News story

Going to the LVT - can we recover our legal costs?

On 15th December 2011 the Upper Tribunal (Lands Chamber) handed down its decision in the case of Plantation Wharf Management Company Limited v (1) Dennis Arthur Jackson (2) Pauline Irving.

This was an appeal by a lessee-owned freehold company against a decision of the LVT dated 20 January 2011. The dispute was over service charge payments for the years 2007 and 2008, a claim having been brought by the landlord in the county court and subsequently transferred to the LVT. The LVT held that save for some modest amendments it was not persuaded that the balances claimed were anything other than reasonable and recoverable.

The LVT then went on to rule, among other issues, that the terms of the leases did not entitle the freeholder to recover its legal costs by way of service charge.

In considering the appeal the Upper Tribunal reviewed the terms of the leases. They did not refer specifically to the recovery of legal costs. The Tribunal accepted the argument of the landlord that as the leases permitted them to recover the fees of professional advisers enforcing covenants, the appellant’s legal costs are fees paid by the freeholder to professional advisers for the purpose of enforcing covenants whilst solicitors and counsel are the professional advisers almost inevitably engaged when covenants need to be enforced.

The Upper Tribunal concluded that although it was true that the words “legal costs” or “the cost of legal advisers” did not appear in the leases it seemed to be overwhelmingly clear that such costs were included on any fair construction. The Tribunal found the provisions of the leases “clear and unambiguous” that a tenant is liable via the service charge to subsidise the landlord’s costs of suing defaulter tenants.

The lease should make clear provision for the recovery of legal costs through the service charges but the Tribunal may take a more lenient approach where the management is effectively in the hands of the leaseholders.

Further information:

• Service Charges and other issues

(News story added: 24 January 2012)