[2024] UKUT 122 (LC)

The appellants are the leaseholders of one of 90 flats at Maitland Court, near Lancaster Gate station. The respondent is the leaseholder-owned management company, entitled to demand service charges under the lease. In October 2022 the respondent made an application to the FTT for a determination about service charges, which the FTT made on 10 April 2023. The amount of service charges in dispute was initially £5,560.24, but that sum was reduced by a direction of the FTT before the hearing to £4497.36 because the FTT had no jurisdiction in respect of the rest of the amount claimed.

The sum claimed was further reduced by concessions made by the respondent shortly before the hearing, so that at the hearing the amount in issue was £1,909. The FTT found that £1,063.97 was payable by the appellants, made up of £804.23 and £259.74. It declined to make an order under section 20C of the 1985 Act; its reasons were:

“(i)

that the applicant has been the more successful party as more than half the amount in contention has been found payable, (ii) the property is a self-managed block owned by the residents and (iii) even a successful party can have no expectation of a s.20C order: Tenants of Langford Court v Doren Limited [2001] 3 WLUK 935.”

On 9 May 2023 the appellants applied to the FTT for permission to appeal that decision and also applied for an order under paragraph 5A; the application was drafted by Ms Diane Dolivoux of counsel and explained that the landlord’s litigation costs appeared to be recoverable under the lease as administration charges rather than as service charges and that the appellants, being unrepresented, had not appreciated they needed to make an application under paragraph 5A.

The application challenged both the decision itself and the refusal to make the section 20C order. As to the decision itself, among the grounds of appeal was the argument that of the amount found to be due to the respondent (for reasons I do not need to go into) £804.23 was not due on the basis of the evidence provided to the FTT, so that only £259.74 was payable. As to the refusal to make a section 20C order the appellants said that (a) as a result of concessions made by the respondent shortly before the hearing it had in fact recovered only 25% of the £4,497.36 originally in issue in the proceedings (b) if the appeal in relation to the £804 was successful the respondent would have recovered only 5% of what it sought.

The respondent made written representations in response to that application. The FTT then reviewed its decision and on 31 August 2023 issued an amended decision in which it accepted that the £804.23 was not payable, for the reasons given by the appellants. It amended its decision in relation to section 20C, and made a separate order in relation to paragraph 5A. Its reasoning was identical in both, and it is the paragraph 5A decision that is now in issue (because the appellants take the view that litigation costs are recoverable under the lease by way of administration charge and not of service charge) so I set that out below. There is an amendment in it because the FTT later corrected a typographical error:

“2.

Taking into account the determinations in the decision of 10 April 2023 as amended on 31 August 2023, the Tribunal determines that an order be made that not more than half the applicant’s administration charges in respect of litigation costs may be recovered via the service charge from the respondent.

3.

The reasons are (i) neither party has been wholly successful. Although the amount found payable of £259.74 was small compared to the initial claim of £5,560.24 (reduced by Judge Pittaway to £4493.36) the applicant had been entitled to £259.74 since November 2022 and that amount was admitted in the appeal application(ii) there was no evidence of any offer by the respondent to settle this action (iii) the property is a self-managed block owned by the residents and (iv) even a successful party can have no expectation of a s. 20C order Tenants of Langford Court v Doren Limited [2001] 3WLUK 935, which by parity of reasoning the Tribunal considers applies equally to this application.

The sole ground of appeal, as to which the FTT itself gave permission to appeal, is that the FTT was wrong to make that order, and that either none, or only 5% of the respondents’ costs of the FTT litigation should be recoverable from the appellants by way of administration charge.