Legal charges arising from FTT

[East London Girl]

Hello

To cut a long story short, I had to go through an FTT process recently which I lost - even though I provided evidence of underhand activities (including invoices which had been forged, etc) undertaken by my Managing Agent. I complied with the FTT decision and paid the service charges specified (they were reduced somewhat, though not nearly as much as they should have been - but I decided to just swallow it and pay rather than go through the process of appealing). HOWEVER, the Managing Agent has now just sent me a bill for £4000+ for his purported legal fees relating to the FTT!!

As part of the FTT ruling, my application for a S20C was refused, but surely I cannot realistically be expected to pay more than £4000 in legal fees?! Can anyone please tell me if there is a cap on such charges? Most of the paperwork for the FTT case was already in existence (copies of the lease, etc) - there is no way any legal work on the FTT would have been anywhere close to this amount.

For background: the property in question is in Newham, London - it is a traditional Victorian family home that has been carved into 4 studio flats. It's a tiny place, yet the service charges per sq ft are more than you would pay for a high-end apartment in Mayfair. He's running a racket, and it's beyond unfair that's he's allowed to get away with this.

The deadline for the FTT appeal has passed, but there may be grounds to apply for an extension - given that the legal fees have just been sent to me?

Any help or advice offered would be greatly appreciated.

Thanks so much in advance.

[Macromia]

Two questions:
1. Did the tribunal decision say anything at all about costs?
2. Does your lease contain any clauses that could refer to legal costs and, if so, what is the exact wording?

The legal costs of defending against your tribunal application can only be passed on to you if one of the above applies.
The fact that your section 20C application was rejected means that, if the lease allows this, the costs can be included as part of the service charge, which may mean that the costs are shared between all leaseholders according to the service charge proportion they each usually pay (which won't please other leaseholders).
It may also be that your lease allows costs to be passed onto an individual leasehold (you) as an administration charge.

If your lease doesn't contain any clauses that allow legal costs incurred by the freeholder (the costs here will be regarded as the freeholder's, not the managing agents) to be passed on to the leaseholder as either part of the service charge, or as an administration charge, and the tribunal made no order regarding costs, it is unlikely that you have to pay.

[Gordon999]

Make a complaint about unfair charges to your local MP and to the Competition and Markets Authority.

[Macromia]

Make a complaint about unfair charges to your local MP and to the Competition and Markets Authority.

Worth doing - although, unfortunately, this will have no effect on whether or not the OP is required to pay.

The fact that leaseholders are often deterred from making even reasonable challenges to service charges and other costs because leases can rack up whatever legal costs they like knowing that the leaseholder is likely to be required to pay the freeholders costs (often even if the leaseholder wins), is among the things that leasehold action groups should be addressing - not most of the things that they currently are prioritising.

[Sussex818]

Macromia,

Out of interest Mac, what is the usual wording of clauses that relate to administration charges? I have never seen it in any leases I've owned

[East London Girl]

Two questions:
1. Did the tribunal decision say anything at all about costs?
2. Does your lease contain any clauses that could refer to legal costs and, if so, what is the exact wording?

The FTT decision states:
* The application for an order under section 20C of the Landlord and Tenant Act 1985 so that none of the landlord’s costs of the Tribunal proceedings may be passed to the lessees through any service charge is refused.
* The application for an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, so that none of the landlord’s litigation costs can be recovered as an administration fee is refused.

Looking at the lease, it says:

To pay to the Landlord on demand the costs and expenses (including any solicitors',surveyors' or other professionals’ fees, costs and expenses and any VAT on them)assessed on a full indemnity basis incurred by the Landlord (both during and after theend of the Term) in connection with or in contemplation of any of the following:
a) The enforcement of any of the Tenant Covenants
b) preparing and serving any notice in connection with this lease under section146 or 147 of the Law of Property Act 1925 or taking any proceedings under either of those sections, notwithstanding that forfeiture is avoided otherwise than by relief granted by the court;
c) preparing and serving any notice in connection with this lease under section17 of the Landlord and Tenant (Covenants) Act 1995;
d) preparing and serving any notice under paragraph 4 (c) of Schedule 3; or
e) any consent applied for under this lease, whether or not it is granted.

