Clause attached - Can FH charge ALL admin legal fees for FTT(Tribunal) to leaseholder

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    Clause attached - Can FH charge ALL admin legal fees for FTT(Tribunal) to leaseholder

    Hi. Can the freeholder charge the (residential) leaseholder ALL agent, admin, legal costs even if the FTT finds that some of the service charge arrears are unreasonable? The freeholder's lawyer claims that the freeholder has nothing to lose as all costs can be charged back to the leaseholder.

    In this case, the dispute is based on arrears from many years ago when there was a different freeholder/management, minor accounting errors from years ago and also unreasonable service charges under current management/freeholder. Can the FTT decide to make the freeholder pay for his own legal fees (which I assume it means he pays nothing as these lawyers often work on a no win no fee basis) after seeing the evidence?

    Thanks for you advice x

    #2
    Originally posted by Farrella View Post
    Hi. Can the freeholder charge the (residential) leaseholder ALL agent, admin, legal costs even if the FTT finds that some of the service charge arrears are unreasonable? The freeholder's lawyer claims that the freeholder has nothing to lose as all costs can be charged back to the leaseholder.
    Hmm. Well, plainly not. Lease says 'act, omission, negligence, breach or non-observance' of the lessee. Are you the freeholder or the lessee?

    Comment


      #3
      It surprises me that freeholders would use no-win-no-fee lawyers,but those lawyers are not going to take on a case unless they are sure of winning.

      Comment


        #4
        I am the Lessee. Although the arrears first started when I wasn't the Lessee, they have been passed onto me. The FTT has just sent directions (with suggestion for mediation), nothing has been done yet. I doubt the lawyer knows the full ins and outs of the case, as much of the dispute is with the ex-freeholder and ex-management.

        When you say "plainly not", which question are you referring to?

        Comment


          #5
          In my opinion (and contributors who are legally qualified and/or more experienced with lease interpretation than me may disagree), Clause 3.25 does not apply - unless the freeholder is the person who applied to the FTT and they can put forward a convincing argument that they are genuinely pursuing forfeiture of the lease as a result of the arrears (in which case the second part allows all costs to be passed on).

          clause 3.26 though, does seem to allow the freeholder to charge costs back to the leaseholders because the costs will either be in pursuit of sums that the lease allows to be collected, or in defence of an act of the tenant (If the tenant applied to the tribunal).


          Comment


            #6
            You can ask the FTT to determine who should pay the costs of the case.

            Has the freeholder served a s146 notice?

            Comment


              #7
              It is always worth considering the possibility of reaching an agreement with the freeholder or seeking alternatives eg arbitration or mediation in order to avoid the FTT proceedings.

              Comment


                #8
                All leases have clauses to say the leaseholder must pay the lessor's cost for recovery of ground rent and service charge arrears. If you cannot pay the service charges , then you have to sell the flat and move out.

                If you think some items in the service charges are unfairly charged , then you should make an application to FTT to judge the reasonableness of the service charges. The FTT can reduce the service charges if you can show they are unfair.

                Its better if other leaseholders in the building and paying for same service charges, are helping you to fight against unfair charges at the FTT .



                Comment


                  #9
                  Originally posted by Gordon999 View Post
                  All leases have clauses to say the leaseholder must pay the lessor's cost for recovery of ground rent and service charge arrears. If you cannot pay the service charges , then you have to sell the flat and move out.

                  If you think some items in the service charges are unfairly charged , then you should make an application to FTT to judge the reasonableness of the service charges. The FTT can reduce the service charges if you can show they are unfair.

                  Its better if other leaseholders in the building and paying for same service charges, are helping you to fight against unfair charges at the FTT .


                  The leaseholder has not stated that he cannot afford to pay reasonable service charges.

                  It is unclear who is bringing the case to the FTT, the freeholder or the leaseholder?

                  Comment


                    #10
                    The freeholder (not a nice man, even his agents admit that "off the record") started a county court claim for service charge arrears, and I (leaseholder/tenant) said that the arrears are unfair/incorrect and suggested FTT so the court transferred the case to FTT. Does this mean I started it or did the freeholder start it because he started the court claim?

