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Case law updates and developments

Case law update and developments –a couple of recent decisions and an important change in legislation affecting recovery of litigation costs from leaseholders

Right to manage not invalidated by minor procedural irregularities

Elm Court RTM Co Ltd v Avon Freeholds Ltd (2017) EWCA Civ 89

The Court of Appeal held that minor procedural irregularities will not invalidate a claim. The Upper Tribunal had previously ruled that defects in the Notice Inviting Participation and the Notice of Claim prevented the RTM company from acquiring the right to manage. The Court of Appeal ruled though that the claim should not be defeated by technical arguments on minor issues and allowed an appeal by the RTM company. Whilst this is helpful to RTM companies it does not avoid the need to follow the legislation to the letter. It leave open the question of what irregularities will and will not invalidate a claim and in that respect potentially creates more uncertainty for both landlords and applicants for the right to manage. The Court of Appeal has encouraged the government to look at either simplifying the procedure further or granting the FTT power to relieve failure to comply with the statutory obligations if just and equitable to do so.

Upper Tribunal upholds recovery of legal costs for dealing with threatened legal proceedings by tenant through service charge

Bretby Hall Management Company Limited v Christopher Pratt (2017) UKUT 70 (LC)

The Upper Tribunal ruled that the legal costs of dealing with threatened legal proceedings by a tenant were recoverable through the service charge even though no claim was actually commenced. The costs were £11,100. There has to be a suitable clause in the lease which in this case there was, each case will depend on its own facts. The UT also ruled that a s.20C order (restricting the landlord from putting costs through the service charge) could not be made in respect of the landlord’s costs of dealing with the threatened claim as no claim had been issued – s.20C concerns proceedings before a court, tribunal or arbitral tribunal – as there were none the Tribunal could not make such an order even if it felt inclined to do so. No s.20 C order was made in respect of the costs of the appeal either as the appeal succeeded on almost all points and it was a residents owned management company with no resources save for the service charge income.

New power for courts and tribunals to limit recovery of litigation costs from leaseholders as from 6th April 2017

Section 131 of the Housing and Planning Act 2016 gives a discretionary power to courts and tribunals to limit the ability of a landlord to recover legal costs recoverable from a leaseholder by the terms of the lease as an administration charge. The section comes into force on 6th April 2017 and applies to costs incurred or to be incurred in respect of proceedings begun on or after 6th April 2017. As from this date a leaseholder can apply for an order reducing or extinguishing their liability to pay such costs and the court or tribunal may make whatever order it considers to be just and equitable. The courts has always had the power to do this under the general discretion on costs even where a contractual entitlement to costs exists but this specifically enshrines the ability to do so and also grants tribunals the power to do so where no such power has existed previously.

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