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What is the scope of the Tribunal’s powers under s20C

What is the scope of the Tribunal’s powers when making an order under section 20C of the Landlord and Tenant Act 1985?

In SCMLLA (Freehold) Limited [2014] UKUT 0058 (LC), the Upper Tribunal was required to consider the above question, following an appeal from the then LVT.

Section 20C of the Landlord and Tenant Act 1985 (‘the Act’) provides the Court with the power to limit the landlord’s recovery of the costs of the proceedings through the service charge. The relevant parts of section 20C are set out below:

  • A tenant may make an application for an order that all or any of the costs incurred, or to be incurred, by the landlord in connection with proceedings before a court, residential property tribunal or leasehold valuation tribunal, or the First-tier Tribunal or the Upper Tribunal, or in connection with arbitration proceedings, are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge payable by the tenant or any other person or persons specified in the application.
  • The application shall be made:
    • (b) in the case of proceedings before a leasehold valuation tribunal, to the tribunal before which the proceedings are taking place or, if the application is made after the proceedings are concluded, to any leasehold valuation tribunal;
  • The court or tribunal to which the application is made may make such order on the application as it considers just and equitable in the circumstances.

The Facts

This matter concerned an application by the landlord in the LVT for a determination that service charges were payable under section 27A of the Act. The action was originally commenced against 21 lessees (out of a total of 140,) but eventually proceeded against 10. Various applications were made by some of the lessees pursuant to section 20C of the Act, although the landlord was not made aware of these. One particular application was made for an order limiting costs against all 140 lessees.

When the decision was handed down, the LVT also made a partial order under section 20C allowing the landlord to only recover 50% of its costs through the service charge, and this order was applicable to all 140 lessees! This would result in the landlord losing almost £30,000 in legal costs.

The landlord subsequently appealed to the Upper Tribunal. The appeal was not opposed and was heard by Martin Rodger QC.

The Appeal

It was clear to Martin Rodger QC upon examining the LVT’s file that the LVT had not provided the landlord with copies of the written applications in accordance with the correct procedure. The landlord had not been aware of the application for a section 20C notice on behalf of all 140 lessees.

The questions before the Tribunal were therefore twofold:

  • Did the LVT have the power under section 20C to make such a wide-ranging order?
  • What was the consequence of the failure by the LVT to serve the landlord with the applications?

Considering the question of jurisdiction first, Martin Rodger QC considered previous case-law. These cases suggested that the Upper Tribunal had the power to make a section 20C order in favour of someone who was not party to the proceedings, provided that they had been named in the application.

Martin Rodger QC found that in circumstances where a correct application had been made, the LVT had the power to make an order under section 20C, but that the order could not be made in wider terms than had been requested. In this particular instance, the LVT had had the jurisdiction to make the order that it did on the basis of the application that had been made.

However, as the landlord had not been given notice of the application, the order was set aside. This was because the landlord had not had the opportunity to properly respond to the application.

Martin Rodger QC went on to stress that section 20C orders general interfere with parties’ contractual rights and obligations under the lease, and that they have serious implications for landlord companies, whose only asset is the freehold interest in a building let on long leases. As such, a section 20C order “ought not be made lightly or as a matter of course, but only after considering the consequences of the order for all those affected by it and all other relevant circumstances”.

The consequence of this decision is clear; it confirms that the First-tier Tribunal (Property Chamber), the LVT’s replacement, has the power to make an order under s20C affecting all of the leaseholders of the relevant building. However, such an order is not be made without carefully considering all of the facts, and without first allowing the landlord an opportunity to respond.

This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.

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