Leasehold enfranchisement – Lease extension – Leasehold Reform, Housing and Urban Development Act 1993 – Parties agreeing terms of new lease – Appellant landlord claiming solicitors’ costs pursuant to section 60 of 1993 Act – First-tier tribunal disallowing certain costs – Whether appellant entitled to recover solicitor’s costs incurred in dealing with counternotice and considering valuation report – Whether costs to be reduced on ground that appellant would have negotiated fixed fee if it were personally liable for those costs – Appeal allowed in part
The first-tier tribunal (FTT) was asked to determine the sum properly recoverable by the appellant landlord, under section 60 of the Leasehold Reform, Housing and Urban Development Act 1993, in respect of its costs incurred in connection with a claim by the respondents to acquire a new lease of a flat pursuant to Chapter II of Part I of that Act.
The appellant had served a counternotice in response to the claim, admitting the respondents’ right to a lease extension but putting forward counter-proposals as to the premium payable for the new lease. The parties ultimately agreed all the terms of the new lease and settled on a premium of… The only issue outstanding was the question of the appellant’s costs.
In that regard, the respondents disputed the figure of £1,725, plus VAT, claimed by the appellant for solicitors’ fees. The appellant put before the FTT a letter confirming that it had agreed to pay for the services of its solicitor in respect of enfranchisements, lease extensions and the associated conveyancing at the rate of £250 per hour in so far as they were not recoverable from the nominee purchaser or tenant; the letter stated that the ownership of freehold reversions was a core business of the appellant and that it would be willing to pay the costs of fully complying with its instructions if paying them itself.
The FTT disallowed certain items of solicitors’ work after finding that the costs “of and incidental to” the grant of the new lease, for the purposes of section 60, did not extend to the solicitor’s fees for instructing a valuer, advising on the valuation report and dealing with the appellant’s counternotice.
The FTT found that the appellant was oentitled to its legal costs of obtaining advice on the respondents’ entitlement to a new lease, and the work then involved in granting that new lease. However, it refused to accept the appellant’s letter at face value as evidence of those costs. It considered that, on the open market, a company such as the appellant who had to pay for the costs out of its own pocket would expect a solicitor to quote in advance and would negotiate a fixed fee for a number of similar transactions on one estate. It found that the reasonable costs on that basis were £845 plus VAT. The appellant appealed.
Held: The appeal was allowed in part.
(1) The FTT was wrong to hold that the costs recoverable by a landlord under section 60 of the 1993 Act did not include legal fees incurred in dealing with the landlord’s counternotice. The service of a counternotice pursuant to section 45 of the Act was a crucial step in the statutory procedure. Failure by a landlord to serve a proper counternotice could have serious adverse effects on the landlord’s position. It was reasonable for a landlord to instruct a solicitor, experienced in that specialised area of law, to consider a tenant’s claim to a new lease under section 42 and to advise on the terms of a counternotice. Such costs were properly described as costs “of and incidental to” each of the matters mentioned in section 60(1). The service of a counternotice was effectively the result of the work referred to in section 60(1)(a), namely the investigation of the tenant’s right to a new lease. Further, the service of a counternotice was a necessary step to be taken if the landlord was to be able to advance its arguments regarding the valuation of the flat and the price to be paid for the new lease, which were the valuation matters referred to in section 60(1)(b). The service of the counternotice was also a necessary prerequisite, so far as the landlord was concerned, of the grant of the new lease under section 56, so as to fall within section 60(1)(c). Although a new lease could be granted in the absence of any counternotice, the service of such a notice was necessary for the landlord if it was to have a satisfactory status on which it could make representations regarding the terms of the new lease.
(2) Contrary to the FTT’s findings, the solicitor’s costs incurred in instructing a valuer and considering the valuer’s report also fell within section 60. Such costs were “of and incidental to” the valuation matters in section 60(1)(b). The provisions regarding the price to be payable and the calculation of the premium under section 13 were complicated and it was reasonable for a landlord to instruct a solicitor to be involved in relation to the valuer’s report. If a solicitor instructed a valuer to produce a valuation and then considered the valuation once it was provided, then the solicitor’s costs were “incidental to” the valuation and were properly recoverable provided that they were reasonable. However, the instructing of the valuer, as opposed to the later consideration of the valuer’s report, was an administrative rather than a professional task for which no separate time charge could reasonably be made: Sidewalk Properties Ltd v Twinn [2015] UKUT 122 (LC); [2015] PLSCS 101 applied.
(3) It was reasonable for a landlord to instruct a solicitor with extensive experience in the relevant area of the law at a charge of £250 per hour. However, while the time spent by the solicitor would be considered reasonable in relation to a one-off transaction, the FTT had been entitled to hold that the costs were not reasonable because a landlord who was paying its own costs would seek to negotiate a fixed fee and there was no evidence of such any negotiation in the instant case. The burden was on a landlord claiming costs for professional services under section 60 prove that the costs were reasonable. In circumstances where there was a clear opportunity for the appellant to negotiate a fixed fee or quantum discount, the appellant had not proved either that it had obtained such a deal, or that it had attempted to negotiate one but had been unable for good reason to do so. It followed that the FTT had been entitled to find that the appellant, if personally liable for all solicitor’s costs, would have been liable for substantially less by way of solicitor’s costs than it had in fact incurred. In all the circumstances, the appellant would have obtained a 20% discount, such that it was required to pay no more than 80% of the costs that would be applicable to a one-off transaction, rather than one of potentially many similar transactions. On that basis, the appellant was entitled to recover £1,320, plus VAT.
Oliver Radley-Gardner (instructed by WH Matthews & Co, of Kingston upon Thames) appeared for the appellant; the respondents did not appear and were not represented.
Sally Dobson, barrister
Click here to read transcript:Sinclair Gardens Investments (Kensington) Ltd v Wisbey and another