[East London Girl]

Make a complaint about unfair charges to your local MP and to the Competition and Markets Authority.

Thanks. I will most certainly do this, but sadly it won't have any impact on the demand I have received to pay these crazy charges of £4,000+ within the next seven days. I really need advice on how to avoid this if at all possible.

[eagle2]

Have you been provided with a breakdown of the £4,000+ charges? If not, you should request one.
Was there a FTT hearing and did a solicitor or barrister attend? Or is this the managing agent charging additional sums? Did you pay the service charges which were demanded prior to the FTT application? Is there anything within your lease regarding resolving disputes? Did the managing agent offer any alternative to legal action?
You can make a fresh application to the FTT to consider whether or not you should pay the £4,000+ and whether or not the amount is reasonable.
You can also apply to the FTT to make a late application to appeal against the decision but you would need a good reason why you did not apply in time. If you are a matter of days out of time and you have a valid reason, you may be granted permission.

[eagle2]

Also who made the application to the FTT, was it you?

[Macromia]

Macromia,

Out of interest Mac, what is the usual wording of clauses that relate to administration charges? I have never seen it in any leases I've owned

I wouldn't expect many leases to actually refer to "administration charges" using those words - but if they refer to any costs that can be charged to the individual leaseholders separately from service charges they are referring to what the law will typically consider to be administration charges (service charges also being a term that may not be used).

The paragraph of East London Girl's post that starts with "Looking at the lease, it says:" gives examples of administration charges within a lease.

It is the type of charges that determine whether they are administration charges, service charges, or something else - what the lease says they are will usually not be relevant.

[Macromia]

The FTT decision states:
...

* The application for an order under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, so that none of the landlord’s litigation costs can be recovered as an administration fee is refused.

This (in combination with the terms in your lease) is the part of the FTT's decision that allows the freeholder's costs to be charged to you


Your lease, unfortunately, does allow costs of legal action to be passed on to you as administration charges, although mostly only if it was the freeholder who started the legal action (which will presumably be why eagle2 has asked who made the application.
However, part 'a' seems to be open enough to potentially allow costs defending against a challenge to service charges to be claimed.


Nothing is payable currently if the demand for payment was not accompanied by the correct notice explaining leaseholders rights regarding administration charges - but that can be 'corrected' by the freeholder/managing agent by sending the demand again at a later date.

eagle2's other questions are because administration charges are only payable to the extent that they are 'reasonable'.
Unfortunately, tribunals will allow quite high costs for solicitors fees, so they could quite easily determine that £4000 is reasonable - especially if there was a hearing that the solicitor attended, as it could then be argued that you are liable for a days wages for the solicitor (potentially at £250+ per hour) in addition to any time spend preparing for the case, plus the managing agents costs and wages for their time).
You should still find out what the breakdown of the costs is though, and ask them what clause in your lease they are using to charge you these fees.

What the tribunal case originally concerned may be important, but it sounds like the tribunal may have decided that the majority of the costs you challenged were legitimate and you are responsible for legal costs because you shouldn't have challenged the costs.

Your best argument may be that the freeholder/managing agent was unreasonable to engage a solicitor and pursue legal action rather than seeking potentially cheaper ways of addressing the dispute - but, unless you lease says that this should be done, they don't necessarily have any obligation to try alternatives.

[East London Girl]

eagle2,

The only breakdown provided is the amount of time spent on the case (34.5 hours; charged at £100 p/h + application fee £100 + VAT)
There was an FTT hearing via videoconference, but no solicitor/barrister attended on either side.
I didn't pay the service charges prior to the FTT because I foolishly believed the FTT would be on my side when I informed them about the fabricated invoices, etc. I don't believe there is anything in the lease re dispute resolution.
The FTT decision was reached on 25th January, so the appeal should have been lodged by 22nd February - but I only received this invoice pertaining to legal fees last Friday.
I'm not certain if I now have grounds to appeal?

