[2024] UKUT 50 (LC)

The appellant is the tenant of flat 7, 154 Gloucester Terrace, under a long lease granted in 1982. Mindmere Ltd owns the freehold of property comprising 67 flats at 142-168 (even) Gloucester Terrace and 9 – 15 (odd) Westbourne Terrace Mews, W12; the flats are all held on long leases and each of the tenants is a shareholder in Mindmere Ltd.

The appellant’s lease contains provision for the tenant to pay service charges and ground rent. It also contains a covenant by the tenant at clause 3(g):

“To pay all costs charges and expenses (including Solicitors’ costs and Surveyors’ fees) incurred by the Lessor for the purpose of or incidental to the preparation and service of a notice under Section 146 and/or 147 of the Law of Property Act 1925 notwithstanding forfeiture may be avoided otherwise than by relief granted by the Court.”

On 7 October 2021 the respondent’s solicitors sent to the appellant a letter stating that he was indebted to the respondent in the sum of £13,431.05 in respect of service charges, reserve fund contributions and ground rent; the letter said

“We confirm that we are instructed with a view to serving a notice under section 146 Law of Property Act 1925.”

No payment was made and on 27 October 2021 the respondent issued proceedings against the appellant in the County Court claiming service charges and ground rent. In his defence the appellant challenged the reasonableness and payability of the service charges and the proceedings, and therefore on 8 April 2022 Deputy District Judge Le Bas made an order that “The Claim be transferred to the First Tier Tribunal (Property Chamber)”.

Following a number of procedural defaults in the FTT, on 17 January 2023 the appellant was debarred from disputing the service charges in issue. The FTT then conducted a hearing on 29 February 2023 and issued a decision on 3 April 2023. The service charges were found by the FTT to be reasonable and payable. The judge in the FTT, sitting as a judge of the County Court pursuant to judicial deployment arrangements, made orders about interest and costs.

The FTT then turned to the costs incurred by the respondent in the FTT. The FTT is a no-costs jurisdiction when determining the reasonableness and payability of service charges in its jurisdiction under section 27A of the Landlord and Tenant Act 1985. It may award costs, pursuant to rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 when a party has behaved unreasonably but there was no application for it to do so. However, the FTT considered the costs incurred by the respondent in the FTT and determined that the sum of £15,563 would be reasonable and payable if demanded as an administration charge pursuant to clause 3(g) of the lease, together with VAT if the respondent confirmed that it was unable to recover VAT as an input tax.