials tell them, Until last year the Housing Minister did not even know how big the sector is. We helped show him there are at least 4.1 million leasehold homes in the private sector in England. His officials had previously used the figure of 2- 2.5 million homes. The new figure suggests all historic assumptions about the size and structure of the leasehold sector were wrong!
This article: The Fukushima Accident was Preventable (http://rsta.royalsocietypublishing.org/content/373/2053/20140379) recently published in the Philosophical Transactions of the Royal Society contains the following comment on a report by the Japanese parliament:
“The report comments that the mindset that contributed in the disaster can be found across Japan, in essence blaming Japan’s insularity. The report states that nuclear power in Japan had become ‘immune to the scrutiny of civil society’, and that ‘its regulation was entrusted to the same government bureaucracy responsible for its promotion’.” (emphasis added)
I would argue that leasehold is a radioactive form of property ownership, rightly abolished everywhere else that inherited it from English common law; that it persists because of the toxic combination of insularity, vested interest and the immunity of the government bureaucracy to the scrutiny of civil society.
Leasehold won’t (one hope’s) end with a violent explosion of any kind, but the bureaucrats resisting change should be under no illusion that it poisons the lives of many millions of people. As is the case of other forms of exposure with adverse effects –poisoned air, polluted water, unhealthy food — it is often the poor and the most vulnerable who are most affected.
The Daily Mail, of all papers, has described it for what it is: a system for preventing people from owning their own homes — and thereby being vulnerable to all of the abuses this site has documented and which many of us have experienced (particular in some cases at the hands of donors to the current governing party).
What, I would like to know, is the excuse for perpetuating a feudal property ownership system that is radioactive for leaseholders and which is rigged against them and which makes a mockery of any idea of equality and justice.
Is it callous indifference? Are the civil servants involved all freeholders? Are they landlords? Given the importance of housing to society I think the public is entitled to ask these questions.
Of course I presented information in my court papers that Peverel/OM did not want disclosed. This is why I refused to sign Tomlin Order which would had prevented me from sharing this information. The reason they gave me Notice of Discontinue and paid my service charges is they thought I would keep quiet. The reason they gave Campaign against retirement leasehold exploitation is because they thought it was unfair to other leaseholders. Absolute rubbish as earlier on when they sent me letter they informed me they would be going through my mortgage provider. I politely told them good luck with that as flat was paid for in cash and had no mortgage. Therefore they knew if I lost Court Case they easily could have got money. Instead they chose to pay my service charges plus remaining service charges owing which were not listed in Court Case(I never agreed to this as it was on condition I kept quiet and would drop pursuing historical charges, I refused to sign their letter and informed them by email that I did not accept their conditions. They then put my service charge to zero and said this was end of matter. Of course I have never accepted this and never will)
My Court Case was 02/02/2015 and big surprise Janet Entwistle resigned on 03/02/2015. She was very clever to get out. As far back as 2 years ago I emailed OM about the hundreds of thousands they needed to repay all Peverel properties back. They repaid my development money back. I have email from Jerry Fox office telling me it is not my concern. I have 3 months ago emailed Chris Owens regarding this situation. His email back is refusing to address situation. He has also in over three emails informed me he has full backing of the CEO and Chairman.
So all these top people are fully aware of huge amounts of monies owed and think it’s fine to con every single retirement development and private development.
Well done for refusing to sign the Tomlin order in order that you could share the information. Have you done so and with whom? Campaign against retirement leasehold exploitation? LKP? FPRA? Your MP? Sir Peter Bottomley? ARMA?
You’re aware, I suppose, that ARMA is supposedly due to decide on the admittance of FirstPort to membership?
Any suggestion that FirstPort is not Peverel is not serious. Same staff, same culture, same practices, same captive leaseholders, same lawyers, same rigged game.
Surely we need companies to suffer the consequences of their actions and not simply pass on the costs of a slap on the wrist to their customers? Having this company struck off, even from something as lame as ARMA, would be a useful start. Helping others win cases would be even better.
This information should be shared with ARMA, particularly the Regulatory Board which is chaired by the Rt Hon Lord Hill.
I have an e.mail from the ARMA Head of Operstions who states that they are considering all complaints about Peverel/First Port, in their consideration of accepting them to ARMA Q.
Peverel/First Port have agreed to this..
So now is everyone’s opportunity to say their piece.
It would be interesting to know whether the residents would be better off with this company in or out of ARMA.Q
This information should be made available to the ARMA Regulatory Board who are considering Peverel/First Ports entry to ARMA Q.
They are taking into consideration all complaints about this company and Peverel /First Port have agreed that they should.
It would be interesting to know if residents would be better off with this company in or out of ARMA.
I will repeat that I have never used a solicitor in the Court Case against at the time Solitaire and Estates and Management who took me to Court.. Their defence was provided by OM Management. I’m happy to o provide their communication to court against me and my defence to court which obviously resulted in them paying all service charges.