[East London Girl]

Also who made the application to the FTT, was it you?

The Managing Agent made the application to the FTT. I was happy at the time, because I thought there was no way they would rule in his favour. I got that wrong..!

[East London Girl]

....

Nothing is payable currently if the demand for payment was not accompanied by the correct notice explaining leaseholders rights regarding administration charges - but that can be 'corrected' by the freeholder/managing agent by sending the demand again at a later date.

eagle2's other questions are because administration charges are only payable to the extent that they are 'reasonable'.
Unfortunately, tribunals will allow quite high costs for solicitors fees, so they could quite easily determine that £4000 is reasonable - especially if there was a hearing that the solicitor attended, as it could then be argued that you are liable for a days wages for the solicitor (potentially at £250+ per hour) in addition to any time spend preparing for the case, plus the managing agents costs and wages for their time).
You should still find out what the breakdown of the costs is though, and ask them what clause in your lease they are using to charge you these fees.

What the tribunal case originally concerned may be important, but it sounds like the tribunal may have decided that the majority of the costs you challenged were legitimate and you are responsible for legal costs because you shouldn't have challenged the costs.

Your best argument may be that the freeholder/managing agent was unreasonable to engage a solicitor and pursue legal action rather than seeking potentially cheaper ways of addressing the dispute - but, unless you lease says that this should be done, they don't necessarily have any obligation to try alternatives.

The Managing Agent did instigate the FTT, as I refused to pay his fabricated charges. I was certain that the evidence I had collected made it obvious that the guy is a crook, but for some strange reason they sided with him for the most part..

The invoice for his legal fees was sent via e-mail, and did not make any reference to rights regarding administration charges.

No solicitor was engaged for the hearing, and I very much doubt that one was used to prepare the case either. I am convinced it is just another bogus charge that I will have no choice but to pay.

Thank you for the advice re breakdown and the clause in my lease - I will ask for this info.

[Macromia]

The Managing Agent did instigate the FTT, as I refused to pay his fabricated charges. I was certain that the evidence I had collected made it obvious that the guy is a crook, but for some strange reason they sided with him for the most part..

Any action taken by the managing agent will be considered to have been taken on behalf of the freeholder, and therefore counts as action being taken by the freeholder.

If your defence against the service charges that had been demanded was that the charges were "fabricated" and "the guy is a crook", and you used phrases that said that, I am afraid that I'm not really surprised that the tribunal ruled against you, or that they refused an order preventing legal costs being passed on to you.
Allegations of fraud will rarely be received well at a tribunal, and would typically require a substantial amount of evidence. If you were claiming that work that had not been carried out was being charged for you would have been better off just stating that the work hadn't been done (and providing evidence that it hadn't been carried out).
The Freeholder (represented by the managing agent) initially only needs to show that it is reasonable for costs to have been incurred, and provide evidence that the costs were incurred.

The invoice for his legal fees was sent via e-mail, and did not make any reference to rights regarding administration charges.

A demand for administration charges does not become payable unless it is accompanied by the correct summary of rights.
If it was not, this means that you have no obligation to pay until you are sent a copy of the demand accompanied by the correct summary.

You also have the right to challenge the reasonableness of the costs. 34.5 hours of solicitors time is potentially quite a lot, especially if the solicitor didn't attend the hearing - but it depends how complicated the issues were and, in part, how much material you provided during the preparation for the case.

However, since you have already lost a tribunal case, and this is the resulting costs, you should think very carefully before any further challenges.

No solicitor was engaged for the hearing, and I very much doubt that one was used to prepare the case either. I am convinced it is just another bogus charge that I will have no choice but to pay.

Since your lease allows costs to be recovered, I would think it likely that the freeholder would engage a solicitor - especially if the unpaid service charges that they were trying to recover were a significant amount.