                    I have been paying service charge regularly for the past year, in fact the arrears are lower now than the arrears stated in the FTT. The disputed arrears (less than £1000) are mostly from a long time ago before I became the leaseholder (I lived in the flat as a tenant before buying), I inherited the arrears when I bought the flat.

                    I am scared that in my pursuit of "justice", even if the FTT rules that I don't have to pay the unfair and inaccurate charges, I will be forced to pay excessive legal costs that are far greater than what I will gain at FTT.

                    The lawyer has already added a few hundred pounds "admin" charge to the court case and FTT case.

                    The disputed amount is way less than £1000 but I refused to pay out of principle! Am I being silly?

                    Comment


                      #11
                      Sticking to principles can prove costly. Could you offer to pay half the disputed sum and no costs? The freeholder would include costs under the service charge anyway.

                      Comment


                        #12
                        It was up to the freeholder to advise if any monies were outstanding upon sale of the lease, and you would negotiate that the outgoing leaseholder paid his/her service charge bill owing before you paid for the lease.
                        Apparently, this did not happen.

                        If you were not told of any outstanding service charges when buying the lease ( from freeholder / managing agent / either one or both of their solicitors,) then you "could" say that there were no outstanding service charges, as none were mentioned at time of sale. In other words, if you were not told there were previous outstanding arrears, then there were none.

                        You were not told that the army would use your grounds to camp in, and have battle exercises there for a week each year, therefore that will not happen.

                        Unfortunately, think that depending on the year of the lease ( when flats were first made ) before or after 1986 ( please check ) that either side of that date, leaseholders debts carry over to the next leaseholder, and the other does not. I cant remember which way round it is. ( or true date ).

                        Ask why you were not told of the service charge arrears before you handed over your money, as it is in the best interest of the freeholder to get all debts paid BEFORE he authorises the transfer of a lease.

                        Comment


                          #13
                          How confident are you that the disputed charges actually are unreasonable?

                          The wording of your lease seems to allow the freeholder to recover any solicitors costs etc. that he incurs from you, as an admin charge, via the service charge.
                          You should immediately contact the FTT and tell them that you want to have a section 20C determination included if they decide the case (and if you settle through mediation, make sure that you make it clear, preferably in writing, that paying no costs is part of the settlement).
                          The fact that the claim was started in the county court might complicate things, since the tribunal may decide that it is up to them to decide on costs.

                          One thing in your favour is that all costs (whether awarded through the courts or claimed via the terms of the lease) must be reasonable. Costs that exceed the amount of the original debt can be considered reasonable (otherwise no tenant would need to pay small debts), but there will be limits.

                          It's also worth checking that every service charge demand, ground rent demand, etc. that you have received has been correctly demanded. If the landlord's name and address has not been included, the correct version of the 'Tenant rights and responsibilities' hasn't been included, ground rent demands haven't been included, etc., you can potentially claim that those amounts are not yet payable (meaning whatever you paid towards them covers any part of the original debt that is determined to be reasonable). If you want to argue this, the FTT will need to be told in advance.

                          It is important to also ensure that you fully comply with any directions given by the tribunal. If you don't, and the freeholder does, they are more likely to award costs against you.

                          Comment


                            #14
                            No matter how confident you are, the odds are stacked against you. You will be up against a solicitor or a barrister who will be funded from service charge monies. The costs will heavily outweigh any benefit so I strongly advise that you try to settle.

                            Comment


                              #15
                              Thank you for the advice!

                              When you say "a solicitor who will be funded by service charge monies", do you mean my service charge fees or service charge for the whole building?

                              Also the FTT directions do not specify what the freeholder is supposed to send the tenant (i.e. accounts from what years) and since the court claim was started by the freeholder, no one has specified exactly why the amounts were disputed. I wrote in the blurb for the Defence, but there was only a small space and I could not detail the multiple reasons why the service charge is unreasonable. What if the freeholder fails to send the accounts by the FTT's deadline (very soon) in the Directions?

                              ps: The service charge was "unreasonable" over a decade ago under different management, then it became reasonable. Under new management, the same thing happened. This is over many many years so technically the freeholder needs to show the court years of accounts (could incur high admin charge...).

                              pps: Building was built after 1986. I guess I could settle direct with freeholder and say I will only settle if there are no "admin" fees for his lawyer?

                              Comment

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