Solicitors costs of and incidental to the preparation of a counter notice were recoverable under s. 60 LRHUDA 1993. There ought to be some reduction in costs where a landlord was dealing with multiple claims involving the same building.
The landlord claimed costs under s. 60 LRHUDA 1993 in the sum of £1,725 plus VAT. S. 60 provides as follows:
“60.— Costs incurred in connection with new lease to be paid by tenant.
(1) Where a notice is given under section 42, then (subject to the provisions of this section) the tenant by whom it is given shall be liable, to the extent that they have been incurred by any relevant person in pursuance of the notice, for the reasonable costs of and incidental to any of the following matters, namely—
(a) any investigation reasonably undertaken of the tenant's right to a new lease;
(b) any valuation of the tenant's flat obtained for the purpose of fixing the premium or any other amount payable by virtue of Schedule 13 in connection with the grant of a new lease under section 56;
(c) the grant of a new lease under that section;
but this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void.”
The issues were:
- Whether the cost of preparation of the counter notice was recoverable under s. 60 (1).
- Whether the cost of the solicitor of instructing a valuer and considering that report was recoverable under s. 60 (1).
- Whether it was reasonable for the landlord to use a Grade A fee earner for the conveyancing work.
- What reduction, if any should have been made, to reflect the fact that this was one of a number of lease extensions in the same building?
The FTT reduced those costs to £845 plus VAT.
- The FTT disallowed the cost of preparation of the counter notice.
- The FTT disallowed the cost of the solicitor of instructing a valuer and considering that report.
- The FTT held it was not reasonable for the landlord to use a Grade A fee earner for the conveyancing work.
- The FTT arrived at £845 by reason of the fact that that was what had been awarded by the tribunal in relation to another lease extension claim in the same building.
Decision on appeal
The Upper Tribunal (HHJ Huskinson sitting with the Registrar as an assessor) held as follows:
- Service of a counter notice was a “crucial step in the procedure”. It was reasonable “for a landlord to instruct a solicitor, experienced in this specialised area of law, to consider a tenant's claim to a new lease under section 42 and to advise upon the terms of a counter-notice.”
- The costs of the solicitor in instructing a valuer and considering the valuer’s report were recoverable. They were costs “of and incidental to” the valuation of the tenant's flat obtained for the purpose of fixing the premium under schedule 13.
- It was reasonable for the landlord to use a Grade A fee earner for the conveyancing work.
- It would be reasonable to allow a discount of 20% to the fees to reflect the opportunity that the landlord had to negotiate a discount referable to the fact that there were several lease extension claims in the same building.
Prior to this decision there was, surprisingly, no authority on whether the costs of preparation of a counter notice fell within s. 60 of the Act, although it was widely assumed that they did. The basis of the decision was that the cost of a counter notice was incidental to each one of the sub-paragraphs (a) (b) and (c) of section 60(1). It is sometime the case that it is unclear whether a particular tenant or property qualifies under the Act and thus advice is needed as to whether a counter notice admitting the claim or a counter notice disputing the claim should be served. The reasoning in this case suggests that there would be a good case to say that the cost of advice on that issue would also be recoverable.
Solicitors acting for landlords will also read with some satisfaction the Upper Tribunal’s finding that it was reasonable for the landlord to use a Grade A fee earner for the conveyancing work.