Landlord and tenant – Service charge – Costs – Appellants representing leaseholders applying for order under section 20C of Landlord and Tenant Act 1985 – Members of leaseholders’ association represented by one firm of solicitors – Suggested uncertainty over identity of leaseholders for whom solicitors acted – First-tier Tribunal dismissing application – Whether alleged lack of clarity over identity of leaseholders relevant to section 20C application – Appeal allowed
The appellants were a group of 93 leaseholders of flats in the Point West Building in Cromwell Road, London SW7. The building was a mixed residential and commercial development in west London. It comprised 399 leasehold apartments, 320 parking spaces and approximately 20,000 sq m of commercial space. The respondent landlord was entitled to recoup its expenditure on the building through an annual service charge payable by the commercial and residential leaseholders. The appellants applied for an order under section 20C of the Landlord and Tenant Act 1985 to exempt them from liability to contribute towards the costs of proceedings before the First-tier Tribunal (FTT), under section 27A of the 1985 Act, concerning a 10-year capital expenditure programme proposed to be undertaken to the building by the respondent landlord. The estimated cost of the proposed work excluding professional and administrative costs was approximately £8.36m including VAT.
Section 20C of the 1985 Act enabled a tenant of a dwelling to apply to a tribunal for an order that costs incurred by the tenant’s landlord in connection with proceedings before the tribunal were not to be regarded as relevant costs which might be taken into account in determining the amount of any service charge payable by the tenant or any other person specified in the application.
The FTT refused the application. Although it had significantly reduced the sums payable by the appellants towards the capital expenditure, it refused their application for an order under section 20C. It did so, in part, because the appellants had not been wholly successful and, in part, because of what the FTT considered to be a lack of clarity over the identity of the leaseholders on whose behalf the application was made which was said to have caused additional expense and inconvenience to the respondent and to the FTT. The FTT regarded the identity of the parties to the application as a fundamental issue and criticised the appellants and their solicitors for failing to be clear about that matter from the outset. The appellants appealed.
Held: The appeal was allowed.
(1) The FTT’s order that the appellants’ solicitor should provide a witness statement, supported by a statement of truth, listing the leaseholders for whom it acted and explaining what steps had been taken to ensure the list was accurate was not justified and ought never to have been made. It was inconsistent with rule 14(4) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013 and ignored the privilege afforded to solicitors by rule 14(3)(b). Both the tribunal and the respondent were entitled to rely on the assurance by the appellants’ solicitor that it represented those whom it had identified. If the respondent was concerned that some of those named were not parties to the proceedings it could quite properly point that out, but in itself it was a matter of no consequence. If the respondent wished to make the serious allegation that the solicitor was purporting to act for individuals for whom it had no authority to act, that was a matter it could take up with the solicitors’ regulatory authority and it was not a matter for the FTT. Although in so large a piece of litigation it was inevitable that individual flats might change hands, such changes had no effect on the identity of the parties to the proceedings.
(2) The FTT ought not to have given weight to the issue of suggested discrepancies in the list of the appellant’s solicitor’s client list when it determined the application under section 20C. It was apparent from the FTT’s decision that its refusal of an order under section 20C was influenced to a very substantial extent by the view it had formed on the representation question. Had it directed itself that the issue was irrelevant it was impossible to suggest that its decision would have been the same. It was therefore necessary to allow the appeal and set aside the FTT’s decision. The Upper Tribunal had a sufficient understanding of the background and issues to enable it to deal with the section 20C application fairly. This was a case in which an order was clearly justified, and no purpose would be served by remission to the FTT.
(3) By the terms of the residential leases, the respondent was entitled to add its costs of proceedings to the service charge. There was no automatic presumption that a successful leaseholder should be entitled to an adjustment of that contractual obligation, but section 20C allowed such an adjustment to be made if it would be just and equitable. The relevant part of the dispute concerned the use by the respondent of its power of apportionment, which the FTT considered produced a result which was unfair to the leaseholders. The reduction in the leaseholders’ contribution was matched by an increase in the sum which the respondent would have to find from its own resources. This was not a dispute in which there was a large number of issues, or a lengthy hearing, such as to justify an issue based assessment of success. The appellants had achieved a substantial success, much greater than they had been prepared to concede, and no good reason had been advanced why they should meet the respondent’s costs of unsuccessfully defending its apportionment.
Per curiam: In this case all 399 residential leaseholders were joined as parties to the original application made by the respondent under section 27A. Whilst the number of parties to the proceedings was large, it was not unprecedented in disputes under the 1985 Act concerning the payability of service charges for work not yet undertaken or dispensation from the statutory consultation requirements. It was important that such cases did not become bogged down in unnecessary procedural complexities. Ensuring that that did not happen was the responsibility both of the FTT itself and of the parties, especially parties with professional representation.
Daniel Dovar (instructed by Wallace LLP) appeared for the appellants; Jonathan Wills (instructed by Fladgate LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Rotenberg and others v Point West GR Ltd
