Recovering residential lease extension costs

6 July, 2016

Hand holding out cashPerhaps not the most glamorous of topics, but often the subject of terse exchanges between the parties’ advisers!  Parties often conclude that it is not worth the cost of asking the First-Tier Tribunal (“FTT”) to determine what level of costs a landlord is entitled to recover for a lease extension of a flat under Section 60 of the 1993 Act, and look to agree the costs instead, which means the recent authority in the Upper Tribunal case of Sinclair Gardens Investments (Kensington) Ltd v Wisbey and another [2016] UKUT 203 (LC) was most welcome.  The Upper Tribunal ruled that:

 

  • The FTT was wrong to hold that the landlord was not entitled to recover its legal costs of preparing and serving a counter-notice.
  • It was also wrong to hold that the landlord’s legal costs incurred in instructing a valuer and considering the valuer’s report did not fall within Section 60, albeit that in this case the task of instructing a valuer was administrative only, meaning the professional costs could not be recovered for that element.
  • Whilst it was not unreasonable for a landlord to instruct an expert solicitor with a rate of £250 plus VAT per hour, the FTT was entitled to apply a discount to reflect the fact that the landlord would in the circumstances have had an opportunity to negotiate a fixed fee or a reduced rate due to the number of lease extension matters on which it instructed the solicitors.

 

As with many decisions, this closes down some angles of dispute whilst opening others, so it will be interesting to see how parties seek to make use of it to their advantage.