PLA response to consultation on possible changes to the Tribunal Procedure (First Tier Tribunal) (Property Chamber) Rules 2013 and the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 concerning costs in leasehold cases and residential property leases.

 

TRIBUNAL PROCEDURE COMMITTEE CONSULTATION ON POSSIBLE CHANGES TO   THE TRIBUNAL PROCEDURE (FIRST- TIER TRIBUNAL) (PROPERTY CHAMBER) RULES 2013 AND THE TRIBUNAL PROCEDURE (UPPER TRIBUNAL) (LANDS CHAMBER) RULES 2010 CONCERNING COSTS IN LEASEHOLD CASES AND RESIDENTIAL PROPERTY CASES.

RESPONSE   OF   THE   PROPERTY   LITIGATION   ASSOCIATION   LAW   REFORM COMMITTEE.  Feb 2018.

 

QUESTION 1

1) Is it appropriate to amend the Property Chamber Rules to include a cap on the award of rule 13(1)(b) costs in residential property cases other than applications under the Mobile Homes Act 1983 or the Caravan Sites and Control of Development Act 1960 (which are the subject of question 3 below)? If so, why? If not, why not? Please provide your reasons.

Response

It is not appropriate to include a cap on the award of rule 13(1)(b) costs.   The question relates to residential property cases excluding mobile homes cases.  However as a general point we would oppose a cap across the board for the reasons explained below.

We note that ‘residential property cases’ include local authority enforcement type cases where you report that local authorities are usually represented by in house solicitors or environmental health officers and landlords are represented in about 50% of cases.   It is likely that in many cases landlords would have sufficient means to obtain legal advice even if not representation and a change to the rules does not appear to be justified.

Firstly we explain our general response to the proposal and then respond to the specific questions raised.

General Response

It is accepted that the FTT is generally a no costs shifting jurisdiction and we note the concerns of the Tribunal that threats of applications for costs can result in individuals either not bringing cases or withdrawing cases.  That is a genuine concern to be addressed but we suggest that a cap is not the best way to do this.

 

We propose instead that a standard form guidance note be prepared that explains Rule

13(1)(b) in the context of the judicial guidance in Willow Court Management Company (1985) Limited v Alexander.  The FTT should require every party to provide a copy of that guidance whenever a costs application under Rule 13(1)(b) is threatened or issued.  Rule 13(4) could be amended to add a sub section (c) that requires a party to send, with the application and schedule of costs, evidence that the standard form note has been sent to the receiving party. We propose that the Tribunal issue a practice note that a failure to provide this information at the appropriate time can itself result in a costs order (under Rule 13(1)(a) or (b)) and that no costs order will be made where the guidance has not been provided. The Practice Note and guidance should also be publicised on the Tribunals website and Lease website for tribunal users to access.

The history and development of Tribunals means that they are designed to be more informal and user friendly for unrepresented parties.  As a part of this the FTT is for the most part a no-costs shifting jurisdiction.  However the legal and procedural issues before the Tribunal can be complex and so representation is utilised, not only by commercial landlords, but also by management companies, local authorities and individuals.   The involvement of legal representation can be helpful in informing the parties of their legal obligations and thereby aiding settlement.   Legal representation can also assist the Tribunal for example, by the provision of bundles in the required format.   As the FTT is a no-costs shifting jurisdiction often it is the corporate side (landlords or local authorities) that is represented.  This can be daunting for an individual, as they may feel at a disadvantage in terms of their knowledge of the law and the procedural steps required by the tribunal.   If a represented party threatens to seek to recover its legal costs from an individual, in the absence of further information, a litigant could be discouraged.

However, in the context of a discussion about costs, it is important to also mention that it is already possible for landlords to recover their costs through the service charge where the lease allows for this.  Additionally some leases contain a covenant entitling the landlord to recover certain legal costs from a lessee outside of the service charge regime (administration charges).  Therefore litigants in person may already face the risk of paying some of the costs (the size of that risk depending upon the lease and size of the development).  Both service charges and administration charges can be challenged within the FTT. There is also the jurisdiction to award wasted costs in Rule 13(1)(a).

Already the costs position is not straightforward.  To say that the FTT is generally a no-costs jurisdiction, whilst accurate, could in fact lead to applicants believing that there are no costs consequences when, depending upon their lease and the facts of their case, there might be.

In its new measures announced on 21 December 2017, the Department for Housing, Communities & Local Government indicated that it would look at providing leaseholders with clear support on the various routes to redress and a wider internal review of the support and advice  to  leaseholders  to  make  sure  that  it  is  fit  for  the  legislative  and  regulatory environment.    The  complexity  of  this  area means  that  parties  require  access  to  better information and in the absence of access to legal aid it is hoped that the review will go some way to addressing the problems being faced by individual users of the courts and tribunals.

 

Why retain Rule 13(1)(b)?

If a party deliberately increases costs believing that the costs will either not be paid by him or her or only a proportion via the service charge, it can in itself be a way to injure the other party. The threat of a costs award in that case can be justified and valuable.

There are cases where applications to Tribunals are akin to neighbour disputes where the lessees not involved in the management company are in long standing conflict with those running the management company.   In that sort of case the cost risk can be a valuable deterrent to unreasonable conduct.  In the exceptional case where an order is made under Rule 13(1)(b) it would ensure that the legal costs are not paid by the lessees with whom the applicant is in dispute.

