The Tribunal Procedure Committee (TPC) has published a consultation paper seeking views on Rules in relation to the question of placing a cap on costs recoverable in leasehold and property cases.
First Tier Tribunal (Property Chamber)
The First Tier Tribunal (FTT)– Property Chamber (PC) hears cases on property, landlord and tenant and housing matters. A typical landlord and tenant matter would be a fair rent or HMO dispute. The PC also hears leasehold cases typically matters such as management issues including service charge disputes and enfranchisement.
Costs in the PC are governed by rule 13 of the PC Rules. PC rule 13(1) provides:
“ 13(1) The Tribunal may make an order in respect of costs only –
(a) under section 29(4) of the 2007 Act (wasted costs) and the costs incurred in applying for such costs;
(b) if a person has acted unreasonably in bringing, defending or conducting proceedings in –
(i) an agricultural land and drainage case,
(ii) a residential property case, or
(iii) a leasehold case; or
(c) in a land registration case. ”
It is important to note at this stage that there is no cap on the costs that can be recovered under Rule 13. Costs orders may be made by the Tribunal either on a party’s application or of its own initiative. The rationale for Rule 13 is that it discourages litigants from acting unreasonably and compensates the other party that has been forced to respond to the unreasonable party. However, the failure to cap fees can be open to abuse. Threats of large cost awards etc. can leave some people frightened to issue proceedings despite their legal right to do so.
Accordingly, the rationale for this proposed cost cap (which some may recall was in place prior to Rule 13 being created in 2013) is:
- To ensure access to justice, litigants should not be discouraged from defending or making a claim for fear of large costs awards;
- It acts as a restraint to those being met with unreasonable behaviour, that is parties who are confident in recovering their costs should not throw everything at the matter assuming their costs will be met;
- It provides some monetary limitation to any threat that might be imposed; and
- To reflect the ‘no costs shifting’ approach of the Tribunal.
The TPC has also noted that the frequency of applications for Rule 13 costs has increased when compared to the previous rules when a cap was in place. Further that in London, some parties applying for the payment of service charges include within their application a claim for costs which can be seen as threatening from the outset. Finally, applications for costs are usually for the whole amount of costs incurred and not for costs referable to the unreasonable behaviour. This can lead to further costs to defend such an application which in itself can be seen to be unreasonable. It is for all these reasons that the TPC is therefore considering a costs cap in Rule 13. Any cap will need to compensate a party for the other party’s unreasonable behaviour and at the same time act as a restraint for that behaviour. The proposed amendment to Rule 13, by way of an additional paragraph, is:
“(1A) The amount of costs to be paid under an order made under paragraph (1)(b)(ii) or (iii) of this rule shall not exceed £[ ] ”.
Upper Tribunal (Land Chambers)
Costs in the Upper Tribunal (Land Chamber) (UT(LC)) are governed by rule 10 of the UT (LC) Rules and are similar to rule 13 of the PC Rules for both property and leasehold matters. So again, there is no cap on costs and any costs are awarded on a party’s application or on the Tribunal’s own initiative. However, the difference between the PC and the LC is that there are far fewer costs applications made. Reasons for the difference highlighted in this consultation document include:
- Permission to appeal requirement filters out unmeritorious claims;
- Steps parties take to prepare for an appeal are much more limited compared with the PC; and
- Having already experienced the PC process parties should be more aware of what is and is not reasonable.
It is for this reason that any cap considered for the PC should also be considered for the LC on similar lines to that mentioned above.
The consultation paper then includes 10 questions for parties to respond to by 1 February 2018.
We have simplified the basic tenets of the consultation paper and only concentrated on leasehold and property matters. However, if cost caps do come in then parties will need to seriously consider their own conduct and response to any litigation. However, the Tribunal very rarely awards costs at the moment and is even less likely to do so if a cap is imposed. Costs are usually only awarded for very unreasonable actions within the conduct of a matter before the tribunal and so expecting or seeking costs routinely is not realistic and should be avoided.