With the cost of going to court set to rise again, Hayley Harris warns that the property industry will feel the brunt.
The government has confirmed new increases in court fees and published proposals for further rises for money claims as well as new fees for the First-tier Tribunal (Property Chamber) and Upper Tribunal (Lands Chamber). The announcement comes barely three months after controversial fee increases took effect in April 2015, which led to a hike of more than 660% in some cases.
Confirmed and proposed fee increases
The latest confirmed and proposed new fees are summarised in the table below. Not all of them are big numbers, but they represent a sea change in the way that court users are charged. Some of the new charges will be “enhanced fees”, meaning the amount of fee exceeds the cost of providing the service (the government passed legislation in 2014 to bypass the usual rule that fees for public services should be at cost).
The Ministry of Justice consulted on enhanced fees, including for possession claims, in January 2015. Despite more than 90% of respondents opposing the increases, the government has confirmed that it is nonetheless going ahead with the proposals. The changes are expected to come into effect later this year and produce £52m per annum of additional income.
As a result of the changes in April this year, current fees for issuing a money claim for more than £10,000 are 5% of the value of the claim, capped at £10,000. Not content with the anticipated annual revenue of £120m that this is set to produce, the government now proposes to increase the cap to £20,000 – which would be payable for claims of £400,000 or more – and have floated the possibility of a higher cap, or no cap at all.
Barrier to justice
Many are concerned that this relentless rise in court fees will have a serious impact on access to justice. Some may simply be unable to afford the upfront cost of starting proceedings.
Claims with a value of more than £200,000 are not necessarily the reserve of high-net-worth individuals or multinational organisations, particularly in the property sector. With property and rental values being what they are, claims for unpaid rent can easily run into hundreds of thousands of pounds. For the landlord, whose cash flow and overdrafts may already be severely stretched as a result of the dispute, a court fee of more than £10,000 could present a real barrier to justice.
Nor are property disputes with a value of £400,000 rare. Dilapidations claims for commercial premises are often of this level or more. An issue fee of £20,000 is likely to prove prohibitively expensive in many cases, particularly when multiplied across several floors of a multilet property, or a portfolio of units.
While the government may hope that the further increase in issue fees will encourage more parties to explore alternative dispute resolution, many claimants find it impossible to persuade the other side to negotiate without first issuing proceedings; parties may also have to issue to avoid being time barred. Having paid a hefty upfront fee, a party may be more inclined to go through with those proceedings to “get their money’s worth”.
According to the Ministry of Justice, fee increases are needed to help transfer the financial burden of the courts and tribunal systems away from the taxpayer to the
court users themselves. If that is the case, a fairer system would be a “pay as you go” approach with fees being imposed in stages as parties progress through proceedings.
Those cases which settle early and take up a relatively small amount of court resources would then pay less than those which proceed all the way to trial.
While the government has pledged to reinvest the income it receives from fee increases back into the justice system as a whole, there is no guarantee that the civil courts will be prioritised. Those paying the fees may just see it as another “tax” for which they get nothing in return in the way of an improved service.
The government’s consultation closes on 15 September 2015. Details of where to submit responses are set out in the consultation document at: https://consult. justice.gov.uk/digital-communications/ further-fees-proposal-consultation
Click here to view table.
This article was originally published in Estates Gazette on 5th September. Matthew Ditchburn, Partner at Hogan Lovells International LLP, also contributed. Both he and Hayley are members of the Property Litigation Association’s law reform committee.