There will be cases of aggressive landlords seeking to bully tenants and a threat of an adverse costs order against them can be a restraining measure. A cap on these costs could mean that Rule 13 costs become no more than a price for poor behaviour.   It strips the Tribunal of its power to make an award that represents the true effect of the conduct.  If the cap is too low it lacks any impact, if it is too high it does not achieve the stated result of reassuring potential applicants.

The  power  to  award  costs  is  a  valuable  tool  where  it  can  be  shown  that  there  is unreasonable behaviour and a flat rate cap would detract from this power considerably. Exercising the existing powers but taking in account the resources available to the parties would be preferable.

We are of the view that the better route is to improve the information that is available to litigants in person from a source that they will trust; namely guidance approved by the Tribunal.

 

Information

Parties could be required to provide the recipient with a standard guidance sheet approved by the Tribunal at the same time as threatening an application for costs under Rule 13(1)(b). Rule 13(4) already provides for the applicants to take certain steps when issuing an application and a sub-section (c) could be added to require, as a pre-condition to issuing an application, that evidence that the applicant has served the approved guidance sheet on the other party be provided to the Tribunal.

 

The guidance could also be made available on the Tribunal’s web page and to organisations such as Lease to address the problem of threats being made by unscrupulous parties who do not ever issue an application. This should be supported by a Practice Note stating that the Tribunal will consider threats to issue Rule 13(1)(b) applications without providing the guidance as unreasonable conduct that itself risks a cost award under Rule 13(1) (a) or (b) depending upon the circumstances. Additionally no costs order will be made unless the guidance note has been provided.

The guidance to form the basis of the information sheet is to be found within the decision of the Upper Tribunal in Willow Court Management Company (1985) Limited v Alexander but this needs to be condensed into a form easily understood by non-lawyers.  The judgment makes it clear that the FTT is a cost shifting jurisdiction by exception only and that rule 13 will be  applied  in  only the clearest  cases.    Summarising  this  guidance  will  not  restrict  the Tribunal’s powers any more than the case itself but will ensure that lessees have balanced information in order to make a decision about the way forward.

 

Specific Comments on a Cap for Residential Cases

The consultation paper suggests that local authorities are professionally represented in most cases (by lawyers or other advisers) and that landlords are represented about half of the time.  It is not known how many of the landlords have accessed legal advice, even if they are not represented or how many lack the means to do so.   Given that they have sufficient means to own property to rent out it is expected that many could obtain some legal advice if required.  In the absence of any evidence of a problem in this area and in view of the benefits of the jurisdiction under Rule 13(1)(b), we do not feel that a change to the rules is justifiable.

 

QUESTION 2

  1. If so, in what amount should the cap be? Please provide your reasons.

We are opposed to a cap for the reasons stated above.  If a cap is imposed, it would need to be sufficiently high to deter parties with deep pockets and so a cap of no less than £20,000.

 

QUESTION 3

 

  1. Is it appropriate to amend the PC Rules to include a cap on the award of rule 13(1)(b) costs in applications under the Mobile Homes Act 1983 or the Caravan Site and Control of Development Act 1960? If so, why? If not, why not? Please provide your reasons.

 

We repeat the general response contained in the response to question 1.

 

The consultation papers states that site owners are more often represented and occupiers more often represent themselves.  There is therefore the potential for inequality of arms in some of these cases.  However we oppose a cap for the reasons stated and would promote instead better information for occupiers.

 

QUESTION 4

  1. If so, in what amount should the cap be? Please provide your reasons.

If a cap is imposed, it would need to be sufficiently high to deter parties with deep pockets and so a cap of no less than £20,000.

 

QUESTION 5

 

  1. Is it appropriate to amend the Property Chamber Rules to include a cap on the award of rule 13(1)(b) costs in leasehold cases? If so, why? If not, why not? Please provide your reasons.

 

We repeat the general response contained in the response to question 1.

The consultation paper states that in the case of enfranchisement both parties are usually represented (by a lawyer or surveyor) and so a change to the existing rules is not justified.

In the case of leasehold management cases it is stated that landlords are represented 70% of the time and lessees 30% of the time. Accordingly in this type of case there is a potential for inequality of arms.  For the reasons explained we oppose a cap so that the Tribunal can discourage poor behaviour and adapt each decision to the facts of the case.   Improved information at the appropriate time is preferred.

 

QUESTION 6

  1. If so, in what amount should the cap be? Please provide your reasons.

If a cap is imposed, it would need to be sufficiently high to deter parties with deep pockets and so a cap of no less than £20,000.

 

QUESTION 7

  1. If a cap (or caps) is/are appropriate, is it/are they best achieved by the drafting in the manner illustrated above?

We repeat the points on drafting mentioned above.

If the cap is adopted, we would support the proposed drafting save that it is not clear why within para (1)(b)(iii) leasehold management and enfranchisement cases are being treated as one class when the legal representation differs between each class. In this type of case tenants  are  likely  to  be  represented  and  are  unlikely  to  be  deterred  from  making  an application as they are motivated to gain an extended lease or freehold.

 

QUESTION 8

  1. If not, why not? Do you have any other drafting suggestions?

Adopt the same method as for proposed (1A) (i) and (ii).   We repeat the drafting points mentioned above.

 

QUESTION 9

  1. Do you have any other suggestions as regards how rule 13(1)(b) costs in these cases should be dealt with in the PC Rules?

As above.

 

QUESTION 10

If you consider it appropriate to amend the PC Rules in the respects you have identified in your answers to the questions above, is it also appropriate to amend the UT(LC) Rules likewise?  If so why?  If not, why not? Please provide your reasons.

We do not support any change to the rules and we note that the consultation paper does not identify any particular problem with the status quo.

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